Exhibit 10.1

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

 

    )    UNITED STATES OF AMERICA           )        )    v.   )    Criminal No.
  )    NiSOURCE, Inc.   )      )   

Defendant.

  )        )   

DEFERRED PROSECUTION AGREEMENT

1. Andrew E. Lelling, United States Attorney for the District of Massachusetts
(by Assistant U.S. Attorneys Neil J. Gallagher, Jr. and Evan Gotlob) (the
“Government”); and defendant NiSource, Inc. (“NiSource”) (by counsel Alejandro
N. Mayorkas, Esq., WilmerHale, LLP and NiSource Chief Executive Officer Joseph
Hamrock) hereby enter into the following Deferred Prosecution Agreement
(“Agreement”).

2. It is the intention of the parties that this Agreement will cover any and all
of NiSource’s federal criminal liability in the District of Massachusetts
arising from the conduct of its wholly-owned subsidiary, Bay State Gas Company,
d/b/a Columbia Gas of Massachusetts (“CMA”), or any of NiSource’s conduct that
is related to the conduct alleged in the criminal information filed against CMA
(“the CMA Criminal Information”), attached to this Agreement as Exhibit A, and
covered by the plea agreement dated February 24, 2020 between the Government and
CMA (“the CMA Plea Agreement,” attached to this Agreement as Exhibit B), or that
is in any other way related to the Merrimack Valley Over-Pressurization Event on
September 13, 2018 (hereinafter, “the Event”), including CMA’s and NiSource’s
restoration work in the Merrimack Valley following the Event that is currently
known to the Government.

 

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3. This Agreement is effective for a period beginning on the date on which this
Agreement is signed (“Effective Date”) and ending thirty-six (36) months from
the Effective Date (the “Term”).

4. The Government enters into this Agreement based upon the individual facts and
circumstances of this case, including:

 

  a.

NiSource’s agreement to use reasonable best efforts to sell CMA or CMA’s gas
distribution business, to a qualified third-party buyer consistent with the
requirements of M.G.L. c. 164, § 96 and Interlocutory Order on Standard of
Review, D.P.U. 10-170 and upon the completion of any such sale, to cease and
desist any and all gas pipeline and distribution activities in the District of
Massachusetts;

 

  b.

In the event that CMA or its gas distribution business is sold within CMA’s
three (3) year term of probation, NiSource’s agreement to forfeit and pay a
monetary penalty equal to the total amount of any profit or gain from the sale
of CMA or CMA’s gas distribution business;

 

  c.

NiSource’s prior voluntary payments of restitution to the victims of the Event
including, but not limited to, payments to the individuals, businesses and
municipalities affected;

 

  d.

NiSource’s agreement to seek to resolve all pending civil claims, including
NiSource’s agreement to seek to settle the claims filed by the Massachusetts
Department of Public Utilities (“MA DPU”);

 

  e.

NiSource’s acknowledgement that, based on the allegations in the CMA Criminal
Information, the Government has sufficient basis to allege that NiSource is
responsible for CMA’s conduct as alleged in the CMA Criminal Information; and

 

  f.

NiSource’s commitment to fulfill all of the terms of this Agreement.

5. The Government agrees that so long as NiSource adheres to and complies with
the provisions of this Agreement, the Government will not file criminal charges
against NiSource, either for NiSource’s conduct or CMA’s conduct, related to the
allegations in the CMA Criminal Information, the Event, or CMA’s and NiSource’s
restoration work in the Merrimack Valley following the Event that is currently
known to the Government. In the event

 

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of a breach of this Agreement, the Government reserves the right to prosecute
NiSource for the conduct related to the allegations in the CMA Criminal
Information, the Event, or CMA’s and NiSource’s restoration work in the
Merrimack Valley following the Event that is currently known to the Government
or any other conduct the Government in its sole discretion deems appropriate.

6. In consideration of the Government’s agreement described above in paragraph
5, NiSource waives its right to a speedy trial pursuant to the Sixth Amendment
to the United States Constitution and Rule 48(b) of the Federal Rules of
Criminal Procedure. NiSource also expressly waives and will not plead, argue, or
otherwise raise any statute of limitations or other similar defenses to any
criminal charges brought by the Government related to the allegations in the CMA
Criminal Information, the Event, or CMA and NiSource’s restoration work in the
Merrimack Valley following the Event, except to the extent to which such a
defense would have been available had charges been brought on or before the date
on which this Agreement is executed.

NISOURCE’S OBLIGATIONS

7. NiSource acknowledges that, based on the allegations in the CMA Criminal
Information, the Government has sufficient basis to allege that NiSource is
responsible for CMA’s conduct alleged in the CMA Criminal Information. NiSource
will not, through any person authorized to speak on its behalf, make any public
statement, in litigation or otherwise, contradicting in whole or in part
NiSource’s acknowledgement set forth above.

8. NiSource agrees that it will use reasonable best efforts to sell CMA or CMA’s
gas distribution business to a qualified third-party buyer consistent with the
requirements of M.G.L. c. 164, § 96 and Interlocutory Order on Standard of
Review, D.P.U. 10-170, and, upon the completion of any such sale, NiSource will
cease and desist any and all gas pipeline and distribution activities in the
District of Massachusetts.

 

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9. In the event of a sale of CMA or CMA’s gas distribution business following
the execution of a definitive purchase and sale agreement within the three
(3) year period of probation under the terms of the CMA Plea Agreement, within
thirty (30) days of the later of the sale becoming final or the date on which
post-closing adjustments to the purchase price are finally determined in
accordance with the agreement to sell CMA or its gas distribution business,
NiSource will forfeit and pay a monetary penalty equal to the total amount of
any profit or gain from the sale of CMA or its gas distribution business.

10. Upon request of the Government, NiSource will also promptly provide any and
all records regarding the sale including but not limited to audited financial
statements and income tax returns of NiSource, to the extent required to verify
the accuracy of any profit, gain or loss amount that resulted from the sale of
CMA or CMA’s gas distribution business.

11. NiSource also agrees, as to each of its subsidiaries involved in the
distribution of gas through pipeline facilities in Massachusetts, Indiana, Ohio,
Pennsylvania, Maryland, Kentucky and Virginia to implement and adhere to each of
the recommendations from the National Transportation Safety Board (“NTSB”)
related to NTSB Accident ID PLD18MR003 regarding the Event.

GOVERNMENT’S OBLIGATIONS AND RIGHTS

12. If NiSource fully complies with all of its obligations under this Agreement,
the Government will not file any criminal charges against NiSource related in
any way to the allegations in the CMA Criminal Information, the Event, or CMA’s
and NiSource’s restoration work in the Merrimack Valley following the Event
currently known to the Government.

 

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13. If, however, during the Term of this Agreement, NiSource (1) commits any
felony under U.S. federal law including, but not limited to, any felony
violation of the Pipeline Safety Act; (2) gives deliberately false, incomplete,
or misleading testimony or information to the Government or to the Court; or
(3) otherwise fails to perform or fulfill each of NiSource’s obligations under
this Agreement, NiSource will thereafter be subject to prosecution for any
federal criminal violation of which the Government has knowledge, including, but
not limited to, federal criminal violations related to the conduct alleged in
the CMA Criminal Information, the Event, or CMA’s and NiSource’s restoration
work in the Merrimack Valley following the Event.

14. The Government, in its sole discretion, will determine whether NiSource has
breached the Agreement and whether, as a result, the Government will pursue
prosecution of NiSource and any such prosecution may be premised on information
provided by NiSource.

15. NiSource also agrees that, in the event that the Government determines, in
its sole discretion, that NiSource has violated any provision of this Agreement,
an extension of the Term of the Agreement may be imposed by the Government, in
its sole discretion, for up to a total additional time period of twelve
(12) months. Any extension of the Agreement extends all terms of this Agreement
throughout the extension period.

16. In the event the Government determines that NiSource has breached this
Agreement, the Government agrees to provide NiSource with written notice of such
breach prior to instituting any prosecution resulting from such breach. Within
thirty (30) days of receipt of such notice, or within any longer period of time
the Government agrees to in writing, NiSource may respond to the Government in
writing to present its position regarding whether a breach has in fact occurred;
whether any breach was material; whether any breach was knowingly or willfully
committed; and any other facts and circumstances that NiSource submits are
relevant to the Government’s determination of breach. The Government agrees to
consider NiSource’s written submission in determining whether a breach occurred
and, if so, whether to institute a prosecution of NiSource.

 

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17. In the event the Government institutes a prosecution due to its
determination that NiSource has breached this Agreement: (a) all statements made
by or on behalf of NiSource or CMA to the Government or to the Court and any
testimony given by or on behalf of NiSource before a grand jury, a court, or any
tribunal, or at any legislative hearings, whether before or after this
Agreement, will be admissible in any criminal proceedings brought by the
Government against NiSource; and (b) NiSource will not assert any claim under
Rule 11(f) of the Federal Rules of Criminal Procedure; Rule 410 of the Federal
Rules of Evidence; or any other federal rule that any such statements or
testimony made by or on behalf of NiSource or CMA before or after this
Agreement, are inadmissible.

18. NiSource acknowledges that the Government has made no representations,
assurances, or promises concerning what sentence may be imposed by the Court if
NiSource breaches this Agreement, the Government pursues criminal charges, and
this matter proceeds to judgment. NiSource further acknowledges that any such
sentence is solely within the discretion of the Court and that nothing in this
Agreement binds or restricts the Court in the exercise of its discretion.

