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Permian Discount Could Rise To $20 Per Barrel

Permian Discount Could Rise To $20 Per Barrel

Midstream constraints plaguing Permian drillers…

California Impose Record Fine against PG&E for 2010 Gas Explosion

In 2010 an explosion of a natural gas pipeline in San Bruno, California killed eight people and destroyed 38 homes. Whilst investigating the explosion the safety division of the Public Utilities Commission determined that Pacific Gas & Electric Co. could have actually taken steps to prevent the explosion. Even going as far as stating that “the tragedy in San Bruno, which was directly caused by PG&E’s unreasonable conduct and neglect for decades, was the worst disaster in the history of California electric and/or gas utilities.”

The National Transportation Safety Board (NTSB) discovered that the explosion was caused by a leak which occurred after a faulty weld in the ancient pipeline ruptured causing a huge fire.

Initially the commission called for PG&E to pay a $2.25 billion penalty, although this wouldn’t actually take the form of a fine, and would instead be spent making improvements to the pipeline network. This punishment was quickly objected by officials from San Bruno who rightly stated that the benefits that PG&E would reap from improving their pipelines would reduce the severity of the punishment to nothing.

Related article: 10 Points to Consider in the NGV Debate

Fire fighters try and tackle the conflagration in San Bruno
Fire fighters try and tackle the conflagration in San Bruno after a pipeline explosion on Thursday, 9th September 2010. (timesunion.com)

The commission has now come out with a revised penalty, stating that at least $300 million of the $2.25 billion will take the form of a fine and go into the state’s general fund. Tom Long, the legal director for the Utility Reform Network, said that “what the safety division announced today is finally a real penalty. It will actually require PG&E shareholders to pay real money.”

The $300 million fine will be the largest ever charged by the state commission.

PG&E were clearly not too thrilled by the news, with Tom Bottorff, the senior vice president for regulatory affairs, warning that the new fine will only backfire by making it difficult to raise “the capital necessary to maintain the extraordinary investment in safety currently under way, or raise billions of dollars more for safety improvements mandated by the CPUC.

In its zeal to punish PG&E, the staff of the California Public Utilities Commission has lost sight of our important shared goal of making PG&E’s natural gas operation the safest in the country as quickly as we possibly can.”

Related article: The “Mexico Explosion” in Natural Gas

devastation caused by the explosion
The devastation caused by the explosion and subsequent fire which left eight dead and 38 homes destroyed. (NPR)

Fuel Fix states that the new punishment must now be reviewed by an administrative law judge, and the commission, with both reserving the right to make counter-proposals, or final amendments before taking a vote.

By. Charles Kennedy of Oilprice.com



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