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Attorney general: One company forced Oklahomans to pay more for propane


Scott Cooper June 11th, 2009

Whether it was heating a home, refueling a vehicle or just firing up the grill, many Oklahomans may have been subjected to deceitful tactics that drove up the price of propane gas, according to ...

Propane-53mh

Whether it was heating a home, refueling a vehicle or just firing up the grill, many Oklahomans may have been subjected to deceitful tactics that drove up the price of propane gas, according to the state attorney general.

MAIN ARGUMENT
NATIONAL CHAINS
'FAILURE TO ADHERE'

The AG office announced on May 29 it has filed a lawsuit against BP America for manipulating the price of propane gas in 2004. The company is a subsidiary of the BP oil company headquartered in London.

State officials claim BP America cornered the market of propane gas coming into Oklahoma and controlled all aspects, from the supply of gas to the cost.

"BP could dictate how much they would sell and what the price was to the middle suppliers and wholesalers," said Tom Bates, state assistant attorney general. "That price is going to get passed on to the consumer."

MAIN ARGUMENT
The state's main argument follows a path of BP America purchasing all of the propane gas from a pipeline in Texas from which Oklahoma gets most of its liquefied petroleum (or LP) gas for heating homes and fueling up cars, which run on propane. Once in control of the flow of gas, the company drove up the demand by drastically reducing the flow from Texas to Oklahoma. When demand went up, which during a cold month like February would easily happen, the company spiked the price. This happened at the same time as other states, using different suppliers, saw a decrease in the price.

Some Oklahomans had no choice but to pay the higher price because so many in-state suppliers used the Texas pipeline.

"For that time period, I won't say impossible, but it would have been very, very close to impossible," to find another source for propane gas, Bates said.

According to the AG's office, 148,000 homes in Oklahoma are heated by propane gas and state LP consumers spend more than $200 million a year purchasing the gas. The state argues that at the time BP America manipulated the price, the company was in control of 88 percent of the propane gas supply to Oklahoma.

One of the biggest uses of propane gas is to fuel gas grills, which thousands of Oklahomans have for backyard cookouts. Whether that price was spiked as well depends on where the wholesaler purchased its supply from.

"If it's bottled here locally or nearby, it very well could have been influenced by that," Bates said.

NATIONAL CHAINS
Because many of the places selling propane gas tanks for grilling are national chains of grocery stores, convenience stores and home supply stores, the propane tanks sold there may have been purchased around the country.

The Oklahoma lawsuit stems from a settlement agreement BP America reached with the U.S. Justice Department in 2007. The federal government agreed to a deferred prosecution, essentially deciding not to prosecute on the company's agreement to pay millions of dollars in fines and admit fault in the case.

The fines totaled more than $303.5 million, including a criminal penalty of $100 million and a $125 million civil penalty, $53.5 million to a victim restitution fund and $25 million to the U.S. Postal Inspection Service Consumer Fraud Fund. The company agreed to pay the fines in three years, at which time the Justice Department would drop all charges.

According to the company's announcement of the agreement, BP conducted its own investigation into the matter and concluded it had engaged in manipulation.

"This settlement acknowledges our failure to adequately oversee our trading operation," according to the company statement. "The agreement provides compensation for victims and establishes a foundation for working with the government to ensure our participation in the nation's energy markets is always appropriate. We are determined to restore the trust of regulators in our trading operations."

'FAILURE TO ADHERE'
BP America also fired some of its employees for "failure to adhere to BP policies."

It was after the announcement that Oklahoma officials started looking into a possible lawsuit.

"We knew this had happened, and we knew there was other litigation going on," Bates said. "There was a concern Oklahoma consumers were not sufficiently represented."

Oklahoma Gazette contacted BP America officials, who refused to comment for the story.

"We do not comment on pending litigation," said company spokesman Scott Dean.

The state estimates up to $4.5 million was overcharged to Oklahoma customers.  "Scott Cooper

 
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