Mark McKenzie (ACAPMA CEO), Philip Skinner (ACAPMA, Policy and Programmes Officer) and Paul Wessel (ACAPMA Member and Director of Wessel Petroleum), attended a hearing of the Queensland Parliamentary Utilities, Science and Innovation Committee – that is, the Committee considering draft legislation for the imposition of a biofuel mandate in Queensland from 1 July 2016.

ACAPMA’s principal objective was to make the Queensland Government aware of the fact that the introduction of this legislation was likely to come at a significant cost to the Retail Fuel Industry in Queensland – with the vast majority of these costs being shouldered by the large number of small to medium businesses retailing fuel in Queensland.

“We were extremely concerned that many Queensland Parliamentarians do not appear to have any knowledge of the substantial costs that will be borne by these businesses to make the infrastructure changes needed to accommodate the sale of ethanol blended fuel”, said ACAPMA CEO Mark McKenzie.

“Further, many parliamentarians appear to wrongly believe that the adjustment costs will be borne by the oil majors and supermarket majors”, said Mark.

Paul Wessel provided the Parliamentary Committee with an early estimate of the costs of compliance suggesting that for his business, the cost of ensuring compliance across 18 sites was likely to be in the vicinity of $6M with no opportunity for recovering this cost – other than by passing these costs onto motorists in the form of higher petrol prices.

“We sensed that having Paul look the members of the committee in the eye and describe the likely costs of the legislation on his business made the issue ‘real’ for everyone in the room”, said Mark.

While many stakeholders suggest that development of a biofuels industry in Queensland is likely to bring new jobs in regional areas – and support a flagging sugar industry – it is also very clear that the proposed legislation will likely marginalise the many small to medium sized businesses that sell and distribute fuel in Queensland.

“ACAPMA pointed to comprehensive assessments recently undertaken by the Australian Government showing that despite investing more than $895M of taxpayer funds in Australia’s fledgling biofuels industry over the past 12 years, the regional employment and environmental benefits have been marginal at best – and there has been no tangible benefit in national energy security”, said Mark.

Analysis of the experience of the only Australian state to have implemented a biofuel mandate – New South Wales – also shows that there is a need for considerable caution given that the legislation in this State has failed to deliver the promised regional economic benefits and actually increased fuel costs for NSW motorists.

The operation of the New South Wales mandate has seen a very significant increase in the proportion of premium petrol sold, as consumers actively avoid purchasing ethanol blended fuel. Sales of premium fuels now account for 43% of all automotive gasoline in NSW – double the average sold in all other Australian States and Territories.

graphPremium Unleaded & Proprietary Brand Petroleum Sales as % of Total Automotive Gasoline Sales (Data Source: Department of Industry Australian Petroleum Statistic 2010-2015)
| 6% mandate comes into effect in NSW

‘The lead up to the prohibition of Regular Unleaded (RULP) in NSW in 2012 produced a spike in the number of consumers who switched to purchasing premium and proprietary blends rather than purchase ethanol blended products’ said ACAPMA Policy & Programmes Officer Philip Skinner.

A report compiled by Michael Noel and Travis Roach from the Texas Tech University entitled “Regulated and Unregulated Almost-Perfect Substitutes: Aversion Effects from a Selective Ethanol Mandate”, estimated that the cost to consumers resulting from purchasing premium fuels instead of E10 was in excess of $300 million between introduction of the mandate in 2007 and the end of the study period in 2013.

‘We have seen a significant amount of money thrown at this industry by the Federal Government (and various State Governments) in recent years to support the early growth of this industry. Yet this investment has yielded little return for taxpayers, largely owing to the fact that the majority of consumers do not want to put ethanol blended fuel in their vehicles”, said Mark.

Yet for some reason the Queensland parliament believes that the outcomes of a biofuel mandate will somehow be different to both the national and NSW experience – putting at risk the almost certain outcome that the legislation will increase costs for both retail fuel business and Queensland motorists.

“Given that this legislation has bipartisan support in the Parliament, the decision to introduce a mandate is a foregone conclusion and so we have been working cooperatively with the Queensland Government to mitigate against the key industry and consumer risks that typically arise from biofuel mandates in Australia”, said Mark.

Accordingly, ACAPMA will continue to work with the Queensland Government and industry stakeholders to ensure that the interests of our industry are duly represented in the design and approval of the final Queensland Biofuel Mandate.

The final report from the Utilities, Science and Innovation Committee on the proposed ethanol and biodiesel mandates is due to be handed down by the 17th of November 2015.

The legislation is then likely to be considered by the Queensland Parliament in early December with a view to the reporting obligations becoming active from 1 January 2016 – and compliance with the legislation required from 1 July 2016.

If you would like to know more about ACAPMA’s Policy positions click here, or contact the ACAPMA Secretariat on 1300 160 270.