19. NiSource also agrees that in the event that CMA’s guilty plea is not
accepted by the Court or is withdrawn for any reason, or if CMA should fail to
perform an obligation under the CMA Plea Agreement prior to the sale of CMA or
its gas distribution business, the Government may, at its sole option, render
this Agreement null and void.

 

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20. This Agreement is between NiSource and the United States Attorney’s Office
for the District of Massachusetts. This Agreement does not bind any other
federal, state, or local prosecuting authorities. Furthermore, this Agreement
does not prohibit the United States, any agency thereof, or any third party from
initiating or prosecuting any civil or administrative proceedings directly or
indirectly involving NiSource, including, but not limited to, proceedings by the
Internal Revenue Service relating to potential civil tax liability.

21. Any notice, certification, resolution, or report to the Government under
this Agreement will be given by personal delivery, overnight delivery by a
recognized delivery service, or registered or certified mail, addressed to:

Chief, Public Corruption and Special Prosecutions Unit

U.S. Attorney’s Office for the District of Massachusetts

John Joseph Moakley Federal Courthouse

One Courthouse Way, Suite 9200

Boston, MA 02210

22. Any notice to NiSource under this Agreement will be given by personal
delivery, overnight delivery by a recognized delivery service, or registered or
certified mail, addressed to:

Alejandro N. Mayorkas, Esq.

WilmerHale LLP

1875 Pennsylvania Avenue NW

Washington, DC 20006

Carrie J. Hightman

Chief Legal Officer

801 East 86th Avenue

Merrillville, IN 46410

23. Notice will be effective upon actual receipt by the Government or NiSource.

24. The Government’s acceptance of delivery of any notice, certification,
resolution, or report referenced in this Agreement, or the absence of any
response thereto, is not, and will not be construed as, evidence of compliance
with this Agreement or any other applicable laws, policies, or procedures.

 

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25. This Agreement, to become effective, must be signed by all of the parties
listed below. No promises, agreements, terms, or conditions other than those set
forth in this Agreement will be effective unless memorialized in writing and
signed by all parties or confirmed on the record before the Court.

 

FOR THE UNITED STATES   ANDREW E. LELLING   UNITED STATES ATTORNEY     By:  

/s/ Neil J. Gallagher, Jr.

  Neil J. Gallagher, Jr.   Evan Gotlob   Assistant United States Attorneys FOR
NISOURCE, INC.     By:  

/s/ Joseph Hamrock

  Joseph Hamrock   Chief Executive Officer   NiSource, Inc.     By:  

/s/ Carrie J. Hightman

  Carrie J. Hightman   Executive Vice President and Chief Legal Officer  
NiSource, Inc.     By:  

/s/ Alejandro N. Mayorkas, Esq.

  Alejandro N. Mayorkas, Esq.   WilmerHale, LLP   Counsel for NiSource, Inc.

 

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UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

 

UNITED STATES OF AMERICA

 

v.

 

BAY STATE GAS COMPANY, doing business as (“d/b/a”) Columbia Gas of
Massachusetts,

 

Defendant

  

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)

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)

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Criminal No.

 

Violation:

 

Count One: Failure to Prepare and Follow a Procedure for the Starting Up and
Shutting Down of a Pipeline Designed to Assure Operation within the Maximum
Allowable Operating Pressure

(49 U.S.C. §§ 60123(a),60118(a); 49 C.F.R.

§§ 192.605(a), 192.605(b)(5))

INFORMATION

At all times relevant to this Information:

General Allegations

1. Bay State Gas Company, d/b/a Columbia Gas of Massachusetts (“CMA”), was a
Massachusetts corporation that supplied natural gas to approximately 325,000
customers in Massachusetts in and around Springfield, Brockton, and three
Merrimack Valley communities in Lawrence, Andover, and North Andover. CMA was a
wholly-owned subsidiary of NiSource, Inc. (“NiSource”), a publically traded
company based in Merrillville, Indiana.

2. CMA engaged in the transportation of natural gas, was an operator of a gas
pipeline system as well as a gas distributor operator (“Operator”), and was
subject to the jurisdiction of the U.S. Department of Transportation (“US DOT”)
as well as state and local regulations.

 

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CMA’s Low-Pressure Gas Distribution System in South Lawrence

3. CMA owned and operated a network of gas pipeline systems for the
transportation and delivery of natural gas that included a series of
approximately 25 different low-pressure (“LP”) gas distribution systems in
Massachusetts. Among these systems, CMA owned and operated a LP gas distribution
system in the area of South Lawrence (“the South Lawrence LP System”).

4. The South Lawrence LP System used fourteen (14) regulator stations (“Reg.
Stations”) to supply natural gas to main distribution lines (“mains”) and
control downstream pressure. The Reg. Stations were belowground and contained
“regulators” that monitored and controlled downstream gas pressure.

5. Natural gas came into the South Lawrence LP System at high pressure, about 77
pounds per square inch gauge (“psig”). The regulators decreased pressure to
approximately 0.5 psig or 14 inches of water column (“w/c”), a more refined
pressure measurement. The Reg. Stations supplied mains with gas through an
outlet pipe. Mains, in turn, supplied gas to individual houses and businesses
through service lines at roughly the same pressure, 0.5 psig or 14 inches w/c.

6. The fourteen (14) Reg. Stations that were part of the South Lawrence LP
System controlled and regulated pressure in an automated manner. Based on the
pressure the regulator sensed downstream, the regulator valve opened or closed
to control downstream pressure at a pre-set limit called a “set-point” to ensure
that the pressure in the system did not exceed the Maximum Allowable Operating
Pressure (“MAOP”) and become unsafe. Although it varied, the MAOP for the South
Lawrence LP System was generally 14 inches w/c.

 

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7. Each regulator was equipped with a “regulator control line” also called a
“control line,” “sensing line,” or “static line” (“control line”). A control
line was generally a 3⁄4 inch steel pipe that connected the regulator to the
main downstream. Without a control line connected from the regulator to the
downstream gas main, the regulators in the South Lawrence LP System could not
properly function.

8. Each Reg. Station in the South Lawrence LP System had at least two
regulators, a “worker regulator” and a “monitor regulator,” each with a control
line that sensed downstream pressure and connected back to the regulator,
thereby enabling the regulator to regulate system pressure. The worker regulator
was the primary regulator that maintained system pressure. The monitor regulator
was the redundant backup in case the worker regulator was damaged or
malfunctioned. If both control lines malfunctioned or failed to read any
downstream pressure, the worker regulator would automatically and continually
increase the pressure resulting in an “over-pressurization” of the LP system.

Background of the Pipeline Safety Act

9. Congress first established minimum safety standards for the transportation of
natural gas and other gases by pipeline in the Natural Gas Pipeline Safety Act
of 1968 (“NGPSA”) and directed the Secretary of the US DOT to issue regulations
to protect against risks to life and property posed by pipeline transportation
and pipeline facilities.

10. In 1970, in accordance with NGPSA, the Secretary of the US DOT issued
regulations codified in Part 192 of Title 49 of the Federal Code of Regulations,
Subparts A through M (“Part 192”).

 

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11. In 1979, Congress amended the NGPSA to add criminal penalties for knowing
and willful violations of any Part 192 regulation as part of the Hazardous
Liquid Pipeline Safety Act of 1979 (“HLPSA”).

12. In 1994, Congress enacted the Pipeline Safety Act (“PSA”), 49 U.S.C. § 60101
et seq. The PSA combined and re-codified, without substantive changes, the two
then existing pipeline safety statutes, NGPSA and HLPSA. The purpose of the PSA
was to “provide adequate protection against risks to life and property posed by
pipeline transportation and pipeline facilities.” 49 U.S.C. § 60102(a)(1).

13. In 2004, Congress amended the PSA by enacting the Norman Y. Mineta Research
and Special Programs Improvement Act of 2004 to create the Pipeline and
Hazardous Materials Safety Administration (“PHMSA”), an agency within the US
DOT.

14. In 2006, Congress enacted the the Pipeline Inspection, Protection,
Enforcement and Safety Act (“PIPES”) which directed PHMSA to “prescribe minimum
standards for integrity management programs for distribution pipelines.” 49
U.S.C. § 60109(e).

15. On December 4, 2009, PHMSA promulgated the regulations codified in Subpart P
of Part 192, entitled “Gas Distribution Pipeline Integrity Management (IM).”
Subpart P requires an Operator to “develop and implement” an IM Program by no
later than August 2, 2011. 49 C.F.R. § 192.1005.

Regulations Regarding Pipeline Operations and Over-Pressurization

16. Subpart L of Part 192 prescribes the minimum requirements for safe pipeline
operations and states that “no person may operate a segment of pipeline unless
it is operated in accordance with this subpart.” 49 C.F.R. § 192.603(a).

 

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17. Part 192 defines the Maximum Allowable Operating Pressure (“MAOP”) as “the
maximum pressure at which a pipeline or segment of a pipeline may be
operated[.]” 49 C.F.R. § 192.3. It also defines a “low-pressure distribution
system” as a “distribution system in which the gas pressure in the main is
substantially the same as the pressure provided to the customer.” 49 C.F.R.
§ 192.3. Subpart L further mandates that “[n]o person may operate a low-pressure
distribution system at a pressure high enough to make unsafe the operation of
any connected and properly adjusted low-pressure gas burning equipment”
(referring to gas appliances). 49 C.F.R. § 192.623(a).

18. Under Part 192, “[e]ach operator shall prepare and follow for each pipeline,
a manual of written procedures for conducting operations and maintenance
activities,” otherwise known as an operation and maintenance manual (“O&M
Manual”). Among other requirements, § 192.605(b)(5) requires that the O&M Manual
include a procedure for “starting up and shutting down any part of a pipeline in
a manner designed to assure operation within the MAOP limits prescribed by this
part” in order “to provide safety during maintenance and operations.”

