LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

This note provides details about our:


•	legal proceedings,


•	environmental matters and


•	commitments and other contingencies.

LEGAL PROCEEDINGS

We are party to various legal proceedings arising in the ordinary course of business. We are not currently a party to any legal proceeding that management believes could have a material adverse effect on our Consolidated Balance Sheet, Consolidated Statement of Operations, or Consolidated Statement of Cash Flows. See Note 21: Income Taxes for a discussion of a tax proceeding involving Plum Creek's 2008 U.S. federal income tax return.

ENVIRONMENTAL MATTERS

Site Remediation

Under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – commonly known as Superfund – and similar state laws, we:


•	are a party to various proceedings related to the cleanup of hazardous waste sites and


•	have been notified that we may be a potentially responsible party related to the cleanup of other hazardous waste sites for which proceedings have not yet been initiated.

We have received notification from the Environmental Protection Agency (the EPA) and have acknowledged that we are a potentially responsible party in a portion of the Kalamazoo River Superfund site in southwest Michigan. Our involvement in the remediation site is based on our former ownership of the Plainwell, Michigan mill located within the remediation site. Several other companies also have been deemed potentially responsible parties as past or present owners or operators of facilities within the site, or as arrangers under CERCLA.

We cooperated with other parties to jointly implement an administrative order issued by the EPA on April 14, 2016, with respect to a portion of the site comprising a stretch of the river approximately 1.7 miles long referred to as the Otsego Township Dam Area. During third quarter 2018, implementation of this administrative order was completed.

In 2010, the company, along with others, was named as a defendant by Georgia-Pacific Consumer Products LP, Fort James Corporation and Georgia-Pacific LLC in an action seeking contribution under CERCLA for remediation costs relating to a certain area within the site. On March 29, 2018, the U.S. District Court issued an opinion and order assigning the company responsibility for 5 percent of approximately $50 million in past costs incurred by the plaintiffs. The remaining 95 percent of this pool of past costs incurred was allocated to the plaintiffs and other defendants.

The opinion and order, which is currently on appeal before the US Court of Appeals for the Sixth Circuit, does not establish allocation for future remediation costs, and accordingly, we may incur additional costs in connection with future remediation tasks for other areas of the site. In connection with the opinion and order, we updated our best estimate of the liability associated with the site and recorded a pretax charge of $28 million in first quarter 2018 within "Other operating costs (income), net" on the Consolidated Statement of Operations.

Our Established Reserves. We have established reserves for estimated remediation costs on the active Superfund sites and other sites for which we are a potentially responsible party. These reserves are recorded in "Accrued liabilities" and "Other liabilities" in our Consolidated Balance Sheet.

Changes in the Reserve for Environmental Remediation



DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2017	$	48
Reserve charges and adjustments, net	27
Payments	(13		)
Reserve balance as of December 31, 2018	$	62

We change our accrual to reflect:


•	new information on any site concerning implementation of remediation alternatives,


•	updates on prior cost estimates and new sites and


•	costs incurred to remediate sites.

Estimates. We believe it is reasonably possible, based on currently available information and analysis, that remediation costs for all identified sites may exceed our existing reserves by up to $126 million.

This estimate, in which those additional costs may be incurred over several years, is the upper end of the range of reasonably possible additional costs. The estimate:


•	is much less certain than the estimates on which our accruals currently are based and


•	uses assumptions that are less favorable to us among the range of reasonably possible outcomes.

In estimating our current accruals and the possible range of additional future costs, we:


•	assumed we will not bear the entire cost of remediation of every site,


•	took into account the ability of other potentially responsible parties to participate and


•	considered each party’s financial condition and probable contribution on a per-site basis.

We have not recorded any amounts for potential recoveries from insurance carriers.

Asset Retirement Obligations

We have obligations associated with the retirement of tangible long-lived assets consisting primarily of reforestation obligations related to forest management licenses in Canada and obligations to close and cap landfills. Some of our sites have asbestos containing materials. We have met our current legal obligation to identify and manage these materials. In situations where we cannot reasonably determine when asbestos containing materials might be removed from the sites, we have not recorded an accrual because the fair value of the obligation cannot be reasonably estimated. These obligations are recorded in "Accrued liabilities" and "Other liabilities" in our Consolidated Balance Sheet.

Changes in the Reserve for Asset Retirement Obligations



DOLLAR AMOUNTS IN MILLIONS
Reserve balance as of December 31, 2017	$	32
Reserve charges and adjustments, net	11
Payments	(12		)
Other adjustments⁽¹⁾	(2		)
Reserve balance as of December 31, 2018	$	29
(1) Primarily related to a foreign currency remeasurement gain for our Canadian reforestation obligation.

COMMITMENTS AND OTHER CONTINGENCIES

Our commitments and contingencies include:


•	guarantees of debt and performance,


•	operating leases and


•	product remediation contingency.

Guarantees

We have guaranteed the performance of the buyer of a timberland contract we sold in 2005. Future payments on the contract, which expires in 2023, are $10 million.

Operating Leases

Our rent expense was:


•	$47 million in 2018,


•	$39 million in 2017 and


•	$37 million in 2016 (excluding discontinued operations).

We have operating leases for:


•	various equipment, including logging equipment, lift trucks, automobiles and office equipment and


•	office and warehouse space.

Future Commitments on Operating Leases

Our operating lease commitments as of December 31, 2018 were:



DOLLAR AMOUNTS IN MILLIONS
2019	$	35
2020	29
2021	26
2022	24
2023	18
Thereafter	78

Product Remediation Contingency

Refer to Note 19: Charges (Recoveries) for Product Remediation, Net for further information.