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PG&E Hit With More Federal Charges in San Bruno Case

A federal grand jury for the Northern District of California on Tuesday issued a superseding indictment charging Pacific Gas and Electric Co. (PG&E) with obstructing a safety investigation and violating the 1968 Pipeline Safety Act (PSA) related to the 2010 rupture of a natural gas transmission pipeline that killed eight people in San Bruno, CA.

The San Francisco-based utility is charged with one count of obstructing a federal agency proceeding and 27 separate counts of violations of the PSA. PG&E faces collective fines of up to $14 million with $500,000 being the maximum fine for each of the 28 counts, but the fines also could be up to twice the gross gain derived from the violations, or twice the gross losses suffered by the victims, either of which could total hundreds of millions of dollars.

PG&E is scheduled to appear in court Aug. 18 before U.S. District Judge Thelton Henderson. The indictment alleges that PG&E derived gross gains of $281 million, and victims in the case suffered losses of approximately $565 million.

PG&E said that "based on all the evidence we have seen to date, we do not believe that the charges are warranted and that, even where mistakes were made, employees were acting in good faith to provide customers with safe, reliable energy."

Federal, state and county legal representatives announced the allegations of obstructing the National Transportation Safety Board (NTSB) investigation that commenced immediately following the Sept. 9, 2010 pipeline failure about 10 miles south of San Francisco.

In April, PG&E pleaded not guilty to 12 federal criminal charges stemming from its actions leading up to the explosion (see Daily GPI, April 21). At that time, PG&E attorneys entered the not guilty pleas for the 12 charges regarding violations of PSA between 2003 and 2010. Those indictments alleged that the company’s failures led to a preventable tragedy.

Based on the allegation in the newest indictment, PG&E obstructed the NTSB investigation by providing one version of a policy on how the utility addressed manufacturing threats to its pipelines, but later withdrew that policy claiming it was offered by mistake and had not been approved. The charges, however, contend that PG&E had in fact operated under the unapproved draft policy from 2009 through April 5, 2011.

"The consequence of this practice was that PG&E did not prioritize as high-risk, and properly assess, many of its oldest gas pipelines, which ran through urban and residential areas," a spokesperson for the U.S. attorney’s office said.

In addition, the 27 counts in the superseding indictments accuse PG&E of "knowingly and willfully" violating the PSA, adding that these charges stem from PG&E's admitted poor record keeping and pipeline integrity management programs. As a result, PG&E allegedly "failed to identify threats to its larger natural gas pipelines and then did not take appropriate actions to investigate the seriousness of threats to pipelines when they were identified."

The counts also allege that PG&E failed to adequately reprioritize and assess threatened pipelines after the pipelines were over-pressurized as required by the PSA and its regulations.

PG&E said in its prepared statement that management was "confident the legal process will ensure all of the facts are fully reviewed." In the meantime, the maligned utility intends to "stay focused on transforming this 100-plus-year-old natural gas system into the safest and most reliable in the country."

As a backdrop to Tuesday's legal bombshell, San Bruno officials on Monday demanded the ouster of the president of the California Public Utilities Commission (CPUC) and are seeking state court sanctions against PG&E for what the city alleges are illegal and improper contacts between the utility and the CPUC.

Last Friday, CPUC said it reached a settlement with San Bruno over a Public Records Act lawsuit the city launched early this year, alleging regulators were withholding documents related to the pipeline rupture (see Daily GPI, July 28).

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