NiSource Faces Criminal Probe in Massachusetts Gas Blasts

(Bloomberg) -- NiSource Inc. disclosed that federal authorities have launched a criminal investigation in connection with a series of explosions on its natural gas network that rocked several towns north of Boston in September.

The Sept. 13 blasts erupted in the towns of Lawrence, Andover and North Andover, damaging 131 homes and buildings and killing one person. A preliminary report from the National Transportation Safety Board found that crews contracted by NiSource’s Columbia Gas of Massachusetts unit were replacing a cast-iron distribution main when the workers removed a section of pipe containing pressure sensors, leading gas to surge into the pipes beyond maximum levels.

On Thursday, NiSource said it took charges of about $415 million in the third quarter for third-party claims related to the incident, and an additional $45 million in other expenses.

NiSource “will likely see additional incident-related expenses in subsequent quarters,” Chief Financial Officer Donald E. Brown said on a call with analysts Thursday. “However, we do expect to substantially recover these expenses through insurance.”

The company and Columbia Gas are the subjects of a grand jury probe by the U.S. Attorney’s Office for the District of Massachusetts, the Merrillville, Indiana-based company said in a regulatory filing Thursday. It said it received the initial subpoenas on Sept. 24.

NiSource is cooperating with “all investigations and inquiries” into the incident, spokesman Ken Stammen said in an email Thursday. A spokeswoman for the U.S. Attorney’s Office in Boston didn’t immediately return a call seeking comment.

The investigation didn’t come as a surprise to analysts, and the shares had little reaction, gaining 0.5 percent to $25.49 at 12:34 p.m. in New York.

“Everybody kind of expected the criminal investigation,” Nikki Hsu, a Bloomberg Intelligence analyst, said in an interview.

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