Federal officials are prepared to bill wildfire victims for a portion of the nearly $4 billion the government says it's owed by Pacific Gas & Electric Co., if the debt isn't resolved as part of the utility's bankruptcy case, according to a newspaper report Sunday.
The Federal Emergency Management Agency has asked for reimbursement from PG&E to cover costs from the government's response to destructive fires in 2015, 2017 and 2018. Under PG&E's current plan to resolve its bankruptcy, any payment to FEMA would have to come from the $13.5 billion the utility intends to reserve primarily to settle claims from wildfire victims, the San Francisco Chronicle reported.
Victims' lawyers are fighting FEMA's claim, which would take up nearly 30% of the settlement. But FEMA told the Chronicle it is compelled to seek compensation from PG&E. Otherwise, individual victims would be responsible if they get settlement funds that duplicate money already paid by the federal government, according to Bob Fenton, the agency's regional administrator.
Fenton said FEMA has "no interest" in reducing the amount of settlement funds available for fire victims.
"What we are interested in doing is holding PG&E responsible and accountable for the billions of dollars taxpayers provided to assist individuals and communities affected by the wildfires," he told the newspaper. "The last thing I want to do is have to go after these individuals that have received claims from the bankruptcy where certain parts of that claim may duplicate funding that we've already given them. … It's much easier up front to go ahead and simply deal with PG&E directly."
The FEMA dispute is one of several major unresolved issues in the PG&E bankruptcy. PG&E has already won court approval of its deal with victims' attorneys and a separate $11 billion settlement to resolve claims from insurance companies. But the company must clear a series of other hurdles as it works to resolve the rest of the case, which includes a broader bankruptcy exit plan.
FEMA has requested about $3.9 billion in bankruptcy claims against PG&E because of the 2015 Butte Fire, the 2017 wildfires in wine country and the 2018 Camp Fire. Court papers show that only about $282 million of the total relates to individual assistance FEMA gave to victims of the disasters -- the rest is for aid provided to other government agencies and administrative costs.
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FEMA's attempt to recover from PG&E was sharply criticized by 40 members of Congress in a letter to the agency's acting administrator last week. The letter cited concern at FEMA's "decision to litigate claims to the settlement fund for wildfire victims established by PG&E."
FEMA's efforts also have drawn criticism from James Lee Witt, a former director of the agency, who told the Santa Rosa Press Democrat newspaper last month that it was an "unusual" and "inappropriate" request.
U.S. Bankruptcy Judge Dennis Montali is expected to consider the FEMA issue at a hearing next month.
Eric Goodman, an attorney for a committee of fire victims involved in the PG&E bankruptcy case, said FEMA's defense of its $3.9 billion request "doesn't hold any water" with him. Goodman's firm is asking Montali to reject FEMA's claim.
In a statement to the Chronicle, PG&E said it agrees with the victims' committee that "FEMA does not have a valid legal claim against the company."
FEMA released the following statement Monday morning:
"On October 17, FEMA filed claims in the Pacific Gas and Electric (PG&E) chapter 11 bankruptcy case pending in the U.S. Bankruptcy Court for the Northern District of California to pursue reimbursement of $3.9 billion in disaster assistance provided following California wildfires in 2015, 2017 and 2018 that resulted in three major disaster declarations. Since these major disaster declarations, the California Department of Forestry and Fire Protection (CalFire) determined that PG&E was responsible for starting these fires.
"The Robert T. Stafford Disaster Relief and Emergency Assistance Act and FEMA’s duty to be a good fiscal steward require FEMA to pursue claims against responsible third parties who cause a condition creating the need for disaster assistance. Responsible third parties should not be unjustly enriched at the taxpayer’s expense. The reimbursement claims against PG&E include expenditures for FEMA’s Individual Assistance and Public Assistance programs and the agency’s disaster administrative costs for the three major disaster declarations associated with the wildfires.
"FEMA must also follow the law to ensure that disaster assistance provided in these disasters – that resulted from fires PG&E equipment caused – is not duplicated by other sources, and we strive to implement our legal responsibilities in ways that are least disruptive to survivors.
"Lawyers for the individual tort claimants agreed to a settlement with PG&E without including the federal and state governments in settlement discussions. The Department of Justice made repeated attempts to engage with the major parties in the bankruptcy, but has been excluded from negotiations.
"FEMA remains willing to participate fully in negotiations so that all parties, including government agencies, can work to settle well-documented claims. We have no interest in reducing the funds PG&E owes to survivors. Instead, we are interested in ensuring taxpayers do not bear the burden of PG&E’s responsibility for the billions of dollars FEMA provided to assist individuals and communities impacted by wildfires."
