SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.   20549-5546

       DIVISION OF
CORPORATION FINANCE

        June 30, 2008

Jeffrey P. Totusek
Vice President and Controller
Union Pacific Corporation
1400 Douglas Street
Omaha, NE 68179

 RE:  Union Pacific Corporation
  Form 10-K for the Year Ended December 31, 2007
  File Number: 001-06075

Dear Mr. Totusek:

 We have reviewed your May 19, 2008 correspondence and considered the
information provided as part of our disc ussion during the week of June 20, 2008, and
have the following comments.  Please file your response to our comments via EDGAR,
under the label “corresp,” by August 1, 2008.

Allocation of Payroll Costs (Prior Comments 2 and 3)
1. You refer to project supervisors in re sponse to our prior comment number 2.
Please clarify whether these project superv isors are on-site, or remote from the
projects that they supervise.
2. Please further explain to us the reason it is appropriate to capitalize the payroll
costs that relate to employees who provide materials management, crew dispatching, timekeeping, etc.  It is not clear why you do not consider these costs
to be general and administrative cost s, which you expense as incurred.
3. In addition, please clarify whether thes e employees devote any time to routine
track maintenance activities, like the one s identified in your response to prior
comment number one.  If so, describe for us your allocation methodology and explain to us why this method is appr opriate.  Under paragraph 7 of SFAS 67,
which you have referenced by analogy, “indi rect costs that relate to several
projects shall be capitalized and allocated to the projects to which they relate.  Indirect costs that do not clearly re late to projects under development or
construction, including general and admini strative expenses, shall be charged to
expense.”  The paragraph 7 definition of indirect costs appears to only contemplate capitalizable projects and, c onsequently, it may only be appropriate
to allocate payroll costs be tween capitalizable projects.  When an employee’s time
is divided between capitalizable projects and operating expense activities, it is not

Union Pacific Corporation
June 30, 2008
Page 2 of 4
clear how this cost is “clearly related” to  the capitalizable acti vities as required by
paragraph 7 and the related definition in appendix A, unless the employee keeps
track of his or her time.  We believe employee payroll costs are unlike the other
indirect costs you a llocate (e.g., leased vehicles, diesel fuel, etc.), where an
allocation method may more accurately repres ent the costs related to a project.

Replacement of Rail (Prior Comments 5 and 7)
4. We note that your tangent rail projects vary  in length, with five miles and longer
being typical and shorter lengths being atypical.  We believe this five mile and longer length to be to be the case, in part, because of the cost involved in
deploying crews and equipment.  Consequent ly, we would not expe ct there to be a
significant amount of isolated ¼ mile replacements of rail.  In addition, the significant disparity between your typical capital program length and your ¼ mile
unit of property for rail may be an indicati on that the ¼ mile replacements of rail
should not be accounted for as part of your capital program.  With that, please quantify for us the number of quarter m ile replacements of rail made during 2007,
and provide any other information that you believe would enhance our
understanding of your accounting.

Track Surfacing (Prior Comment 10)

(a) Undercutting
5. You have indicated that your unit of pr operty for undercutting is one net ton of
ballast.  In regard to this  unit of property, please tell us (i) the approximate dollar
amount that is capitalized in connection with one net ton of  ballast; (ii) the
approximate length of track that corresponds to one net ton of ballast; and (iii) the
average length, and range of  lengths, of continuous track that is part of an
individual underc utting project.
6. Please explain to us why the replacement of  one net ton ballast is not considered
the repair and maintenance of track struct ure.  Since ballast is a component of
track structure, it appears that it should  be evaluated against it.  In addition,
explain to us why you believe one net ton of  ballast is substantial, and not more
akin to the routine repla cement of a minor part, which you expense as incurred.
Based on the information provided to us, we note that the cost to replace ballast is
approximately $29 per foot ($48,000,000 / (311 miles *5,280 feet per mile)).  Accordingly, it appears that the replacement of less than a substantial length of
ballast might be considered similar to the replacement of a minor part.

