Thirteen years ago, the then NSW Government passed new laws to mandate the sale of ethanol and biodiesel blended fuels by the State’s larger fuel retailers. This 2007 legislation was premised on the prohibition of the sale of regular unleaded petrol by January 2012 and required liable fuel retailers to sell 6% ethanol as a proportion of all petroleum product sales. Put simply, achievement of this target required that 6 out of every 10 (i.e. 60%) customers visiting every service station in the State to purchase E10.
Following a high-profile campaign by fuel retailers in 2011, led by ACAPMA, the NSW Coalition government later bowed to public pressure and rolled back the planned prohibition of the sale of regular unleaded petrol in NSW in 2012. At the time, sales of E10 had already stalled at just 37% of all petrol sales.
Interestingly, sales of the higher priced premium petrol products were growing steadily in a market that was supposed to be price sensitive – suggesting that NSW motorist were shunning E10 in favour of ‘pure’ petrol blends given the reduced availability of regular unleaded petrol at many service stations.
In the following two-years, E10 sales fell from 37% of all petrol sales (July 2013) to 31% of all petrol sales (July 2015). That is, just 50% of the NSW Government’s ‘mandated’ target. The decline in E10 sales over this period resulted in renewed lobbying (and alleged additional political donations to the NSW Coalition and Labour parties) by the State’s monopoly biofuels producer – the Manildra Group.
The intensity of this lobbying of both major political parties increased substantially in advance of the March 2015 NSW Election. Soon after being elected, the NSW Government commenced work on an expansion of the NSW Biofuels mandate. This action was reportedly to address the failed 2007 legislation, but no one believed that the action had not been motivated by a desire to respond to the pressure that had been exerted by the State’s monopoly biofuels producer and political donor.
Despite protestations by the fuel retail industry about the substantial business risk to smaller fuel retailers (and the consequent risk of increased fuel prices flowing through to NSW motorists because of higher compliance costs) of an expanded mandate, the NSW Coalition Government pushed through changes to the Biofuels mandate with dedicated support from the State’s peak motoring body.
“Long story short, the NSW Coalition Government rammed through legislation with the support of the NSW Labor opposition to expand the failed 2007 mandate to smaller fuel retailers from 1 January 2017”, said ACAPMA CEO Mark McKenzie.
“This, despite strong and vocal opposition from MP’s within its own ranks, from the NSW Greens and from the fuel industry”, Mark added.
The new laws came into effect on 1 January 2017.
Since that time, E10 sales have fallen from an average of 31% (July 2015) of petrol sales to just 22% of petrol sales (July 2020) – and averaged 23% during FY20.
“In other words, even after the NSW Government decided to strengthen the biofuels mandate, consumer purchases of E10 have continued to decline, said Mark”.
And so, we turn to the latest development in this saga, with the NSW Government having recently completed a 5-year statutory review of the legislation. This review is required by law and involves the NSW Government deciding whether the legislation should continue unchanged, should be modified, or should be abandoned altogether.
“Mindful of the fact that this legislation imposes costs on fuel retailers for a fuel product that NSW motorists don’t want – and that the operation of the legislation imposes unnecessary red tap of service station businesses – we believed that it was time to give up on the mandate given the ‘bad joke’ that it has become”, said Mark
But, the most recent review has recently recommended that the Legislation be continued for a further five years. The reasons for this recommendation are hard to fathom and are not addressed in the latest NSW Government Review Report.
The Review found that “the regulatory framework and objectives of the Act continue to be largely appropriate”.
“The report acknowledges that the minimum biofuels sale requirements have not been met at any time since it was first introduced 13 years ago – but that does not acknowledge that the total volume of E10 sales has actually fallen since the last review of 2015”, said Mark
Curiously, the report goes on to state that the reasons for the failure “are numerous, including low price differentials between several types of fuel, customer concerns about ethanol blends and, in the case of biodiesel, a lack of supply”.
“Any objective assessment of these issues suggest that the continued pursuit of the mandate is unrealistic in the face of constantly falling market adoption rates of biofuels – and the inability of the biofuels industry to supply biodiesel”, added Mark
Yet, in a somewhat bizarre conclusion, the Review Report concludes that these “barriers are not insurmountable, and the NSW Government remains committed to the objectives of the Act”.
“In other words, the NSW Government is committed to the pursuit of patently unrealistic biofuels targets that have been going backwards for more than a decade”, said Mark.
The report makes eight recommendations about the future operation of the NSW Biofuels Legislation. Fortunately, three of these recommendations seek to reduce the regulatory compliance burden for fuel businesses. These recommendations include:
- Digitising the exemption application process for volume fuel retailers (Recommendation 2)
- Amending the Act to remove the requirement for primary wholesalers to be registered with NSW Fair Trading and to report volumes of petrol sold (Recommendation 4)
- Reducing the frequency of reporting requirements from quarterly to every six months (Recommendation 5)
For its part, ACAPMA welcomes the three recommendations cited above but strong maintains the position that the continued pursuit of the mandated biofuels targets in NSW is wholly unrealistic – and benefits no one other than the State’s monopoly biofuels producer.
A copy of the August 2020 NSW Government Review Report can be downloaded via https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0003/922179/Report-on-the-Statutory-Review-of-the-Biofuels-Act-2007.pdf