Dan Walters: Should fossil fuel companies pay for LA wildfire losses?

As wildfires swept through Los Angeles County last month, the New York Times published a commentary by former insurance commissioner Dave Jones, who suggested that oil companies should pay for the disaster’s immense losses of human life and property, not insurance companies.

“Major oil and gas companies have known for decades that burning their products could lead to potentially catastrophic events like the higher temperatures and abnormally dry conditions that fed the fires still being battled in Los Angeles,” Jones, now director of the Climate Risk Initiative at the University of California at Berkeley, wrote, adding, “We should require these highly profitable companies to compensate communities, homeowners, businesses and even insurers for the losses.”

Jones cited what happened after the Camp Fire destroyed the rural community of Paradise in 2018 as a model for going after the oil industry. After paying the claims of Paradise property owners, insurers recovered $11 billion from PG&E because the failure of a single metal hook on a transmission tower was deemed to have ignited the fire.

Dinging oil companies for the damages in Los Angeles would dissuade insurers from exiting the California market or cutting back on coverage, Jones said, which they were doing prior to the firestorm in L.A.

Five days after the essay was published, state Sen. Scott Wiener, a San Francisco Democrat, introduced Senate Bill 222, which would authorize exactly what Jones suggested if it becomes law.

“Californians are paying a devastating price for the climate crisis, as escalating disasters destroy entire communities and drive insurance costs through the roof,” Wiener said in a statement. “Containing these costs is critical to our recovery and to the future of our state. By forcing the fossil fuel companies driving the climate crisis to pay their fair share, we can help stabilize our insurance market and make the victims of climate disasters whole.”

SB 222 is a new wrinkle in four interrelated California issues: climate change, the future of California’s once-large petroleum industry, the scourge of wildfires and the reluctance of many insurers to write fire policies in the state.

Almost immediately, California business leaders declared war on the legislation, contending that it would have an immense and negative effect on the state’s economy and lead to major increases in Californians’ cost of living.

The California Center for Jobs and the Economy, an arm of the influential California Business Roundtable advocacy group, issued an analysis of the measure, alleging that “SB 222 could lead to damage claims totaling up to $1.1 trillion by 2030 and an additional $10.8 trillion in retroactive liability for past emissions. These claims, if pursued, could function as an unchecked carbon fee, drastically increasing costs for households, businesses, and state agencies.”

The report projected that “gasoline could jump 63% to $7.38 per gallon, diesel 69% to $8.23, and electricity rates could rise up to 55% for industrial users. Natural gas prices would spike 76% for residential customers, increasing heating and cooking costs.

“Housing costs will also climb sharply, with homeowners paying $1,161 more per year and renters facing an extra $1,692 annually due to rising utility costs. Food, transportation, and consumer goods will become more expensive as businesses struggle with higher fuel and operating costs. Air travel could see dramatic price hikes, potentially making flights to and from California unaffordable.”

Despite the Legislature’s tilt to the political left, getting SB 222 passed would be a steep uphill climb. At the very least, it gives a new flavor to some thorny, perhaps existential, issues that face the state and its political leaders.

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. His commentary comes via CalMatters.org, a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more, go to calmatters.org/commentary.