June 24, 2019 Best of ABA Sections

Money to Burn: Investing in Proactive Fire Management

ABA ENVIRONMENT, ENERGY & RESOURCES SECTION

Stephanie M. Regenold and Matthew L. Rojas

The increase in wildfire severity and a corresponding increase in loss of life and property has forced fire management to the forefront of the public eye—both the public and private sectors are responding.

Wildfire management and funding. At the federal level, the U.S. Forest Service (Forest Service) is responsible for wildfire management and response across the approximate 193 million acres of the National Forest System. The U.S. Department of the Interior is responsible for more than 400 million acres of national parks, wildlife refuges and preserves, Indian reservations, and other public lands. Likewise, at the state level, state and local governments are responsible for wildfires beginning on nonfederal lands, except for lands protected under a cooperative agreement with a federal agency.

Until recently, the Forest Service and Department of the Interior federal wildfire management budgets, including wildfire suppression on federal lands, have been funded primarily through congressional appropriations via annual discretionary appropriations under the Interior, Environment, and Related Agencies appropriations bill. These budgets and annual appropriations generally are set based on the ten-year rolling average of suppression costs. These appropriations are then transferred into two funds: (1) a Wildfire Management Account, and (2) a reserve fund known as the Federal Land Assistance, Management, and Enhancement Act account, which can only be accessed to transfer funds if certain conditions are met. Wildfire suppression includes all work associated with extinguishing or confining wildfires, including fuel reduction, preparedness, suppression, and site rehabilitation. Congress also has authority to grant additional funds if agency wildfire suppression funding is exhausted in an emergency appropriations bill.

Based on this budget setup, wildfire management has been primarily reactive. This perpetuates the problem of “fire borrowing” (i.e., federal agencies are forced to reallocate funds that would be used for non-fire programs, such as forest management or other fire prevention work, to aid in fire management and suppression). Because the agency “borrows” against its forest management budget to cover wildfire costs, without replacement or other reimbursement of the “borrowed” money, fuel-reduction operations or thinning projects go unfunded or cannot occur because these budgets are reduced and shifted to cover wildfire expenses for that year. Consequently, there are insufficient funds available to complete other proactive timber management projects.

At the state and local level, wildfire suppression funding not shared with the federal government varies state by state but can include general fund appropriations, landowner assessments, assessments on timber harvests, private insurance programs, disaster response accounts, and legal actions. However, the federal government also provides assistance to states, local governments, and private landowners for wildfires that begin on nonfederal lands, and agencies may enter into cost-share agreements with states.

In addition to general appropriations, cooperative wildfire management may be subject to disaster relief under the Robert T. Stafford Disaster Relief and Emergency Assistance Act if the wildfire originates on state lands and threatens damage to state and county infrastructure, and a major disaster is declared by the president upon request by the governor of the affected state. These amounts are separate and distinct from the general budgets of the Forest Service and Department of the Interior and are funded through the Disaster Relief Fund within the U.S. Department of Homeland Security appropriations acts.

Consolidated Appropriations Act of 2018. The 2018 Appropriations Act fundamentally changes the way the Forest Service and other federal agencies pay for wildfire suppression by providing additional funds and budget authority to these agencies by (1) appropriating an additional $500 million above the ten-year average for wildfire suppression for fiscal year 2018 and similar amounts for 2019 under the Stafford Act, and (2) creating a new “disaster cap allocation” for fiscal years 2020 to 2027 at a rate of $2.25 billion in 2020, with annual increases of $100 million to $2.95 billion in 2027.

Under this new budgetary authority, agencies effectively must make a budget request for the baseline fiscal year 2015 funding level and forecasted excess under the disaster cap. If costs exceed this estimate, the agency must seek congressional approval to use additional funds under the disaster cap.

Federal forest management programs. Over the years, Congress has taken several steps to try to address forest management and restoration beyond annual wildfire appropriations, recognizing the positive impact on the environment and economics to a range of beneficiaries.

Healthy Forests Restoration Act of 2003. This statute expedites environmental review under the National Environmental Policy Act (NEPA) for authorized hazardous fuel reduction projects, including thinning projects, establishment of strategic fuel breaks, and prescribed fires. The 2014 Farm Bill expanded these provisions to allow the secretary to work with state officials to designate forest restoration treatment areas within the National Forest to address deteriorating forest health conditions caused by insect infestation and disease, and to include a new categorical exclusion for certain small projects meeting specific location requirements.

Good Neighbor Authority. This allows the Forest Service and Department of the Interior to enter into cooperative agreements or contracts with the states to perform watershed restoration and forest management services on federal public lands.

Consolidated Appropriations Act, 2018. In addition to funding, this Act included several forest management policy reforms, including amendment to existing agency authorizations and regulatory requirements, such as amendments to the Healthy Forests Restoration Act of 2003 to include (1) a categorical exclusion from environmental review under NEPA for certain hazardous fuels reduction projects that are no more than 3,000 acres, and (2) expansion of the type of projects that qualify under the Healthy Forests Restoration Act to include fuel breaks and firebreaks. Likewise, the 2018 Act expanded the Good Neighbor Authority to include road reconstruction, repair, and restoration in the list of permitted activities. The Act also amended the Federal Land Policy and Management Act to include provisions for additional guidance for utility transmission and distribution line vegetation management directed at enhancing grid reliability and reducing wildfire risk and exempted the Forest Service from Section 7 Endangered Species Act consultation for existing land management plans if certain conditions are met.

Green investments, environmental impact bonds, and public-private partnerships. Green investments or environmental impact bonds (EIBs) are investments that focus on projects designed to further the conservation of natural resources, improvements to air and water quality, or other environmentally responsible business practices. EIBs are more narrowly focused than social impact bonds in general, but still cover a range of projects. These investment vehicles are frequently designed to generate both an environmental benefit and a financial return by improving resource management and represent an opportunity for proactive wildfire management.

EIBs commonly involve public-private partnerships in the form of a contract providing that some portion of the repayment to investors be based on a project’s outcome. In the case of forest management, investors could purchase a bond to fund restoration activities and forest management initiatives designed to reduce the frequency and severity of forest fires. Investors also would enter into a contract that provides for additional returns tied to future savings in firefighting costs. This allows a public entity to act proactively in pursuit of environmental benefits where there is a likely financial benefit down the road. Consequently, both public and private entities can make use of EIBs to share the risk and cost of trying a new approach to proactively managing forest resources.

ABA ENVIRONMENT, ENERGY & RESOURCES SECTION

This article is an abridged and edited version of one that originally appeared on page 12 of Natural Resources & Environment, Winter 2019 (33:3).

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By Stephanie M. Regenold and Matthew L. Rojas

Stephanie M. Regenold (sregenold@perkinscoie.com) is a counsel with Perkins Coie LLP in Portland, Oregon. Matthew L. Rojas (mlrojas@perkinscoie.com) is a partner with Perkins Coie LLP in Phoenix, Arizona.