Veolia Water Indianapolis is challenging a proposed $13,500 penalty sought by the state for three “serious” safety violations involving an excavation last February at the University of Indianapolis campus.

The Indiana Occupational Safety and Health Administration cited the operator of the city’s water system after an excavator hit a gas line at a depth of about 6 feet at Hanna Avenue and Matthews Avenue.

IOSHA officials said there were no reports of injury. But the state agency alleges Veolia failed to instruct employees to recognize and avoid hazards and failed to properly determine the location of a gas line.

Veolia had an informal conference with IOSHA, filed a petition for review and is further evaluating the issues in the safety order, said Veolia spokesman Paul Whitmore.

“All employees receive training on hazards and maintaining a safe workplace on a monthly basis and supervisors offer daily safety briefings,” he said.

Whitmore said Veolia’s safety performance “is posting its safest results ever,” recording eight injuries in 2009, among 400 employees and 750,000 hours worked, “outpacing Bureau of Labor statistics for the industry.”

Veolia manages Indianapolis Water under a long-term contract, although Mayor Greg Ballard in March announced plans to sell the city-owned utility to Indianapolis-based Citizens Energy in a $1.9 billion deal.

The proposed sale has sharply divided the City-County Council along party lines, with many Democrats preferring the city retain the utility and its oversight. Ballard, a Republican, said the sale would generate about $450 million for needed city infrastructure improvements.

Citizens Energy, which operates the city’s gas system and steam/chilled water operations, said it would engage Veolia’s expertise following a sale, although did not specify to what degree.