April 2 (Bloomberg) -- PG&E Corp., owner of California’s largest utility, was charged with 12 pipeline safety violations by the U.S. government for a 2010 natural gas explosion that killed eight people and left a crater the size of a house.
PG&E was charged in a grand jury indictment filed yesterday in federal court in San Francisco with knowingly and willfully violating the Natural Gas Pipeline Safety Act by failing to test and assess unstable pipelines to determine whether they could fail. The company was also charged with keeping incomplete and inaccurate records about the pipeline that exploded.
This is only the second time the federal government has criminally charged a company with pipeline safety violations since the law was enacted in 1968, said Carl Weimer, executive director of the Pipeline Safety Trust.
The advocacy group was formed after a 1999 pipeline explosion in Bellingham, Washington, killed three teenagers and led to criminal charges against Olympic Pipe Line Co., the first criminal case.
Such cases are brought when the evidence against a company suggests “they didn’t just mess up, they messed up on purpose,” said Weimer by phone today.
“One of the reasons you don’t see them very often is it’s pretty hard to prove that the company was knowingly breaking the law,” he said.
The indictment underscores increased scrutiny on pipeline and utility companies over the safety risks of aging pipes running beneath U.S. cities.
Federal investigators are studying whether a leaking gas main operated by Consolidated Edison Inc. contributed to an explosion in New York City last month that also claimed eight lives.
The charges come 3 1/2 years after the explosion in San Bruno, a city with 42,000 residents about 12 miles (19.3 kilometers) south of San Francisco.
A natural-gas pipeline that was at least 54 years old, 30 inches (76.2 centimeters) in diameter and located under a street intersection in a residential area, exploded just after 6 p.m. on Sept. 9, 2010. It sent a 28-foot section of pipe weighing 3,000 pounds flying through the air, fueled by blowing natural gas, according to a state report.
The maximum penalty for each charge is $500,000 or a fine based on the gain the corporation made in violating the law or the loss to victims.
“The citizens of Northern California deserve to have their utility providers put the safety of the community first,” U.S. Attorney Melinda Haag in San Francisco said in an e-mail.
Based on faulty information about the San Bruno pipeline, San Francisco-based PG&E chose a method of assessing its integrity that tested only for corrosion on the outside, not manufacturing or construction defects on the inside, according to the indictment.
“Pacific Gas and Electric Co. knowingly and willfully failed to gather and integrate existing data and information on a line, specifically Line 132, that could be relevant to identifying and evaluating all potential threats,” according to the indictment. Segments of Line 132 ruptured in the blast.
PG&E Chairman and Chief Executive Officer Tony Earley yesterday again apologized for the explosion.
“We’ve taken accountability and are deeply sorry,” Earley said in an e-mail. “We have worked hard to do the right thing for victims, their families and the community and we will continue to do so.”
The company believes its employees didn’t intentionally violate the pipeline safety law, it said in a statement.
“Even where mistakes were made, employees were acting in good faith to provide customers with safe, reliable and affordable energy,” Pacific Gas said.
The company said in a regulatory filing last week that it expected the charges after discussions with Haag’s office about a settlement broke down.
“PG&E knowingly and willfully failed to identify and evaluate threats to its transmission pipelines,” California Attorney General Kamala Harris, whose office joined with federal prosecutors in the explosion investigation, said in a statement. “When allegedly faced with evidence of transmission line problems, PG&E knowingly and willfully chose not to assess and remediate them.”
The explosion in San Bruno created a crater about 72 feet (21.9 meters) long by 26 feet wide, completely destroyed 38 homes and damaged another 70. Sixty-six people were injured.
Federal and state regulators investigating the blast determined that inadequate quality controls, deficient management and a corporate culture that emphasized profits over safety caused the accident, which has cost PG&E’s shareholders $1.4 billion in mandated safety work and other expenses.
The explosion precipitated the retirement of former PG&E Chairman and CEO Peter Darbee and forced the company to freeze its dividend.
A $2.25 billion penalty for the explosion proposed by California regulatory staff could force the company into bankruptcy, Early has said.
Since the San Bruno accident, PG&E has replaced 127 miles of pipeline in its system, retrofitted 268 miles more to allow for in-line inspections and opened a “state-of-the-art” gas control center, the company said. The system has 6,750 miles of gas transmission pipe.
The Bellingham explosion resulted in $21 million in criminal fines against Olympic Pipe and Shell Pipeline Co. and more than $92 million in federal civil fines. Company employees served jail time for unsafe practices, according to the Pipeline Safety Trust, which was created as a result of the tragedy.
The California case is U.S. v. Pacific Gas and Electric Co., 14-cr-00175, U.S. District Court, Northern District of California (San Francisco)
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