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 long-term consolidated financial position, results of operations or cash flows. See "Ongoing IRS Matter" in Note 20: Income Taxes for a discussion of a tax proceeding involving Plum Creek REIT's 2008 U.S. federal income tax return.

ENVIRONMENTAL MATTERS

Our environmental matters include:


•	site remediation and


•	asset retirement obligations.

Site Remediation

Under the Comprehensive Environmental Response, Compensation and Liability Act — commonly known as the 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 operated upstream pulp mills within the remediation site. We are currently cooperating with the 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. We do not expect to incur material losses related to the implementation of this administrative order; however, we may incur additional costs, as yet not specified, in connection with remediation tasks resulting from other areas of the site. 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 the site. The trial has been concluded but a decision on cost contribution and allocation has not yet been rendered by the Court.

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, 2016	$	34
Reserve charges and adjustments, net	29
Payments	(15		)
Reserve balance as of December 31, 2017	$	48
Total active sites as of December 31, 2017	37

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 $150 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, 2016⁽¹⁾	$	29
Reserve charges and adjustments, net	12
Payments	(11		)
Other adjustments⁽²⁾	2
Reserve balance as of December 31, 2017	$	32
(1) Reserve balance for continuing operations (2) 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/lessee of a timberlands lease we sold in 2005. Future payments on the lease, which expires in 2023, are $12 million.

Operating Leases

Our rent expense for continuing operations was:


•	$39 million in 2017,


•	$37 million in 2016 and


•	$24 million in 2015.

We have operating leases for:


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


•	timberland ground leases; and


•	office and wholesale space.

Future Commitments on Operating Leases

Our operating lease commitments as of December 31, 2017 were:



DOLLAR AMOUNTS IN MILLIONS
2018	$	40
2019	35
2020	32
2021	29
2022	27
Thereafter	161

Product Remediation Contingency

In July 2017, the company announced it was implementing a solution to address concerns regarding our TJI® Joists with Flak Jacket® Protection product. The company has determined that an odor in certain newly constructed homes is related to a recent formula change to the Flak Jacket coating that included a formaldehyde-based resin. This issue is isolated to Flak Jacket product manufactured after December 1, 2016, and does not affect any of the company’s other products. We recorded a pretax charge of $290 million in the period ended December 31, 2017, related to remediation costs. Refer to Note 18: Charges for Product Remediation for further information.