Edward Ring: What Caused the Devastating California Fires and What Could Have Prevented Them? | CLIP

Tell me a little bit about this question of insurance. Why is it that apparently, a number of insurance companies were quitting homeowners in the year prior to these fires happening? How big an issue is that in the aftermath? It's a very big issue and a very complicated issue. The insurance companies got out for a they got out because they weren't seeing any evidence that we were taking the kind of precautions we need to take to mitigate fire risk. And, you know, you can talk about cities that are up in the in the conifer forests in northern California, you know, the city of Paradise actually lost more homes in the fires of 2020. Actually, that was I think that was 2018. They lost more homes than was lost, than were lost in Los Angeles a few weeks ago. Wikipedia says it's only 11,000 homes, but Congressman LaMalfa, who represents that area, says it was 18,000 homes. I tend to believe him. Again, you can't prevent all these fires, but if you manage the forest appropriately, you can you can prevent a lot of them. You know, there's a Shaver Lake, which is administered by Southern California Edison. It's a watershed and a lake, a reservoir in the central Sierras that has 20,000 acres of managed forest owned by the utility surrounding that. And they've been doing what they call total ecosystem management with thinning, burning, and selective timber harvests for the last 40 years. There was a fire that burned 300,000 acres in 2020 in that area, and it literally went all the way around Shaver Lake, and the watershed, the 20,000 acres in Shaver Lake, didn't burn. And the wildlife biologists, and I've talked to the current one and the retired two of them who have managed that property over these these decades, claim that the species counts are actually higher in these managed forests. By managing these forests in a manner that is congruent with what was historically normal in those forests, the species actually thrive more than in, for example, the national forests in California, which are almost completely hands-off. And of course, if you have a catastrophic fire in those forests, the species are, you know, they're wiped out. So that wasn't being done, and the insurance companies looked at the these communities all over and fire, you know, urban wildlife interface areas, wildlife urban interface. They said, there's too much risk. We can't write premiums for these people anymore. And they eventually, you know, looked at the situation in the foothills of Los Angeles and said, these neighborhoods are equally vulnerable. We just, we can't write insurance policies. And the other reason they couldn't write insurance policies is because they weren't permitted to raise their rates by the state of California to recognize the elevated risk. And they also were prohibited from passing on their reinsurance costs because, you know, if they see elevated risk, insurance companies, and we're just, a lot of us are learning this for the first time, but insurance companies themselves have insurance, you know, the reinsurance or the assurers, and those companies would look at the risk profiles in these areas and say, well, we will issue you reinsurance policies, but you're going to have to pay more because we see more risk. And then the state of California wasn't allowing the retail insurance companies to pass those costs on in the form of higher premiums. The state of California also made it difficult for out-of-state insurance companies to come into California and compete. So all of those things combined to make the insurance companies, a lot of them leave. And now, you know, the companies that are left are in a pretty bad position, but less bad because they already canceled some of the policies. Those people had to go to what's called the FAIR program, Fair Access to Insurance Resource, or something like that, set up by the state of California. They estimate the damage from this fire to be about $250 billion. That's the latest number I saw. Who knows? No one knows yet. But we do know how much money they've got in the FAIR program, which is less than $300 million, maybe one-tenth of one percent of the amount of the... Now, FAIR's share of all these claims that are on the way is not 100 percent of the claims, but let's say it's 10 percent of the claims. That's $25 billion, and they've got less than $300 million to work with. So they're in a pretty desperate situation, and there's no way out of it apart from a federal bailout. And hopefully, the federal bailout will have some terms and conditions to reform some of the regulations. If you have elevated risk of fire, then you're going to have more claims. And then if you have elevated, through over-regulation, costs to rebuild, I mean, it costs $400 to $500 a square foot to construct a home in California, whereas in... I think the best state was Arkansas or somewhere like there, it's $150 a square foot. So you also have... And that's all regulation. And maybe they don't have enough regulations in Arkansas, but we have to find some kind of balance. We have to deregulate enough so that people can construct homes at an affordable cost per square foot. And if we did that, not only would we have fewer claims because we'd done something with our wildfire management prevention policies, but the claims themselves would be lower because the rebuilding cost would be lower. So on both ends of that equation, the insurance companies in California had a really