19. Subpart L also requires an operator to “keep records necessary to administer
the procedures under § 192.605.” 49 C.F.R. § 192.603. Among the records required
to be kept, and made available to operating personnel include, “construction
records, maps and operating history.” 49 C.F.R. § 192.605(b)(3).

The September 13, 2018 Over-Pressurization Event

20. On or about September 13, 2018, beginning at approximately 4:00 p.m., a
series of fires and explosions resulted from an over-pressurization of the South
Lawrence LP System (“the Event”). By approximately 4:07 p.m., the actual
operating pressure of the South Lawrence LP System increased to more than 35
inches of w/c and ultimately increased until the actual operating pressure was
approximately 13 times greater than the MAOP.

 

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21. The over-pressurization of the South Lawrence LP System caused multiple
fires and explosions including inside house-hold appliances and residences. The
resulting fires and explosions caused substantial damage to approximately 131
residential and commercial structures in the communities of Lawrence, Andover,
and North Andover, including the total destruction of three houses in Lawrence,
injured 22 people, killed one individual in Lawrence and severely disabled
another.

Operational Notice 15-05

22. By at least September 2015, CMA’s employees in the Lawrence Division from
Field Engineering, Construction, and Measurement and Regulation (“M&R”), as well
as Senior Field Engineering Management in CMA were aware of the particular
dangers associated with belowground control lines. In particular, these
employees and CMA knew that a faulty, damaged, or unaccounted for control line
on a Reg. Station in a LP system could lead to a dangerous over-pressurization
of the system resulting in fires and explosions in a populated area.

23. On or about September 2, 2015, NiSource and CMA internally disseminated
Operational Notice (“ON”) 15-05, entitled “Below Grade Regulator Control Lines:
Caution When Excavating Near Regulator Stations or Regulator Buildings.” The
impetus for ON 15-05 was a “near miss” experience involving another NiSource
company outside of Massachusetts where a construction crew, excavating to repair
a gas leak near a Reg. Station, came close to hitting a control line and was
unaware of its purpose and importance.

 

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24. The stated objective of ON 15-05 was two-fold: “1. Bring awareness to
Company and Contractor employees regarding the existence and importance of
regulator control lines . . . that help to provide critical sensing information
for the accurate monitoring and control of outlet pressure into the Company’s
piping systems . . .” and “2. Set forth required actions for future Company
excavations.”

25. ON 15-05 described what Reg. Station control lines did, and said control
lines:

. . . sense the outlet pressure of the regulator. Based on the pressure sensed
through the control line, the regulator valve will open or close to control the
downstream pressure at the set point of the regulator.

26. ON 15-05 further warned that a broken or disrupted control line could lead
to a “catastrophic event:”

If a control line breaks, the regulator will sense a pressure loss, causing the
valve to open further, resulting in an over pressurization of the downstream
piping system, which may lead to a catastrophic event. The same result occurs if
the flow through the control line is otherwise disrupted (e.g., control line
valve shut off, control line isolated from the regulator it is controlling).

27. Finally, the “Required Action” from ON 15-05 to the Company’s employees was
that:

any Company excavations within the footprint of a [Reg. Station] and/or within
25 feet of a station building or fence shall only proceed with M&R standing by
throughout the excavation . . .

28. While over-pressurization that could result in a “catastrophic event” was a
known risk, CMA never prepared or implemented any written procedure to ensure
that belowground control lines were accounted for, and, if necessary, removed or
relocated. Instead, CMA relied upon an informal practice of encouraging verbal
communication among members of Field Engineering, Construction and M&R when
excavation took place within the footprint of a Reg. Station.

 

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CMA’s Gas System Enhancement Program (“GSEP”)

29. An Act Relative to Gas Leaks, Massachusetts General Law, Chapter 164,
Section 145), effective October 1, 2014 (“Section 145”), provided Massachusetts
gas utility companies with a financial incentive to replace or improve aging or
leaking gas infrastructure. Under Section 145, a gas distribution company was
permitted to submit a Gas System Enhancement Program (“GSEP”) plan to the
Massachusetts Department of Public Utilities (“MA DPU”). Among other
requirements, the overall GSEP plan had to include a timeline for the removal of
all leak-prone infrastructure within 20 years.

30. If accepted by the MA DPU, Section 145 permitted a gas distribution company
“to begin recovery of the estimated costs of [pipe replacement] projects
included in the plan on May 1 of the year following the initial filing and
collect any revenue requirement, including property taxes and return associated
with the plan.” More broadly, Section 145 permitted a gas company to more
quickly recover its capital costs associated with its yearly forecasted pipeline
replacement through the rates the MA DPU permitted the Company to charge its
customers.

31. On or about October 31, 2014, CMA submitted its first annual GSEP plan and
thereafter in 2015, 2016 and 2017. In the 2014 GSEP plan, CMA proposed to
replace 44 miles of leak-prone mains and recover approximately $2.6 million in
related costs. In its later GSEP plans submitted to the MA DPU, CMA sought to
recover approximately $9 million in costs for 2016, approximately $16.8 million
in 2017 and approximately $26.8 million in 2018.

32. In total, between 2015 and 2018, as part of the GSEP program, CMA earned a
total of approximately $49.3 million in accelerated capital cost recovery and,
after costs, realized a total profit of approximately $26.5 million.

 

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The South Union Street Project

33. In or about August 2016, CMA began construction on a GSEP pipe replacement
project in the South Lawrence LP System called the “South Union Street Project”
(“the South Union Project”). The Field Engineering Department in Lawrence
selected the South Union Project in part due to a pending City of Lawrence
water-main project that would encroach upon the two aging cast-iron (“CI”) mains
on South Union Street.

34. The South Union Project sought to replace two CI mains from the intersection
of Market Street to Winthrop Avenue on South Union Street, measuring
approximately 6 inches and 8 inches in diameter, with one plastic main. Once
installed, the new plastic main would be “tied-in” and connected to the pipes on
the side streets that supplied gas to customers through service lines. As
typical in pipe replacement projects, upon completion of the project, the two CI
mains on South Union Street would be completely disconnected from the LP system
and abandoned in the ground.

35. The scope of the South Union Street project included the replacement of the
CI mains near a belowground Reg. Station located at the intersection of Winthrop
Avenue and South Union Street (the “Winthrop Reg. Station”), one of the fourteen
(14) different regulator stations that monitored and controlled downstream
pressure in the South Lawrence LP System.

36. From in or about September 2015 and continuing up until the time of the
Event, two control lines connected the Winthrop Reg. Station to the two CI mains
on South Union Street.

 

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A.

The Control Lines at the Winthrop Avenue Reg. Station

37. In or about early September 2015, two CMA M&R technicians conducting an
annual inspection of the Winthrop Reg. Station discovered that one of the
control lines on the Winthrop Reg. Station failed to read any downstream
pressure. Under CMA’s O&M Manual, each belowground Reg. Station was required to
have at least two functional control lines (one for the “worker” regulator, one
for the “monitor” regulator) that connected the Reg. Station to the mains to
monitor and regulate downstream pressure.

38. Further investigation by the M&R technicians revealed that the control line
reading zero pressure had been erroneously left on the CI main on Winthrop
Avenue sometime in 2015, near the intersection of South Union Street, during an
earlier pipe replacement project known as the “Parker Street Project.” Having
only one functional control line was a violation of CMA’s O&M procedures and
created a significant risk of an over-pressurization event had the second
control line also failed.

39. Following the discovery of the control line erroneously left on the
abandoned pipe, on or about September 21, 2015, a CMA Construction Leader
(“Construction Leader-1”) coordinated the installation of a new control line for
the Winthrop Reg. Station. Instead of connecting to the abandoned main on
Winthrop Avenue, the new control line connected the Winthrop Reg. Station to the
8-inch CI main on South Union Street approximately 39 feet from the Winthrop
Reg. Station, a distance further than the 25 feet parameter in ON 15-05.

 

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40. Following the installation of the new control line, a CMA inspector created
a hand-drawn “as-built” drawing to document the location of the new control
line. Although not foreseen as part of the construction in the Parker Street
Project, records of the installation of the new control line from the Winthrop
Reg. Station became part of CMA’s records relating to the Parker Street Project.
As a result of the installation, a darkened asphalt trench with spray-painted
markings remained visible on the street from the Winthrop Reg. Station across
South Union Street to the location of the CI mains up through the day of the
Event.

41. Less than a year later, on or about May 13, 2016, a third party construction
crew conducted an additional pressure test of the same newly installed control
line from the Winthrop Reg. Station. As part of the process, the construction
crew, with a CMA inspector onsite, excavated and removed a portion of the new
control line and re-attached the control line again to the 8-inch South Union CI
main.

 

B.

CMA’s Records of Control Lines in Lawrence

42. Prior to the Event, CMA did not maintain consistent and reliable records of
control lines. Instead of mapping control lines into their main computerized
mapping system, Geographic Information System (“GIS”), records of control lines
were primarily located in a patchwork of multiple locations, including records
of completed construction projects known as the “Work Done Files” and “Capital
Close-Out” Files; a paper notebook of the location of critical valves known as
the “Critical Valve Book” (“CVB”); and in a binder of documents that M&R
personnel kept in their CMA trucks.

