$2.25B Fine Urged in Pipeline Blast


The California utility responsible for a fatal pipeline explosion is likely in for an "astronomical" fine after investigators turned up dozens of preventable problems dating back decades.

Calling Pacific Gas and Electric Company (PG&E) "morally and ethically reprehensible," the Safety and Enforcement Division of the California Public Utilities Commission (CPUC) has recommended that the commission fine the utility $2.25 billion for a massive 2010 explosion, officials announced Monday (May 6).

The fine stems from three investigations into the Sept. 9, 2010, pipeline rupture in San Bruno, CA, which killed eight people and demolished a neighborhood.

If adopted by the CPUC, the penalty would be the largest ever levied by a state regulator.

The largest CPUC safety-related penalty imposed in the past was $38 million against PG&E as a result of a natural-gas explosion on Dec. 24, 2008, in Rancho Cordova, CA.

'Highest Penalty Possible'

"I am recommending the highest penalty possible against PG&E, without compromising safety, and I want every penny of it to go toward making PG&E's system safer," said Brigadier General (CA) Jack Hagan, Director of CPUC's Safety and Enforcement Division.

"There is no amount of money that will bring back the eight people who tragically lost their lives in the pipeline blast or heal the lasting wounds to the people of San Bruno," said Hagan. "I listened to legislators and the public and determined that every single dollar available from PG&E should go straight to efforts that will ensure safety."

"The recommendation is what the Safety and Enforcement Division believes is the maximum financial penalty that can be imposed on PG&E shareholders without compromising safety. This is a penalty far greater than the CPUC, or any other state regulatory body, has ever assessed," Hagan stated.

Spending Terms

The recommended penalty payment would encompass monies PG&E already has been ordered to spend on safety enhancements, as well as future safety investments.

Under the division's recommendation, the $2.25 billion would be directed toward Phases I and II of PG&E's Pipeline Safety Enhancement Plan. The money would come out of shareholder funds and would not be paid by ratepayers, authorities said.

San Bruno Fire Department

Regulators reported that PG&E had had "literally no idea" about the pipeline sections that ruptured. The utility was criticized for thousands of missing documents and inspection reports.

In December, CPUC ruled that PG&E could raise its rates by about $299 million through the end of 2014 to cover its efforts to upgrade its network of pipelines.

'Lax Safety Culture'

PG&E would also be subject to audits to make sure it does not shortchange any other safety-related areas of operations to offset the expenditures for the fine. The recommendation calls for an independent third party to oversee the funds.

"The CPUC itself must recognize its contribution to the lax safety culture that directly led to the unsafe conditions resulting in the explosion," Hagan said.

"PG&E was not operating safely, and we at the CPUC did not do enough to spot this. PG&E failed to know, failed to test, failed to prioritize safety in its gas system integrity management program. But the CPUC, its staff, and all intervening parties failed as well to do their job to ensure safety of the natural-gas system. This is the harsh lesson of the pipeline rupture," said Hagan.

PG&E will file its reply to the recommendations on May 24, the CPUC said. Replies to PG&E will be filed on June 5, 2013. A CPUC decision is expected in the late summer.

Public 'Badly Shaken'

In a 76-page brief on the fines and remedies, the CPUC's Consumer Protection and Safety Division called the explosion "the worst accident of any electric or gas public utility in the history of California" and added, "[T]ragically, it was entirely foreseeable and preventable."

California Public Utilities Commission
National Transportation Safety Board

The report with the recommended penalty listed 55 separate violations by PG&E that covered 300,000 days. Some of the conditions dated back decades.

"The serious failure by PG&E to detect and prevent this explosion, leading up to (and during) the incident, was morally and ethically reprehensible," the report stated.

The report stated that PG&E was missing thousands of records required by law to ensure that strength test records were created, maintained, and available. The division calls on the CPUC to consider that "the public's faith and trust has been badly shaken by the revelation that PG&E had literally no idea that the flawed pipe sections that ruptured were there (italics in original)."

When listing the utility's failures, the division included that PG&E did not:

  • Visually inspect the pipe sections before placing them in service;
  • Test its pipelines;
  • Keep records showing the existence of any of the pups;
  • Keep records showing its pressure tests or other critical information;
  • Upgrade its pipelines in areas of increasing population;
  • Listen to its own engineers' warnings about aging pipeline that needed to be replaced;
  • Acknowledge potential weld seam issues known to exist on pipelines of a similar manufacture and age;
  • Acknowledge overpressurizations that jeopardized the integrity of the pipelines;
  • Replace aging equipment until it failed;
  • Acknowledge leak incidents on Line 132 and similar transmission pipelines;
  • Prepare for a predictable incident;
  • Shut off the gas promptly after the explosions; and
  • Contact and coordinate with fire or police departments immediately after the incident.

The division said it had documented more than 100 violations that continued for years—some as long as 54 years.

The report lists summaries of 55 separate violations and the dates the violations occurred, which total over 300,000 days.

During the investigation of the San Bruno explosion, the division said it became apparent that "the number of violations, their severity, and their long duration periods, would result in a fine that would be astronomical."


Tagged categories: Corrosion; Enforcement; Explosions; Fatalities; Health & Safety; NTSB (National Transportation Safety Board); Pipelines

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