E10 fuel legislation on the nose with independents

The Baird Government is expected to meet today to consider a move to compel all service stations in NSW to sell E10 fuel.

Although major chains in the state are already required to sell E10, companies with less than 20 sites are currently exempt under legislation passed by the previous state government.

Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association (ACAPMA), told C&I Week, since the initial legislation was passed the industry has seen signification growth in premium fuel, while the sale of E10 has dropped.

“Instead of [E10] climbing from a bit above 4 per cent towards the 6 per cent target the government had set, it’s been progressively falling over the past few years to the point where it is now around 2.7 per cent of all unleaded sales,” McKenzie said.

If the stocking and sale of E10 becomes mandatory for all service station operators, ACAPMA estimates the cost could be upwards of $300 million in upgrades of equipment needed for the 900 sites yet to install E10 onto their forecourts.

“The biggest problem is that [petrol retailers] then have to recover those costs, which means they are going to have to pass it through to motorists in the form of higher prices. There is no other way to pay that back.

“Our concern is that the government is pursuing a strategy that is going to hurt the industry and hurt consumers and motorists without any real tangible benefit,” McKenzie said.

The Manildra Group and United Petroleum dispute claims made against ethanol
In statement made to C&I Media, the Manildra Group, NSW’s only producer of ethanol for the E10 blend, said ethanol saves consumers at the pump and E10 has always been the cheapest fuel at the pump since its introduction.

“In 2014, NSW consumers saved $38.4m through the purchase of E10. 63 countries have national biofuel mandates or targets, including the United States, European Union, Canada, China and Thailand. In countries with ethanol mandates, the more ethanol contained in the fuel – the cheaper the price at the pump.

“Ethanol is a sustainable locally-grown alternative to imported fossil fuels. Since 2000, our dependence on imported oil for transport has grown from 60 per cent to over 90 per cent. This dependency is costing us $25 billion in foreign debt every year. Think about the jobs and economic opportunity that money could create here at home if we didn’t siphon it out of our economy to subsidise the economies of other nations. Ethanol displaces imported crude oil imported from unstable foreign countries and increases Australia’s energy independence.

“Currently Australian ethanol production contributes $402 million in GDP every year. The industry also delivers 3,000 direct jobs and a further 20,000 indirect jobs with the majority of these in rural and regional areas. At the heart of ethanol production are generations of Australian wheat, sugar and grains farmers – more than 5,000 of them across the country,” said the Manildra Group.

United Petroleum also took issue with claims made in the media about the cost of installing technology needed to sell ethanol enhanced fuel.

“United Petroleum has converted more than 400 service stations to sell E10 over the last 9 years and have never spent anything like this amount. Rather, it is our experience that small sites can be converted by spending as little as $7,000 and sites with where there is minor pipe rework or more complicated signage involved you may be able to spend as much as $25,000. There is no need to replace pumps or clean tanks to convert to E10. The claim that $900,000 needs to be spent is outrageous and irresponsible,” United Petroleum said in a statement.

The independent petrol retailing chain also hit back at claims the costs of switching to ethanol fuel would unfairly burden small petrol sellers.

“Only about 20 per cent of service stations in NSW are privately owned and only about a third of those would be spending any money on an E10conversion. According to the 2013 ACCC (Monitoring of the Australian petroleum industry), 66 per cent of sales in Australia go through Coles, Woolworths, and large independent chains such as 7-Eleven, United, Puma, etcetera. Once you take out the sites operated by the major oil companies such as BP, Caltex, Shell (Viva), you end up with a number around 15 – 20 per cent (rather than about 50 per cent). Many small independent sites in NSW sell E10 fuel and in fact most of those have sold E10 now for many years and so the number of 908 sites is an exaggeration.”

ACCC threatens fines for mislabelling
Meanwhile the ACCC is threatening big fines on service stations who do not label E10 as having a RON number of 94 on the dispenser. The ACCC said it would begin fining companies up to $110,000 and individuals $22,000 starting early next year. It also warned that failing to display an accurate RON number may breach the Australian Consumer laws and attract penalties up to $1.1 million.