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Cost of Western blazes spreads like wildfire

Thursday, 22 Aug 2013 | 11:05 AM ET
A house is fully engulfed with flames in the midst of the Black Forest Fire northeast of Colorado Springs, Colo.
Helen H. Richardson | The Denver Post | Getty Images
A house is fully engulfed with flames in the midst of the Black Forest Fire northeast of Colorado Springs, Colo.

When the last embers cool on the wildfires now spreading across more than 750,000 acres in 10 Western states, the economic toll could be 30 times higher than the cost of simply dousing the fires, a major issue as cities and states struggle with shrinking budgets.

As the cost of fighting fires keeps rising, the effort is diverting funds from other forest management programs designed to reduce fire risk. And experts say the economic damage is being vastly underestimated in the initial headline numbers for the fires raging through an area out West that is the size of Rhode Island.

Beyond the financial cost of the firefighting effort, the human toll this fire season has been unusually high as well. So far 30 wildland firefighters have died in 2013, including 19 elite fighter fighters trapped last month in a 13-square-mile blaze in Yarnell, Ariz.

Massive wildfires in Idaho
NBC's Miguel Almaguar reports the wildfire in Idaho is threatening more than 5,000 homes.

More than 50 large fires were burning this week. So far this season, more than 260 have already been contained, according to the National Interagency Fire Center. The center this week raised the nation to the highest preparedness level for the first time in five years.

The latest outbreak included a California inferno on the outskirts of Yosemite National Park that threatened more than 2,000 buildings and forced the evacuation of camps and remote rural homes. In central Idaho, a 100,000-acre fire forced the evacuation of 1,250 homes in the Idaho resort areas of Ketchum and Sun Valley.

With new fires breaking out this week, and nearly 18,000 people at work containing the blazes, the fire center was struggling to fill all requests for crews and equipment from areas where fires were burning out of control. As of this week, the total spending so far this year topped the $1 billion mark.

Last year, the bill for wildland firefighting topped $1.9 billion—the second highest on record—as the relentless pace of development in fire-prone areas continues to expand the area at risk and tax already stretched resources.

Since 1960, the cost to federal, state and local governments to fight wildland fires has also mushroomed from less than $100 million to more than $3.3 billion, according to a report by a panel of public and private groups working to try to better manage the risk of wildland fires.

Those costs are increasingly siphoning money from forestry management programs—like clearing timber and brush in high-risk areas—geared toward reducing the scope and severity of fires, according to Caitlyn Pollihan, executive director of the Western Forestry Leadership Coalition, a group of state and federal forestry management agencies.

"Federal budgets have not increased," she said. "So over time the suppression costs have taken more of the bigger piece of the pie, leaving less for forest management activities and other preventive work."

This year, with money running out at the peak of the firefighting season, the U.S. Forest Service is taking $600 million from timber, recreation and other programs to fill the gap. A spokesman said the agency had enough money to cover just a few days of firefighting costs before making the transfer.

The government has repeatedly diverted funds designated to thin national forests to prevent wildfires, despite a 2009 law known as the FLAME Act that dedicated funds for that purpose.

And the long-term cost of shortchanging those forest management programs is much bigger than the annual firefighting cost of about $1.5 billion, a figure that badly understates the true cost of wildland fires, according to the coalition.

Based on a review of detailed studies of the long-term economic impact of past fires, the group found that the total economic impact of a wildland blaze can run to as much as 30 times the cost of putting it out.

Beyond the immediate expensive of repairing and replacing homes and other structures damaged or destroyed by fire, a full accounting of the long-term impact includes a host of other costs.

Direct losses—from crop or property damage to lost business—are fairly clear cut and often covered by insurance. Last year, for example, some 38 catastrophic wildfires in the U.S. produced $1.1 billion in economic losses—about half of which were covered by insurance, according to estimates in a January 2013 report by Munich Re.

(Read more: 'Monster' California wildfire reaches ocean, pushes toward Malibu)

Uncovered losses represent more than the cost of repairing or replacing an uninsured burned home or other structure. Homes that remain standing in badly burned neighbors may lose property value. A business near recreational parklands may survive the fire but succumb to the impact of lost tourist traffic.

Wildfires also produce a series of indirect, short-term impacts that are often overlooked in a full accounting of the cost. Health-care costs from people breathing smoke-filled air or the loss of safe drinking water are not usually accounted for, according to the coalition report.

Long-term impacts also can be more difficult to tally in the case of wildfires because environmental damage can last for years or decades. Scorched landscapes stripped of vegetation are much more prone to flooding, for example, increasing the risk of additional damage that may not be included in the initial assessment of a fire's impact.

One thing is clear: The overall economic damage inflicted by U.S. wildfires is increasing rapidly—largely because the pace of development in fire-prone areas shows no signs of slowing. Of the roughly 600 million acres of federal, state, local government and private wildlands near urban areas—the so-called wildland urban interface—about a third is already developed.

Since 1990, the rest has been built out at rate of about 2 million acres per year—or about 3 acres per minute, according to a 2008 report by a panel of public and private groups working to try to better manage the risk of wildland fires.

(Read more: Desire for wild spaces ignites US fire insurance hazard)

Of the 17 million homes built between 1990 and 2008, some 10 million were constructed in wildlands near urban areas, according to Corelogic, a real estate research firm. Today, about 40 percent of the 115 million single-family homes in the U.S. are in areas prone to fire risk. More than 740,000 of those with an estimated value of more than $136 billion are at "high" or "very high" risk, the firm found.

The result has been a sharp increase in the number of homes consumed by wildfire. As recently as the 1960s, roughly 200 homes a year were lost to wildfires, inflicting about $3.5 million in insured damage. By the 2000s, that number had jumped to an average of 2,700 homes costing roughly $800 million a year in losses.

And that rising cost of fire-damaged homes further boosts the cost of insurance premiums for all homeowners living in wildland areas, according to Robert Hartwig, president of the Insurance Information Institute.

"To the extent that more structures are being built in vulnerable areas, that is leading to higher insurance cost for people who live in those areas," he said. "The cost of insuring property in most parts of the country is rising because of an escalation of natural disasters."

—By CNBC's John W. Schoen. Follow him on Twitter @johnwschoen.

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