PG&E Claims Liability For Pipeline Explosion Ahead of Court

Will PG&E really take responsibility for the San Bruno Explosion?

SAN FRANCISCO (Dow Jones)—PG&E Corp. (PCG) said Tuesday that it is liable for a fatal 2010 pipeline explosion and will compensate victims who have sued the company, ahead of a court hearing.

A judge presiding over lawsuits that victims of the explosion filed against PG&E had asked the company to state its position on liability for the pipeline explosion at a hearing scheduled Friday in San Mateo County Superior Court.

The lawsuits stem from the Sept. 9, 2010 explosion of PG&E’s natural-gas pipeline in San Bruno, Calif., that killed eight people and injured 58 others.

PG&E said Tuesday that none of the plaintiffs, San Bruno residents or the city of San Bruno is at fault for the accident.

The company made a similar statement last July, after its attorneys filed documents with the court that suggested that a third party may have damaged PG&E’s pipeline prior to the explosion, and that asserted “comparative and contributory negligence,” which some took to mean that victims’ conduct contributed to their injuries.

“PG&E’s official position is that we’re taking on financial responsibility to compensate the victims for the injuries they suffered as a result of this tragic accident,” said Brian Swanson, a spokesman for PG&E.

The company has estimated that the legal claims and other so-called “third-party liabilities” could cost the company as much as $600 million.

Mike Danko, an attorney representing more than 40 of the plaintiffs, said Tuesday that PG&E’s stated official position was merely a “litigation tactic” designed to avoid having to argue in court what the company did wrong.

Danko’s clients are seeking not only compensation for losses, but punitive damages, meant to punish the company for what they believe was its “conscious disregard for the safety of others,” Danko said.

PG&E’s statement is “setting up a request to the judge to throw out the punitive damages claim, because then nobody can ask any questions and no conduct can come to light,” Danko said.

Plaintiffs have accused PG&E of burying documents and disregarding evidence or information they knew that the system was dangerous, said Danko, who estimated that roughly 250 such cases are pending against PG&E.

Many of those cases are scheduled to go to trial in July.

PG&E President Chris Johns said in a statement that the company hoped to compensate victims “without unnecessary legal proceedings.”

After a yearlong investigation, the National Transportation Safety Board concluded in August that welding defects that weakened the pipeline over time were to blame for the pipeline rupture. The board also blamed widespread flaws in PG&E’s pipeline operations and poor government oversight.

The utility has proposed that it spend about $220 million and that its customers should spend nearly $2 billion to beef up the safety of PG&E’s pipeline system. But consumer advocates oppose making customers shoulder the cost of the pipeline system upgrade, arguing that PG&E should have done the work in prior years.

“To the extent that pipeline safety costs are the result of years of neglect, mismanagement and shoddy work, PG&E, rather than its customers, should pay the costs,” said Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer group.

State regulators will decide how much the company will pay and how much customers will pay for the work.

PG&E also faces potentially costly fines that could result from pending investigations.

Earlier this month, the California Public Utilities Commission levied its largest-ever safety fine, $38 million, against PG&E for a 2008 pipeline explosion that killed a man in Rancho Cordova, Calif.

California officials are still investigating whether PG&E violated state laws leading up to the San Bruno pipeline explosion.

The U.S. Department of Justice has been leading a separate criminal investigation, along with the San Mateo County District Attorney’s office, into the San Bruno pipeline explosion.