Propane distributors are fuming over a legal opinion by the Utah attorney general that said a fire protection rule restricting who consumers can buy propane gas from violates federal and state anti-trust laws.
"Members of the (propane industry) are adamently opposed to this," said Ivan Jaques, chairman of the Utah Liquefied Petroleum Gas Board and a sales manager with Suburban Petrolane Gas Service.The opinion outlaws the way the propane industry operates across the country, he said, and its adoption could raise the price of propane.
The LPG board regulates the industry in Utah, and it adopted the National Fire Protection Association standards as its own rules to ensure public safety in handling the volatile fuel. One of the rules says only owners of propane tanks have permission to fill the tanks.
But in Utah, where 85 percent of the tanks are leased, the rule also means that a customer leasing a propane tank can only buy gas from the supplier that owns and leased the tank.
Public safety officials requested a legal opinion about the rule when a propane dealer asked the state fire marshall to enforce it. The dealer had leased a tank to a customer who purchased propane from one of the dealer's competitors for a cheaper price. Violators could be fined up $500 and serve a six-month jail sentence for a first offense.
The attorney general said that tying the lease of the tank to the purchase of propane violates both state and federal anti-trust laws, which also pre-empt the National Fire Protection Association Rules.
"The rule . . . requires a propane tank lessee to purchase all of her propane from the lessor . . . (and) permits members of the propane industry to divide up customers" as lessors and suppliers agree on who fills the tanks, wrote assistant attorney general Art Strong.
Jaques said a supplier that hasn't invested in leasing a tank to a customer can sell propane much cheaper to that customer than the dealer that leased the tank. He explained that the gas price often includes the rental fee for the tank.
At the same time, however, when it comes down to competing for customers the rental fee is the first thing to go, he added.
The industry can't ignore the legal opinion because the LPG board has to address it, Jaques said. Strong will discuss his findings with the board in April before a decision is made on how to bring the rule in line with anti-trust statutes.
If the seven-member board, which includes three representatives from the propane industry, decides to allow customers to purchase propane from any authorized supplier, the price of propane could go up as operators try to cover their investment in leased tanks, Jaques said.
"We will have to change the way we operate and consumers will pay," he said.