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PA IROQUOIS PIPELINE CO. TO PAY SECOND LARGEST ENV. PEN. EVER

Release Date: 5/24/96
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PA IROQUOIS PIPELINE CO. TO PAY SECOND LARGEST ENV. PEN. EVER

FOR RELEASE: THURSDAY, MAY 23, 1996

IROQUOIS PIPELINE CO. TO PAY SECOND-LARGEST ENVIRONMENTAL PENALTY EVE= R=20
-- $22 MILLION FOR CLEAN WATER ACT VIOLATIONS=20

In one of the largest environmental criminal investigations in= =20
U.S. history, the U.S. Environmental Protection Agency and the U.S.= =20
Department of Justice announced today that the Iroquois Pipeline=20 Operating Co. and four of its top corporate officials and field=20 supervisors have pleaded guilty to violations of the Clean Water Act= =20
(CWA). The case, involving construction of a natural gas pipeline= =20
=66rom Ontario to Long Island, is the second largest environmental= =20
prosecution and enforcement action conducted by the United States,= =20
exceeded only by the $1 billion Exxon Valdez settlement. Among other= =20
violations, the company degraded scores of wetlands and streams durin= g=20
construction activities.

Under the terms of the settlement, the company will be required= =20
to clean up 30 wetlands and streams damaged during the construction o= f=20
a gas pipeline that runs underground from Ontario to Long Island, and= =20
pay a total of $22 million in criminal fines and civil penalties for= =20
knowingly violating a number of environmental and safety provisions o= f=20
the pipeline construction permit, $2.5 million of which will be used= =20
to create additional wetlands.
=20
"This criminal prosection shows that the Clinton Administration = -

° and the public it serves -- will not tolerate those who try to gain= =20
an economic advantage through pollution," said Carol M. Browner, EPA= =20
Administrator. "The company illegally cut corners in disregard of= =20
the potential harm to both the environment and public safety. They=

=20

1. Iroquois Pipeline Operating Company: A company who on behal= f of Iroquois Gas =20 Transmission System LP constructed a natural gas pipeline which exten= ded =20 approximately 370 miles from Ontario, Canada, to Long Island, NY.
2. Robert Reid: Former President of Iroquois Pipeline Operatin= g Company.
3. John Mackenzie: Former Manager of Engineering and Construct= ion at Iroquois =20 Pipeline Operating Company.
4. Michael Saley: Former Spread One construction Supervisor at= Iroquois Pipeline =20 Operating Company.
5. Carl Addison: Former Spread two Construction Supervisor at = Iroquois Pipeline =20 Operating Company. II. LOCATION OF THE CRIME/VIOLATIONS

In June, 1991, Iroquois commenced construction of a 370 mile pip= eline for the purposes of transporting=20 natural gas from Ontario, Canada to Long Island, NY. The pipeline c= rossed well in excess of 500 rivers, streams=20 and wetlands throughout New York and Connecticut with construction pe= rmits being issued by the U.S. Army Corps of=20 Engineers and the Federal Energy Regulatory Commission.

It should be noted that said permits mandated specific steps to = avoid damage to the environment and to=20 foster prompt and proper clean-up of he pipeline right-of-way upon th= e immediate culmination of construction=20 activities. The pipeline was completed in its entirety in January, 1= 992 and the gas began to flow to respective=20 buyers, however it was discovered that construction had not proceeded= pursuant to the permits/law.

As an overview, the four felony violations of the Clean Water Ac= t to which Iroquois plead guilty=20
encompasses three categories of violations:

=09 1) The failure to clean up or otherwise restore numerous = streams and wetlands (188 in total);

=09 2) The failure to install innumerable trench breakers (a = construction device preventing water=20 from migrating down the pipe trench on slopes and wash= ing out soil support; and

=09 3) The failure to install trench breakers at the edges of= wetlands (to insure construction=20
activities did not upset the natural aquatic containme= nt commonly found in wetlands.

The criminal investigation substantiated 188 streams and wetland= s which Iroquois is acknowledging through=20 its plea that it failed to restore. It should be noted however that = an additional 30 wetlands have been identified=20 via investigation/search warrants and these sites were also improperl= y restored as required by the COE permit.

