Union Pacific 2010 Annual Report Download - page 17

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to perform environmental remediation at approximately 9,000 residential yards in Omaha and to take
other remedial measures as part of a final remedy. The Railroad continues to contest its purported liability
for these costs but has submitted an offer to the EPA to attempt to negotiate a resolution of the matter.
On June 23, 2010, the Railroad filed suit in federal district court in Omaha, Nebraska against the EPA and
its Administrator under the Freedom of Information Act (FOIA), the Administrative Procedure Act and the
Federal Records Act asking the court to compel EPA to respond fully to outstanding FOIA requests and to
prevent EPA from destroying records. The court granted the Railroad a temporary restraining order
prohibiting further document destruction. On August 26, 2010, the Court entered an agreed Preliminary
Injunction preventing destruction of records by EPA. In November 2010, the Railroad reached a
tentative, confidential settlement agreement subject to further negotiation to resolve its liability at the
Omaha Lead Site. The FOIA litigation has been stayed pending possible resolution of the case.
As we reported in our Annual Report on Form 10-K for 2005, the Illinois Attorney General’s office filed a
complaint against the Railroad in the Circuit Court for the Twentieth Judicial Circuit (St. Clair County) for
injunctive and other relief on November 28, 2005, alleging a diesel fuel spill from an above-ground
storage tank in a rail yard in Dupo, St. Clair County, Illinois. The State of Illinois seeks to enjoin UPRR
from further violations and a monetary penalty. The amount of the proposed penalty, although uncertain,
could exceed $100,000.
As we reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, we received
notices from EPA Region 8 and U.S. Department of Justice (DOJ) alleging that we may be liable under
federal environmental laws for violating the Clean Water Act and the Oil Pollution Prevention Act relating
to derailments and spills and UPRR’s Spill Prevention Countermeasure and Control Plans and its
Stormwater Pollution Prevention Plans in Colorado, Utah, and Wyoming. We cannot predict the ultimate
impact of these proceedings because we are continuing to investigate and negotiate with the EPA Region
8 and DOJ. The amount of the proposed penalty, although uncertain, could exceed $100,000.
We received notices from the EPA and state environmental agencies alleging that we are or may be liable
under federal or state environmental laws for remediation costs at various sites throughout the U.S.,
including sites on the Superfund National Priorities List or state superfund lists. We cannot predict the
ultimate impact of these proceedings and suits because of the number of potentially responsible parties
involved, the degree of contamination by various wastes, the scarcity and quality of volumetric data
related to many of the sites, and the speculative nature of remediation costs.
Information concerning environmental claims and contingencies and estimated remediation costs is set
forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Critical Accounting Policies – Environmental, Item 7.
OTHER MATTERS
U.S. Customs and Border Protection (CBP) Dispute and Litigation – As we reported in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010, CBP directed its field offices to issue penalties
against the Railroad in December 2007 for discoveries of illegal drugs in railcars crossing the border from
Mexico. The cars are in trains delivered by Mexican railroads directly to CBP; the Railroad receives the
trains only after CBP inspects them. Additionally, CBP imposed or reinstated earlier penalties that had
been held in abeyance while the Railroad and CBP pursued a collective plan to address drug smuggling.
In some instances, CBP seized railcars in which drugs were found.
On July 31, 2008, the Railroad filed a complaint in the U.S. District Court for the District of Nebraska
asking the court to enter (1) a judgment declaring that CBP’s penalties and seizures are invalid and
unenforceable and (2) preliminary and permanent injunctions prohibiting CBP from enforcing penalties
and holding seized cars and directing CBP to refrain from issuing additional penalties and from future
equipment seizures. The total amount of penalties assessed against the Railroad at that time was
approximately $61.4 million. The parties discussed settlement, and the case in the District Court was
stayed. During this period, no new penalties were issued and no cars were seized.
Settlement discussions were unsuccessful. As a result, the Railroad reinstituted its lawsuit on February
18, 2009. U.S. Department of Justice (DOJ) then filed enforcement actions in the U.S. District Court for
the Southern District of Texas on March 17, 2009, and in the U.S. District Court for the Southern District
of California on March 18, 2009, and nine separate forfeiture complaints in the U.S. District Court for the
District of Arizona on March 19, 2009 (covering ten seized cars).