U.S. settles with timber firm over 2007 fire north of Lake Tahoe

SACRAMENTO — Federal prosecutors Tuesday announced a record $122.5-million settlement for one of the most devastating wildfires in state history, which charred 65,000 acres in Northern California in 2007.

The deal, which includes $55 million in cash and $67.5 million in land to be turned over to the federal government, is the result of a closely watched legal battle between federal prosecutors in Sacramento and Sierra Pacific Industries, the state’s largest timber company.

The case has been a flash point in a debate over how much money government agencies should be able to collect for damage in wildfires caused by negligence. A parallel political fight is still playing out in the state Capitol.

Company officials said the settlement reinforces the need for a new law, supported by Gov. Jerry Brown, to curb what they characterize as overzealous prosecutions.

Prosecutors’ “focus should be on finding the truth, not on burying people with claims for damages that put at risk the existence of companies and jobs in California,” said William Warne, a lawyer for Sierra Pacific.

The federal government, including members of President Obama’s Cabinet, have lobbied against the state proposal, which would limit the amount of money that government agencies — but not private citizens or companies — could sue for after wildfires. Federal officials say the proposal would cut off money needed to rehabilitate priceless natural habitats.

The measure would not apply to pending lawsuits. Lawmakers are expected to consider it next month when they return from their summer recess.

Under the settlement announced Tuesday, Sierra Pacific will turn over 22,500 acres and pay $47 million of the cash settlement. The owners and managers of the land north of Lake Tahoe where the Moonlight fire started will pay $7 million, and the logging contractor working at the site will pay $1 million.

Federal prosecutors say the contractor was using a bulldozer and hit a rock, which caused sparks to fly and ignite the fire. Sierra Pacific has denied responsibility and accused federal prosecutors of targeting the company because it has deep pockets.

chris.megerian@latimes.com