PG&E Co. was convicted by a federal jury in San Francisco Tuesday of five counts of pipeline safety law violations and one count of obstructing a National Transportation Safety Board probe into a fatal pipeline explosion in San Bruno in 2010.
It was acquitted of six other counts of violating record-keeping requirements of the U.S. Natural Gas Pipeline Safety Act.
The verdict came after a five and one-half week trial and six and one-half days of jury deliberation in the court of U.S. District Judge Thelton Henderson.
The maximum penalty for the six counts is $3 million. Henderson did not set a sentencing date, but scheduled an Oct. 11 hearing on a soon-to-be filed PG&E motion for judicial acquittal on the six convictions.
U.S. Attorney Brian Stretch said in a statement:
“On occasion an event occurs that is sufficiently devastating that a public account must be made, either through an admission of wrongdoing and acceptance of responsibility, or through the judgment of the people acting through a jury. … Such an event was the explosion in San Bruno on September 9, 2010, and the physical and emotional injuries suffered by so many that terrible day.”
“The jury has determined that PG&E management chose willfully not to follow certain” safety regulations, he said.
Stretch said the verdict was “a reflection only of choices and priorities set at the top” of the company and did not diminish the “hard, honest work done by PG&E’s employees in the field.”
PG&E defense attorney Steven Bauer issued a statement saying:
“We would like to thank the jurors for their long deliberations. We will file our motion for acquittal on the remaining counts next week.”
Outside of court, Bauer said he would have to consult with PG&E before deciding whether to appeal, if the acquittal motion is denied.
San Bruno City Attorney Mark Zafferano said:
“The city is very pleased with the verdict holding PG&E accountable for not only violating the pipeline safety law but also obstructing the NTSB investigation.”
The unusual criminal trial of a utility stemmed from investigations following the Sept. 9, 2010, rupture and explosion of a 30-inch-diameter high-pressure natural gas transmission line in San Bruno.
Eight people died, 66 were injured and dozens of houses were damaged or destroyed in the explosion and ensuing fire.
The NTSB concluded that the cause was a defective seam weld on a pipeline segment that was installed in 1956, incorrectly listed in PG&E records as seamless and not appropriately tested and repaired.
In a separate civil proceeding, the California Public Utilities Commission last year fined PG&E a record $1.6 billion in three cases concerning the San Bruno explosion, pipeline record keeping and maintenance of pipelines in high-population areas.
But the federal criminal trial did not concern the cause of the explosion. Henderson barred prosecutors from arguing during the trial that PG&E caused the blast and limited the evidence of damage they could show to the jury, to avoid prejudicing the panel.
Instead, the trial focused on allegations of specific violations of the pipeline law’s record-keeping, risk assessment, and repair prioritization requirements for several Peninsula and East Bay pipelines, including Line 132, the line that exploded in San Bruno.
It also focused on the charges of obstructing the NTSB investigation.
Prosecutors claimed, and the jury agreed, PG&E misled the board in a letter it sent the agency on April 6, 2011. The letter withdrew a February 2011 letter that said pipelines were considered unstable and therefore in need of testing only if their pressure had risen higher than 10 percent above the allowed maximum.
The letter said PG&E could not find any record that the 10 percent leeway policy was ever approved or implemented.
Prosecutors said internal PG&E emails and records presented as evidence in the trial showed that the utility used the 10 percent policy between 2009 and the early spring of 2011 and changed its approach only when it came under the “hot spotlight” of regulatory, media and public scrutiny after the San Bruno explosion.
The government attorneys said the law required expensive high-pressure water tests when the gas pressure exceeded the allowed maximum by any amount and contended PG&E was trying to boost profits by avoiding those tests on Line 132 and other lines.
The five pipeline safety convictions concerned failing to gather and integrate existing data; failing to identify and prioritize potential pipeline threats, such as cracks or defects; failing to prepare baseline assessment plans for the threats and select the most suitable tests; failing to prioritize high-risk segments when a change in circumstance made a manufacturing threat unstable; and failing to prioritize certain types of welds as high-risk.
Each of those counts referred to several pipelines, including 132.
Jurors needed to find a violation for at least one line in order convict PG&E on that count.
Those five counts were originally 20 separate counts, one for each pipeline, in a July 2014 version of the indictment. But Henderson in December ordered those charges consolidated into five counts, because each category represented a single course of conduct.
He wrote, however, that the consolidation of the counts “does not diminish how serious PG&E’s alleged failure to heed the integrity management regulations was, or how dangerous it was for PG&E to fail so many times over.”
By contrast, the six record-keeping violations on which PG&E was acquitted each referred to one pipeline. Two of those counts referred to Line 132.
Prosecutors originally planned to seek an enhanced multimillion-dollar penalty for PG&E, if the utility were convicted, under a law that allows an alternative fine of twice the loss suffered by victims or twice the profit the defendant made by evading the law.
They suggested the amount could be $1.2 billion, or twice the amount PG&E paid to settle lawsuits by San Bruno victims and survivors, or $562 million, or twice the cost of meeting post-San Bruno CPUC orders for improvements to meet the federal requirements.
But the law allows the enhanced penalty only if it would not unduly complicate or prolong the sentencing phase of a trial. In December, Henderson ruled that calculating the victim loss would be overly complicated.
Prosecutors then planned to seek the $562 million doubling of the alleged profit as a fine.
But last week, amid arguments between PG&E and prosecution lawyers about how to calculate the alleged profit and whether it would be unduly complicated, prosecutors suddenly withdrew their bid for an enhanced fine, without giving an explanation.
That decision left the normal $500,000 per count, or a total of $3 million, as the maximum possible fine for the six convictions.
PG&E issued a general statement after the verdict saying:
“While we are very much focused on the future, we will never forget the lessons of the past. … We have made unprecedented progress in the nearly six years since the tragic San Bruno accident and we are committed to maintaining our focus on safety.”
The San Francisco-based utility provides gas and electricity to 16 million people in northern and central California.