Union Pacific 2011 Annual Report Download - page 16

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of Financial Condition and Results of Operations – Liquidity and Capital Resources – Financial Condition,
Item 7.)
2012 Capital Expenditures – In 2012, we expect to make capital investments of approximately $3.6
billion, including expenditures for PTC of approximately $335 million. We may revise our 2012 capital
plan if business conditions warrant or if new laws or regulations affect our ability to generate sufficient
returns on these investments. (See discussion of our 2012 capital plan in Management’s Discussion and
Analysis of Financial Condition and Results of Operations – 2012 Outlook, Item 7.)
OTHER
Equipment Encumbrance – Equipment with a carrying value of approximately $2.9 billion and $3.2
billion at December 31, 2011 and 2010, respectively, served as collateral for capital leases and other
types of equipment obligations in accordance with the secured financing arrangements utilized to acquire
such railroad equipment.
As a result of the merger of Missouri Pacific Railroad Company (MPRR) with and into UPRR on January
1, 1997, and pursuant to the underlying indentures for the MPRR mortgage bonds, UPRR must maintain
the same value of assets after the merger in order to comply with the security requirements of the
mortgage bonds. As of the merger date, the value of the MPRR assets that secured the mortgage bonds
was approximately $6.0 billion. In accordance with the terms of the indentures, this collateral value must
be maintained during the entire term of the mortgage bonds irrespective of the outstanding balance of
such bonds.
Environmental Matters – Certain of our properties are subject to federal, state, and local laws and
regulations governing the protection of the environment. (See discussion of environmental issues in
Business – Governmental and Environmental Regulation, Item 1, and Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Environmental,
Item 7.)
Item 3. Legal Proceedings
From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection
with our business. We routinely assess our liabilities and contingencies in connection with these matters
based upon the latest available information and, when necessary, we seek input from our third-party
advisors when making these assessments. Consistent with SEC rules and requirements, we describe
below material pending legal proceedings (other than ordinary routine litigation incidental to our
business), material proceedings known to be contemplated by governmental authorities, other
proceedings arising under federal, state, or local environmental laws and regulations (including
governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of
$100,000), and such other pending matters that we may determine to be appropriate.
ENVIRONMENTAL MATTERS
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. Union Pacific settled this matter by paying the State of
Illinois $34,000.
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.,