States have broad powers to regulate the handling of hazardous materials that are moved across their borders, a federal appeals court has ruled in a case involving Utah.
The issue came up in a lawsuit filed by V-1 Oil Co., which objected to Utah's assessment of a license and certification fee on its liquid propane gas facilities in Preston, Idaho, and Rock Springs, Wyo.Utah imposes the fee to "service, regulate and police" LPG facilities and employees doing business with-in its borders. The policing is done by the Utah Liquefied Petroleum Gas Board through the state fire marshal.
After V-1 refused to pay Utah the $225 fee for the Preston facility, Utah's fire marshal threatened it with civil penalties and criminal prosecution. V-1 then paid the fee under protest and went to court in 1995.
The company argued the fees discriminated against interstate commerce. It also said the money wasn't used as intended because Utah had never performed any safety inspections of the Idaho and Wyoming facilities. U.S. District Judge Tena Campbell ruled in the state's favor, and A-1 appealed.
At the outset, the U.S. 10th Circuit Court of Appeals in Denver rejected Campbell's and the litigants' conclusion that the fee was actually a user tax. The appeals judges held the fee is a fee.
The distinction is important, wrote Chief Judge Stephanie Seymour, because "while a regulatory police power fee that is reasonable in relationship to its costs is almost always sustained . . . a tax with effects upon interstate commerce is more carefully scrutinized and more consistently resisted."
Utah's assessment is an "unadorned fee" used to help defray the costs of inspecting LPG facilities and to ensure that all LPG handlers providing services within the state meet minimum safety standards, the judges said.
Citing prior rulings, Seymour added, "There is no question that the proper handling of hazardous materials is a valid regulation of local aspects of interstate commerce that is a power essential to a state in safeguarding vital local interests."
The regulation of the handling of LPG along with providing fire and police services to ensure the safety of the public using LPG are "indisputedly important local interests," she said.
"We are reluctant to invalidate state legislation that furthers a legitimate local public interest such as this one, which ensures the safety of the state's roads and provides emergency services to the public," the appeals court said.