FEMA defends its request for $4 billion of PG&E’s $13.5 billion settlement with wildfire victims

Federal Emergency Management Agency officials defended the disaster agency’s unprecedented claim for more than a quarter of the $13.5 billion PG&E has agreed to pay to wildfire victims in its bankruptcy case, saying the government assistance must be paid for by the utility that caused the disasters.

FEMA is asking for $4 billion to cover what it spent after the 2017 Northern California firestorm, the 2018 Camp fire and a 2015 fire in Butte County for debris clearing from burned properties, road and infrastructure repair, temporary housing assistance and other services given to residents and local governments.

Federal law prohibits FEMA from providing services that people and local governments can get elsewhere, and it requires the agency to seek repayment if money for the services can be paid by another source - such as payouts from the PG&E bankruptcy case, said Robert Fenton, the agency’s regional administrator.

“The last thing we want to do is have to ask any of these people impacted by these events to return funds they’ve already received from FEMA,” Fenton said.

FEMA’s request is controversial because the money would come out of a negotiated $13.5 billion trust the utility set aside primarily to settle claims from about 72,000 individual wildfire victims, including businesses, people who lost property and others whose relatives were killed in one of the fires started by PG&E power equipment.

U.S. Bankruptcy Judge Dennis Montali last week approved the broad strokes of PG&E’s $13.5 billion settlement, a hard-fought negotiation with wildfire victims. But the details of how the money will be divided among than 70,000 individual claimants, plus FEMA and two state agencies aren’t yet settled. PG&E already has agreed to pay $1 billion to local governments hit by fires and $11 billion to insurance companies under separate agreements.

Wildfire victims have formally objected to FEMA’s claims, and Montali is scheduled to hear the arguments in court on Feb. 11.

Rep. Jared Huffman, a San Rafael Democrat, called the notion of paying FEMA out of a fund for wildfire victims “disturbing.”

Huffman, whose district stretches along the coast from the Golden Gate to the Oregon border, said that while it may be appropriate for PG&E to compensate the federal government for disaster relief it provided, “It can’t come at the expense of victims; that should be a nonstarter.”

“I for one would be very open to pushing back on FEMA and urging them to pursue whatever compensation they think they’re owed through a different channel,” Huffman said.

FEMA’s request to recoup billions of dollars shocked some fire survivors who thought the federal-led debris cleanup created significant and costly problems. Many residents, especially those in Santa Rosa’s hilly Fountaingrove neighborhood, reported debris workers scraped too much of their properties, ruined driveways and septic systems, leaving property owners on the hook to make costly repairs.

Some wildfire victims have written letters to Judge Montali, asking him to reconsider terms of the deal with PG&E, including FEMA’s cut.

Santa Rosa resident Sharon Zimmerman wrote a Dec. 17 letter to the bankruptcy judge detailing her family’s problems with the ?FEMA-led cleanup of her Fountaingrove property, writing that allocating to FEMA billions of dollars PG&E agreed to pay wildfire victims “will serve to victimize them yet again.”

The contractor hired by the government agency “obliterated” Zimmerman’s long driveway and caused other damage that ultimately cost nearly $200,000 to repair, she said in an interview.

“It’s preposterous - given how they mismanaged that contract in this community, given the scale of over-excavation, given the scale of damage they caused,” Zimmerman said.

FEMA has never before asked a company to pay for all of the work the agency did in response to a disaster, the agency’s Fenton said. Most disasters it responds to are earthquakes, hurricanes and other catastrophes not directly caused by a corporation.

The agency has sought reimbursement in cases when it discovers aid it provided duplicated funding given by another source, such as a nonprofit.

Fenton said FEMA does not want to hurt people recovering from wildfire disasters, but he is responsible for representing taxpayers in the proceedings.

“We have a responsible party - PG&E,” Fenton said. “It’s not Mother Nature. It’s not an earthquake. And I have a responsibility to the taxpayers.”

The law he cited is called the Stafford Act, which states that “a person receiving Federal assistance for a major disaster or emergency shall be liable to the United States to the extent that such assistance duplicates benefits available to the person for the same purpose from another source.”

FEMA “has no legal authority to waive that requirement” to seek reimbursement, Fenton said.

Attorneys representing wildfire victims objecting to the agency’s request have argued in court filings that the federal law cited requires that an entity have intentionally caused a disaster - which is not the case with PG&E, though the company was found negligent in its safety practices that led to some fires.

The bulk of FEMA’s reimbursement request via the utility’s bankruptcy is for the billions it spent on public assistance programs rather than on assisting individuals. In Sonoma County, FEMA spent $46.7 million on public assistance programs, such as debris removal and infrastructure repairs, and $11 million on direct services for households and individuals, an agency spokesman said.

Montali will have the authority to reject FEMA’s $4 billion request, approve or reduce it, said Eric Goodman, an attorney with Baker & Hostetler who wrote the objection to it on behalf of wildfire victims involved in the PG&E bankruptcy case.

The state Office of Emergency Services also has submitted a $2.7 billion claim for reimbursement in bankruptcy court, but that includes about $2.4 billion it would then give to FEMA that duplicates a portion of the federal agency’s claim, Goodman said. Taking that portion out, Cal OES and Cal Fire are collectively requesting about $650 million from PG&E, he said.

“They’re in completely uncharted ground here,” Goodman said. “FEMA has put itself in direct competition with the people it’s supposed to help.”

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