PG&E convicted of obstructing blast probe, breaking safety laws

Nearly six years after a defective natural gas pipeline exploded in San Bruno, killing eight people and destroying 38 homes, a federal court jury convicted Pacific Gas and Electric Co. on Tuesday of obstructing the federal probe of the blast and of violating pipeline safety laws both before and after the disaster.

The jury found PG&E guilty of five felony counts of knowingly failing to inspect and test its gas lines for potential dangers, in addition to the felony obstruction count. The panel also found that company officials had tried to derail the San Bruno investigation by denying a practice of pumping natural gas through aging pipelines at excessive pressures.

Firefighters battle a fire that destroyed an entire neighborhood on Claremont Drive in San Bruno in September 2010. The blaze was caused by a natural gas explosion at an underground PG&E pipeline. Firefighters battle a fire that destroyed an entire neighborhood on Claremont Drive in San Bruno in September 2010. The blaze was caused by a natural gas explosion at an underground PG&E pipeline. Photo: Brant Ward, The Chronicle Photo: Brant Ward, The Chronicle Image 1 of / 78 Caption Close PG&E convicted of obstructing blast probe, breaking safety laws 1 / 78 Back to Gallery

Jurors acquitted the company of six charges of deliberately failing to maintain proper records of pipeline tests and repairs.

The 12-member panel deliberated for just over seven days in San Francisco before returning their unanimous verdicts. Jurors declined to speak with reporters before leaving the courthouse.

PG&E faces a maximum total fine for the convictions of $3 million, far less than what prosecutors had sought before a judge’s ruling during the trial prompted them to scale back the potential penalties. U.S. District Judge Thelton Henderson did not schedule a sentencing date Tuesday.

PG&E did not say immediately whether it would appeal the verdict, but lawyers for the company said they would ask Henderson to overturn the convictions and dismiss the charges.

“We have made unprecedented progress in the nearly six years since the tragic San Bruno accident and we are committed to maintaining our focus on safety,” PG&E said in a statement after the verdict. “We want our customers and their families to know that we are committed to re-earning their trust.”

San Bruno Mayor Jim Ruane said city officials had wanted federal prosecutors to file criminal charges against top PG&E executives, who “made conscious decisions to put safety on the bottom of their list.” Only the company was charged, not its current or former officials.

But Ruane said it was still gratifying to see the company convicted, saying the verdicts “put a very dark stain on the corporate seal.”

The explosion, early in the evening of Sept. 9, 2010, sent flames 1,000 feet into the air and devastated San Bruno’s Crestmoor neighborhood. In addition to the dead, 58 people were seriously injured.

The cause was a defective seam weld in a 30-inch transmission pipeline from the 1950s that PG&E charts had labeled seamless.

The state Public Utilities Commission fined the company a record $1.6 billion for the explosion. Prosecutors in the criminal case initially sought a fine of up to $562 million for convictions on all 12 counts, which they said was twice the amount PG&E saved by illegally cutting safety programs. But after Henderson ruled that prosecutors could not use new state safety standards to prove illegal cost-cutting, they backed off from the higher penalties and instead sought standard fines of up to $500,000 for each conviction.

That means the maximum the company could be fined for the convictions Tuesday is $3 million.

Rep. Jackie Speier, D-Hillsborough, whose district includes the neighborhood devastated by the explosion, said in a statement that “the punishment to these serious charges is woefully inadequate. A paltry maximum fine of $3 million — or 0.3 percent of PG&E’s $888 million profits in 2015 — is not a strong message to industry that safety must take priority over profits.”

Fines are paid by company shareholders, rather than the customers. But the state commission said ratepayers would bear 55 percent of the long-term costs, or $125 million, for upgrades in PG&E’s pipe inspection and safety programs.

From the outset of the trial, the opposing sides clashed over references to San Bruno, with prosecutors seeking to keep the explosion at the forefront and PG&E opposing all references to it.

Henderson allowed evidence about the blast’s effects on PG&E’s inspection practices and interactions with regulators, but rejected prosecutors’ attempts to refer during the trial to the deaths and damage that the explosion caused. He also refused to let prosecutors haul the wrecked 28-foot-long, 3,000-pound pipe to the front of the courthouse on Golden Gate Avenue so jurors could see it.

“This is not a trial about the San Bruno explosion,” the judge told lawyers in a pretrial hearing.

But the blast prompted a National Transportation Safety Board investigation that led to the rare criminal prosecution on issues normally handled by regulatory agencies.

Prosecutors said investigators had found that PG&E ignored its legal obligation to closely monitor older pipelines, like the Peninsula line that ran through San Bruno, and to test or replace them when gas pressures exceeded federally prescribed limits.

One charge that led to a conviction was that the company knew of two previous leaks, one of them in the San Bruno line in 1988, but failed to enter them in its database or consider them in inspection and testing plans for the pipelines.

The database contained “a ton of errors,” according to a company memo, and prosecutors said in another set of charges that PG&E managers had known they were relying on flawed records in making safety-related decisions. PG&E denied knowingly failing to maintain adequate records, and the jury acquitted the company of those charges.

Jurors convicted PG&E, however, of the most substantive charges of violating safety laws — failing to identify and evaluate potential risks, to use the most accurate assessment methods and to give the highest priority to the most serious hazards.

Prosecutors said PG&E had regularly boosted gas pressure above legal limits on numerous aging pipelines — including 84 miles of pipes identified in a company memo in early 2010 — but had deliberately chosen a low-cost inspection method that was incapable of detecting internal welding flaws, violating laws that require pipeline operators to conduct effective scrutiny.

“The motive was profit over safety,” Assistant U.S. Attorney Jeffrey Schenk said in closing arguments Tuesday. Prosecutors cited a PG&E memo from 2008 on its priorities that listed a number of topics up for executives’ debate, including safety and reliability, but said ensuring shareholder returns of 8 percent was not negotiable.

PG&E denied engaging in unsafe cost-cutting and accused prosecutors of trying to tap into anticorporate resentment — the common view, as defense attorney Steven Bauer put it in closing arguments, that a big company “might be a little greedy.”

He and other defense attorneys sought to present California’s largest utility in human terms, as hardworking people who live in the neighborhoods they serve. The defense even presented a map showing that some employees live near large transmission pipelines, though prosecutors noted that none was a company manager or executive.

The obstruction charge involved PG&E documents, dating back to 2009, that described a practice of allowing pipeline pressures up to 10 percent above federal limits.

As PG&E was about to be audited by the state Public Utilities Commission in April 2011, the company sent a letter to federal regulators saying the alleged 10 percent policy was only a draft that had never been approved or implemented. Several past and present company employees echoed that assertion during trial testimony.

But prosecutors said company memos and other evidence showed that PG&E had pressured pipelines up to 10 percent above the limits for several years, and that the company had sent the letter in hopes of misleading the San Bruno investigators.

Bob Egelko is a San Francisco Chronicle staff writer. Email: begelko@sfchronicle.com

Twitter: @egelko