As controversy rages over a proposed $3 million fine for failing to give state regulators pipeline-safety documents on time, PG&E on Monday will face its first key deadline in a potentially far more punitive state inquiry — examining whether its record-keeping practices contributed to the San Bruno natural gas disaster and other pipeline hazards.

This broader record-keeping inquiry will consider whether the utility’s missing or otherwise hard-to-locate records violated the law and hurt the safety of its vast network of gas pipes. It’s likely that PG&E will be found guilty and potentially fined $400 million or more, according to a report Friday by Bernstein Research, which does detailed financial analysis of utilities.

“The fact that they knew so little about their gas transmission lines strikes many of us as a risk,” said Paul Clanon, executive director of the California Public Utilities Commission, which launched the record-keeping investigation in February. Noting that the inquiry will likely take months to conclude, he added, “it will be a very litigated process. The potential fines could be very significant. PG&E will certainly put up a fight.”

PG&E already has indicated it objects to the tone of the investigation. In a testy response to the commission’s order that by Monday it answer questions about its record-keeping practices, PG&E’s attorneys said the agency seems to be starting “with a presumption of guilt” that is “contrary to American precepts of due process.”

The progress of the state’s inquiry will be watched closely by lawyers suing the company on behalf of those injured or killed in the San Bruno blast. While the commission’s investigative findings wouldn’t be admissible in court, the attorneys “would be interested in the information that PG&E turns over to the PUC about what it knew and when,” said Mike Danko, who represents nearly two dozen San Bruno victims.

The commission’s concerns about PG&E’s records stem from the National Transportation Safety Board’s investigation of the San Bruno explosion, which discovered that PG&E’s computerized records had incorrectly described the ruptured pipe segment as being “seamless.” That segment — part of gas transmission line 132, which runs from Milpitas to San Francisco — actually had been welded along its length.

Fearing that error may have caused PG&E to overestimate how much pressure the pipe could withstand, the commission in January ordered the company to provide documents proving that the rest of its urban pipe pressures were set at safe levels. PG&E’s failure to submit all of those records by the March 15 deadline prompted the commission to propose fining it $3 million, plus another $3 million if it cannot turn over the documents by Aug. 31. Critics have objected that the proposed fine is much too small.

However, the utility could be slammed much harder, depending on the outcome of the broader record-keeping investigation. The company could be hit with “daily fines for a significant period of time,” the agency declared in a formal notice launching that inquiry. The potential fine — assuming the commission hits it with the maximum $20,000 a day penalty since the San Bruno pipe was installed in 1956 — “would total some $400 million,” Bernstein Research concluded. “A higher fine could of course be imposed if multiple violations were found.”

How tough the commission might get with the company remains to be seen. When PG&E failed to meet the March 15 records deadline, the agency threatened a fine that could have amounted to more than $100 million. But under its current proposal, which is yet to be approved by the full commission, the most PG&E would pay is $6 million.

The commission has demanded that PG&E provide a detailed summary of all the actions it took from 1955 through Sept. 8, 2010, to keep its pipes safe. Because of the amount of work it will take to accumulate that and other information, the commission has granted the company’s request to provide only a few initial responses to the investigation Monday, including whether its record-keeping error may have contributed to the San Bruno accident.

Aside from the “seamless” mistake, the investigation likely will focus on PG&E’s recent difficulties in locating records to justify its pipeline pressure levels. PG&E said it has so far found pressure-test records for about a third of its 1,805 miles of urban pipes that were subject to the records request.

PG&E has argued that it wasn’t required to keep records when it installed many of its older pipes. But a 1970 federal law required extensive documentation on pipes built since then. And the commission has said it is especially troubled that PG&E has incomplete files for about 7 percent of the urban pipes installed after that date.

In addition, the commission must determine whether the general condition of PG&E’s records violates laws requiring it to run a safe pipeline network.

Although it’s unclear what, if any, punishment the commission will decide is warranted as a result of its investigation, such paperwork lapses strike some pipeline safety experts as troubling.

“As the sad experience of the San Bruno pipeline explosion has clearly demonstrated,” Bob Bea, a UC Berkeley engineering professor with extensive pipeline experience said, “you cannot adequately manage what you do not understand or know.”

Contact Steve Johnson at sjohnson@mercurynews.com or 408-920-5043.