The owners and managers of the land, north of Lake Tahoe, where the fire started, are to pay US$7m, and the logging contractor working at the site will pay US$1m.

The fire charred 65,000 acres.

The record settlement has heightened the debate over how much government agencies should be able to collect for wildfire damage caused by negligence.

Federal prosecutors say the fire was caused by the contractor’s bulldozer hitting a rock and creating sparks. Sierra Pacific has denied responsibility and accused federal prosecutors of targeting the company because of its financial reserves.