Up in Flames: Containing Wildfire Liability for Utilities in the West
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Up in Flames: Containing Wildfire Liability for Utilities in the West Anthony Nordman & Isaac Hall* I. INTRODUCTION ....................................................................................56 II. GETTING FIRED UP ..............................................................................58 A. Electricity Infrastructure in the West ................................. 59 B. Increasing Wildfire Costs ................................................... 63 1. Worsening Fire Seasons ....................................................63 2. Rising Costs for Utilities ...................................................64 3. Utility-Caused Wildfires and the Duty to Serve Rural Customers ................................................................66 C. Comparing State Wildfire Liability Laws ........................... 67 1. California ...........................................................................68 2. Other Western States .........................................................70 III. BEFORE THE BLAZE: EX-ANTE APPROACHES TO ADDRESSING THE UTILITY WILDFIRE LIABILITY PROBLEM .....................................74 A. Greater Collaboration in Wildfire Prevention Plans ......... 74 B. Smarter Sharing of Duties Between Federal Agencies and States ............................................................ 76 C. Allocating Risk: The Moral Hazard Problem and Wildfires ............................................................................. 79 1. Incentivizing Landowners in Fire-Prone Areas to Invest in UVM ...................................................................79 2. Eliminating California’s Inverse Condemnation Standard .............................................................................80 D. More Streamlined Permitting for UVM and Related Activities ............................................................................. 82 1. Expedited UVM Permitting ..............................................83 2. Better Monitoring of UVM Work ....................................84 © 2020 Anthony Nordman & Isaac Hall. * Both authors are Sustainability Law Student Research Fellows within the Program on Law and Sustainability at Arizona State University’s Sandra Day O’Connor College of Law. This Article was researched and written under the supervision and guidance of Professor Troy A. Rule as part of the Sandra Day O’Connor College of Law’s Sustainability Law Research Fellowships initiative. The authors wish to thank other Fellows within the initiative for their invaluable input on the early stages of this Article. 55 56 TULANE ENVIRONMENTAL LAW JOURNAL [Vol. 33:55 IV. FROM THE ASHES: EX-POST APPROACHES TO THE UTILITY WILDFIRE LIABILITY PROBLEM ..........................................................85 A. Allocating Blame: More Accurately Assigning Wildfire Liability ................................................................ 86 B. Disincentivizing Risky Redevelopment After Wildfires ............................................................................. 88 V. CONCLUSION .......................................................................................90 I. INTRODUCTION On the evening of October 8, 2017, dry winds in Northern California were gusting at a speed of over fifty miles per hour.1 At 11:34 PM, a local resident near the city of Santa Rosa placed a 911 call to report a forest fire,2 claiming to have seen a “tree illuminate when the conductors arced” on a nearby power line.3 Within hours, the region’s strong winds had consolidated this fire with two other newly started fires into a complex blaze that became known as the Redwood Fire.4 The Redwood Fire tore through Mendocino County, California, engulfing more than 35,000 acres of land and claiming the lives of nine nearby residents.5 CAL FIRE, California’s state fire-fighting agency, investigated the causes of Redwood Fire and eventually discovered two points of ignition resulting from contact between vegetation and electric power lines.6 Among the Redwood Fire’s victims were Kai and Kressa Shepherd.7 Just after midnight on October 8, the Shepherd family tried to evacuate the area when their car caught fire.8 Kai Shepherd, age fourteen, attempted to flee on foot but could not escape the flames. Kai’s parents and sister, Kressa, were eventually found near their car with severe burns.9 Kressa 1. Clifford F. Mass & David Owens, The Northern California Wildfires of October 8-9, 2017: The Role of a Major Downslope Wind Event, 100 BULL. AM. METEOROLOGICAL SOC’Y 235 (2019), https://journals.ametsoc.org/doi/pdf/10.1175/BAMS-D-18-0037.1. 2. CAL. DEP’T OF FORESTRY & FIRE PROT., INVESTIGATION REPORT: REDWOOD INCIDENT (Oct. 8, 2017), https://www.tellusventure.com/downloads/safety/calfire_investigation_report_ redwood_fire_4jun2018.pdf. 3. Id. at 17. 