Consumers could be slugged more at bowsers across NSW after the Baird government introduces today regulations that would fine service stations if they did not meet minimum targets for the sale of ethanol-based petrol, fuel that has proven unpopular with motorists.

The new rules will threaten petrol stations with fines of up to $500,000 for each quarter they fail to sell at least 6 per cent ethanol as a proportion of their total sales.

The regime, to come into force on January 1, applies to stations that sell more than 3.6 million ­litres of any fuel annually.

Former Baird government whip Peter Phelps, who resigned his position in March rather than support legislation allowing the change, yesterday described it as “crazy”.

“It should be repealed — there’s no justification for penalising service station owners because customers just don’t want to buy E10,” Dr Phelps said. “Even if it were the greatest thing in the world, there is no justification for fining a service station owner because people don’t want to buy it.”

While NSW has had an ethanol target for several years, regulations have applied only to companies operating 20 or more petrol stations. The new regulations would apply to most ­average-size and larger stations.

The chief executive of the Australasian Convenience and Petroleum Marketers Association, Mark McKenzie, said the change would impose “substantial compliance costs” on independently owned businesses.

Because ethanol, which is sourced ­almost entirely from agribusiness firm Manildra, is sold in a 10 per cent blend with petrol, the regulation will mean E10 fuel must account for six purchases out of every 10 customers.

“Essentially, the government is moving to make more fuel ­retailers invest in E10 storage and dispensing infrastructure despite the fact that motorists have been largely shunning this product for many years in favour of pure petrol products,” Mr McKenzie said.

Sales of ethanol-based petrol have fallen substantially in recent years, down by a third since 2010, according to the Office of the Chief Economist.

The current rate of consumption was 2.4 customers out of every 10, a steady fall from highs of about four in 10 in 2012, Mr ­McKenzie said. This was despite E10 prices consistently being lower than regular unleaded.

Better Regulation Minister Victor Dominello said the 3.6-megalitre threshold would ­exclude most small ­operators.

“We are acutely aware that there will be transition costs for the newly captured businesses … I’ve asked the NSW Small Business Commissioner and the Biofuel Expert Panel to develop an exemptions framework that gives these businesses adequate time to transition,” he said.

The government’s decision to push for stricter regulation of the ethanol mandate has been met with acrimony because it is largely a monopoly product produced by Manildra, owned by billionaire Dick Honan.

The company secured nearly two dozen meetings with government ministers and donated more than $160,000 to the ­Coalition in the year before the decision was made to tighten regulations.

That was despite an Independent Pricing and Regulatory Trib­unal review concluding that “no option would achieve the 6 per cent mandate and result in a positive net benefit to the NSW community”.

Extracted from The Australian.