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The tragedy happened as a party of officials from the Northwest Water Authority were showing people from the nearby village of St. Michael's-on-Wyre around the plant.
It is thought that most of the visitors, including some children, are among those killed and injured.
A massive rescue operation is underway, involving more than 20 ambulances and heavy lifting equipment.
Cranes are being used to pull concrete beams from the wreckage of an underground chamber where most of the victims are thought to have been at the time of the explosion.
Survivors spoke of a huge ball of fire which engulfed them. Many were trapped inside, while others were thrown out into a neighbouring field.
One villager from St Michael's, Pat Kaylor, was blown out of the entrance doorway by the force of the explosion.
"I just sat on the wall," she said. "My clothes were practically all burned off and my skin was just in tatters, and I could hear everybody inside crying and screaming."
The blast brought down the ceiling of the underground chamber crashing down on top of the group of visitors. The crater immediately filled with river water.
Outside, the force of the explosion damaged cars parked nearby, and twisted steel fittings in the pumping station itself.
The cause of the explosion remains a mystery, although the possibility that it may have been a gas explosion is being taken seriously.
The Abbeystead water treatment plant is part of a multi-million pound showcase operation to distribute water around Lancashire.
The Abbeystead pumping station itself was built underground to avoid damaging one of the finest beauty spots in the area.
However, there had been complaints the plant was overloading the River Wyre and worsening flooding in 1980, when the rivers burst their banks and caused widespread local damage.
The villagers from St Michael's were at the pumping station to be reassured that the plant's operation were not responsible for the flooding.
The explosion at Abbeystead killed nine people immediately, with another seven people dying later of their injuries. Two children were among the dead. Nobody who was in the underground valve house escaped unhurt.
The mystery surrounding the cause of the explosion continued for some time, as tests in the immediate aftermath revealed no trace of gas, nor were there any gas installations in the pumping station itself.
However, the investigation by the Health and Safety Executive revealed that the siting of the Abbeystead pumping station underground, and close to seams of coal, had made it vulnerable to build-ups of methane gas.
The station had also been unused for several weeks before the visit, and the gas had accumulated in the water pipe leading into the valve chamber.
It was then pumped into the valve house during the demonstration, creating a lethal inflammable atmosphere.
The investigators never found out how the gas came to explode. However, nobody involved in building the pumping station had realised that gas could be a problem, so both guests and workers in the valve house were allowed to smoke.
The Abbeystead pumping station was refurbished and returned to use following the accident.
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