43. As employees from CMA Engineering, Construction and M&R in Lawrence knew,
the records regarding the location of control lines were often outdated,
incomplete and thus unreliable. Records of the locations of the control lines
for the Winthrop Reg. Station were first located in the CVB, a binder that
contained hard copies of maps that depicted the location of “critical valves,”
valves designated by both state and federal code as critical. The Lawrence
Engineering Department kept and maintained the CVB, but did not regularly or
consistently update information about the location of control lines. For
example, for the Winthrop Regulator Station, the CVB had the location of the
control lines as they existed in approximately May 2010, but when the new
control line was installed in or about September 2015, the CVB was never updated
to reflect the change.

 

11

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44. A second location for records of control lines was the Work-Done and Capital
Close-Out Files. Following the completion of a construction job, CMA
Construction inspectors completed hand-drawn “as-built” drawings to record the
location of pipes and new infrastructure. In the case of the Winthrop Reg.
Station, while the Work-Done and Capital Close-Out File for the Parker Street
Project included the “as-built” drawing for the September 2015 installation of
the new control line, the drawing did not depict the location of the second
control line from the Winthrop Reg. Station to the CI main on South Union
Street.

45. A third location for records of control lines were the binders of documents
and hand-drawn diagrams often referred to as “bibles” that M&R personnel kept in
their trucks that were not maintained in a centralized location. With regards to
the Winthrop Reg. Station, the M&R book contained two diagrams with information
about the location of the control lines in approximately 2000 and 2010, but did
not reflect the location of the newly installed control line from September
2015.

46. While GIS, CMA’s most readily available and centralized record of their
pipeline system, depicted the location of the Reg. Stations and the outlet
pipes, it generally did not include any information about the control lines.
Furthermore, despite concerns that CMA engineers raised about control lines not
being consistently mapped in GIS, CMA deliberately chose to not include
consistent and reliable information about the location of control lines in GIS
and instead relied upon the patchwork of records described above that were often
outdated and unreliable.

 

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47. For example, on or about April 24, 2017, a NiSource engineer in Gas Systems
Planning (“GSP”) working with CMA Field Engineers scheduled a telephonic meeting
entitled “Feasibility discussion of mapping reg station control lines in GIS”
with the Leader of GIS Capital Closeout and a Leader of Field Engineering (“FE
Leader”). During the meeting, GSP Engineer expressed concerns that control lines
were not included in GIS and was adversely affecting the accuracy of gas
pressure models for Field Engineers.

48. Despite this concern, CMA deliberately chose not to change its practice and
failed to include the location of control lines into GIS because of the
substantial cost involved in proactively locating and mapping control lines.
Instead, the primary use and utility of GIS continued to be the accounting of
the replacement and abandonment of CI pipe for capital recapture in the GSEP
program, a financial benefit for CMA.

C. The Responsibility for Control Lines

49. Without any clear direction and implementation of a procedure to address the
dangers associated with control lines, and despite the known risk, employees in
CMA’s Lawrence Division in Engineering, M&R and Construction frequently ignored
and shifted the responsibility for locating and accounting for control lines to
other Departments. For example, while employees in the Field Engineering
Department in Lawrence considered the control lines to be an M&R responsibility
(because they were associated with Reg. Stations), M&R personnel considered
control lines to be an Engineering responsibility because the control line pipes
extended outside the boundaries of the Reg. Station.

 

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D. Early Planning Stages of the South Union Project

50. In and around 2015, CMA Field Engineering in Lawrence was understaffed and
consisted only of two Field Engineers: a more junior Field Engineer (“Field
Engineer-1”) whom CMA hired in approximately July 2015 with no prior
professional engineering experience and a more senior Field Engineer ( “Field
Engineer-2”). Because of Field Engineer-2’s workload, in or about late 2015,
Field Engineer-2 gave the South Union Project to Field Engineer-1. In terms of
size, complexity and budget, the South Union Project, at a projected cost of
over $1.4 million, was the largest project on which Field Engineer-1 had ever
worked to date.

51. In or about February 2016, Field Engineer-1 finalized an initial Proposed
Drawing (“Pro-Drawing”) for the South Union Project that included maps derived
from GIS that depicted the location of the existing gas main to be abandoned and
the proposed location of the new plastic main. The Pro-Drawing also depicted the
location of the Winthrop Reg. Station and outlet pipes, but because CMA did not
include information about control lines in GIS, the Pro-Drawing also did not
include any information about control lines.

52. While Field Engineer-1 and others members of Field Engineering knew the
precise danger associated with control lines, throughout the duration of the
project from approximately late 2015 and continuing until the day of the Event,
Field Engineer-1 never took any action to locate the control lines associated
with the Winthrop Reg. Station. Moreover, despite the high probability of a
catastrophic over-pressurization of a LP system that would result if a Reg.
Station’s control lines were left connected to a main that was then replaced and
abandoned, CMA and CMA’s Field Engineering Department never implemented any
formal written procedure to ensure the necessary relocation of control lines.

 

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53. Instead, CMA followed an informal practice of encouraging verbal
communication and collaboration among members of Field Engineering, Construction
and M&R involved in a particular project including through a process called
“Constructability Reviews.”

54. For example, on or about March 1, 2016, Construction Leader-1 and Field
Engineer-1 engaged in the first of three “Constructability Reviews” on the South
Union Project, a discussion between Field Engineering and Construction that
followed a two-page checklist entitled “Constructability/Safety Review.” The
two-page checklist, from a CMA template, was required documentation for a pipe
replacement project, but made no reference to control lines and did not require
a formal discussion with M&R.

55. Despite the fact that Construction Leader-1 knew that in September 2015, a
new control line had been installed from the Winthrop Reg. Station to the CI
main on South Union Street that was now planned for abandonment in the South
Union Project, Construction Leader-1 never discussed with or identified to Field
Engineer-1 the need to relocate the control line on the South Union Street CI
main. Instead, Construction Leader-1 encouraged Field Engineer-1 to discuss with
then-Leader of M&R (“M&R Leader-1”) the type and size of the valve needed for a
new outlet pipe that would connect the Winthrop Reg. Station to the new plastic
main on South Union Street.

 

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56. While Field Engineer-1 generally discussed the South Union Project with M&R
Leader-1, Field Engineer-1 did not have a meaningful conversation about the
control lines or the necessity to relocate the control lines at the end of the
project with M&R Leader-1. Instead, Field Engineer-1 assumed that nothing
further was needed from Engineering even though Field Engineer-1 knew that
nothing had been done to plan for, or actually relocate, the control lines
before the final abandonment of the CI mains on South Union Street. In doing so,
CMA recklessly disregarded a known and certain risk of a catastrophic
over-pressurization.

E. Approval of the South Union Street Project

57. In or about March 2016, Field Engineer-1 submitted the South Union Project
for approval first to the Leader of FE and then to the Manager of Field
Engineering for CMA (“FE Manager”). Among the materials that Field Engineer-1
submitted through the company’s Work Management System were a scope map of the
project, specific tie-in and abandonment procedures for the various stages of
the project, and a Project Budget Request (“PBR”) that indicated that the total
cost of the project was approximately $1.4 million, but which would ultimately
result in the retirement of approximately 7,500 feet of CI main pipe for the
GSEP Program.

58. The PBR also made clear that the project involved the ultimate abandonment
of a substantial portion of CI mains but not their entirety “due to the
regulator station at the intersection of S. Union Street and Winthrop Ave and
that the LP system in this area depends on the stretch of LP mains on S. Union
St.” The documents that Field Engineer-1 submitted through WMS Docs to senior
Engineering Management did not include any procedure for the relocation of the
control lines before the final abandonment of the CI mains.

 

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59. Even though Field Engineering was ultimately responsible for the design and
procedures for the execution of the South Union Project, and Engineering
Management knew that the South Union Project was Field Engineer-1’s largest and
most difficult project to-date, members of Field Engineering Management never
addressed the need to relocate, or account for, the control lines on the
Winthrop Reg. Station to prevent an over-pressurization event. Instead, Field
Engineering Management focused its’ project review on cost and budget issues.
Both the FE Leader and FE Manager approved the project for release to the
construction phase without any discussion about control lines or concerns about
over-pressurization.

Construction of the South Union Project in 2016

60. In or about July 2016, construction of the South Union Project began with a
third-party contractor construction crew and one of three CMA inspectors onsite.
From in or about August 2016 through the remainder of 2017, a third-party
contractor (“CMA Inspector-1”) served as the project’s primary inspector. On at
least two different occasions in 2016, the construction crew, with a CMA
inspector onsite conducted work in and around the Winthrop Reg. Station.

61. First, on or about August 9, 2016, the construction crew excavated in the
area of the Winthrop Reg. Station in order to install the new plastic main
directly under the two control lines that connected the Winthrop Reg. Station to
the CI main’s on South Union Street. Even though a CMA inspector was onsite
during the work, CMA did not document or record the location of the control
lines.

62. Second, on or about October 17, 2016, the construction crew installed an
outlet pipe from the Winthrop Reg. Station to the newly installed plastic main.
The same day, in an email at approximately 9:09 p.m., Construction Leader-1
informed M&R Leader-1 that construction was “working on the low pressure outlet
[at the Winthrop Reg. Station] . . . and eventually moving the static lines to
the new outlet piping.”

 

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63. On or about October 27, 2016, CMA was required to discontinue construction
on the South Union Project due to a citywide moratorium from the City of
Lawrence on all gas, water and sewer construction projects in Lawrence.
Thereafter, from in or about 2017 until in or about early 2018, the City of
Lawrence discontinued authorizing permits for all but a limited number of public
utility construction projects due to a concern about a lack of coordination and
communication about ongoing construction projects.

