One hundred homes and businesses, as well as a primary school, were evacuated following the incident at Fife council's Milesmark Depot in Carnock Road, Dunfermline, in June 2010.
Dunfermline Sheriff Court heard that although there were no casualties, the public were put at risk.
On the day of the incident the employees, who were not supervised, decided to excavate a new trench for drainage works, unaware a decision had been taken not to dig in that area.
During the excavation, they exposed and disturbed whinstone dust, which is an indicator of the presence of gas or water pipes. In spite of this, they continued and their digger struck and ruptured a gas valve on a six-inch pressure main.
They immediately reported the incident. Emergency services and Scottish Gas Networks were called and all properties in the area evacuated for five hours.
An investigation by the Health and Safety Executive revealed various failings by the council including failure to assess the risks to members of the public near the depot and failure to provide and maintain a safe system of work for the excavation.
The council pled guilty to breaching Sections 2 and 3 of the Health and Safety at Work Act 1974.