BOSTON — Columbia Gas of Massachusetts will be sold to Eversource Energy for $1.1 billion in a deal announced hours after federal prosecutors made public a settlement with the company to resolve a criminal charge for its role in the Merrimack Valley gas fires and explosions.
News of the embattled company's pending sale to a rival utility came after the U.S. Attorney's Office, U.S. Department of Transportation, FBI and other federal agencies announced that Columbia Gas and it's parent company, NiSource, had agreed to a guilty plea as part of a deal to avoid prosecution for role in the Sept. 13, 2018, disaster.
Federal officials blame the companies for causing the disaster that killed a teenager, injured dozens and damaged more than 130 homes in Andover, North Andover and south Lawrence.
Under the plea deal with prosecutors, Columbia Gas accepted responsibility for the disaster and agreed to pay a $53 million fine while NiSource put the company up for sale.
A criminal charge filed in U.S. District Court says Columbia Gas "recklessly disregarded" federal and state safety rules on regulator control lines, sections of pipe that connect and monitor gas lines and pressure, which caused the disaster.
"This disaster was caused by a wholesale management failure at Columbia Gas in overseeing the South Union Street project in Lawrence," Lelling told reporters at a briefing at the J. Joseph Moakley U.S. District Courthouse in Boston on Wednesday.
He said the company has also agreed to allow a federal monitor to supervise its operations for the next three years, or until it is sold to a third-party.
The plea deal also includes an agreement with the company’s parent, Indiana-based NiSource, to take steps to sell Columbia Gas as part of a deferred prosecution for NiSource's role in the disaster.
NiSource has also agreed to forfeit any profits from the sale, to the and implement safety regulations that were previously recommended by federal regulators.
While it will "cease and desist any and all gas pipeline and distribution activities" in Massachusetts, it be required to implement safety measures throughout its natural gas distribution system, which includes subsidiaries in Indiana, Ohio, Maryland, Virginia, Pennsylvania and Kentucky.
In a statement, Columbia Gas said it "takes full responsibility" for the "tragic events" that "impacted our customers throughout the Merrimack Valley."
"Today’s resolution with the U.S. Attorney’s Office is an important part of addressing the impact," the statement read. "Our focus remains on enhancing safety, regaining the trust of our customers and ensuring that quality service is delivered."
Glaring mistakes
The $53 million fine that Columbia Gas will pay the government is double the company’s profits earned between 2015 and 2018 from a pipeline infrastructure program, called the Gas System Enhancement Plan.
Federal regulators say the gas disaster was preceded by a series of glaring mistakes by Columbia Gas in the years preceding the incident, including shoddy record keeping.
A report by the National Transportation Safety Board concluded the utility had a "weak engineering management" system, where information about safety sensors was missing from construction plans. As the disaster unfolded, company officials scrambled to locate shut-off valves as more than 130 fires and explosions ripped through the region.
The board was highly critical of Columbia Gas, suggesting the tragedy could have been prevented if better safety systems were in place.
Thousands of residents and businesses in the three communities were left without natural gas service for heat and hot water for months, in some cases.
Columbia Gas of Massachusetts has agreed to pay more than $80 million to the affected communities for reimbursement of costs stemming from the disaster.
It has also reached an undisclosed settlement with the family of 18-year-old Leonel Rondon, the Lawrence teen who was killed in the disaster.
The company has also reached a $143 million settlement with residents in a class action lawsuit, which goes before a Essex County Superior Court judge on Thursday.
U.S. Rep. Lori Trahan, D-Westford, said the settlement shows the disaster "was avoidable and the result of a careless abandonment of safety standards and practices.”
"While nothing that follows will erase the pain felt by these communities, the news that Columbia Gas will be sold will help our region heal and return to a sense of normalcy," she said in a statement.
'Lost faith'
State Sen. Barry Finegold, D-Andover, welcomed the plea deal and pending sale of Columbia Gas, saying people in the Merrimack Valley "have lost faith" in the company.
Still, Finegold said he was "disappointed" that money from the fine will go to the federal government and not to affected gas customers in the region.
"I believe that money should have come back to the people," said Finegold, whose home and law offices were among thousands that lost service during the gas fires. "We're the one's who have suffered tremendously as a result of this disaster."
Most of the $53 million fine will be deposited in the U.S. Justice Department’s Crime Victims Fund, which funds victim service programs, according to Lelling's office.
The federal investigation uncovered internal documents showing that the company knew as far back as 2015 that the failure to locate and remove regulator control lines could lead a catastrophic event, but ignored the safety risks.
Federal officials say the company failed to implement safety plans to protect against over-pressurization of the lines.
"Their records were outdated, incomplete and unreliable," Joseph R. Bonavolonta, special agent in charge of the FBI's Boston office, told reporters. "While over-pressurization was a known risk, Columbia Gas never implemented any written procedures to make sure that buried control lines were accounted for, removed or relocated."
Bonavolonta said the criminal charges and settlement are a "sobering reminder" to gas companies that "if they decide to put profits before public safety they will pay the consequences."
"There should never be another disaster like this one," he said. "We hope that Columbia Gas' acknowledgement of its misconduct by agreeing to plead guilty, brings some measure of justice to those who suffered so much, both physically and emotionally."
Eversource leg up?
NiSource is one of the largest utilities in the country, serving more than 3.5 million natural gas customers and 500,000 electric customers in seven states.
Its subsidiary Columbia Gas serves about 330,000 customers in Massachusetts, including about 8,600 in the Merrimack Valley.
The gas company's service area is surrounded by National Grid, but Eversource was called in by the state to oversee Columbia's emergency response to last year's disaster.
Eversource has 300,000 natural gas customers and 1.5 million electric customers in 51 communities in the state, according to the company's website.
In a statement, Eversource said it was expecting a "safe and smooth transition of service" when the deal to take over Columbia's service area is finalized by this fall.
"We have a strong track record of investing in infrastructure to significantly improve the reliability and safety of our systems,” said Eversource Gas President Bill Akley said in a statement. "Our commitment to operational excellence and superior customer service will create value for customers, employees, shareholders, and the communities we serve."
The company's sale must still be approved by the state Department of Public Utilities and the U.S. Department of Justice, which is required to sign off on large-scale utility purchases.
Marc Kempic, president and CEO of Columbia Gas of Massachusetts, issued a statement Wednesday night praising the Eversource's pending acquisition of his company's assets.
"Eversource is the right partner for Columbia Gas," said Mark Kempic, President and Chief Operating Officer of Columbia Gas of Massachusetts. "While we have taken significant restoration and safety steps over the past 17 months, we acknowledge that events have led many to lose trust in Columbia Gas."
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhi.com.
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