Union Pacific 2011 Annual Report Download - page 82

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Our asbestos-related liability activity was as follows:
Millions 2011 2010 2009
Beginning balance $ 162 $ 174 $ 213
Accruals/(credits) (5) (1) (25)
Payments (10) (11) (14)
Ending balance at December 31 $ 147 $ 162 $ 174
Current portion, ending balance at December 31 $ 8 $ 12 $ 13
We have insurance coverage for a portion of the costs incurred to resolve asbestos-related claims, and
we have recognized an asset for estimated insurance recoveries at December 31, 2011 and 2010.
We believe that our estimates of liability for asbestos-related claims and insurance recoveries are
reasonable and probable. The amounts recorded for asbestos-related liabilities and related insurance
recoveries were based on currently known facts. However, future events, such as the number of new
claims filed each year, average settlement costs, and insurance coverage issues, could cause the actual
costs and insurance recoveries to be higher or lower than the projected amounts. Estimates also may
vary in the future if strategies, activities, and outcomes of asbestos litigation materially change; federal
and state laws governing asbestos litigation increase or decrease the probability or amount of
compensation of claimants; and there are material changes with respect to payments made to claimants
by other defendants.
Environmental Costs – We are subject to federal, state, and local environmental laws and regulations.
We have identified 285 sites at which we are or may be liable for remediation costs associated with
alleged contamination or for violations of environmental requirements. This includes 32 sites that are the
subject of actions taken by the U.S. government, 17 of which are currently on the Superfund National
Priorities List. Certain federal legislation imposes joint and several liability for the remediation of identified
sites; consequently, our ultimate environmental liability may include costs relating to activities of other
parties, in addition to costs relating to our own activities at each site.
When we identify an environmental issue with respect to property owned, leased, or otherwise used in
our business, we perform, with assistance of our consultants, environmental assessments on the
property. We expense the cost of the assessments as incurred. We accrue the cost of remediation where
our obligation is probable and such costs can be reasonably estimated. We do not discount our
environmental liabilities when the timing of the anticipated cash payments is not fixed or readily
determinable. At December 31, 2011, less than 1% of our environmental liability was discounted at 2.0%,
while approximately 5% of our environmental liability was discounted at 2.8% at December 31, 2010.
Our environmental liability activity was as follows:
Millions 2011 [a
]
2010 2009
Beginning balance $ 213 $ 217 $ 209
Accruals 29 57 49
Payments (70) (61) (41)
Ending balance at December 31 $ 172 $ 213 $ 217
Current portion, ending balance at December 31 $ 50 $ 74 $ 82
[a] Payments include $25 million to resolve the Omaha Lead Site liability.
The environmental liability includes future costs for remediation and restoration of sites, as well as
ongoing monitoring costs, but excludes any anticipated recoveries from third parties. Cost estimates are
based on information available for each site, financial viability of other potentially responsible parties, and
existing technology, laws, and regulations. The ultimate liability for remediation is difficult to determine
because of the number of potentially responsible parties, site-specific cost sharing arrangements with
other potentially responsible parties, 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.
Estimates of liability may vary over time due to changes in federal, state, and local laws governing