UPDATE 1-Union Pacific and U.S. strike $102 mln settlement

SAN FRANCISCO, July 22 (Reuters) - The Union Pacific Corp (UNP.N) railroad said on Tuesday a $102 million settlement with the U.S. government to resolve a dispute arising from a forest fire would not affect its 2008 earnings or cash flow.

The railroad said it had incurred a $10 million liability at the time of the fire and insurance would provide for the balance of the settlement.

The agreement with the government settles claims from a forest fire in California in 2000 started by sparks from equipment used by railroad track repair crews.

More than 2,600 firefighters, air tanker pilots and helicopter crews fought the fire, which raged for three weeks in a 56,000-acre area that included some private land.

The settlement is the largest recovery in U.S. Forest Service history for a forest fire case, according to a statement from the U.S. Department of Justice. (Additional reporting by Suzanne Hurt in Sacramento, California; Reporting by Jim Christie; editing by Carol Bishopric)