The Oklahoma Bar Journal May 2024

N atural R esources L aw

The Role of the General Counsel in Managing Risk By Charlene Wright

E NERGY AND CRITICAL INFRASTRUCTURE COMPANIES are among the most highly regulated entities in the United States. In addition to multilevel regulatory oversight, these companies face ever-increasing scrutiny from investors, customers and the public at large. Stakeholders expect these companies to implement robust processes to effectively manage risk. With mounting pressure for increased transparency, it is crucial that companies adopt integrated risk management throughout their enterprise, where the general counsel plays a key role.

Gas and Electric Co. (PG&E) plead guilty to 84 separate counts of involuntary manslaughter and one felony count of unlawfully starting a fire. PG&E received the maximum allowable fine of $3.5 million and agreed to a $25.5 billion settlement fund. 1 A year-long investigation conducted by the Butte County district attorney concluded that outdated power lines had sparked the fire known as the “Camp Fire.” The focus of the investigation and subsequent public outcry centered on allegations that the company had ignored known risks. The media reported: “Long before the failure suspected in the Paradise fire, a company email had noted that some of PG&E’s structures in the area, known for fierce winds, were at risk of collapse. It reported corrosion of one tower so severe

that it endangered crews trying to repair the tower. The company’s own guidelines put Tower 27/222 a quarter-century beyond its useful life – but the tower remained.” 2 Colonial Pipeline Cyberattack Throughout 2020, the Pipeline and Hazardous Materials Safety Administration (PHMSA) con ducted an inspection of Colonial Pipeline’s customer relationship management (CRM) procedures and records for locations in New Jersey, Louisiana, North Carolina and Georgia. Shortly after the inspections concluded, PHMSA gave notice to Colonial that it was in probable violation of several pipeline safety regulations. Among the findings noted in PHMSA’s Notice of Probable Violation (NOPV) were Colonial failed to conduct proper point-to-point

GENERAL COUNSEL IS UNIQUELY QUALIFIED TO UNDERSTAND THE IMPORTANCE OF NOTICE OF RISK A company’s failure to ade quately address known risks or to avoid foreseeable consequences can have devastating results. The industry’s collective experience is littered with examples of escalated enforcement and litigation arising from allegations that a compa ny’s leadership did not properly address known risks. Consider the following examples. PG&E Camp Fire In November 2018, the deadliest wildfire in California’s history was started by a failure of a 99-year old electrical tower (Tower 27/222), killing 85 people and destroying 19,000 buildings. In 2020, Pacific

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

54 | MAY 2024

THE OKLAHOMA BAR JOURNAL