Prosecutors Dramatically Slash Potential Fines in PG&E Case

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A law enforcement official runs toward a massive fire in a residential neighborhood Sept. 9, 2010, in San Bruno, after a PG&E pipeline exploded. (Justin Sullivan/Getty Images)

Federal prosecutors asked a judge Tuesday to cut nearly all of a potential $562 million fine against Pacific Gas & Electric Co. in a criminal case alleging the utility violated pipeline safety regulations before a deadly natural gas explosion in San Bruno and later obstructed investigators looking into the blast.

Shortly after the government's filing, federal judge Thelton Henderson approved the dismissal of enhanced fines, and PG&E agreed.

The U.S. Attorney's Office made the request in a brief court filing that did not give any reasons. It came just four days after jury deliberations began on whether PG&E is guilty of the charges.

Abraham Simmons, a spokesman for the U.S. Attorney's Office in San Francisco, said the office would have no comment.

Stanford Law Professor Robert Weisberg said in an emailed response that the government may be “anticipating or, in effect, inducing a jury compromise (a kind of indirect settlement).”

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“Perhaps it fears that the jury would perceive it as having asked for too much ... and it views this move as tempting the jury to convict on a lesser sentence and just end things,” Weisberg said.

Under the proposal, PG&E would face a maximum fine of $6 million if convicted of obstructing investigators in the wake of the September 2010 blast and of 11 pipeline safety violations. No PG&E officials are facing prison time, which is a sore spot for state Sen. Jerry Hill, whose district includes San Bruno.

"It’s still unfortunate that those individuals who made the decisions to cut safety and maintenance and to do it in the manner that they did and create that unsafe environment, that none of them will be going to prison," Hill said.

The explosion of a PG&E natural gas pipeline six years ago sent a giant plume of fire into the air, killing eight people and destroying 38 homes in San Bruno.

Hill said that a potential fine one-hundredth the size shows that prosecutors "gave in" to PG&E.

"There’s no reason that can justify this move when you weigh it against the eight people who perished when the PG&E pipeline exploded in September of 2010," Hill said. "Nothing can justify this."

PG&E did not address the diminished fine in an emailed response to questions about it:

“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," the company's statement says.

Its attorneys had challenged the imposition of enhanced fines in a flurry of recent court filings, and prosecutors opposed those arguments until Tuesday.

"It’s just a shame that they took this easy way out and chose not to really make a complete statement," Hill said of the prosecution. "If there’s a guilty verdict, that’s one statement, but a half a billion dollars in fines is another statement, and a strong one."

San Bruno Mayor Jim Ruane said he was surprised by the fine reduction, but hoped the judge would decide on a conviction.

“We still believe that the real important thing in this whole trial is a conviction -- a black mark on the corporate seal of PG&E,” Ruane said.

During the investigation, the San Francisco-based utility misled federal officials about the standard it was using to identify high-risk pipelines, prosecutors have said.

The standard PG&E used violated safety regulations and led to a failure to classify the San Bruno pipeline and others as high risk and properly assess them, prosecutors said in a 2014 indictment.

PG&E also was charged with violating pipeline safety laws by ignoring shoddy record keeping and failing to identify threats to its larger natural gas pipelines. The company did not subject the pipelines to appropriate testing, choosing a cheaper method to save money, prosecutors told jurors.

PG&E pleaded not guilty and said its employees did the best they could with ambiguous regulations they struggled to understand. Engineers did not think the pipelines posed a safety risk, and the company did not intend to mislead investigators, PG&E attorney Steven Bauer said during the trial.

The utility inadvertently sent officials a draft policy about its standard for identifying high-risk pipes, not one the company was actually following, he said.

Investigators have blamed the blast in part on poor PG&E record keeping that was based on incomplete and inaccurate pipeline information.

In a separate case, the California Public Utilities Commission imposed a $1.6 billion fine against PG&E last year for it's role in the San Bruno explosion.

San Bruno mayor Ruane reiterated calls Tuesday for greater oversight of PG&E, in addition to the California Public Utilities Commission. He said it's clear the utility "has a key to the back door of the CPUC."

"What we are pushing for and have pushed for the last number of years is a totally independent monitor to look at the relationship between PG&E the utility and the Public Utilities Commission of the state of California,” he said, adding that he's hopeful the judge in the case considers appointing a federal monitor.

The post contains reporting from the Associated Press.