Earlier this month, ACAPMA made a submission to the Queensland Government about the design and operation of an ethanol mandate in that State. Within our submission, ACAPMA warned that the industry cost of an ‘all in’ mandate could impose more than $200M in capital adjustment costs for the many small to medium businesses that comprise the fuel retail industry in Queensland – with consequent risks for motorists in the form of higher fuel costs as these business seek to recover these capital costs.
In late April 2015, the Queensland Treasurer and the Queensland Energy Minister jointly announced an intention for the Queensland Government to introduce an ethanol mandate for fuel sold in Queensland. The Government later suggested that the mandate would stipulate a minimum requirement for ethanol to comprise at least 2% of Regular Unleaded Petrol (RULP) sales from 1 July 2016
The announcement was followed by the release of a Discussion paper in late May 2015 and several rounds of industry and stakeholder consultation meetings conducted during the month of June 2015.
ACAPMA understands that, barring formal introduction of the legislation, there is likely to be a 2% ethanol mandate for RULP sales from 1 July 2016. The real question is whether the mandated volume will increase over time with the biofuels industry calling for the mandate to increase to 10% in a relatively short timeframe.
“This issue appears to be less about the merits of biofuels and more about the Katter Party wielding undue influence in a State Parliament that is on a knife-edge”, said ACAPMA CEO Mark McKenzie
“Given the adverse experience of NSW and the sub-optimal outcomes realised by Australian Government investment in the biofuels industry over the last 13 years, it is amazing to find that we still find some politicians pushing this barrow”, said Mark
“More importantly, the Katter Party does not seem to understand that they are putting the future of the many small to medium businesses that sell fuel in Queensland at risk – many of these located in the very regional and rural communities that they strive to serve’, Mark said.
All that being said, ACAPMA accepts the political reality that will see the introduction of a 2% ethanol mandate from 1 July 2016. Further, it is estimated that the cost of accommodating this level of ethanol mandate could be met by industry for a modest investment on the part of fuel retailers.
Anything beyond 2% of RULP sales, however, will impose capital costs on fuel retailers as they are forced to invest in a reconfiguration of existing fuel storage and dispensing infrastructure to accommodate the corrosive characteristics of E10.
“We estimate that the total industry cost of increasing the mandate beyond 2% of RULP could be anywhere between $50M and $324M, depending on how many of the State’s 1380 sites are made liable for the mandate”, Mark said.
“We are opposed to any suggestion by anybody that the many small to medium businesses that comprise the fuel industry in Queensland be forced to fund the costs of developing a biofuels market in Queensland – this cost must be borne by either the Biofuels industry itself of the State Government”, Mark said.
ACAPMA has therefore proposed in its submission that the mandate start at 2% of RULP and does not increase until such time as the industry costs associated with moving beyond this level are known – and a process for funding this cost (other than by imposing it on fuel retailers) is agreed.
Further ACAPMA strongly suggests that it is neither practical not legally enforceable to make Fuel Wholesalers liable for the mandate.
“This is an issue that is of critical importance to all of the small and medium businesses that comprise the downstream fuel industry and we will continue to work with the government to ensure that any future mandate does not marginalise these businesses”, said Mark
A copy of the submission can be downloaded by clicking here.