CA Bill Would Make Oil and Gas Companies Liable for Natural Disasters

California has been facing catastrophic wildfires due to poor management and overregulation. But instead of tackling these problems, California lawmakers want to hold oil and gas companies responsible for damages attributed to natural disasters, including high-intensity wildfires, under a new bill. 

Senate Bill 222, billed as the Affordable Insurance and Climate Recovery Act, claims it will improve “insurance affordability in California by shifting the burden of increased insurance costs away from California ratepayers to the fossil fuel companies driving the climate crisis” and would allow “victims of major climate disasters” to “seek damages from fossil fuel companies in court.” 

This would impact California’s Fair Access to Insurance Requirements (FAIR) Plan and likely result in FAIR Plan officials suing “oil and gas companies on behalf of policyholders.”

This bill, if passed, would be the first of its kind codified into law.

The bill’s lead sponsor, Scott Weiner (D), claims fossil fuel companies are intentionally misleading Californians about their products and blames the industry for inviting “climate disasters” like “devastating wildfires, mud slides, sea level rise, and skyrocketing insurance costs.” But there are several glaring problems with Senate Bill 222. 

Blame California Proposition 103, Not Oil and Gas Companies

First, bad policymaking—not the oil and gas industry—is to blame for higher insurance rates. 

Insurance companies have stopped covering certain areas of California, including fire-prone Los Angeles, due to laws like Proposition 103. The 1988 law purports to protect consumers “from arbitrary insurance rates and practices, to encourage a competitive marketplace and to ensure that insurance is fair, available and affordable for all Californians.” Since Prop. 103 became law, the California Department of Insurance enacted a “prior approval” system—where the Insurance Commissioner is required to approve an insurance rate adjustment or rollback—and claims this system saved Californians billions in premiums. 

This, however, has invited a price-controlled market and resulted in major insurance companies pulling out of California altogether—most notably, State Farm’s 2023 pullout from the Golden State. One analysis found 2.4 million policies statewide are “in ZIP codes under nonrenewal moratoria, many of them added following additional catastrophic wildfires in 2020” as of November 2022.

City Journal explains the problem with California’s price-controlled insurance market: “In a functioning market, sellers of goods and services determine prices, and competition keeps prices affordable. In a price-controlled market, the government sets prices, resulting in shortages as companies pull back their offerings or quietly flee the market.”

Without evidence, Senate Bill 22’s sponsor, Scott Weiner, and California Insurance Commissioner Ricardo Lara attribute these insurance company pullouts to climate change and not bad policymaking. That’s where they’re wrong.

It’s Difficult to Sue Oil and Gas Companies on Climate Change Grounds

Legally assigning blame to oil and gas companies for climate change is hard to prove in the courts. 

Earlier this month, the Supreme Court declined to hear a challenge to lawsuits filed against the oil and gas industry claiming they’re liable for financial damage attributed to climate change. And on January 24th, a Maryland judge dismissed two landmark cases that accused the oil and gas industry. 

On Wednesday, a New Jersey court tossed out a similar lawsuit filed by the state attorney general targeting ExxonMobil, Shell Oil, Chevron, BP, ConocoPhillips, and the American Petroleum Institute. 

“There’s a sense of skepticism toward how plaintiffs try to fit climate concerns within established legal frameworks,” writes Pennsylvania State University’s Institute of Energy and the Environment. “Judges often view climate change as a problem best addressed by legislation and regulation, not through broad interpretations of existing laws and rights.”

The Trump administration has indicated forthcoming rulemaking will avoid climate posturing, and Congress is unlikely to pass legislation punishing lawful energy companies that aren’t responsible for natural disasters.

Climate Change Isn’t Top Cause of High-Intensity Wildfires

Holding oil and gas companies liable for natural disasters like wildfires ignores the root causes of high-intensity wildfires. 

The majority of fires are started by individuals, intentional or not—not climate change. 

The Congressional Research Center determined in a 2023 report that 89% of wildfires are attributed to “discarded cigarettes, unattended campfires, burning debris, or through equipment malfunctions.” A University of Montana study published in February 2023 found that 76% of destructive wildfires out West, between 2010-2020, were human-caused and not attributed to oil and gas companies. 

In April 2018, IOP Science—the publishing arm of the Institute of Physics—found the key driver behind high-intensity wildfires is live fuel (53%), followed by weather (23%) and climate change (14%). 

California scientists attribute recent high-intensity wildfires to decades of “fire suppression and the existing debt of wood fuel.” The absence of proactive forest management, namely prescribed burns and live fuel treatment, invited recent catastrophic wildfires out West. 

Conclusion 

California Senate Bill 222 doesn’t address the root causes of high-intensity wildfires and would invite frivolous lawsuits. There’s also little appetite in the courts—even from left-leaning judges—to support cases like these. 

To learn more about wildfire mismanagement, go HERE.