(b) Track Lining
7. Please explain to us why the addition of  one net ton ballast to existing track
structure is not considered the repair a nd maintenance of the track structure.

Union Pacific Corporation
June 30, 2008
Page 3 of 4
Since ballast is a component of track structure, it appears that it should be evaluated against it.  In addition, explain to us why you believe one net ton of
ballast is substantial, and not  more akin to the routine replacement of a minor part,
which you expense as incurred.  Based on the information provided to us, we note that the cost to track line is approximately $7,875 per mile ($48,000,000 / 6,095
miles).  Consequently, track lining one mile  of track may be similar to the routine
replacement of a minor part.  We note that  this amount is substantially less than
the $2.7 million average cost of new track.

Rail Grinding (Prior Comment 11)
8. We note that you incurred $26.6 million in direct rail grinding costs covering
21,000 miles of rail, during 2007.  You have indicated, though, that rail may require more than one pass to reach the desired result and the number of passes required varies.  You have not provided  any information for us to assess how
many passes may typically be require d.  Based on the information you have
provided, it appears that the cost of rail grinding is approximately $1,267 per mile
of pass ($26,600,000 / 21,000 miles).  We ha ve seen one indication, on the
Internet, that certain rail may require upw ards of ten passes, which would equate
to a range of approximately $1,267 through $12,670 cost per mile.  This range of
costs does not appear significant and may be an indication that rail grinding is
more akin to routine repairs and maintenance.  Based on the preceding, please provide us a further analysis explaining why the cost of rail grinding is an
appropriately capitalizable cost.
9. In addition, please clarify what you mean by “because rail grinding is factored into the life of our rail, gri nding costs are capitalized as part of our rail assets and
the costs are depreciated over the same usef ul life as rail.”  If rail grinding is
factored into the useful life of rail, this would appear to  be an indication that rail
grinding is a routine activity that only main tains the useful life of the rail.  The
point that is illustrated by your last sent ence appears to be analogous to the fact
that routine oil changes, which are a ma intenance activity, are typically factored
into the useful life of automobiles.  Acco rdingly, a Class I railroad that expenses
as incurred rail grinding costs would account for the underlying rail over the extended useful life of the rail, but a Class I railroad that capitalizes rail grinding
costs would account for the underlying rail  over the unextended useful life of the
rail.
10. Please provide us an analysis for each of  the 10 sections of track that are most
frequently grinded.  For each section of tr ack, provide (i) its gr inding history (i.e,
the dates of all previous grindings); (ii) the anticipated dates of all future
grindings; (iii) the estimated  annual gross tons carried over it; (iv) its estimated
life in gross tons; (v) whether it is tangent  rail or curve rail; (vi) its length; and
(vii) the approximate number of passes th at would be require d to grind it.

Union Pacific Corporation
June 30, 2008
Page 4 of 4
In response to our prior comment, you ha ve stated that the frequency rail is
grinded varies.  We believe more definitive information and analysis regarding frequency is necessary to determine whether it is appropriate to capitalize the cost
of it.  If rail grinding is a periodic activity, it would appe ar to be an indication that
rail grinding should be expensed as incurred.  Among other reasons, a recurring activity might not appreciably extend the life of the underlying asset each
individual occurrence, rather only in the aggregate occurrences of the activity.
11. Please tell us whether you capitalize the lubr ication of rail.  If  so, clarify for us
why your accounting policy is appropriate.   In this regard, we note from your
response to prior comment one that you have  not identified lubrication as part of
your routine track maintenance.  (We unders tand that it may be included within
item number seven of response number one.)

Disclosure
12. Please provide in your remaining 2007 Forms 10-Q, and then in your continuing annual reports, an enhanced accounting polic y for the costs that are incurred in
connection with your cap italizable projects.

You may contact the undersigned at 202-551-3812 with any questions.

        S i n c e r e l y ,

        M i c h a e l  F a y
        B r a n c h  C h i e f