PG&E Guilty of Safety Violations Stemming From Fatal Blast

  • U.S. prosecution of utility follows 2010 gas line explosion
  • Fine may be less than 1 percent of $1.13 billion first sought

PG&E Corp. was found guilty of safety violations six years after one of its natural gas pipelines blew up and killed eight people in California.

The verdict reached Tuesday by a San Francisco federal court jury stains the reputation of California’s largest utility, but the maximum fine PG&E faces may only be $3 million after prosecutors backed off a proposal to seek a penalty of as much as $562 million. Jurors found the company guilty of six out of 12 counts.

The verdict, following a week of deliberations, is the latest fallout from a 2010 explosion in San Bruno, a city about 12 miles (19.3 kilometers) south of San Francisco. A 30-inch wide pipeline that was at least 54 years old and located under a street intersection in a residential area blew up, sending a 28-foot, 3,000-pound section of the pipe skyward. The blast left a crater the size of a house, destroying 38 homes and damaging 70 others. Sixty-six people were injured.

PG&E said after the verdict that it’s committed to re-earning its customers’ trust.

“We have made unprecedented progress in the nearly six years since the tragic San Bruno accident and we are committed to maintaining our focus on safety,” the company said in a statement.

California Regulators

Last year, state regulators ordered PG&E to pay $1.6 billion in penalties for failures that led to the explosion. It was the largest fine ever levied against a U.S. natural gas utility. California regulators have also opened a probe of the company’s safety practices.

Since the San Bruno explosion, PG&E replaced its chief executive officer and froze its dividend for six years. It also separated its gas division from its electricity business, provided safety training to managers and tested and replaced pipelines.

The company also paid more than $550 million to settle personal injury and property damage claims.

PG&E was charged in 2014 with 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 accused of keeping incomplete and inaccurate records about the pipeline that exploded and obstructing a federal probe of the explosion.

The jury found PG&E guilty of the obstruction charge and five of the other 11 counts.

PG&E’s Lawyer

Steven Bauer, a lawyer for the utility, said he will ask the judge next week to order that the company be acquitted of all counts.

At the close of the trial, Assistant U.S. Attorney Jeff Schenk told jurors that PG&E put profits over safety by relying on “error-filled” records about the quality of its pipelines, and knowingly pushed the pressure limits of the pipes. After the explosion, PG&E misled federal investigators, he said, citing internal company e-mails and an April 2011 letter to the National Transportation Safety Board.

"PG&E provides gas and electricity to the citizens of Northern California and must adhere to certain safety requirements and financial limitations," U.S. Attorney Brian Stretch said in a statement after the verdict. "We hope that the verdict today insures that PG&E’s management will adhere faithfully to this compact in the future."

The government originally sought a fine of as much as $1.13 billion, but U.S. District Judge Thelton Henderson in December set a limit of half that amount. Then, last Tuesday, as the jury was deliberating, the government abandoned its penalty proposal and agreed to seek no more than $500,000 for each count charged in the indictment of the company. The U.S. did not explain the reason for its retreat.

‘Substantial Reduction’

"Given the substantial reduction of the maximum penalty, the fine probably won’t be all that much of a focus," said Paul Patterson, a New York-based analyst for Glenrock Associates LLC.

Bauer cautioned jurors during closing arguments that the case is “not about San Bruno,” which he called a “terrible accident.” The evidence showed that not every gas leak is dangerous and some of the government’s claims about pipeline safety were exaggerated, he said.

“We have to manage these pipes in reality, not against some ideal standard that no one has ever lived up to,” Bauer said.

The 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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