PG&E Gas Line Blast Kills at Least Four, Destroys 38 Homes

A PG&E Corp. pipeline exploded yesterday in the San Francisco suburb of San Bruno, California, killing four people and destroying 38 homes in the utility owner’s second deadly natural-gas blast in two years.

The pipeline ruptured about 6 p.m. local time, starting a fire that spread rapidly over an area of 15 acres, Kelly Huston, a spokesman for California’s emergency agency, said in an interview on KGO Radio in San Francisco. The devastated neighborhood is about two miles (3.2 kilometers) west of San Francisco International Airport.

“I thought it was a plane crash,” Karen Yee, who lives seven houses from the explosion, said in an interview. “I looked at it in disbelief, and said, ‘Is it coming this way?’” Yee and her husband said they didn’t know the condition of their house this morning.

In addition to the four deaths, three people were critically injured with third-degree burns, said Lieutenant Governor Abel Maldonado, who is serving as acting governor of the state while Republican Governor Arnold Schwarzenegger is in Asia. Another 52 fire victims got hospital treatment, and four firefighters were taken to the hospital, he said.

PG&E dropped 8.4 percent to $44.21 as of the 4 p.m. close of New York Stock Exchange composite trading. The drop, PG&E’s biggest since October 2008, wiped out more than $1.5 billion in market value. The company’s $3 billion of 6.05 percent bonds due in 2034 fell 3.9 cents to 112.1 cents on the dollar, the biggest decline since February 2009, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Accountability Question

The company has $992 million in liability insurance for damages caused by fire, according to a public filing today. Financial results “could be materially adversely affected” if, after the explosion is investigated, insurance is insufficient or unavailable, PG&E said.

“If it is ultimately determined that we were responsible for the cause of the incident, we will take accountability,” PG&E said in an e-mailed statement.

The blast severed water and sewer mains. Investigation of the cause can’t begin until the water main is shut, sewer lines are plugged and water is pumped out of the crater formed by the explosion, San Bruno Fire Chief Dennis Haag said.

The National Transportation Safety Board will oversee all probes into the incident. The California Public Utilities Commission said in a statement yesterday it has investigators on the scene and will “gather all relevant information about the incident and obtain information from PG&E.”

Casualty Search

A partial search of homes destroyed turned up no fatalities beyond the four reported earlier today, and no one from the affected neighborhood has been reported missing, Haag said at a press conference this afternoon near the explosion site, 10 miles (16 kilometers) south of San Francisco. Rescue dogs searched 75 percent of the homes destroyed in the blast.

“It’s very encouraging at this point,” Haag said. Rescue teams will search the balance of the burned-out homes once they are cool enough for the dogs to enter, he said.

The site has been declared a crime zone, San Bruno Police Chief Neil Telford said at the press conference.

The damaged section of the 30-inch (76-centimeter) transmission pipeline was shut off within hours of the blast, Chris Johns, president of PG&E’s Pacific Gas & Electric utility, told reporters this morning.

The pipe that burst is buried about three feet (one meter) underground, Johns said. The utility had no crews working in the area and is investigating whether a third party may have been digging there, he said.

Hospitalized Victims

A December 2008 gas leak at a home served by PG&E caused an explosion and fire that killed one person and destroyed a house in Rancho Cordova, California. Government investigators said the cause of that incident was use of the wrong pipe.

PG&E promised faster and more effective response to customer reports of gas odors after that incident, Mark Toney, executive director of The Utility Reform Network, said today in an e-mailed statement.

“The previous explosion in Rancho Cordova should have been a wake-up call, not only to PG&E but to the California Public Utilities Commission,” Toney said.

A gas transmission pipeline owned by El Paso Corp. ruptured in 2000 near Carlsbad, New Mexico, killing 12 campers.

Transmission Lines

There have been no fatalities related to gas transmission pipelines in the past two years, according to the Pipeline and Hazardous Materials Safety Administration. There were about 306,000 miles of gas transmission pipelines in the U.S. at the end of 2008, according to the U.S. Energy Information Administration.

Ruptures of gas-transmission conduits are infrequent, said Richard Kuprewicz, president of pipeline safety consulting firm Accufacts Inc. in Redmond, Washington. Transmission pipelines are larger than the distribution lines that carry gas to homes.

Kuprewicz said the ruptures tend to occur in rural areas and can cause significant damage because of the pressure and volume of gas in the lines.

“In microseconds the pipe, if it goes to rupture, shrapnels into many pieces and it’ll just toss out metal fragments all about,” he said. When the gas ignites, the explosion often creates a crater, he said.

Windows Shook

In the San Bruno blast, it’s too early to know the extent of damages, culpability for the rupture or costs to PG&E, said Phil Adams, an analyst at Gimme Credit Inc. in Chicago, wrote today in a note to clients. Another unknown is how seamlessly the insurance recovery process will be, he said.

San Bruno had 44,213 residents in 2008, according to estimates provided by the Metropolitan Transportation Commission and the Association of Bay Area Governments. Median family income was $84,978 in the past 12 months, and the median price of an owner-occupied home was $667,400 in the years 2006 to 2008, according to the data.

Maria Reynoso was attending an open house at her daughter’s school 200 feet away from the blast. “The windows, the classrooms, everything was shaking,” she said in an interview. “We went to the car and were able to burn rubber away from there.”

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Katarzyna Klimasinska in Houston at kklimasinska@bloomberg.net.

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