Earlier this week, the Queensland Government introduced draft legislation that will result in the imposition of a mandate for the sale of E10 and B5 in Queensland from 1 July 2016 and a requirement for compulsory reporting of sale volumes by fuel wholesalers and retailers from 1 January 2016. ACAPMA is very concerned about the effect on this proposed legislation in terms of the additional infrastructure costs and administrative burden that will be placed on fuel wholesale and retail businesses.
Earlier this year, the Queensland Government announced an intention to introduce a biofuels mandate in 2016 requiring minimum sales of ethanol and biodiesel in the state in order to support the growth of a biofuel industry in Queensland.
The initiative is the “brainchild” of the Katter Party in Queensland who are understood to be trying to secure new markets for agricultural commodities in the state –particularly sugar.
ACAPMA immediately voiced strong concerns about the proposal on the basis that similar Federal and Interstate initiatives – most notably in NSW – had been problematic and largely resulted in the downstream petroleum industry bearing additional infrastructure costs for the storage and dispensing of biofuels with no tangible benefits to consumers or regional economies.
“We are very concerned that the Queensland proposal will amount to the traditional fuel industry being required to shoulder the market development costs of the biofuels industry – a policy position that is neither fair nor equitable”, said ACAPMA CEO Mark McKenzie.
To its credit, the Queensland Government has been working with ACAPMA and other stakeholders to address the concerns of the fuel industry and some of these concerns have been addressed by the draft legislation that was tabled this week.
Specifically, the draft legislation excludes wholesalers (and fuel resellers) from liability for the achievement of the ethanol mandate – instead placing the liability on the retailer only. This provision, however, is dependent upon the wholesalers making the fuel available to retailers who are liable for the ethanol mandate.
Fuel wholesalers will, however, be liable for the achievement of the biodiesel mandate.
In a further apparent concession, the draft legislation proposes that the mandate be set at an initial 2% despite calls from the Katter Party and other stakeholders for a 5% requirement that quickly grows to 10%.
“We note that many of the stakeholders calling for a higher level have zero appreciation for the significant adjustment costs that would likely need to be funded by our industry to build the storage infrastructure needed to support these higher levels”, said Mark.
“Given these likely costs, the net benefit to regional economies is likely to be marginal to negative. While economic benefits would potentially be realised by some agricultural businesses, these would be more than offset by the fact that regional communities will likely be required to pay higher prices for fuel as regional fuel businesses seek to recover the costs of increased investment in fuel storage and dispensing infrastructure”, said Mark
The draft legislation makes provision for wholesale and retail fuel businesses to be exempted from the legislation where they can demonstrate that biofuel cannot be readily sourced and/or the capital costs associated with compliance cannot reasonably be borne by the business.
“These concessions are welcomed by our industry, but the legislation is pretty vague at present. We are keen to see the Government develop Industry Guidelines on how a business secures an exemption before the legislation is passed in December”, said Mark
ACAPMA’s biggest concern is that the threshold for retail liability that is proposed in the legislation is1M litres of petrol products sold per annum. ACAPMA maintains that this level is too low and will impose large costs on many fuel retailers who will therefore need to seek exemption from the legislation”, said Mark
Surely it makes more sense to start with a higher threshold of 2M litres or more and minimise exemptions rather than set such a low level that the government and industry will ultimately be burdened with paperwork associated with large numbers of applications for exemptions, said Mark.
Persons interested in the draft legislation can download a copy of the bill here.
In the meantime, ACAPMA will work with the government to address ongoing concerns with a view to securing legislation that minimises the cost on fuel wholesale and retail businesses in Queensland.
Any member wishing to seek more information about the legislation, or concerned about key aspects of the proposed legislation, is invited to contact the ACAPMA Secretariat at email@example.com or by calling 1300 160 270.