FEMA agrees to let wildfire victims get paid first in PG&E bankruptcy

The Federal Emergency Management Agency reached a deal with PG&E that will allow wildfire victims to get paid first in the utility’s bankruptcy case and slash its claim by $3 billion.|

Wildfire victims will be compensated by PG&E before the Federal Emergency Management Agency receives any payment from the utility for disaster assistance the government provided in the wake of recent Northern California fire disasters, according to a tentative deal announced Tuesday in U.S. Bankruptcy Court.

As part of the agreement, FEMA said it would not seek repayment from any individual fire victim or agency with wildfire losses that received help from the federal government. The pledge, a key element of the deal, eliminates earlier threats that wildfire victims who receive compensation from PG&E might get a bill from the federal government demanding a return of federal disaster aid.

The agency also agreed to reduce its claim from $4 billion to $1 billion, diminishing its potential take from the $13.5 billion PG&E has promised to settle remaining claims in its bankruptcy case, mostly from people who lost homes or businesses to fires linked to the utility’s electrical system, according to attorney Eric Goodman, who represents wildfire victims in the bankruptcy proceedings.

“Until the fire victims are all paid in full, FEMA will get nothing,” Goodman said in an interview Tuesday during a break in the court proceeding.

A FEMA spokesman confirmed the terms of the tentative plan. In a statement, he said the agency is satisfied the agreement both ensures “the needs of disaster survivors are placed first” and “holds PG&E accountable for expenditures of federal disaster assistance” for fires caused by the utility’s electrical equipment.

FEMA’s demand for more than a quarter of the PG&E settlement, buried deep in court documents and filed just days before an October deadline for claims, was brought to the public’s attention by The Press Democrat in December.

In response, federal lawmakers introduced legislation to protect disaster victims and pressured FEMA to back down from its stance.

U.S. Rep. Jared Huffman of San Rafael commended FEMA for rescinding its original demand, ensuring the money goes to individual fire victims comprised of people who lost homes, businesses or family members killed in the fires.

“I’m pleased to see FEMA agrees the victims need to be fully compensated before they claim reimbursement from PG&E - that’s all I’ve ever asked,” said Huffman, who with U.S. Rep. Mike Thompson has been urging FEMA to drop its claim.

FEMA officials had defended the agency’s effort to be compensated by PG&E because of the utility’s inability to run a safe electrical system. FEMA’s claims are for its assistance in the 2018 Camp fire, the 2017 Northern California firestorm and the 2015 Butte fire in Amador and Calaveras counties.

Wildfire victims objected to FEMA’s claim and urged U.S. Bankruptcy Judge Dennis Montali to ensure those who survived the disasters receive the bulk of what the utility has described as a finite amount of cash and stock available to settle all ?remaining claims.

News of the agreement was encouraging for people who lost their homes including Jason Meek, whose family house in the Fountaingrove Meadows neighborhood of Santa Rosa was destroyed in the 2017 Tubbs fire. His family’s ability to rebuild has been severely inhibited by problems with the FEMA-led debris removal program, Meek told the judge in a letter objecting to FEMA’s claim.

In an interview, Meek said fire victims remain skeptical about PG&E’s overall plan to compensate them for their losses, which he said remain formidable and diverse.

“If FEMA is coming last so to speak, that seems to be the right priority,” said Meek, who now lives in Marin County. “We have calculated financial losses and the distress of displacement and coming out of the fires, we have people who lost relatives ... there are still so many legitimate needs left.”

The agreement, which must receive final approval by both the bankruptcy court and the U.S. Department of Justice, was brokered late Monday on the eve of a key hearing Tuesday.

PG&E attorneys began outlining the company’s plans to exit bankruptcy, including negotiated deals with creditors seeking compensation from the company, and mentioned that an agreement had been brokered with FEMA and wildfire victims.

In court, Goodman elaborated on the terms, which include a $3 billion reduction in what the federal government initially sought to receive from PG&E. FEMA also agreed to release the California Office of Emergency Services from federal rules requiring states seek all reasonable avenues to compensate the federal government for its disaster aid.

As a result, Cal OES withdrew its claims against PG&E that included about $2.4 billion the state was requesting on behalf of the federal government to fulfill this requirement.

The mediated agreement saves Montali from having to rule on the issue, which hinged on his interpretation of federal statutes governing disaster assistance.

The controversy has generated legislation aimed at protecting victims of future disasters. Huffman, Thompson and a bipartisan group of lawmakers last month introduced a bill, HR 5953, that would bar FEMA from demanding disaster victims return federal assistance that was received in good faith.

Federal disaster assistance is meant to be a last-resort resource, and demands for returned aid arise when FEMA determines the victim has received help from another source.

“My core concern is that it was going to shortchange victims who deserve to be compensated,” Huffman said. “Hopefully this brings us closer to closure and compensation for the victims so they can move on with their lives.”

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com. On Twitter @jjpressdem.

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