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Pipeline Operator Fined $38M in Blast

Tuesday, December 6, 2011

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A natural-gas explosion attributed to thin pipeline walls, inappropriate pipe usage and other violations has prompted a $38 million state fine against Pacific Gas & Electric Co.

The California Public Utilities Commission (CPUC) approved the fine and settlement Thursday (Dec. 1) in the Christmas Eve 2008 explosion and fire that killed one man and injured five people in Rancho Cordova, CA.

 A Rancho Cordova home was flattened by the explosion on Christmas Eve 2008.


A Rancho Cordova home was flattened by the explosion on Christmas Eve 2008.

The safety fine is the largest ever levied by CPUC and could signal even larger penalties when the commission weighs PG&E’s fine for the much larger 2010 blast and fire that killed eight people and leveled a neighborhood in San Bruno, CA.

Safety Law Violations

The Commission determined that PG&E had violated several safety laws in the Rancho Cordova explosion. Investigators blamed the blast on faulty repairs by PG&E that allowed gas to leak.

According to the Commission, violations include:

• Installing pipe in September 2006 that was not authorized for gas service;

• Lack of pressure testing, as required by law, before restarting gas service;

• Using pipe with thinner walls than allowed by gas piping specifications;

• Failure to follow procedure when the utility discovered the too-thin pipe;

• Failure to administer drug and alcohol tests to utility employees on the job at the time; and

• An “unreasonably delayed and not effective” response to a neighbor’s call reporting an outdoor gas odor four hours before the explosion.

PG&E has also faced widespread criticism for lack of pressure testing on the San Bruno line, which had leaked numerous times before it exploded in 2010.

 Administrative Law Judge increased PG&E’s fine from $26 million to $38 million.
Administrative Law Judge Coren Wong increased PG&E’s fine from $26 million to $38 million.

The company’s policy favored less expensive corrosion inspections. Pressure testing is now underway along the San Bruno line, causing several ruptures in the process.

Fine Increased

The final Rancho Cordova fine was $12 million higher than originally set. Public Utility Commissioners and PG&E had agreed to a $26 million fine, but Administrative Law Judge Coren Wong rejected the amount as insufficient when he reviewed the settlement.

PG&E could have contested the higher fine, but it did not.

"PG&E takes full responsibility for the mistakes that led to this tragedy," said PG&E spokesman Brian Swanson.

The fines, claims and other costs associated with the explosion and settlement will come from shareholder funds—not from ratepayers—and will be deposited into California's General Fund, according to a statement by CPUC.

‘Integrity and Safety’

Commissioner Timothy Alan Simon said the settlement “sends a signal that California is taking a firm stand on integrity and safety in its gas distribution infrastructure.”

Simon said CPUC was making an “ongoing effort to set a high bar on California's distribution pipeline safety standards that will incentivize utilities to maintain effective pipeline safety, risk assessment, and response procedures."

Added Commissioner Mark J. Ferron: "Today's decision not only fines PG&E for its culpability in this tragedy, but it also underscores that our role as a regulator is to expect and enforce a culture of safety. I cannot stress enough to PG&E management that safety must come before everything else.”

$800M Penalty?

The Rancho Cordova penalty could eventually augur a fine of up to $800 million in the San Bruno disaster, Hugh Wynne, a senior analyst at Bernstein Research, told Dow Jones.

PG&E declined to comment on that potential fine, but says it plans to spend $2.2 billion over the next two years on pipeline safety, Dow Jones reported. PG&E has replaced several top executives and reorganized since the San Bruno blast.

“The tragedy in Rancho Cordova is something that we will never forget,” said the utility’s Swanson. “We've taken many steps to improve our operations and procedures to help ensure a tragedy like this never happens again."


Tagged categories: Explosions; Health and safety; Pipeline; Pipelines

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