64. While originally planned for completion by the end of 2016, due to the
citywide moratorium, in late 2016 the project was placed on hold. By in or about
October 2016, the construction crew installed and “energized” the new plastic
main on South Union Street by feeding the main with gas from the Winthrop Reg.
Station. The construction crew, however, was unable to begin any of the “tie-in”
and abandonment procedures to “tie-in” or connect the side-streets to the new
plastic main and thus was also unable to abandon the CI mains on South Union
Street.

65. By December 2016, CMA Inspector 1’s notes on the tie-in procedures to Field
Engineering made clear that the regulator at the Winthrop Reg. Station was still
connected to the old CI-mains on South Union Street and were “NOT CUT-OFF AS OF
12-9-16,” meaning that gas from the Winthrop Reg. Station was still feeding the
two CI mains on South Union Street.

66. Around the same time, Construction Leader-1 and CMA Inspector-1 had
discussions about the need to eventually move the control lines, but neither
took any material action to ensure that the controls lines were moved at the
appropriate time to prevent a catastrophic over-pressurization event. Moreover,
by the completion of the project in 2018, Construction Leader-1 was working in a
new position and CMA Inspector-1 was working on different construction projects.

 

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67. As a result, though it was originally planned to be one of three “carry-over
projects” that was at first scheduled for 2017, the continued construction of
the South Union Project was ultimately delayed until approximately May 2018.

The Project Cost Review of the South Union Project in 2017

68. On or about January 16, 2017, Field Engineer-1 submitted an updated PBR for
the “carry-over” South Union Project to Field Engineering Management. In
contrast to the first PBR submitted for the South Union Project on March 9,
2016, the updated PBR had an estimated total additional cost of more than
$1.1 million with a projected completion date of the fall of 2017, though no
construction took place in 2017.

69. As a result of the increased costs related to the South Union Project, the
FE Manager scheduled a “Project Cost Review” to take a closer look at the South
Union Project “due to its’ size and the financial impact to the budget.”

70. The Project Cost Review for the South Union Project took place on or about
February 17, 2017 and included a presentation from Field Engineer-1 and
Construction Leader-1 to the FE Manager. The presentation was focused on cost
and included a slide entitled “Work Completed in 2016 (what did we get for our
money).” The presentation also addressed the construction involving the Winthrop
Reg. Station and made clear was still feeding both old CI mains as well as the
new plastic main on South Union Street. The presentation also included a
timeline of events that emphasized the fact that “City of Lawrence shut down all
work” on October 17, 2016 as the primary reason for the “extended contracting
costs.”

 

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71. While over three consecutive years in 2016, 2017 and 2018 both the FE
Manager and FE Leader participated in the approval of the South Union Project
and a more detailed Project Cost Review in February 2017, no one from Field
Engineering involved in the project ever specifically addressed the need to
account for the control lines on the Winthrop Reg. Station to prevent a known
risk of catastrophic over-pressurization. Instead, CMA and Field Engineering’s
evaluation of risk focused on the actual occurrence of prior events affecting
pipeline integrity and the fact that, despite a 2015 “near-miss” involving
control lines within NiSource, CMA had never previously had a serious
over-pressurization event involving control lines.

Field-Engineering’s Focus on GSEP Goals and Company Earnings

72. While CMA Field Engineering was ultimately responsible for the design and
written procedures relating to pipeline replacement projects, the focus of the
FE Manager’s position was the management and administration of CMA’s Capital
Expenditure and GSEP Program, and promoting the achievement of the company’s
financial objectives. Following the initiation of the GSEP Program in or about
2015, CMA dictated yearly mileage goals under the GSEP program that increased
annually. The FE Manager made clear to CMA employees that meeting GSEP mileage
goals was directly connected to company earnings.

73. For example, on or about January 6, 2017, following the completion of the
first full year of GSEP in 2016, the FE Manager emailed Engineering,
Construction and Senior Management in CMA to tout the booking of approximately
$67.3 million in capital expenditures as a “huge milestone” and stated that
their meeting “the GSEP targets is contributing to the earnings of CMA.”

 

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74. In addition, during monthly Capital Program Management Meetings, the FE
Manager frequently encouraged CMA employees from Construction and Engineering to
timely execute and close-out capital GSEP projects and connected the completion
of these projects to company earnings. In April 2016, the FE Manager’s
presentation included a graphic linking the terms “Concept,” “Execute,” and
“Close Out” to promote the timely completion of projects. By April 2018, the FE
Manager added the term “Earnings” to flow directly from the “Close Out” or
completion of GSEP projects to emphasize the point that company earnings derived
directly from completed GSEP projects.

75. In addition to touting success, the FE Manager also frequently expressed
dissatisfaction directly to subordinates and direct reports about the failure to
meet GSEP goals for the retirement of “priority pipe.” For example, on or about
November 16, 2017, the FE Manager emailed that “failing to meet a goal of
retiring 234,000 ft will be severely frowned upon. (think Game of Thrones . . .
:-).”

76. On or about March 12, 2018, after CMA had reported the retirement of only 43
miles of pipe, the FE Manager emailed that, “We better have retired more than 43
miles of priority pipe! More like 53 miles.”

77. On or about September 7, 2018, following an email from the leader of the
Capital Closeout that CMA was approximately 14 miles behind its goal for the
retirement of priority pipe, the FE Manager emailed a group of subordinates,
“For CMA we are 14 miles behind. My question to the group, is anyone concerned
that we will not meet our target for the year? If so, what can we do to mitigate
the risk?” referring to the risk of failing to meet the GSEP goal rather than
any particular risk of pipeline integrity or safety.

 

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The M&R Department in Lawrence

78. Between approximately 1988 and January 2018, CMA’s M&R Department in
Lawrence was primarily responsible for maintaining the Reg. Stations and
ensuring compliance with state and federal regulations as well as the company’s
internal Gas Standards that were based on state and federal regulations,
primarily Part 192. During the same period of time, among other
responsibilities, M&R was also responsible for maintaining and staffing a
Liquefied Natural Gas (“LNG”) and Liquid Propane Gas (“LPG”) Plant in the
Lawrence area that provided additional supplies of gas for winter.

79. In or about 2017, CMA Senior Management proposed a structural change to the
Lawrence M&R Department, already in place in the Brockton and Springfield M&R
Departments, that would divide the responsibility for M&R and the LNG/LPG Plant
into two separate departments. By no later than mid-2017, M&R Leader-1
complained to CMA’s Vice President and Operations Center Manager (“OCM-1”) that
the change would be a bad decision, resulting in a lack of resources to manage
not only the LNG/LPG Plant, but the area Reg. Stations.

80. Specifically, because the six total qualified employees in M&R could not
shift responsibility between Plants and M&R as needed, only two M&R personnel
would be left to manage all the Reg. Stations in Lawrence, Andover and North
Andover. Around the same time, CMA Senior Management also knew that CMA needed
more use of its LNG/LPG Plant, particularly in winter, due to the recent defeat
of a proposed transmission pipeline in Northern Massachusetts, requiring four
M&R Technicians to work 12-hours shifts to operate the Plant around-the-clock
with a minimum staff of two employees per shift. According to an October 2017
email regarding M&R Leader-1’s concern, “That leaves no time to respond to
regulator station issues or the like.”

 

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81. Pursuant to a request from CMA’s Vice President, M&R Leader-1 was required
to put together “a business case” for more resources in M&R. As a result, on or
about October 16, 2017, M&R Leader-1 made a presentation to CMA’s Vice
President, OCM-1 and the Finance Director about the need for more resources in
M&R and the Plant. During the meeting, M&R Leader-1 described the need for more
resources as “urgent” and warned that there were potential consequences for not
adding the resources, including the fact that M&R could not adequately respond
if there were multiple Reg. Station concerns. While the CMA Vice President
ultimately agreed to provide the additional resources that M&R Leader-1
requested, CMA did not secure more resources for M&R until after the Event, and
still divided M&R and the Plant into separate divisions.

82. Specifically, between in or about December 2017 and April 2018, CMA senior
management shifted the responsibility for Lawrence M&R and Reg. Stations from
M&R Leader-1 to the leader of M&R for Brockton and Springfield (“M&R Leader-2”)
while M&R Leader-1 retained responsibility for the Plant. By in or about May
2018, M&R Leader-1, the sole CMA employee with the most knowledge of all
Lawrence Reg. Stations, abruptly retired from CMA.

83. Around the same time, in April 2018, CMA shifted managerial responsibilities
in Lawrence in order to focus on the “rate case” before the MA DPU to increase
the rates CMA could charge to CMA’s customers, based in part on the GSEP
Program. According to a January 29, 2019 email from the Vice President of CMA,
“After the filing [of the rate case in April 2018], the next six to eight months
are focused on the case management and the litigation process – creating a
significant burden on resources.”

 

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84. In order to shift CMA’s focus to the upcoming rate case, in late January
2018, CMA temporarily gave the Lawrence Manager of Systems Operations (“OCM-2”)
the additional responsibility of serving as the Lawrence OCM, with oversight
over M&R in Lawrence even though OCM-2 had no prior experience with M&R as well
as no understanding of ON 15-05 and the importance of control lines.

The Continuation of the South Union Project in 2018

85. On or about January 19, 2018, for the third consecutive year, Field
Engineer-1 submitted a PBR for the South Union Project to Senior Field
Engineering Management. After several revisions to the budget and cost documents
that the FE Manager directed, by on or about March 20, 2018, both the FE Leader
and FE Manager again approved the continuation of the South Union Project for
construction and completion in 2018.

