NiSource Inc. subsidiary Columbia Gas of Massachusetts (CMA) has agreed to plead guilty and pay a $53 million fine in connection with the series of deadly natural gas explosions that rocked three communities north of Boston in September 2018.
Hours after the U.S. Attorney for the District of Massachusetts announced the settlement, New England utility Eversource Energy agreed to pay $1.1 billion to acquire CMA from NiSource.
The explosions killed one man and destroyed homes and businesses in Lawrence, Andover and North Andover in the Merrimack Valley, near the border with New Hampshire.
The fine is the largest criminal penalty ever imposed under the Pipeline Safety Act, and equal to twice the amount of profits that CMA earned between 2015 and 2018 from its Gas System Enhancement Plan (GSEP), prosecutors said.
The plea agreement also mandated that NiSource undertake its best reasonable efforts to sell CMA and cease all pipeline operations in Massachusetts. CMA currently serves 330,000 natural gas customers in the state, while Eversource serves 300,000 natural gas customers and 1.5 million electricity customers.
Adding to the intrigue of the transaction, which the parties expect to close in the third quarter, is a recently announced pledge by Eversource to achieve carbon neutrality in its operations by 2030.
“The energy company will extend the same carbon reduction initiatives in the extended service territory of Columbia Gas in order to achieve that aggressive goal,” Eversource said.
Under the terms of the plea deal, NiSource agreed to forfeit any profit earned from the sale of CMA and “implement each of the safety recommendations from the National Transportation Safety Board (NTSB)” that resulted from the tragic incident.
Eversource, meanwhile, said it expects the transaction to be accretive within a year after completing the transaction.
Matching NTSB findings, Massachusetts prosecutors claimed the incident was caused by “the over-pressurization of a low pressure gas distribution system in South Lawrence,” which led to multiple fires and explosions in the three communities. CMA “recklessly disregarded a known safety risk related to regulatory control lines -- sections of pipe connected to regulator stations that helped monitor and control downstream gas pressure,” prosecutors said.
“By at least 2015, according to an internal company notice, CMA knew that the failure to properly account for control lines in construction projects could lead [to] a ‘catastrophic event,’ including fires and explosions.” The oversights occurred during the South Union Street pipe replacement project that began in Lawrence in 2016.
The charging documents also stated that, rather than heeding the risks related to control lines, CMA “instead focused on the timely completion of construction projects to maximize earnings under the company’s GSEP.”
In addition to CMA, NiSource’s subsidiaries include gas and electric utilities in Kentucky, Maryland, Ohio, Pennsylvania, Virginia and Indiana.
“We hope that Columbia Gas of Massachusetts’ acknowledgement of its misconduct, through its agreement to plead guilty today, brings some measure of justice to those who suffered so much, both physically and mentally,” said the Federal Bureau of Investigation’s Joseph Bonavolonta, special agent in charge, Boston Division.
“No amount of money can make up for the disastrous gas explosions in the Merrimack Valley that leveled homes, displaced thousands of families and caused a heartbreaking loss of life. But today’s settlement is a sobering reminder that if you decide to put profits before public safety, you will pay the consequences.”
A plea hearing had not been scheduled, prosecutors said.
NiSource last July announced a $143 million settlement of all class action lawsuits related to the incident as part of the roughly $1 billion dedicated to address the needs of affected parties.