Damning Documents Exposed in PG&E Trial

SAN FRANCISCO (CN) — The quest for profits drove Pacific Gas and Electric to cut safety and maintenance costs in the years before a fatal pipeline explosion, documents shown in court indicated Thursday.

While questioning the government's seventh witness, PG&E risk assessment supervisor William "Bill" Manegold, prosecutors unveiled a string of emails and budget documents detailing PG&E's priorities before its gas line ruptured in San Bruno on Sept. 9, 2010, killing eight people, injuring another 58 and destroying 38 homes.

Manegold testified in the third week of a criminal trial over PG&E's alleged violation of pipeline safety laws. PG&E, the largest provider of natural gas and electricity in California, was indicted in 2014, four years after the explosion in San Bruno leveled a neighborhood.

Prosecutors Thursday showed emails from 2008 and 2009, in which Manegold was asked to find more ways to cut his risk assessment department's budget. In 2008, Manegold agreed to "knock the leak investigations budget" down again.

One document shown in court identified "safety" as an issue "up for debate" at a 2008 strategy discussion, but the goal to achieve 8 percent earnings per share for investors was listed as "not up for debate."

Another document, "PG&E Business Priorities 2008—2011," ranked "safety" as a 10 percent priority for the company, compared to a 40 percent priority for "earnings from operations."

Prosecutors tied those business goals to internal emails, including a 2008 memo to Manegold addressing the "very low 2009 budget" for the company's integrity management division, which assesses threats to gas pipelines.

Emails also suggested that PG&E's decision to use external corrosion direct assessments, or ECDA, as the preferred method to check pipelines was made primarily for financial reasons.

Last week, a PG&E engineer testified that ECDAs could not have detected manufacturing threats like the problematic long seam on Line 132 in San Bruno, which was mislabeled as seamless rather than welded in PG&E's flawed record system.

In a March 2008 email, Manegold cautioned a fellow PG&E employee against the "wholesale change" from in-line inspections to external corrosion surveys.

An in-line inspection, which involves using a pipeline inspection gadget, or PIG, to check the internal conditions of a pipe, is considered a more thorough assessment tool by the Pipeline and Hazardous Materials Safety Administration, or PHMSA, the federal agency tasked with regulating pipeline safety.

"I think it's difficult to justify based on what we've found and haven't found," Manegold wrote in a March 2008 email about the transition from in-line inspections to ECDA. "We've found leaks in DA pipes before the re-assessment period."

Manegold wrote in a January 2009 email that ECDA is "not an option" when maximum operating pressure is exceeded. In those instances, federal law requires PG&E to perform a costly hydro-pressure test or replace the pipeline, Manegold wrote.

Earlier this week, prosecutors showed the jury internal memos indicating that PG&E operated "a handful of lines" at more than 10 percent above the maximum allowable operating pressure, which should require the company to immediately pressure test or replace a pipeline.

When asked if cost was a factor in the decision to make ECDA the primary assessment tool for pipelines, Manegold said he wasn't sure how much finances played a role in the decision.

In response, U.S. Assistant Attorney Hartley West read Manegold's prior testimony to a grand jury, before PG&E was indicted. In that testimony, Manegold said cost was a major factor in the decision.

"Is it or is it not good engineering judgment to select the assessment method based solely on economic considerations?" West asked Manegold.

Without precisely answering the question, the PG&E official replied that engineers "must follow the code."

Manegold was expected to continue testifying on Friday.

PG&E faces 12 counts of violating recordkeeping and testing requirements under the federal Pipeline Safety Act and one count of obstructing an investigation into the cause of the 2010 pipeline explosion.

If convicted, the utility company could be fined $562 million.

Last year, the California Public Utilities Commission fined PG&E $1.6 billion, the largest penalty ever assessed against a utility company in the state's history.

The criminal trial is expected to continue until mid-August.

Follow @NicholasIovino

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