86. The managerial review of the project was again focused on cost and budget in
part because the project was delayed, over-budget, and needed to be completed in
order to allow for a City of Lawrence water project to commence in the same
area. Immediately following the approval, in an email on or about March 20,
2016, Field Engineer-1 informed Construction that, “This is one of the projects
that needs to start as soon as the city allows us” in order to complete the
project in 2018. Furthermore, unlike the previous two years, no Constructability
Review took place between Field Engineering and M&R. Instead, the South Union
Project proceeded to the final construction phase without any formal or informal
collaboration or planning among Field Engineering, Construction, and M&R.

 

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87. The final stages of the South Union Project involved step-by-step “tie-in”
and abandonment procedures whereby the construction crew would “tie-in” or
connect the new plastic main to the side-streets and cut-off portions of the CI
mains on South Union Street. As CMA collectively contemplated and planned, the
project would be completed upon the final “tie-in” and abandonment procedure. At
that time, the CI mains on South Union Street would be abandoned and completely
disconnected from the flow of gas.

88. Nevertheless, despite the fact that CMA knew that the control lines were
still attached to the CI mains and that the complete abandonment of the CI mains
would cause the Winthrop Reg. Station control lines to read decreasing pressure,
prompting the regulators to automatically and continually supply more gas to the
South Lawrence LP System to the point of a dangerous over-pressurization, CMA
did not prepare and follow, nor even contemplate, a formal written procedure for
the removal of the control lines CMA knew was needed to prevent an
over-pressurization and assure operation within the MAOP.

89. Furthermore, while CMA had encouraged an informal practice of verbal
communications and collaboration among Field Engineering, CMA and Senior
Management knew that by 2018, with the exception of Field Engineer-1, each of
the prior significant participants in the South Union Project – including
Construction Leader-1, M&R Leader-1, CMA Inspector-1, and the 2016 construction
crew – were no longer involved in the project. Yet, CMA did nothing to manage
the change in personnel or to pass on the information about the project they
collectively shared.

 

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90. For example, in early 2018, Construction Leader-1 took a new position with
CMA in the Lawrence Operations Department. Construction Leader-1 was directly
involved in the installation of the new control line in 2015, and knew that CMA
would have to eventually move the control lines on the Winthrop Reg. Station,
but failed to inform the new Construction Leader or the new CMA Inspector (“CMA
Inspector-2’) about the need to relocate the control lines to prevent an
over-pressurization.

91. The renewed construction of the South Union Project began with a new
construction crew and CMA Inspector-2 on or about May 22, 2018. On or about
June 12, 2018, the construction crew began work near the Winthrop Reg. Station.
During the construction, CMA Inspector-2 contacted Field Engineer-2 and Field
Engineer-1 when it was discovered that the construction crew could not excavate
in a particular area because the street had been newly paved.

92. As a result, Field Engineer-2 and Field Engineer-1 viewed the construction
site, and directed the construction crew to alter the procedure to “cut-and-cap”
portions of the old CI mains on South Union Street, thus removing portions of
the CI mains from the street. At the time of the construction, CMA Inspector-2
noted the darkened asphalt trench—depicting the location of the control line
installed in September 2015—but wrongly assumed the trench was the location of
the outlet pipe. At the same time, while present at the construction site,
neither Field Engineer-2 or Field Engineer-1 ever took any steps to investigate
or determine the location of the control lines or contact M&R even though the
construction site was in close proximity to the Winthrop Reg. Station.

 

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93. On or about September 13, 2018, at approximately 4:00 p.m., the construction
crew completed the final “tie-in” and abandonment procedure following the
procedures CMA provided to the crew at the intersection of Salem Street and
South Union Street. While not anticipated by the construction crew, the final
“tie-in” and abandonment procedure resulted in the complete abandonment of the
CI mains on South Union Street. Upon the complete abandonment and isolation of
the CI mains on South Union Street, the Winthrop Reg. Station—that CMA knew was
still connected to the CI mains on South Union Street—sensed a sharp decline in
pressure, causing the Winthrop Reg. Station to automatically and continually
feed more pressure into the South Lawrence LP System causing the catastrophic
over-pressurization event described above in paragraphs 20 and 21.

 

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COUNT ONE

Failure to Prepare and Follow a Procedure for the Starting Up and Shutting Down
of a Pipeline

Designed to Assure Operation within the Maximum Allowable Operating Pressure

(49 U.S.C. §§ 60123(a), 49 U.S.C. § 60118(a);

49 C.F.R. §§ 192.605(a), 192.605(b)(5))

The United States Attorney charges:

94. The United States Attorney re-alleges and incorporates by reference
paragraphs 1-93 of this Information.

95. From in or about 2015 through on or about September 13, 2018, in in the
District of Massachusetts, the defendant,

BAY STATE GAS COMPANY,

d/b/a Columbia Gas of Massachusetts,

by and through the actions of its employees, and through a pattern of flagrant
organizational indifference, knowingly and willfully violated a minimum safety
standard for the starting up and shutting of any part of a distribution
pipeline, as set forth in Title 49, Code of Federal Regulations,
Section 192.605(b)(5). Specifically, BAY STATE GAS COMPANY, d/b/a Columbia Gas
of Massachusetts, knowingly and willfully failed to prepare and follow
procedures to remove and relocate regulator control lines on the South Union
Project to assure operation of the South Lawrence LP System within the Maximum
Allowable Operating Pressure and safety during maintenance and operations.

All in violation of Title 49, United State Code, Section 60123(a).

 

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  ANDREW E. LELLING   United States Attorney By  

/s/ Neil J. Gallagher, Jr.

  Neil J. Gallagher, Jr.   Evan Gotlob   Assistant U.S. Attorneys

Dated: February 26, 2020

 

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LOGO [g872025g0226222111529.jpg]

 

   

U.S. Department of Justice

 

Andrew E. Lelling

United States Attorney

District of Massachusetts

      Main Reception: (617) 748-3100     John Joseph Moakley United States
Courthouse     1 Courthouse Way     Suite 9200     Boston, Massachusetts 02210  
  February 25, 2020

Alejandro N. Mayorkas, Esq.

WilmerHale, LLP

1875 Pennsylvania Avenue NW

Washington, DC 20006

 

  Re:

United States v. Bay State Gas Company, d/b/a Columbia Gas of Massachusetts

Criminal No.

Dear Counsel:

The United States Attorney for the District of Massachusetts (“the U.S.
Attorney”) and your client, Bay State Gas Company, doing business as (“d/b/a”)
Columbia Gas of Massachusetts (“Defendant”), agree as follows with respect to
the above-referenced case:

1. Change of Plea

At the earliest practicable date, Defendant will waive Indictment and plead
guilty to Count One of the Information, attached to this agreement as Exhibit A,
charging the Knowing and Willful Failure to Prepare and Follow a Procedure for
the Starting Up and Shutting Down of a Pipeline Designed to Assure Operation
within the Maximum Allowable Operating Pressure, in violation of 49 U.S.C.
§ 60123(a), 49 U.S.C. § 60118(a), and 49 C.F.R. §§ 192.605(a) and 192.605(b)(5).
Defendant admits that it committed the crime specified in Count One and is in
fact guilty.

2. Penalties

Defendant faces the following maximum penalties:

 

  a.

A fine of not more than the greater of twice the gross gain or twice the gross
loss, whichever is greater, pursuant to 18 U.S.C. § 3571(d);

 

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  b.

A term of probation of not less than one (1) year nor more than three (3) years,
pursuant to 18 U.S.C. § 3561(c)(1);

 

  c.

Restitution to any victim of the offense; and

 

  d.

A mandatory special assessment of $400, pursuant to 18 U.S.C. § 3013(c)(2)(B).

3. Fed. R. Crim. P. 11(c)(1)(C) Plea

This Plea Agreement is made pursuant to Fed. R. Crim. P. 11(c)(1)(C), and
Defendant’s guilty plea will be tendered pursuant to that provision. In
accordance with Rule 11(c)(1)(C), if the District Court (“Court”) accepts this
Plea Agreement, the Court must include the agreed disposition in the judgment.
If the Court rejects any aspect of this Plea Agreement, the U.S. Attorney or
Defendant may deem the Plea Agreement null and void. Defendant understands and
acknowledges that it may not withdraw its plea of guilty unless the Court
rejects this Plea Agreement under Fed. R. Crim. P. 11(c)(5).

4. Sentencing Guidelines

The parties agree jointly to take the following positions at sentencing under
the United States Sentencing Guidelines (“USSG” or “Guidelines”) and other
applicable law.

 

  a)

No guideline under the USSG has been promulgated for the violation to which
Defendant is pleading guilty, specifically, a violation of 49 U.S.C.
§§ 60123(a), and 60118(a) and 49 C.F.R. §§ 192.605(a) and 192.605(b)(5). See
USSG §§ 2X5.1;

 

  b)

Pursuant to USSG § 2X5.1, the most analogous guideline for the facts and
circumstances of this case is USSG § 2Q1.2 as it pertains to the Mishandling of
Hazardous or Toxic Substances.

 

  c)

Pursuant to USSG § 2Q1.2(a), Defendant’s base offense level is 8;

 

  d)

Defendant’s offense level is increased by 6 levels, because pursuant to USSG
§ 2Q1.2(b)(1)(A) the offense resulted in, by analogy, an ongoing and continuous
discharge of natural gas;

 

  e)

Defendant’s offense level is increased by 9 levels, because pursuant to USSG
§ 2Q1.2(b)(2) the offense resulted in a substantial likelihood of death and
serious bodily injury;

 

  f)

In accordance with USSG § 3E1.1, based on Defendant’s prompt acceptance of
responsibility for the offense of conviction in this case, the adjusted offense
level is reduced by three, resulting in a total adjusted offense level 20.

