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Another punishing wildfire season for the Ninth District

Physical damage is above average so far, but less is known about other kinds of impact

October 6, 2021


Tu-Uyen Tran Senior Writer
Another punishing wildfire season for the Ninth District article key image

Article Highlights

  • Most of the acres burned, structures damaged are in Montana, but many are also in Minnesota, South Dakota

  • Homeowners' insurance rates are rising in Montana and other places, in part because of wildfire risks

  • Damages to economy, health, environment are also likely, but not well quantified

Another punishing wildfire season for the Ninth District

As Montana’s wildfire season enters its final stretch, a tally shows that more than 130 buildings and other structures have been destroyed and more than half a million acres of forests and grasslands have gone up in smoke.

It’s been a worse-than-usual season compared with recent years.

In fact, it’s been a worse-than-usual season for most of the Federal Reserve’s Ninth District and the nation, with more structures destroyed and acres burned than the average in the past two decades (see Charts 1 and 2).

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With mass evacuations and burning homes dominating the headlines and airwaves from Minnesota to California, it’s not hard to see why wildfires grab our attention. They make for compelling images, and their destructive power is obvious.

But the damages they inflict go beyond the immediate physical damage. These include economic and environmental harms, impact on respiratory health, and even a decline in housing affordability. And as research shows clearer connections between climate change and more frequent and larger wildfires, it’s useful to understand their wide-ranging impact.

Hot and dry weather

As of the beginning of September, more than 260 structures have been destroyed in the Ninth District, according to data from the National Interagency Fire Center (NIFC). Half were in Montana, with most of the rest in Minnesota and South Dakota. The median annual number of structures destroyed since 1999 is 61.

Wildfires have also burned more than 688,000 acres in the Ninth District states, including parts of Michigan and Wisconsin outside the district, according to NIFC. The median number of acres burned since 2002 is 238,000.*

Where droughts really increase risks is when they follow a wet period that encourages vegetation growth, which provides plenty of fuel when dry weather arrives. This is precisely what happened in Montana this year.

Most of the fires have been in areas where fuel like trees and shrubs are plentiful and the weather has been very dry, such as in the forests of western Montana, northern Minnesota, and South Dakota’s Black Hills. These materials combust easily when lightning strikes or people ignite them intentionally or by accident. This year’s extreme drought in many parts of the Ninth District has exacerbated the wildfire risk. “Tinderbox conditions” is how one forestry official described the drought’s effect on efforts to suppress the Greenwood fire in northern Minnesota.

It's worth noting that droughts don’t always increase wildfire risks. If droughts last a long time, they can suppress vegetation growth and reduce risks, according to Where droughts really increase risks is when they follow a wet period that encourages vegetation growth, which provides plenty of fuel when dry weather arrives. This is precisely what happened in Montana this year.

In the Ninth District, Montana’s and South Dakota’s populated areas face the greatest risk of wildfire because of a combination of proximity to fuel sources and the higher probability of fire; this probability is calculated using weather, terrain, and ignition patterns in past wildfires. According to a U.S. Forest Service assessment, Montana’s risk is the eighth highest in the nation, mostly in an arc from the northwestern corner of the state to Ravalli County in the south. South Dakota’s risk is the 10th highest, mostly in the southwestern part of the state.

One reason why is the number of homes built in the wildland-urban interface (WUI), where urban areas meet and merge with wildlands. Homes in these areas are at higher risk of wildfires because they’re very close to the dense vegetation that provides fuel for fires. Homes are being built in the WUI all over the United States, but fire risks do go up when this occurs in fire-prone areas. Based on a 2010 estimate, the latest available, 64 percent of Montana homes are in the WUI, the third highest among Western states. In South Dakota, it was 27 percent of homes.

Property damage, firefighting costs

Wildfires can inflict a variety of economic damages, some of which are simple to tally because they are paid out by groups involved.

The cost of wildfire suppression is an example. So far in 2021, that cost has reached $268 million in Montana, five times what was spent in the previous year, which was also a major year for wildfires, with more structures destroyed but half as many acres burned.

Federal agencies, such as the U.S. Forest Service, are paying the bulk of firefighting costs, but states, such as Montana, are paying more too. From July, the start of Montana’s fiscal year, to the beginning of September, the state paid $51 million, according to the Department of Natural Resources and Conservation. Adjusted for inflation, this is the fifth-highest amount over the past two decades, and the wildfire season isn’t over yet.

For comparison, the median amount spent each year since fiscal year 2000 is $14 million.

