Time to come clean on biofuels in NSW

In November 2014, the Baird NSW Government announced a review of its 2008 biofuels legislation following successive years of declining sales of ethanol-blended petrol in the state. Twelve months on, there is still no formal indication about the future of the biofuels mandate, creating uncertainty for the entire fuel retail industry.

The review is understood to have been initiated following intensive lobbying by The Manildra Group – the state’s monopoly biofuel producer and a major donor to both the NSW Liberal Party and the NSW National Party in 2013/14.

The NSW Government is now understood to be seriously considering options to force more NSW motorists to buy ethanol-blended fuel – including requiring all service stations to sell the fuel and/or prohibiting the sale of regular unleaded petrol.

“These changes are being considered despite the fact that such changes could result in regional job losses in the retail fuel industry and/or increased fuel prices for NSW motorists as fuel retail businesses seek to recover the costs of the required infrastructure improvements,” Australasian Convenience and Petroleum Marketers Association (ACAPMA) CEO Mark McKenzie said.

“As many in the industry would be aware, ethanol cannot simply be pumped into existing tanks. In many cases, fuel retailers are required to invest in modification of storage and fuel pump infrastructure to accommodate the chemical properties of ethanol-blended fuel.”

ACAPMA research suggests that the cost of these changes varies widely according to the nature of the fuel infrastructure installed at each site – from a relatively modest $25,000 to $35,000 to as high as $900,000 where the underground storage tanks need to be replaced or reconfigured.

“While many will argue these changes could reasonably be accommodated as part of site rejuvenation works, the costs become concentrated when they are forced on fuel retail businesses within an arbitrary timeline – as opposed to being programmed as part of an overall asset management strategy,” Mr McKenzie said.

ACAPMA says that “contrary to the apparent perception of many politicians and policymakers”, more than two-thirds of the state’s service stations are independently owned small businesses that operate under licence with the major oil companies and it is therefore these small businesses that bear the cost of any changes – not the major oil companies.

The association says these sorts of costs could have crippled many smaller fuel retail businesses – or resulted in a significant increase in fuel prices for motorists as such a business sought to recover the increased capital costs – so the NSW Government introduced exemptions for some fuel retailers to guard against these unwanted impacts.

ACAPMA understands, however, that the NSW Government is now exploring options that may result in the complete removal of these exemptions and the requirement that all the state’s service stations sell E10 – risking the marginalisation of many small fuel retailers and/or increased fuel prices for motorists.

In the face of these potentially negative impacts, ACAPMA finds it “absolutely astonishing” that this process has been underway for 12 months without any form of consultation with the retail fuel industry.

“Consideration of any changes to the existing legislation without comprehensive industry consultation is quite simply reckless,” Mr McKenzie said.

“Despite numerous attempts to engage the Government on this issue, our industry has been fobbed off with suggestions that the Government is still examining options.”

“These continued delays are creating considerable uncertainty for all and we therefore call on the Baird Government to immediately come clean and explain what is being proposed with respect to imminent changes to existing biofuels legislation in NSW.”

Further information on this matter can be obtained by contacting the ACAPMA Secretariat on 1300 160 270.

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