challenging situation. So you've started to answer my next question, which is, give me a framework for how to take the next steps. You talked a little bit about how to get insurance companies to be interested again. We talked a little bit about getting rid of some of the red tape and bureaucracy to be able to start building quicker. What else needs to happen to move forward now? When the president visited Palisades on Friday, we were asked to come up with a list of the laws and regulations in California that ought to be scrapped. A lot of people were asked that question. So a lot of people are going to be presenting their list. My list, which is based on getting a hold of land use attorneys and water rights attorneys, builders, civil engineers, foresters, there's like 50 already, 50 recommendations. And there's so many of them. Some of them are explicitly for forestry. Others, like the California Environmental Quality Act, affect everything. You can't just scrap it. So then there's an assortment of ways to reform it. And we can talk about that one in particular, because that's one of the big ones. But again, to try to answer your question in detail, it's an overwhelming list of things that California does that nobody else does. Or maybe Massachusetts does and New York does. But you go to Texas, you want a building permit. I was talking to a controller for a land developer in Texas a few years ago, and he said, yeah, we had to pay, our building permit was $2,500. And we were astonished, because in California, it's anywhere from 50 to 100, or even over $100,000. And we said, $2,500 per home? And he goes, no, no, no, that was for the whole subdivision. And they can put their plans forward in Texas and get approval in weeks, sometimes days. And in California, it can take decades. It can literally take decades to build a subdivision in California. You're litigating, and you're jumping through hoops perpetually, and spending for, if it's a big, let's say it's a subdivision with 600 homes, you will spend decades, and you will spend hundreds of millions of dollars trying to get approval to build it. The list is overwhelming. The California Environmental Quality Act is probably the one that everybody talks about the most. And in 1970, when that was passed, it was the first of its kind in the nation. And all it said was, put together a statement, when you apply for a building, if you have an impact on the environment, describe what it is, and describe what you're going to do about it. And people would turn in two or three page documents with a reasonable assessment of what was going on. And again, this was before we had the genomics, and before we had the chemistry to look for parts per trillion, and little genetic variants in single species management. And they would get approval. But it was a way to make, we're not filling in the bay. We're not knocking down the whole forest. It was reasonable precautions that people had to take. Now, California Environmental Quality Act requires documents that can be volumes. And they have to go through a lead agency. I have a flow chart I posted showing the process. And sometimes there's more than one lead or so-called responsible agency. But you have to get that thing through the California Air Resources Board. You have to get it through the Coastal Commission if it's within five miles of the coast. You've got to go through the responsible agency, maybe the county, so you've got to go there. And you have all these agencies that have to sign off on it. And at every stage in the process, any third party attorney, not somebody with standing in the community who maybe they don't want a subdivision on the hillside next to their home, that person would have standing. No, it can be anybody. There are law firms in other states that, you know, just fly into California because it's such a positive. And this goes back to crony environmentalism. It's a business model. Have you heard of sue and settle? During the Obama administration, that really got out of control where environmentalist groups would sue an environmental protection agency over some alleged misconduct that's going on on a piece of land or with a manufacturing plant or whatever. And the EPA would immediately settle and give them $100 million. You know, it's a business model. And they're not all frivolous. I'm not claiming they are. And I don't want to come across like every single lawsuit is frivolous. But so many of them are. And so this California Environmental Quality Act, for example, could maybe say third parties cannot sue. It has to be just the district attorney in the county or the state's attorney general. And that's it. And limit it to them. That would be a huge reform. So there are ways to try to fix the California Environmental Quality Act. The governor claims he's going to exempt new home building from the California Environmental Quality Act, and that'll help. But there's all kinds of other environmentalist regulations that they're going to have to navigate anyway. So it's going to be interesting to see how that plays out. I don't know if I answered your question. Again, to answer that question in detail would be very difficult. But we, you know, in practice, functionally speaking, we've got to streamline the process to rebuild. And we've got to start managing our forests and our wildlands in a way that is going to reduce the fuel load. And we need to invest in practical water and energy infrastructure in the state instead of all of these heavily subsidized experiments.