Operating Practices Violations: PG&E Braces For Federal Criminal Charges

PG&E Co. and its parent corporation announced today they expect to be hit with federal criminal charges related to a fatal pipeline explosion in San Bruno in 2010.

The San Francisco-based utility and its holding-company parent, PG&E Corp., said in a news release that they disclosed their anticipation of charges in a document filed with the U.S. Securities and Exchange Commission today.

The explosion of a PG&E natural gas pipeline and subsequent fire in San Bruno on Sept. 9, 2010, killed eight people, injured 58 others, destroyed 38 houses and damaged 70 other buildings, according to the California Public Utilities Commission.

PG&E officials said they had been in discussions with prosecutors in the U.S. Attorney’s Office to reach what they called “a fair resolution” of a federal investigation, but they now expect criminal charges.

The charges, if filed, would allege that PG&E’s past operating practices violated the federal Pipeline Safety Act in areas such as record keeping, pipeline integrity management and identification of pipeline threats, the companies said.

A spokeswoman for U.S. Attorney Melinda Haag could not be reached for comment this afternoon.

PG&E officials said they believe criminal charges are not warranted and that employees did not intentionally violate the pipeline safety law.

“San Bruno was a tragic accident that caused a great deal of pain for many people. We’re accountable for that and make no excuses. Most of all, we are deeply sorry,” PG&E Corp. Chairman and Chief Executive Officer Tony Earley said in a statement.

“We have worked hard to do the right thing for victims, their families and the community, and we will continue to do so,” Earley said.

San Bruno Mayor Jim Ruane said the city commends the diligence of federal prosecutors in investigating the case.

“I’ve always said that the death of eight people at the hands of a utility that wasn’t minding its business was a criminal event in my mind,” Ruane said.

The National Transportation Safety Board concluded in a 2011 report that the San Bruno explosion resulted from a leak in a poorly welded seam in the pipeline, which was incorrectly listed in PG&E records as being seamless.

“The pipeline was not properly inspected or maintained. They really didn’t know what they had in the ground,” Ruane alleged.

“Spending billions going forward does not pay for what was caused,” the mayor asserted.

The state PUC is currently considering a proposal by its safety division staff to impose a $2.25 billion penalty on PG&E, of which $300 million would be a fine that would go into the state’s general fund. The remainder could pay for pipeline repair and upgrade costs.

Earley, who was brought in to lead the corporation after the explosion, said PG&E has committed a total of $2.7 billion in shareholder money to fund safety-related work.

The utility operates 6,750 miles of natural gas transmission pipelines serving 4.4 million households and businesses in northern and central California.

It has completed nine of 12 safety projects recommended by the NTSB, converted more than 3.5 million paper records to digital form in a geographic information system, replaced 127 miles of pipeline and retrofitted 268 other miles to allow in-line inspections, Earley said.

PG&E has also settled claims amounting to nearly $500 million with San Bruno victims and families, established a $50 million trust for the city’s recovery costs and contributed $70 million to support the city’s and community’s recovery efforts, the chairman said.

Julia Cheever, Bay City News

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