Sempra Energy raised its cost estimate to $330 million for a historic natural gas leak in Southern California that sickened residents, forced thousands to relocate and sparked multiple investigations.
Insurance will probably cover about $325 million of that expense, CEO Debra Reed said Friday on a conference call with investors. The estimate includes costs to plug the leak, lost gas and temporary relocation of residents. It excludes potential damage awards, fines, penalties and legal costs that also should be covered by insurance, she said.
Regulators confirmed last week that San Diego-based Sempra’s Southern California Gas Co. utility had permanently sealed a broken well near Los Angeles, where escaping gas was detected on Oct. 23.
The leak was the largest in U.S. history, spewing the equivalent of the annual greenhouse gas emissions from over half a million cars, according to a study published Thursday by federal and university researchers.
“SoCalGas is committed to helping local residents return to their normal lives as quickly as possible and also will support forward-looking regulations to ensure the safety of natural gas storage operations going forward,” Reed said Friday in a statement.
An independent engineering firm will investigate the root cause of the leak, under the direction of the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources and the state’s Public Service Commission, Reed said.
The costs of responding to the leak and mitigating environmental and community impact, including drilling the relief well, temporarily relocating about 6,400 residents and losing stored gas, may total $250 million to $300 million, Sempra said in a Feb. 11 regulatory filing. That estimate didn’t include damage awards, civil or criminal fines, penalties and associated legal costs, said the company, which has more than $1 billion in insurance that’s expected to cover many of the expenses.
Sempra faces more than 60 lawsuits including one filed by the California Attorney General. Multiple state agencies as well as the U.S. Environmental Protection Agency are investigating the leak.
Uncertainty over the event’s financial impact has weighed on Sempra’s stock, with shares down 5.6 percent since Oct. 22, the day before the leak was detected, compared with a 2.8 percent gain in the Standard and Poor’s 500 utility index over the same period. Sempra fell 2.5 percent to $96.41 at 12:47 p.m. in New York.
Fourth-quarter profit rose 24 percent to $369 million, or $1.47 a share from $297 million, or $1.18, according to the statement. Per share profit was $1.47 excluding some items, 15 cents higher than the average of 11 analyst estimates compiled by Bloomberg.