 

  g)

Since USSG § 2Q1.2 is not covered by USSG § 8C2.1, the applicable fine is
determined by USSG § 8C2.10, which provides that the Court “should determine an
appropriate fine by applying the provisions of 18 U.S.C. §§ 3553 and 3572.”

 

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The U.S. Attorney’s agreement that the disposition set forth below is
appropriate in this case is based, in part, on Defendant’s prompt acceptance of
responsibility for the offense of conviction in this case, Defendant’s voluntary
payments of restitution to the victims of the offense, and Defendant’s parent
company, NiSource, Inc.’s (“NiSource”), agreement to use reasonable best efforts
to sell Defendant or Defendant’s gas distribution business to a qualified
third-party buyer consistent with the requirements of M.G.L. c. 164, § 96 and
Interlocutory Order on Standard of Review, D.P.U. 10-170, upon the completion of
which: (1) NiSource will cease and desist any and all gas pipeline and gas
distribution activities in the District of Massachusetts; and (2) NiSource will
pay a fine equal to the amount of any profit or gain NiSource realized from any
such sale.

The U.S. Attorney may, at his sole option, be released from his commitments
under this Plea Agreement, including, but not limited to, his agreement that
Paragraph 5 constitutes the appropriate disposition of this case, if at any time
between Defendant’s execution of this Plea Agreement and sentencing, Defendant:

 

  (a)

Fails to admit a complete factual basis for the plea;

 

  (b)

Fails to truthfully admit Defendant’s conduct in the offense of conviction;

 

  (c)

Falsely denies, or frivolously contests, relevant conduct for which Defendant is
accountable under USSG § 1B1.3;

 

  (d)

Fails to provide truthful information about Defendant’s financial status and/or
Defendant’s payments to victims of the offense of conviction;

 

  (e)

Gives false or misleading testimony in any proceeding relating to the criminal
conduct charged in this case and any relevant conduct for which Defendant is
accountable under USSG § 1B1.3;

 

  (f)

Engages in acts that form a basis for finding that Defendant has obstructed or
impeded the administration of justice under USSG § 3C1.1;

 

  (g)

Commits a crime; or

 

  (i)

Attempts to withdraw Defendant’s guilty plea.

Nothing in this Plea Agreement affects the U.S. Attorney’s obligation to provide
the Court and the U.S. Probation Office with accurate and complete information
regarding this case.

 

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5. Agreed Disposition

Under Fed. R. Crim. P. 11(c)(1)(C), the United States and Defendant agree that
the following is a reasonable and appropriate disposition of this case, taking
into consideration all of the factors set forth in 18 U.S.C. §§ 3553(a) and
3572:

 

  a.

A criminal fine in the amount of $53,030,116 paid within thirty (30) days of
sentencing, which amount represents twice the amount of pecuniary gain of
$26,515,058 that Defendant received from its Gas System Enhancement Plan
(“GSEP”) in Massachusetts from 2015 through and including 2018.

 

  b.

A period of probation of three (3) years that will immediately terminate prior
to the three (3) year term upon a certification to the Court of the completion
of the sale of Defendant or Defendant’s gas distribution business to a qualified
third-party buyer consistent with the requirements of M.G.L. c. 164, § 96 and
Interlocutory Order on Standard of Review, D.P.U. 10-170, and formal acceptance
of the sale by the Massachusetts Department of Public Utilities (“MA DPU”).

 

  c.

In addition to the mandatory conditions of probation pursuant to USSG § 8D1.3
and 18 U.S.C. § 3563(a), which includes the full payment of the fine set forth
in paragraph 5(a), the period of probation shall also include the following
additional conditions:

 

  i.

Defendant will implement and adhere to each of the recommendations from the
National Transportation Safety Board (“NTSB”) related to NTSB Accident ID
PLD18MR003 regarding the Merrimack Valley Over-Pressurization Event on or about
September 13, 2018 (the “Event”);

 

  ii.

Defendant will agree to employ at Defendant’s expense an in-house monitor to
oversee Defendant’s compliance with the recommendations of the NTSB and
applicable laws and regulations. This monitor will report monthly in writing to
a government committee composed of a representative from the U.S. Attorney, the
MA DPU and the Massachusetts Attorney General’s Office (“MA AGO”);

 

  iii.

In the event that Defendant enters into a definitive purchase and sale agreement
for the sale of Defendant or its gas distribution business within the three
(3) year term of probation, Defendant will do the following:

 

4

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  A.

Within three (3) business days of the execution of a definitive purchase and
sale agreement with a purchaser of Defendant or Defendant’s gas distribution
business, Defendant will submit to the U.S. Attorney and the Court a filing,
which if appropriate may be filed under seal, that completely and accurately
details the terms of the purchase and sale agreement including the proposed
purchase price;

 

  B.

Within seven (7) business days of the execution of a definitive purchase and
sale agreement with a purchaser of Defendant or Defendant’s gas distribution
business, Defendant will provide the U.S. Attorney and the Court, in the form of
a declaration under 28 U.S.C. § 1746 that may be filed under seal if
appropriate, a true and accurate detailed accounting following both Generally
Accepted Accounting Principles (“GAAP”) and federal income tax obligations, of
the total amount of any potential gain, profit or loss that will result from the
proposed sale reflected in the filing described above in paragraph 5(c)(iii)(A)
and in accordance with the formula set forth in Exhibit B;

 

  C.

Upon request from the U.S. Attorney, Defendant will promptly provide to the U.S.
Attorney true and accurate records including income tax returns, to the extent
required to verify the accuracy of any potential profit, gain or loss that will
result from the sale of Defendant or Defendant’s gas distribution business
reflected in the filing described above in paragraph 5(c)(iii)(A). Defendant
understands and agrees that the U.S. Attorney may provide these records to an
outside consultant/expert he retains to verify the accuracy of the information,
provided that such consultant/expert is subject to the terms of a
confidentiality agreement; and

 

  D.

No later than three (3) business days before the completion of any sale of
Defendant or its gas distribution business, Defendant will provide the U.S.
Attorney and the Court, in a filing that may submitted under seal if
appropriate, any updated information about the terms of sale, and Defendant’s
calculation of any gain, profit or loss from the sale of Defendant or
Defendant’s gas distribution business in accordance with the formula set forth
in Exhibit B. Defendant understands and agrees that Defendant must completely
and accurately report to both the Court and the U.S. Attorney the total amount
of any profit, gain or loss from the sale of Defendant or its gas distribution
business.

 

5

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  d.

Defendant understands and agrees that the U.S. Attorney reserves the right to
verify and challenge the accuracy of Defendant’s calculation of any potential
profit, gain or loss from the sale of Defendant or its gas distribution business
prior to the final sale and that Defendant’s failure to accurately report the
information described above in paragraph 5(c)(iii) may constitute a violation of
this Plea Agreement and/or a violation of a condition of Defendant’s probation.
See USSG § 8D1.4(b)(3).

 

  e.

Notwithstanding the agreed upon disposition described above, pursuant to USSG
§ 8F1.1, Defendant understands and agrees that upon a finding by the Court that
Defendant violated a condition of probation, including the failure to provide
true and accurate information regarding any profit or gain from a sale of
Defendant or its gas distribution business as described above in paragraph
5(c)(iii), the Court may extend the term of probation up to the time of the
final sale of Defendant or its gas distribution business, impose more
restrictive conditions of probation, or prior to the final sale of Defendant or
its gas distribution business, revoke probation and resentence Defendant.

 

  f.

The U.S. Attorney agrees that no consequence of any breach of this Plea
Agreement or of any violation of a condition Defendant’s probation will be
imposed upon a bona fide purchaser for value of Defendant or Defendant’s gas
distribution business.

 

  6.

No Further Prosecution of Defendant and No Prosecution of its Ultimate Parent
Company, NiSource, Inc.

Under Fed. R. Crim. P. 11(c)(1)(A), the United States agrees that, other than
the charges in the Information attached as Exhibit A, and pursuant to the
Deferred Prosecution Agreement (the “DPA”) attached as Exhibit C, the U.S.
Attorney shall not prosecute Defendant or NiSource for any conduct related to
the allegations in the attached Information, the Event, or Defendant’s
restoration work in the Merrimack Valley following the Event based on the facts
and circumstances now known to the U.S. Attorney.

This provision is expressly contingent on: (i) the Court’s acceptance of the
guilty plea of Defendant to the attached Information; (ii) Defendant’s agreement
not to withdraw or otherwise challenge this Plea Agreement; (iii) Defendant’s
performance of all of its obligations as set forth in this Plea Agreement prior
to the sale of Defendant or its gas distribution business; and (iv) NiSource’s
compliance with the DPA attached as Exhibit C. If Defendant’s guilty plea is
withdrawn for any reason, or if Defendant should fail to perform an obligation
under this Plea Agreement prior to the sale of Defendant or its gas distribution
business, the U.S. Attorney, at his sole option, may render this Plea Agreement
and the DPA attached as Exhibit C null and void.

While based on the information currently available to him, the U.S. Attorney
does not intend to criminally prosecute any individual for violations of the
Natural Gas Pipeline Safety Act, 49 U.S.C. § 60101 et seq. for the conduct
related to the allegations in the attached Information, the Event, or
Defendant’s and NiSource’s restoration work in the Merrimack Valley, the U.S.
Attorney nonetheless reserves the right to prosecute any individual, including
but not limited to present and former officers, directors, employees, and other
agents of Defendant or NiSource.

