An improperly marked waterline at the Union Pacific Railroad's rail yard could cost Tucson taxpayers more than a million dollars.

The City Council is set to discuss a settlement offer with the railroad over an approximately $1.3 million lawsuit the railroad company filed over a 2010 waterline break that flooded the rail yard southeast of downtown with more than 10 million gallons of water.

On June 8, 2010, a contractor performing some excavation work for Union Pacific struck a 30-inch waterline at the rail yard, east of South Campbell Avenue along the Barraza-Aviation Parkway.

Water began gushing out of the pipe, damaging Union Pacific equipment, rail and rolling stock. The water also washed out a nearby oil-water separator and repair pit that contained diesel fuel, oil-based lubricants and other contaminants and spread them throughout the yard and into a nearby wash.

When it was over, between 10 million and 11 million gallons of water had poured out of the pipe.

Union Pacific claimed the city owes it damages because a city employee placed a blue stake in the wrong spot a few days prior to the dig, which led to the company contractor striking the 30-inch water pipe while performing excavation work.

In addition, the railroad contends city workers failed to shut off or control the flow of water for 36 hours after the break occurred, causing even more damage and leaving behind an extensive hazardous-material mess to clean up.

The city responded that even though the city employee erred, the contractor continued digging long after hitting the outer concrete casing of the pipe.

According to court records, the city said the drilling crew stopped to inspect the drill bit after it struck an object. After replacing the drill bit, the crew proceeded to drill past the concrete encasement and into the metal pipe. The city said "any reasonably careful and prudent employee ... would have ceased the excavation" at this point.

The city said workers did respond immediately to the break and took the appropriate actions necessary to protect the water system from being contaminated by hazardous materials.

"By midmorning, ... Tucson Water knew that it had to keep a positive flow in the ruptured 30-inch transmission main in order to prevent contaminated water from flowing back into the line and entering the water-delivery system," court records say.

The two sides have been arguing about who's at fault, and to what extent, ever since.

City Attorney Mike Rankin said that since the item is scheduled for an executive session at Tuesday's council meeting, he couldn't divulge any possible settlement terms.

Union Pacific's corporate relations and media director, Aaron Hunt, said Union Pacific is hoping the matter can be resolved soon.

"Union Pacific has worked closely with the city of Tucson to develop a settlement regarding damage caused to Union Pacific property in 2010 when a Tucson city water main failed," Hunt wrote in an email. "Union Pacific is hopeful the terms of the settlement will shortly be finalized."

If the two sides can't reach an agreement, a trial is scheduled for March.

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Contact reporter Darren DaRonco at 573-4243 or