4. Id. at 3. 5. Press Release, Cal. Dep’t of Forestry & Fire Prot., CAL FIRE Investigators Determine Causes of 12 Wildfires in Mendocino, Humboldt, Butte, Sonoma, Lake, and Napa Counties 1 (June 8, 2018), https://www.fire.ca.gov/media/5100/2017_wildfiresiege_cause.pdf. 6. CAL. DEP’T OF FORESTRY & FIRE PROT., supra note 2, at 13. 7. Michael Cabanatuan, Kai Shephard, 14, Dies Trying to Outrun Redwood Valley Fire, S.F. CHRON. (Oct. 16, 2017, 2:45 PM), https://www.sfgate.com/bayarea/article/Kai-Shepherd-14- died-trying-to-outrun-Redwood-12277350.php. 8. Id. 9. Id. 2020] UP IN FLAMES 57 passed away several weeks later as a result of her injuries. John and Sara Shepherd survived only to face the pain of burying their two children. The circumstances surrounding the Redwood fire are not unique to Mendocino County. Between October 8 and 9, 2017, twelve wildfires originating in Northern California were eventually blamed on utility equipment failure or vegetation contacting power lines.10 The Tubbs fire, which also started on October 8, became the second deadliest fire in California’s history, claiming twenty-two lives and damaging over 5600 homes. It is estimated that insurance companies paid $12.5 billion for property damages stemming from these fires.11 Later dubbed the “Fire Siege,” these October fires scorched a total of 245,000 acres, requiring 11,000 firefighters from numerous states and countries.12 Public outcry and controversy have followed in the aftermath of California’s Fire Siege. Nearly one year after the disaster, CAL FIRE released its report on the Tubbs fire showing that a private homeowner’s electrical system—and not utility equipment—caused that fire, which ultimately caused at least $11 billion in property damage.13 Nonetheless, the large California utility, Pacific Gas & Electric (PG&E), determined that its liabilities from other Fire Siege fires were insurmountable.14 In early 2019, the massive utility company filed for bankruptcy, initiating what is likely to be the largest utility bankruptcy proceeding in U.S. history. Wildfires have long had significant economic, environmental, and political impacts throughout the West, but those impacts have grown substantially in recent years. Although countless factors are contributing to the growing costs of western wildfires, much of the financial burden is falling on electric utilities. As PG&E’s recent bankruptcy filing shows, a strategy of largely relying on electric utilities to spread wildfire-related costs could have major adverse impacts on electricity markets in the West. However, ensuring that electric utilities internalize the costs of actions they 10. CAL. DEP’T OF FORESTRY & FIRE PROT., supra note 2. 11. Nichola Gordon & Sharon Bernstein, PG&E Cleared of Liability in 2017 California Wildfire, Bankruptcy Still Seen, INS. J. (Jan. 28, 2019), https://www.insurancejournal.com/news/ west/2019/01/28/515910.htm; see CAL. DEP’T OF FORESTRY & FIRE PROT., INVESTIGATION REPORT: TUBBS INCIDENT 15 (Oct. 8, 2017), http://www.documentcloud.org/documents/5693976-Cal-Fire- Tubbs-Fire-Investigation-Report-20190124.html. 12. CAL. DEP’T OF FORESTRY & FIRE PROT., supra note 2. 13. Press Release, Cal. Dep’t of Forestry & Fire Prot., CAL FIRE Investigators Determine the Cause of the Tubbs Fire (Jan. 24, 2017), https://www.fire.ca.gov/media/5124/tubbscause1v.pdf. 14. Ivan Penn, PG&E’s Bankruptcy Filing Creates ‘a Real Mess’ for Rival Interests, N.Y. TIMES (Jan. 29, 2019), https://www.nytimes.com/2019/01/29/business/energy-environment/pge- file-bankruptcy.html. 58 TULANE ENVIRONMENTAL LAW JOURNAL [Vol. 33:55 take that contribute to forest fires is also crucial to addressing the West’s growing wildfire problem. This Article highlights the growing connection between wildfire liabilities and electricity transmission and distribution in the West. It uses this data to suggest ways governments could more fairly and efficiently spread wildfire-related costs among contributors to the problem. Through bold and innovative policymaking, it is possible to compel those contributors to internalize more of the costs of their activities and to thereby slow the growth of wildfire liabilities and preserve the solvency of electric utilities in the West. Part II of this Article describes the general growth of wildfire costs in the western United States over recent years and how electric utilities are increasingly becoming overburdened by their share of these costs. Part III describes potential means of reducing wildfire costs in the West through a collaborative prevention system that relies on increased cooperation among private, state, and federal stakeholders. Part IV of this Article addresses how costs could be fairly apportioned after fires have occurred.