Feds Reduce Possible Fines Against PG&E by $556M

SAN FRANCISCO (CN) — Pacific Gas and Electric no longer faces a $562 million fine for allegedly violating pipeline safety laws and obstructing an investigation into the fatal 2010 San Bruno pipeline explosion.

Federal prosecutors on Tuesday dropped Alternative Fines Act charges against the company, leaving PG&E with a new maximum penalty of $6 million.

The government offered no immediate explanation for tossing more than half a billion in potential fines against PG&E, which is accused of 11 counts of defying recordkeeping and testing requirements under the U.S. Pipeline Safety Act and one count of obstructing an investigation.

PG&E was indicted in 2014, four years after a pipeline ruptured in San Bruno on Sept. 9, 2010, killing eight people, injuring 58 and destroying 38 homes.

The decision to dismiss the bulk of criminal fines came as a 12-member jury spent its third full day deliberating behind closed doors on whether to find PG&E guilty on the 12 charges.

If found guilty, a second phase of the trial was expected to begin to determine PG&E's maximum penalty under the Alternative Fines Act, which allows the government to fine an entity no more than twice what it gained or caused others to lose by breaking federal law.

The potential $562 million fine was based on the government's estimate that PG&E gained $281 million by deliberately choosing to defy pipeline safety regulations.

Prosecutors previously stated in court filings and pretrial hearings that they planned to present evidence during a second trial phase to prove PG&E gained the $281 million.

"The government made no attempt to break that estimate down into pipeline-by-pipeline, or regulation-by-regulation figures, let alone count-by-count," PG&E stated in an Aug. 1 court filing.

A Justice Department spokesman declined to comment on the government's decision to drop $556 million in potential fines against the company.

During a six-week trial that ended last week, prosecutors presented evidence and testimony to argue that a profit motive led PG&E to deliberately refuse to adequately test or replace pipelines after exceeding the maximum pressure allowed on those lines under federal law.

PG&E argued the laws were not black and white, and that the regulations gave its engineers leeway to use their best judgment to decide which pipelines to prioritize as "high risk" and which assessment methods to use for testing its pipes.

"Regardless of this action or the next legal steps, we want our customers and their families to know that we are committed to re-earning their trust by acting with integrity and working around the clock to provide them with energy that is safe, reliable, affordable and clean," PG&E said in a statement on Tuesday.

This past year, the California Public Utilities Commission fined PG&E $1.6 billion for its role in the blast.

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