 

6

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7. Waiver of Right to Appeal and to Bring Future Challenge

 

  (a)

Defendant has conferred with its attorney and understands that it has the right
to challenge its conviction in the United States Court of Appeals for the First
Circuit (“direct appeal”). Defendant also understands that, in some
circumstances, Defendant may be able to challenge its conviction in a future
proceeding (collateral or otherwise), such as pursuant to a motion under 28
U.S.C. § 2255 or 28 U.S.C. § 2241. Defendant waives any right to challenge
Defendant’s conviction on direct appeal or in any future proceeding (collateral
or otherwise).

 

  (b)

Defendant has conferred with its attorney and understands that defendants
ordinarily have a right to challenge in a direct appeal their sentences
(including any orders relating to the terms and conditions of supervised
release, fines, forfeiture, and restitution) and may sometimes challenge their
sentences (including any orders relating to the terms and conditions of
supervised release, fines, forfeiture, and restitution) in a future proceeding
(collateral or otherwise). The rights that are ordinarily available to a
defendant are limited when a defendant enters into a Rule 11(c)(1)(C) agreement.
In this case, Defendant waives any rights Defendant may have to challenge the
agreed-upon sentence (including any agreement relating to the terms and
conditions of supervised release, fines, forfeiture, and restitution) on direct
appeal and in a future proceeding (collateral or otherwise), such as pursuant to
28 U.S.C. § 2255 and 28 U.S.C. § 2241. Defendant also waives any right Defendant
may have under 18 U.S.C. § 3582(c)(2) to ask the Court to modify the sentence,
even if the USSG are later amended in a way that appears favorable to Defendant.
Likewise, Defendant agrees not to seek to be resentenced with the benefit of any
change to Defendant’s Criminal History Category that existed at the time of
Defendant’s original sentencing. Defendant also agrees not to challenge the
sentence in an appeal or future proceeding (collateral or otherwise) even if the
Court rejects one or more positions advocated by any party at sentencing. In
sum, Defendant understands and agrees that in entering into this Plea Agreement,
the parties intend that Defendant will receive the benefits of the Plea
Agreement and that the sentence will be final.

 

  (c)

The U.S. Attorney agrees that he will not appeal the imposition by the Court of
the sentence agreed to by the parties as set out in Paragraph 5, even if the
Court rejects one or more positions advocated by either party at sentencing.

 

  (d)

Regardless of the previous subparagraphs, Defendant reserves the right to claim
that: (i) Defendant’s lawyer rendered ineffective assistance of counsel under
Strickland v. Washington; or (ii) the prosecutor in this case engaged in
misconduct that entitles Defendant to relief from Defendant’s conviction or
sentence.

 

7

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  8.

Forfeiture

Defendant hereby waives and releases any claims Defendant may have to any
property seized by the United States, or seized by any state or local law
enforcement agency and turned over to the United States, during the
investigation and prosecution of this case, and consents to the forfeiture of
all such assets.

 

  9.

Civil Liability

By entering into this Plea Agreement, the U.S. Attorney does not compromise any
civil liability, including but not limited to any tax liability, Defendant may
have incurred or may incur as a result of Defendant’s conduct and plea of guilty
to the charges specified in Paragraph 1 of this Plea Agreement.

 

  10.

Withdrawal of Plea by Defendant or Rejection of Plea by Court

Should Defendant move to withdraw its guilty plea at any time, this Plea
Agreement and the DPA attached as Exhibit C shall be null and void at the option
of the U.S. Attorney. In addition, should the Court reject the parties’
agreed-upon disposition of the case or any other aspect of this Plea Agreement,
this Plea Agreement and the DPA attached as Exhibit C shall be null and void at
the option of either the U.S. Attorney or Defendant. In this event, Defendant
agrees to waive any defenses based upon the statute of limitations, the
constitutional protection against pre-indictment delay, and the Speedy Trial Act
with respect to any and all charges that could have been timely brought or
pursued as of the date of this Plea Agreement.

 

  11.

Breach of Plea Agreement

If the U.S. Attorney determines that Defendant has failed to comply with any
provision of this Plea Agreement, has engaged in any of the activities set forth
in Paragraph 4(a)-(i) or has committed any crime following Defendant’s execution
of this Plea Agreement, the U.S. Attorney may, at his sole option, be released
from his commitments under this Plea Agreement and the DPA in their entirety by
notifying Defendant, through counsel or otherwise, in writing. The U.S. Attorney
may also pursue all remedies available to him under the law, regardless whether
he elects to be released from his commitments under this Plea Agreement and/or
the DPA. Further, the U.S. Attorney may pursue any and all charges which
otherwise may have been brought against Defendant and/or have been, or are to
be, dismissed pursuant to this Plea Agreement and/or the DPA. Defendant
recognizes that its breach of any obligation under this Plea Agreement shall not
give rise to grounds for withdrawal of Defendant’s guilty plea, but will give
the U.S. Attorney the right to use against Defendant before any grand jury, at
any trial or hearing, or for sentencing purposes, any statements made by
Defendant and any information, materials, documents or objects provided by
Defendant to the government, without any limitation, regardless of any prior
agreements or understandings, written or oral, to the contrary. In this regard,
Defendant hereby waives any defense to any charges the U.S. Attorney brings that
Defendant might otherwise have based upon any statute of limitations, the
constitutional protection against pre-indictment delay, or the Speedy Trial Act.

 

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12. Who is Bound by Plea Agreement

This Agreement is only between Defendant and the U.S. Attorney for the District
of Massachusetts. It does not bind the Attorney General of the United States or
any other federal, state, or local prosecuting authorities.

13. Corporate Authorization

Defendant shall provide to the U.S. Attorney and the Court a certified copy of a
resolution of the Board of Directors of Defendant, affirming that the Board of
Directors has authority to enter into the Plea Agreement and has (1) reviewed
the Information in this case and the proposed Plea Agreement; (2) consulted with
legal counsel in connection with the matter; (3) voted to enter into the
proposed Plea Agreement; (4) voted to authorize Defendant to plead guilty to the
charges specified in the Plea Agreement; and (5) voted to authorize Joseph
Hamrock, Chief Executive Officer of NiSource, Inc., to execute the Plea
Agreement and all other documents necessary to carry out the provisions of the
Plea Agreement.

14. Modifications to Plea Agreement

This Agreement can be modified or supplemented only in a written memorandum
signed by both parties, or through proceedings in open court.

If this letter accurately reflects the agreement between the U.S. Attorney and
Defendant, please have Defendant sign the Acknowledgment of Plea Agreement
below. Please also sign below as Witness. Return the original of this letter to
Assistant U.S. Attorney Neil Gallagher.

 

  Sincerely,  

ANDREW E. LELLING

United States Attorney

By:  

/s/ Fred M. Wyshak, Jr.

  Fred M. Wyshak, Jr.  

Chief, Public Corruption and

Special Prosecutions Unit

 

/s/ Neil J. Gallagher, Jr.

 

Neil J. Gallagher, Jr.

Evan Gotlob

Assistant U.S. Attorneys

 

9

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Corporate Acknowledgment of Plea Agreement

The Board of Directors has authorized me to execute this Plea Agreement on
behalf of Bay State Gas Company, doing business as (“d/b/a”) Columbia Gas of
Massachusetts (“CMA”). The Board has read this letter of Agreement in its
entirety and has discussed it fully with CMA’s attorney. The Board acknowledges
that this letter fully sets forth CMA’s agreement with the U.S. Attorney. The
Board further states that no additional promises or representations have been
made to the Board by any officials of the United States in connection with this
matter.

 

/s/ Joseph Hamrock

 

Joseph Hamrock

Chief Executive Officer NiSource, Inc.

/s/ Kimberly Cuccia

Kimberly Cuccia General Counsel Bay State Gas, d/b/a Columbia Gas of
Massachusetts

 

10

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I certify that Defendant’s Board of Directors has authority to enter into this
Plea Agreement and has (1) reviewed the Information in this case and the
proposed Plea Agreement; (2) consulted with legal counsel in connection with the
matter; (3) voted to enter into the proposed Plea Agreement; (4) voted to
authorize Defendant to plead guilty to the charges specified in the Plea
Agreement; and (5) voted to authorize Joseph Hamrock, Chief Executive Officer of
NiSource, Inc. and Kimberly Cuccia, General Counsel for Bay State Gas, d/b/a
Columbia Gas of Massachusetts, to execute the Plea Agreement and all other
documents necessary to carry out the provisions of the Plea Agreement.

 

/s/ Alejandro N. Mayorkas, Esq.

Alejandro N. Mayorkas, Esq. WilmerHale, LLP Attorney for Bay State Gas Company,
doing business as (“d/b/a”) Columbia Gas of Massachusetts

 

11

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EXHIBIT C

(Calculation of Profit, Gain or Loss)

For purposes of this Agreement, any such profit or gain shall mean the amount,
if any, by which the net purchase price (after related costs and expenses)
received by NiSource from the sale of CMA or its gas distribution business
(hereinafter “A”), as the case may be, exceeds the total of:

 

  (i)

the book value of CMA (including any liabilities assumed by the purchaser) or
the business so purchased (excluding the book value of any CMA assets not
included in the sale) (“hereinafter “B”);

 

  (ii)

the charges for impairment of goodwill and other intangible assets related to
CMA (hereinafter “C”); plus

 

  (iii)

the aggregate amount of the liabilities of CMA not included in the sale
(hereinafter “D”),

in each case specified in (i)-(iii) above, as reflected on the financial
statements of NiSource as of December 31, 2019.

Stated another way, in sum:

 

      A (net purchase price)  

–  B (book value of assets) + C (impairment of good will/intangible assets) + D
(aggregate amount of liabilities)

 

=  gain or loss

The U.S. Attorney reserves the right to challenge the veracity, accuracy and
proper application under GAAP of each of the above described assets and
liabilities in parts B, C and D of the calculation.