This week, the NSW Parliament approved legislative changes to the operation of the NSW Biofuels Act. These changes will see more fuel retailers being legally compelled to sell ethanol blended fuel. In the face of overwhelming support for the changes within both Liberal and Labor ranks, ACAPMA lobbied for a number of amendments designed to protect vulnerable fuel retailers – and the NSW Government agreed.
In November 2014, the Baird Government announced a review of the operation of the NSW Biofuels Act in the face of a steady decline in market consumption of ethanol fuels.
The announcement triggered a review of the operation of the Biofuels Act (2007) by the Independent Pricing and Regulatory Tribunal (IPART) in early 2015. The stated purpose of this review was to explore mechanisms to increase the market uptake of ethanol blended fuel in the face of the observed decline in market consumption.
IPART completed their report in May 2015 but, despite previous statements to the contrary, the NSW Government failed to release the report for industry and public comment.
Instead, the draft report was returned to IPART for a further revision.
It is understood that a second version of IPART’s report was submitted to the NSW Government in July 2015 but, once again, the report was not immediately released to industry for comment.
After intensive lobbying and media activity by ACAPMA during the ensuing months, IPART’s revised report was finally released in December 2015 – 5 months after it had been delivered to the government.
A quick review of the report highlighted why the Government had been so reluctant to release the report.
IPART, for example, noted that the Government’s proposals to increase the operation of the mandate would likely only lift ethanol fuel sales by 1-2% over the next 10 years (from the current base of 2.7%), falling well short of the government’s stated target of 6% of all motor spirit sales.
Perhaps the most damming finding of the IPART report was the conclusion that “..most options to increase ethanol uptake would increase the cost of an already expensive policy, with little economic gain for the NSW community”.
Any objective reading of the IPART Report, leads to the conclusion that there was no case whatsoever for expanding the mandate and that the NSW Government should instead consider wholesale removal of the requirement for fuel retailers to sell ethanol blended fuel in NSW.
But the NSW Government persisted, with Minister Dominello (the NSW Minister for Innovation and Better Regulation) announcing just 2 weeks later that the NSW Government would pursue an amendment to the NSW Biofuels Act, as previously foreshadowed.
In his statements to the press on 20 December 2015, Minister Dominello indicated that the intended changes would include removal of the exemptions for small fuel retailers (i.e. less than 20 sites) afforded under the existing legislation and would also include a tightening of the process for providing exemptions for fuel retailers in the future.
The NSW Government’s decision to press ahead with the legislation was disappointing, but ACAPMA’s lobbying efforts had suggested that both the Coalition Government and the Labour opposition were heavily indebted to Manildra – the monopoly producer of ethanol in NSW – as a result of significant donations having been made to all parties in recent years.
Having lobbied hard over the past 6 months for the IPART report to be released, ACAPMA focussed its efforts on seeking provisions in the new legislation that would exempt those service stations that would likely be faced with high upgrade costs – as a result of having to accommodate ethanol blended fuel.
“We had to make a decision about working with the government to secure concessions to protect vulnerable retailers, or fight both the NSW Government and the NSW opposition in a desperate attempt to seek rollback of the proposed legislation”, said ACAPMA CEO Mark McKenzie.
“A key consideration in this matter was the fact that, despite significant publicity on this issue, most consumers appeared ambivalent about the changes as long as non-ethanol petrol remained available on the forecourt”, said Mark
“And so we decided to change tack and work cooperatively with the NSW Government on the legislation to minimise industry harm”, said Mark
In February 2016, with the Government having already tabled draft legislation for comment, Minister Dominello agreed to ACAPMA’s request for the volume threshold for liability to be determined by Regulation – rather than legislation.
“This move affords the industry (and the government) the opportunity to better understand the likely economic impact of necessary upgrade works on the economic viability of service station sites before a threshold for liability is set”, said Mark.
In addition, the Minister agreed to ensure that the exemptions framework provided sufficient protection of vulnerable fuel retail businesses.
The Minister formally restated the commitment made to ACAPMA as he introduced the Bill into Parliament last week. During his second reading speech in the NSW Parliament on Wednesday 16 March 2016, Minister Dominello stated:
“Following media speculation, I would like to put on the record the position of ACAPMA – the organisation representing fuel retailers and service station operators, both big and small – in relation to the mandate.
ACAPMA is fundamentally opposed to the ethanol mandate. That position has not changed. They were opposed to the introduction of an ethanol mandate in Queensland last year but sought to work constructively with that government on the detail and implementation process.
Likewise in NSW, ACAPMA CEO Mark McKenzie has committed to working constructively with the NSW Government on the implementation of our reforms.
In particular, we have a shared interest in getting the requisite data on the table to make informed decisions in relation to the questions relating to the threshold for liability in an effort to ensure there are sufficient safeguards for small fuel retail businesses in NSW.
Who is in and who is out; what are the true infrastructure upgrade costs; and how can operators obtain an exemption on the basis of them having taken reasonable steps to comply – or simply not being able to afford to comply in the first place.
The truth is that we currently don’t have that information and that is why we are going to work collaboratively with ACAPMA and other interested parties to get it so government can make informed decisions on an issue which impacts on people’s livelihoods.
That is the responsible course of action”.
Last night, the Biofuels Amendment Bill was formally approved by the NSW Parliament, with the amendments agreed between Minister Dominello and ACAPMA. The Bill also includes provision for a statutory review of the legislation by the NSW Government every 3 years.
“This has been a difficult process where we have had to try and lobby for changes that were supported by both sides of politics”, said Mark
“In the end, the only advocate for our cause was the NSW Greens who highlighted the lack of environmental benefits of ethanol-blended fuel and the risk to small businesses in NSW – an effort that is wholly appreciated by industry”, said ACAPMA CEO Mark McKenzie.
With the Legislation having now been passed, ACAPMA will work to ensure that the NSW Government honours its commitment to the implementation of an exemption process that protects vulnerable fuel retailers – and ensure that the volume threshold for liability of fuel retailers is set at a level that avoids the need for a large number of exemption applications to be processed.
The timing for the introduction of the changes to the Biofuels (Act) has not yet been announced. This timing will only be known following the finalisation of the Regulations, but is unlikely to occur before 30 June 2016.
Further, the legislation makes provision for businesses to be granted leave from the exemption until such time as they can reasonable comply (i.e. complete necessary works) with the new laws.
ACAPMA will continue to provide information to members about the progress of the new Regulations as it comes to hand.
In addition, the ACAPMA Secretariat plans to establish a service for preparing exemption applications for small fuel retailers, once the timing for the introduction of the legislation is known.
In the meantime, any member seeking more information about how the legislation may impact their business is encouraged to contact the ACAPMA Secretariat on 1300 160 270.