Thursday, October 16, 2014

PG&E Fined $1.4 billion For San Bruno Natural Gas Explosion

After nearly four years of investigation and hearings, Administrative Law Judges for the California Public Utilities Commission (CPUC) have recommended that PG&E be fined $1.4 billion for a series of violations of State and Federal law related to a gas leak, explosion and fire in San Bruno, California in 2010 that result in 8 deaths, dozens of injuries and extensive property damage. The CPUC also proposed fines associated with PG&E’s alleged failure adequately to maintain its gas facilities and to maintain records over several decades.
In four separate opinions, the ALJs found that PG&E committed 3,708 violations of various provisions the Code of Federal Regulations.  According to the ALJs’ orders, many of these violations occurred over a number of years, for a total of 18,447,805 days in violation. The $1.4 billion penalty, plus other amounts that the CPUC previously ruled must come from PG&E shareholders for expenditures to improve the safe operation of natural gas pipelines  brings the total of fines and required expenditures to more than $2 billion. PG&E has disclosed that the pre-tax impact of the fine on the Company, with related costs would be $4.75 billion.[
In addition to the civil penalties that have been proposed, PG&E has been accused in Federal indictments of criminal violations that would potentially expose the company to an additional $1.13 billion in fines if the company is convicted. The Company has pled not guilty to the criminal charges. A federal judge rejected PG&E’s motion  to remove reference to the San Bruno explosion from the criminal indictment against the company, ruling that the incident is a permissible count in  the government’s case.
The National Transportation Safety Board (NTSB) issued a Pipeline Accident Report following the tragedy finding:
the probable cause of the accident was the Pacific Gas and Electric Company's (PG&E) (1) inadequate quality assurance and quality control in 1956 during its Line 132 relocation project, which allowed the installation of a substandard and poorly welded pipe section with a visible seam weld flaw that, over time grew to a critical size, causing the pipeline to rupture during a pressure increase stemming from poorly planned electrical work at the Milpitas Terminal; and (2) inadequate pipeline integrity management program, which failed to detect and repair or remove the defective pipe section.
Contributing to the accident were the California Public Utilities Commission's (CPUC) and the U.S. Department of Transportation's exemptions of existing pipelines from the regulatory requirement for pressure testing, which likely would have detected the installation defects. Also contributing to the accident was the CPUC's failure to detect the inadequacies of PG&E's pipeline integrity management program.
The ALJ’s penalty order found a staggering range for potential fines under California’s statutes:
[T]he range of potential fines that could be imposed in light of the violations is from $9.2 billion to $254.3 billion. Nonetheless, the amount of the penalty to be imposed must be significantly decreased in consideration of PG&E’s financial resources.
The ALJs’ fines and remedies order found that the CPUC is required by California law to remit any penalty portion of its order to the General Fund. PG&E argued that such a result is only necessary resulting from a civil action in state Court.  (Martens Law)

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