The NSW Biofuels debate and issues for retailers

Jeff Rogut
The Greens MP in NSW, Dr Mehreen Faruqi made the following speech in the NSW Parliament:
“SPEECH: BIOFUELS AMENDMENT BILL 2016
Dr MEHREEN FARUQI [4.31 p.m.]: I make a brief contribution to the debate on the Biofuels Amendment Bill 2016. As my colleague Mr Jeremy Buckingham has indicated, in no uncertain terms, The Greens will be opposing the bill. The bill amends the Biofuels Act 2007 to modify the minimum biofuel requirements and their application. It is largely aimed at attempting to reach the 6 per cent biofuel mandate, which was set as part of the 2007 Act and aimed at being achieved by 2011. That has not even come close to happening and so now the Government has introduced the bill, with a range of measures to try to reach the 6 per cent target, the ethanol mandate, and at considerable cost to the community and the consumer. This bill will not help address the fuel security needs of New South Wales, nor will it support an environmentally sound approach to reducing pollution and unsustainable fuel consumption. This bill is, in fact, total green-washing, pure and simple.
The environmental and employment benefits of ethanol are both massively overstated by the Government. The Australian Bureau of Research and Energy Economics stated in 2014 that the two key supposed economic and environmental benefits of ethanol production—that is, regional employment and greenhouse gas abatement—are, “Estimated to be relatively modest but come at a high to very high cost”. The bureau also found that ethanol prioritisation and support reduces the competitiveness of other emerging and alternative fuels, which we should be moving towards. Real renewable energy such as wind and solar can create tens of thousands of jobs in regional areas.
We should be deeply concerned about the ongoing diversion of food crops to make fuel. While the Government would like us to believe that all ethanol is made from starch as a by-product of crop production, in fact, as Mr Jeremy Buckingham pointed out, a 2011 report by the Australian Productivity Commission noted that the Manildra Group uses around 50 per cent waste product and 50 per cent raw product. We ought to be deeply concerned about the ramifications of this for our food security. Under this bill more service stations will be required to sell a petrol-ethanol blend and exemptions will be tightened to ensure that service stations are keeping to their obligations to sell the fuel. This is just another attempt to force the sale of ethanol in New South Wales and it further entrenches the political power and influence of the monopoly provider, Manildra Group.
One of the major problems with this bill is not that it will not help New South Wales motorists access the cheaper fuel that they want, but that it will prop up a fuel industry that is a fig leaf for real environmentally conscious and environmentally sound transport solutions. It will not at all help the growth and use of clean low-polluting forms of energy for transport. The Greens recognise that the transport needs of our State will eventually have to be powered by renewable energy and sustainable transport modes. In New South Wales fuel use and road transport accounts for 14 per cent of carbon emissions, with cars being the main means of transport.
While The Greens continue to support the expansion of public and active transport as the critical way by which motor vehicle usage must be reduced, we recognise that for those people who have to drive, sustainable forms of transport such as electric vehicles should be adopted. Instead of propping up the failing, unsustainable ethanol industry, the Government should provide incentives to get people into fuel-efficient and electric vehicles and reduce their dependence on fossil fuel-reliant cars. Interstate and international jurisdictions have implemented these sorts of measures with great success and New South Wales can do the same. New South Wales needs to get with the times and immediately move to support an industry that is sustainable and a great long-term solution to the transport fuel reliance needs of our State.
Tied to the irrational support for ethanol is the propping up of a monopoly provider that will benefit enormously from any Government-sponsored support for the ethanol industry. It is quite telling to see the Minister for Innovation and Better Regulation in his second reading speech state that Manildra:
… has geared up its production capacity in anticipation of an increase in consumption towards the mandated 6 per cent.
It appears that the Minister and the industry have presupposed the outcome of this parliamentary debate and the clear passage of this bill. We may as well have stayed home today. What we need in New South Wales is a transport fuel industry that is not dependent on the fossil fuel economy or the provision of ethanol. The Minister pointed to the fuel security of New South Wales as a significant reason for further entrenching government support for ethanol. Using that same logic it would be more appropriate to invest in renewables, to encourage electric vehicle ownership and to move towards truly sustainable solutions. The Greens oppose the Biofuels Amendment Bill 2016.”
The issues that AACS sees with the proposed legislation if it becomes mandatory are:
The potential detrimental impact on small businesses in NSW could be immense.
Notwithstanding the background to the legislation’s introduction and the wildly inaccurate jobs numbers initially cited by the Better Regulation Minister Victor Dominello, the Act itself places a grossly unfair compliance burden on retailers.
The cost of a rapid increase in the number of nozzles required to dispense E10 fuel is estimated to be as high as $100,000 for some sites, according to one major service station retailer with outlets across New South Wales and the nation.
However the costs to service stations – many of which are small businesses operating under licence or franchise agreement – does not end there. Many sites will need to replace existing fibreglass tanks with E10 compliant steel tanks, the cost of which could run as high as $200,000 per site.
Adding insult to injury, attached to the biofuels legislation is a $22,000 penalty for non-compliance.
This is all to ensure ethanol accounts for 6 per cent of all fuel sold – which would be easier for retailers to stomach if there was actual demand for E10 fuel from consumers.
Our retailers report that ethanol blends are not favoured by consumers, who will typically choose to pay more for traditional fuels when they fill up. Petrol prices are always important to consumers so the fact most are happy to pay more to avoid ethanol blends speaks volumes.
The Independent Pricing and Regulatory Tribunal (IPART) backs up the coal face view from retailers.
According to IPART: “Many consumers, with limited access to regular unleaded petrol, are willing to pay around 15 cents per litre more for premium ethanol-free petrol compared with ethanol blended petrol.”
“Consumers are currently averse to ethanol blended petrol, so major fuel sellers cannot reach the 6% ethanol mandate without reducing consumer choice,” IPART reports.
It beggars belief that retailers should be mandated to alter their business practices to ensure a widely unwanted product accounts for a certain percentage of sales. It deliberately hamstrings these businesses from optimising the performance of their assets.