In the Know: Marijuana legalization presents challenges and opportunities

July 19, 2018 By    

Q: Does the legalization of marijuana in some states present more of an opportunity for propane retailers or more of an issue in terms of safety and legal concerns?

A: It does not matter on which side of the line you find yourself – the propane industry is on a direct collision course with the marijuana industry.

Numerous states already have legislation legalizing the use of marijuana, both medically and/or recreationally. Many more states have legislation fighting to legalize the booming cash crop.

Retailers across the country are seeing the slow decline of the residential home heat business, and the marijuana industry could be the surging market that fills those lost gallons.

Currently, marijuana growers use propane or natural gas to heat their greenhouses, maintain their facilities and utilities, power generators and increase the amount of carbon dioxide in their growing environments to enhance the growth process of their plants. However, propane is not the only resource available. Natural gas, butanes and other natural gas liquids will fight for their market share over time.

The actual economic impact varies depending on the source. However, it’s safe to say that a conservative figure lands somewhere in the billions. In addition, the passed legislation could generate between 600,000 and 1 million new jobs by 2025.

In Pueblo County, Colorado, the marijuana industry contributed $58 million to the local economy following legalization. After about $22 million in additional costs, which included law enforcement, social services and other miscellaneous costs with the new legislation, the county still netted $33 million in gains.

However, some retailers are sure to face a moral or ethical “fork in the road.” Even if marijuana becomes more widely legalized, does a retailer who opposes the use or legalization of marijuana draw the line of servicing what could be a large-volume account? One might say this is a singular polarizing topic, yet it might be no different than a propane retailer servicing the tanks of an abortion clinic, distillery or even a religious institution that conflicts with their own.

This ultimately falls to the retailer and the company’s mission statement. Through legalization of marijuana, do marijuana growers and operations just become another agricultural account?

What if you decide to service a marijuana grower but realize doing so may create backlash with segments of your customer base? Are you willing to lease a tank with your company logo on display at the grower’s site? Or will you recommend that growers purchase their own tanks, above or underground, and you simply fill their tanks while missing out on additional revenue through tank leases, even though by doing so you risk losing the business entirely?

Obviously, we have no idea what legislation would follow wide-sweeping legalization of marijuana. Day-to-day operations will most likely see some impact from the passing of this kind of law. Issues like zero-tolerance policies with employees and Department of Transportation regulations are sure to be visited.

One can assume a gray area will exist to an extent for some time, maybe forever. Some of the major corporations understood this when entering into the business world and decided to operate as chosen until told to do so otherwise. Uber, Lyft, Amazon, Facebook and many more successful organizations have used the same approach. When a product or business idea is new to the market with relatively little regulation, the water becomes rather muddy.

At the end of the day, propane retailers will have to make a decision based on the hand that is dealt to them. If nationwide reform is passed on the legalization of marijuana, we could see tremendous growth opportunity for domestic demand. However, the passing of this legislation may be to the dismay of some. This is where retailers must decide for themselves.


Tony Botts is a supply expert at Propane Resources. He can be reached at tony@propaneresources.com or 913-262-0628.

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