Mark McKenzie, 1/6/16

The Baird government is moving to finalise new laws designed to make all NSW motorists buy more ethanol by forcing more service stations to sell ethanol blended petrol, marketed as E10.

The laws, expected to come into effect from September 1, remove the previous business safeguards that exempted small fuel-retail businesses from selling ethanol-blended petrol and are being pursued despite the government’s own reports advising against their introduction.

The service stations to be affected are small to medium businesses which, according to the government’s figures, will be forced to spend an average $140,000 a site to upgrade their storage tanks. While that might not sound like much, the average annual profit earned by service station businesses over the past decade – as distinct from the large fuel marketing companies – was just $60,000 a site. This means the Baird government is preparing to force smaller fuel retail businesses, many of which are family owned and operating in regional areas, to invest more than 100 per cent of their profit over the next two years just to stay in business.

NSW Minister for Better Regulation Victor Dominello sought to justify the new laws in a recent parliamentary debate, saying the changes were necessary to support more than 3000 direct jobs in the biofuels industry. He was subsequently forced to correct the NSW parliamentary record, when it came to light that the figures he cited were 10 times higher than the real ones.

The minister’s correction, however, made no mention of the risk of associated job losses and small-business damage that is likely to occur in the NSW service-station industry as a result of small family-owned businesses being forced to close because they simply cannot afford the additional regulatory costs.

This is despite the fact Dominello received advice from the Independent Pricing and Regulatory Tribunal of NSW that stated: “Some smaller stations may decide to shut down and exit the business, given the costs of replacing tanks. We did not quantify the costs of business closure, because we assumed another retailer in the area picked up this business.”

The NSW service-station sector comprises 1978 sites. More than 70 per cent of these are run by small to medium businesses that operate under franchise and branding arrangements with big oil companies. These sites look and feel like stations owned and operated by the big chains, which is why few of us realise they are small businesses.

The Australian Convenience and Petroleum Marketers Association estimates that the livelihood of about 542 small businesses in the state – and their 6200 employees – is being put at risk by the new laws.

Even if just 10 per cent of these job losses materialise, the net effect of the new laws will be to cause 620 people to lose their jobs in the service station industry losses, which, when compared with the 200 jobs the NSW government is arguably seeking to protect, results in a net loss of 420 jobs for the state economy.

By proceeding with these new laws, the government is effectively saying that small businesses and associated employment harm is OK. It is saying that further concentration of market power, likely to be ceded to larger fuel retailers who pick up the slack of the small businesses that are forced to close, is also OK.

The NSW Liberals and their state National counterparts also seem totally unconcerned by the significant risk that communities in some regional towns may lose their local servo altogether and be forced to travel to a larger neighbouring town to buy fuel.

In short, the Baird Coalition government is demonstrating a stunning level of economic and social recklessness in the pursuit of these new laws – one that endangers the very sector that their federal Coalition counterparts are seeking to support and grow.

Why are they doing this? Well that is a whole other story that appears to be linked to intense lobbying by the state’s monopoly ethanol producer – which also happens to have made substantial political donations to the Coalition – a story that was ably exposed by Fairfax Media.

In an irony that is not lost on the NSW retail fuel industry, the only hope for small service station businesses now rests on action being pursued by the NSW Greens – the only party not to have received political donations from the state’s monopoly ethanol producer – to secure appropriate changes to these economically and socially destructive laws.

Mark McKenzie is the chief executive of ACAPMA, which represents fuel distributors and retailers in Australia.

Extracted in full from the Sydney Morning Herald.