III. MONETARY SANCTIONS AND REQUIRED REMEDIAL ACTIVITY

A. Iroquois Pipeline Operating Company

Financial Penalties

The Company will pay a total of $22 Million in criminal fines and ci= vil penalties. Of that total, $18 million=20 will go to the Federal Government and $4 million will go to the State= of New York as follows:
=20
1. $15 million dollars will be paid to the United States = as a criminal fine; $1.5 million of this sum=20 =0C=00
will be suspended on the condition that it is pled as restitution to = the State of New York; =20
2. Iroquois will pay to the United States a civil penalty = of $2.5 million dollars with an additional=20 $2.5 million going the National Fish and Wildlife Foundation for the = creation of wetlands in the vicinity of the=20 pipeline; $500,000.00 of these sums will also be suspended on the co= ndition that it is paid to New York State as=20 restitution; and
=20
3. Iroquois will pay to New York $ 4 million dollars ($2 m= illion of which of comes from the Federal=20 fines and penalties) for restitution of violations of Iroquois' state= permit.
=20
In addition to the criminal fines and civil penalties, the Unite= d State anticipates that Iroquois will be=20 unable to pass on to consumers another approximately $20 million doll= ars directly or indirectly related to the=20 construction of the pipeline. Environmental and Safety Remedial Measures

The criminal, civil and administrative dispositions require Iroqu= ois to take specific steps to correct the=20 problems uncovered during the criminal investigation . The company wi= ll be required to cleanup 30 streams and=20 wetlands damaged during the construction of the pipeline. (The compan= y had already restored a number of steams and=20 wetlands after having learned that it was the object of a criminal in= vestigation)..

The Company also must conduct continual monitoring of the pipelin= e to insure that there are no safety or=20 related problems caused by the improper placement of large rocks in t= he pipeline trench and the failure to install=20 numerous trench breakers.
=20
B. Individuals

Plea agreements have been negotiated with four individuals, spec= ifically the former IGTS Manager of=20
Engineering, former IGTS President, and two former IGTS Construction = Supervisors. The IGTS Managers have each=20 agreed to plead guilty to a three (3) count information charging each= with negligent violations of the Clean Water=20 Act (33 U.S.C. =A71319 (c) (1)) with sentences of home confinement fo= r a period of six months. The Construction=20 Supervisors have each plead guilty to one count of negligently violat= ing the Clean Water Act with a six-month home=20 confinement being ordered. Such home confinement is contingent on th= eir cooperation in the prosecution of any=20 other persons charged in connection with this investigation.

It should be noted that the above referenced pleas draw a conclu= sion to a portion of this investigation.

IV. SUMMARY OF EVENTS:

May, 1992: U.S. Attorney's Office, Northern District of New York open= s a criminal investigation of Iroquois=20 Gas Transmission System in response to knowing violations o= f 404 permit within upstate, NY. =20
Initial allegations provided by a NY State DEC Officer.

June 11-12: Simultaneous search warrants were executed at 1992 offi=

ces of Iroquois Gas =20

Transmission System at Shelton, Connecticut and Utica, NY. =

A voluminous =20

amount of records were seized by FBI and EPA-CID agents.

1993: =09 Investigators from EPA-CID and the FBI initiate interviews= of witnesses, review documents and=20
permits and serve Grand Jury subpoenas in an effort to dete= rmine the full scope and magnitude of=20 the criminal allegations/violations at hand. =0C=00

Sept/Oct: The U.S. Attorney's Office, N.D.NY requests/receives 1994= investigative support =20 from other law enforcement agencies (U.S. Army-CID and Departm=

ent of =20

Energy-OIG) to fully support further anticipated search warrants and =

the =20

voluminous document review of seized records from Utica, NY and Shelt=

on, =20

Connecticut.

October 17-21: During this time period the second Iroquois search =

warrant was =20

executed by Federal Investigators. Included in the s=

earch were 22 selected =20

wetland sites were visited in an effort to substantiate th=

e non-existence of trench =20

breakers and clay plugs at the edges of wetlands. The warrant=

allowed for =20

digging in close proximity to the pipeline at the edges of wetlands =

and said =20

action fully demonstrated a pattern of non-compliance with the COE pe=

rmit due to the=20

lack of the mandated plugs/breakers. It should be noted that the exe=

cution of this=20

warrant lead to the initial discovery of large rocks in the pipeline = trench.

Oct. 31-
Nov 3, 1994: During this time period the third Iroquois search warra=

nt was executed by Federal =20

investigators. Numerous wetlands/streams were appropriately docu=

mented as not being=20

properly restored after the construction of the pipeline. The specif=

ic details of=20

Iroquois' inappropriate wetlands restoration was fully documented by =

COE wetlands=20

enforcement personnel.

Early 1995: Joint IGTS Investigative Task Force established.

Summer/
Fall: Iroquois is ordered by the N.Y. State Public Ser=

vice Commission to initiate =20

numerous excavations along the pipeline in response t=
° safety concerns that large =20 rocks were backfilled in the trench. Federal investigators a= ccompany IGTS staff =20 on these digs and documented numerous violations of large rocks in th= e backfill some=20 of which were in direct contact with this "hot" pipeline.
Early 1996 Settlement negotiations continue to foster a global settle= ment of this matter within state and=20 federal jurisdictions in addition to developing a thorough = safety and environmental remediation=20 plan which IGTS must abide.

=09 =09 =09 ###