Wildfires are causing more property damage as well, unsurprising given construction in the WUI. According to data from AON, a global risk-mitigation firm, insured losses from all U.S. wildfires have grown significantly over just the past decade. Losses exceeded $13 billion in 2017, 2018, and 2020, far above the annual median of $1.2 billion. These losses are still dwarfed by those from severe weather and hurricanes, but they have grown. Unfortunately, data on property damage from wildfires at the local level are much less available.

A side effect of this property damage is the rising cost of insurance.

Kerri Emmons, CEO of Independent Insurance Agents of Montana, said agents have told her that insurance rates were rising in areas at high risk of wildfires.

There have been instances of carriers refusing to write new policies or increase coverage in ZIP codes hard hit by wildfires, according to the Montana insurance commissioner’s office. In response to homeowner complaints, the commissioner issued memos in 2017 and in 2019 reminding carriers they’re not allowed to do this.

More commonly, carriers use services that rate wildfire risks to individual properties, such as the presence of vegetation and access routes for firefighters. Verisk, a firm providing such a service, reported that Montana has the greatest number of properties at high and extreme wildfire risk as a percentage of all properties among Western states.

Insurance premium data for areas at high risk of wildfire aren’t publicly available. But average premiums for all Montana homeowners have risen faster than the national rate, according to data from the National Association of Insurance Commissioners. Among factors that affect the rate are wildfire risks along with hail risks and housing costs. From 2004 to 2018, the average Montana homeowner’s premium adjusted for inflation increased by 41 percent. The national average increased 29 percent.

Impact on tourism, health

Broader economic damages, such as impact on tourism, aren’t so simple to tally. They can only be estimated.

In 2017, when severe wildfires burned near some of Montana’s most popular tourist attractions, the University of Montana’s Institute for Tourism and Recreation Research undertook a survey of present and past out-of-state visitors. Among respondents, 8 percent reported canceling their plans because of wildfire and 7 percent said they came but cut their trip short.

“A fair amount of people move to Montana after having visited Montana, or they started a business here. If you’re coming into the state and having a rather smoky experience, that has the potential for long-term impacts.”

In a separate survey, the institute found that expenditures by vacationers for that whole year fell 5 percent compared with the prior year when there were far fewer wildfires.

Jeremy Sage, the institute’s director, said he would have expected the 2021 tourist season to go badly as well but for the pandemic, which impeded international travel and made outdoor recreation more popular than indoor attractions. “We did have quite a bit of smoke for quite some time, and it really started early. But with COVID as a backdrop, we’ve actually seen a large uptick in visitation,” he said. “People try and seek out these more open-space destinations.”

Air quality and its impact on health is another kind of wildfire damage that’s not so simple to add up.

So far this year, the Montana Department of Environmental Quality has announced five times that air quality in parts of the state reached “unhealthy levels” because of wildfires. The most recent announcement in early September affected 20 western counties. “Exposure to wildfire pollutants can irritate lungs, cause inflammation, alter immune function, and increase susceptibility to respiratory infections, including COVID-19,” the announcement said.

Data on the economic impact of wildfire-related illnesses are not widely available outside a few case studies. The estimated costs vary depending on the economic models used, the factors considered by those models, and the area studied. One study of a 2001 fire near Edmonton, Alberta, estimated the impact at $11.7 million, while a study of a 2008 fire in eastern North Carolina estimated the impact at $48 million. The cost of hospitalization, days of work missed, tended to be relatively small. What pushes the impact to many millions of dollars is the increased death rate from exposure to smoke, a connection scientists are beginning to make.

Climate change

Whatever the total impact of wildfires turns out to be, it’s likely to get worse with climate change. Already, one study found that man-made climate change doubled the area burned by wildfires between 1984 and 2015, or an additional 10 million acres. Other studies have shown that, as the climate becomes warmer and drier across the West, it is expected to bring more frequent and severe wildfires.

In Montana, Sage, the tourism expert, said he worries the wildfire trend will have much broader implications for the state.

“A fair amount of people move to Montana after having visited Montana, or they started a business here,” he said. “If you’re coming into the state and having a rather smoky experience, that has the potential for long-term impacts."


* Data for structures destroyed are derived from three sources: The 2021 year-to-date figure is from the NIFC website; 2006 to 2020 figures are from Headwaters Economics; 1999 to 2005 figures are from federal data compiled by Lisa A. St. Denis et al. Data for acres burned are derived from the NIFC website.

Tu-Uyen Tran
Senior Writer

Tu-Uyen Tran is the senior writer in the Minneapolis Fed’s Public Affairs department. He specializes in deeply reported, data-driven articles. Before joining the Bank in 2018, Tu-Uyen was an editor and reporter in Fargo, Grand Forks, and Seattle.