13.

COMMITMENTS AND CONTINGENCIES

Capital Commitments

The Company had authorized capital commitments of approximately $40.4 million and $143.3 million as of December 31, 2011 and 2010, respectively, in connection with the expansion and replacement of existing facilities and equipment. Included in authorized capital commitments is $109.2 million at December 31, 2010 for the major energy optimization projects at its Counce and Valdosta mills.

Lease Obligations

PCA leases space for certain of its facilities, cutting rights to approximately 88,000 acres of timberland, and equipment, primarily vehicles and rolling stock. Lease terms range from one to 14 years and may contain renewal options or escalation clauses. Some leases may require the Company to pay executory costs, which may include property taxes, maintenance and insurance. The minimum lease payments under non-cancelable operating leases with lease terms in excess of one year are as follows:


	(In thousands)
2012	$	32,103
2013		28,384
2014		20,465
2015		13,049
2016		8,676
Thereafter		45,413

Total	$	148,090

Total lease expense, including base rent on all leases and executory costs, such as insurance, taxes, and maintenance, for the years ended December 31, 2011, 2010 and 2009 was $46.1 million, $42.0 million and $41.3 million, respectively. These costs are included in cost of goods sold and selling and administrative expenses.

PCA was obligated under capital leases covering buildings and machinery and equipment in the amount of $21.8 million and $22.5 million at December 31, 2011 and 2010, respectively. Assets held under capital lease obligations are included in property, plant and equipment as follows:


	December 31,
	2011			2010
	(In thousands)
Buildings	$	250		$	250
Machinery and equipment		23,602			23,602

Total		23,852			23,852
Less accumulated amortization		(5,028	)		(3,481	)

Total	$	18,824		$	20,371

Amortization of assets under capital lease obligations is included in depreciation expense.

The future minimum payments under capitalized leases at December 31, 2011 are as follows:


	(In thousands)
2012	$	2,202
2013		2,202
2014		2,202
2015		2,202
2016		2,202
Thereafter		25,872

Total minimum capital lease payments		36,882
Less amounts representing interest		15,050

Present value of net minimum capital lease payments		21,832
Less current maturities of capital lease obligations		718

Total long-term capital lease obligations	$	21,114

Interest paid as part of the capital lease obligations was $1.5 million, $1.6 million, and $1.6 million during the years ended December 31, 2011, 2010 and 2009, respectively.

Purchase Commitments

The Company has entered into various purchase agreements for minimum amounts of pulpwood processing and energy over periods ranging from one to twenty years at fixed prices. Total purchase commitments are as follows:


	(In thousands)
2012	$	6,099
2013		4,903
2014		1,486
2015		1,486
2016		1,486
Thereafter		18,387

Total	$	33,847

The Company purchased $28.5 million, $32.8 million, and $37.3 million during the years ended December 31, 2011, 2010 and 2009, respectively, under these purchase agreements.

Litigation

During September and October 2010, PCA and eight other U.S. and Canadian containerboard producers were named as defendants in five purported class action lawsuits filed in the United States District Court for the Northern District of Illinois, alleging violations of the Sherman Act. The lawsuits have been consolidated in a single complaint under the caption Kleen Products LLC v Packaging Corp. of America et al. The consolidated complaint alleges that the defendants conspired to limit the supply of containerboard, and that the purpose and effect of the alleged conspiracy was to artificially increase prices of containerboard products during the period of August 2005 to the time of filing of the complaints. The complaint was filed as a purported class action suit on behalf of all purchasers of containerboard products during such period. The complaint seeks treble damages and costs, including attorney's fees. The defendants' motions to dismiss the complaint were denied by the court in April 2011. PCA believes the allegations are without merit and will defend this lawsuit vigorously. However, as the lawsuit is in the early stages of discovery, PCA is unable to predict the ultimate outcome or estimate a range of reasonably possible losses.

PCA is a party to various other legal actions arising in the ordinary course of business. These legal actions cover a broad variety of claims spanning our entire business. As of the date of this filing, the Company believes it is not reasonably possible that the resolution of these legal actions will, individually or in the aggregate, have a material adverse effect on its financial position, results of operations, or cash flows.

Environmental Liabilities

The potential costs for various environmental matters are uncertain due to such factors as the unknown magnitude of possible cleanup costs, the complexity and evolving nature of governmental laws and regulations and their interpretations, and the timing, varying costs and effectiveness of alternative cleanup technologies. From 1994 through 2011, remediation costs at the Company's mills and corrugated plants totaled approximately $3.2 million. As of December 31, 2011, the Company maintained an environmental reserve of $10.5 million relating to on-site landfills (see Note 14) and surface impoundments as well as ongoing and anticipated remedial projects. Liabilities recorded for environmental contingencies are estimates of the probable costs based upon available information and assumptions. Because of these uncertainties, PCA's estimates may change. As of the date of this filing, the Company believes that it is not reasonably possible that future environmental expenditures for remediation costs and asset retirement obligations above the $10.5 million accrued as of December 31, 2011, will have a material impact on its financial condition, results of operations, or cash flows.