By Hudson Sangree
The Federal Emergency Management Agency’s claims that Pacific Gas and Electric owes it more than $3.9 billion have thrown the utility’s Chapter 11 case into disarray, just as it seemed on a steadier course toward conclusion.
FEMA is seeking reimbursement for its expenses following disastrous wildfires ignited by PG&E equipment, including the Camp Fire, which killed 86 people and leveled the town of Paradise in November 2018.
Wildfire victims and their lawyers are worried the money could come out of a $13.5 billion trust that PG&E agreed to fund with cash and stock for those who suffered from the fires. FEMA’s statements this week that it could seek reimbursement directly from some victims added to the outrage.
“FEMA is taxpayer funded, as you know, and it is very unfair for them to get any of our settlement, period!” Camp Fire victim Brenda Wright wrote to U.S. Bankruptcy Court Judge Dennis Montali, who is overseeing the Chapter 11 case. “Please take this into consideration as you proceed. FEMA doesn’t deserve any of this money. Please man up and do the right thing for us.”
Lawyers for fire victims argued in court papers that the agency wasn’t entitled to share in the settlement funds or to recover from PG&E.
More than 72,000 proofs of claim have been filed by residents and businesses harmed by the Butte Fire of September 2015, the 22 Northern California wine country fires of October 2017 and the Camp Fire. PG&E is liable for the victims’ damages because the utility’s faulty electric lines and equipment ignited the fires, “but it does not follow from this that the debtors are also liable to FEMA,” the attorneys wrote.
On Monday, FEMA Regional Administrator Robert Fenton held a conference call with reporters in which he said the agency could try to recover approximately $200 million from fire victims who received funds from FEMA and other sources for the same losses, according to the Associated Press. But that wasn’t the agency’s preferred course, he said.
“We want to help people after a disaster,” the AP reported Fenton saying. “The last thing we want to do is to hurt them.”
FEMA said it was excluded from confidential settlement talks that resulted in the $13.5 billion settlement agreement, leaving it in its current position. It said in a statement that it is legally required to try to recover public funds from those that cause disasters.
“Responsible third parties should not be unjustly enriched at the taxpayer’s expense,” the agency said.
Montali approved PG&E’s settlement with victims represented by the official tort claimants committee [TCC] Dec. 17, moving PG&E closer to having its reorganization plan confirmed by the court. (See Judge OKs PG&E Deals with Fire Victims, Insurers.)
PG&E is trying to exit bankruptcy by June 30 to participate in an $21 billion state wildfire recovery fund. It doesn’t want the FEMA controversy to derail those plans.
“PG&E agrees with the tort claimants committee that FEMA does not have a valid legal claim against the company,” the utility said in a statement. “The bankruptcy court has approved our settlement agreements resolving all major wildfire claims. This brings us one significant step closer to getting victims paid so they can rebuild their lives.”
“As for our overall plan of reorganization, we remain engaged in active and constructive dialogue with stakeholders,” the utility said. “We are committed to a safe and financially stable PG&E going forward.”
PG&E and FEMA have not responded in court filings to the TCC’s objections. The matter originally was scheduled to be heard in Montali’s San Francisco courtroom Tuesday, but the hearing was postponed to Feb. 11.