This many years later, there are some great resources on the web. Have you read these:

https://mikethompson.house.gov/pgefvt

https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments

https://www.taxnotes.com/research/federal/irs-private-rulings/information-letters/irs-outlines-basic...

Land doesn't really burn. The value of timber on the land, or other valuable asset on the land, would be part of the consideration for what was lost and reimbursed, vs what was paid over and above this, how this affects basis, the type of property, etc.

You asked about AB1246, but there also is SB1246: "In addition to AB-1249, California also recently enacted the confusingly similarly numbered bill, SB-1246. This new law in California excludes from income any settlement payments received from Southern California Edison in connection with the Thomas or Woolsey fires. Similarly to AB-1249, SB-1246 only affects California income tax. Therefore, fire victims in the Thomas and Woolsey fires must also continue to consider their fire recoveries when they do their federal taxes with the IRS."

Tax bills for how the taxability of settlement funds are treated are not going to control how the asset is handled; that falls under specifics of the property (and if business or personal). For example, you mentioned this is a substantial payment, so it matters if some of it is for injury, sickness or punitive; and if it is higher than FMV, or a consideration for loss of use, value or both.

Both Ca and the IRS have loss/basis guidance. Such as:

https://www.ftb.ca.gov/forms/misc/1034.pdf

https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=170&lawCode=RTC

https://www.irs.gov/taxtopics/tc515

You would break this out into the various parts that need to be handled, if this is more than barren land, in other words, and for Fed, State and County/local considerations. Once you look through the resources, you might find that specific questions get more attention (go ahead and update this existing topic with the applicable new info). There are plenty of preparers that have handled disaster loss, even if not that specific fire.