SoCalGas, Sempra To Settle Gas Leak Litigation; Sees $1.1 Bln Charge
Gas utility Southern California Gas Co. or SoCalGas and its parent company Sempra Energy announced agreements to resolve substantially all material civil litigation related to the 2015 Aliso Canyon natural gas storage facility leak. SoCalGas, which operates the storage facility, will record an after-tax charge of approximately $1.1 billion this month.
The settlement, reportedly of up to $1.8 billion, was made with more than 35,000 clients affected by methane gas leak from a failing well in the Aliso Canyon facility near the Porter Ranch suburb of Los Angeles.
The expected SoCalGas charge will be consolidated in Sempra’s third-quarter results, due to which Sempra was forced to cut its fiscal 2021 earnings view to $3.83-$4.43 from $7.41-$8.01. Meanwhile, the company also guided to the upper end of the range for its full-year 2021 adjusted earnings per share guidance of $7.75-$8.35, and reaffirmed its full-year 2022 earnings per share guidance range of $8.10 to $8.70.
Beginning October 2015, the faulty well at the Aliso Canyon gas storage facility leaked more than 4 billion cubic feet of natural gas into the atmosphere, sickening thousands with headaches, nosebleeds and nausea. The leak continued for 112 days until it was sealed in February 2016.
During the incident, enough gas to supply about 20 million U.S. homes for a day was leaked, forcing more than 8,000 households and two schools to relocate.
The utility was later cleared to resume storing natural gas at the Aliso Canyon facility in July 2017.
An investigation report in 2019, which was commissioned by two state regulatory agencies, found the leak was caused by a corroded pipe casing, and that the California utility failed to adhere to best safety practices.
In a statement, Sempra now noted that the net after-tax cash outflows for SoCalGas are expected to ultimately be up to approximately $895 million, after considering the remaining insurance receivable and other adjustments.
According to the company, the agreements to resolve the referenced claims are subject to obtaining about 97% participation levels among the plaintiffs and court approval of the settlement allocation process, among other conditions.
SoCalGas has previously too settled many cases related to the gas leak brought by local and state government agencies.
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