By: Mark Yum, Partner
In a move to encourage greater competition and transparency in the biofuels market after industry consultation, the Minister for Innovation and Better Regulation, Victor Dominello announced wide reaching reform proposals upon the industry that will impact consumers and fuel retailers.
New requirements for service station operators – the reform package
On 6 April 2016, the Biofuels Amendment Act 2016 received Royal Assent and the current Biofuels Act 2007 (NSW) was amended. The new laws do not yet apply. Presently, it is unknown when the Act will take effect.
On 3 June 2016, NSW Fair Trading opened invitation to the public to make submissions to NSW Fair Trading with respect to a proposed Regulation under the Biofuels Act 2007 which is intended to replace the current Biofuels Regulation 2007. Submissions closed 28 June 2016.
NSW Fair Trading have not confirmed the date the Act will take effect, however it is likely it will be the same date as the proposed new Biofuels Regulation 2016 takes effect.
What is the Biofuels Mandate?
The Biofuels Mandate is also referred to as the "minimum biofuel requirement" and is the minimum percentage of biofuel that must be sold by certain service stations (see below) in comparison to overall sale of fuel products by a particular service station.
If the Biofuels Mandate applies, a service station is required to ensure that:
- 6% of all sales of petrol must be of ethanol. For example, this means that if a service station sold 6 litres of E10 (ethanol content of 10%) for every 4 litres of regular unleaded petrol, then it would have met the Biofuels Mandate.
- 5% of all sales of diesel must be of biodiesel. This means that if a service station only sells B5 (biodiesel content of 5%), it cannot sell any other type of diesel otherwise it will not meet the Biofuels Mandate. A further example, if a service station sold 5 litres of B20 (biodiesel content of 20%) for every 15 litres of regular diesel, then it would have met the Biofuels Mandate.
The Act requires the service station to assess compliance with the Biofuels Mandate on a quarterly basis.
Who must comply with the Biofuels Mandate?
The amendment Act expanded the categories of service stations who must comply with the Biofuels Mandate. All persons who fall within the definition of volume fuel retailers must comply with the Biofuels Mandate.
A volume fuel retailer is someone who operates or controls:
- service station which sells 3 or more types of petrol or diesel fuel and the total volume of petrol and diesel fuel sold exceeds a threshold (the threshold has not yet been set by Parliament); or
- 20 or more service stations, none of which are volume fuel service stations.
Previously, the method for determining whether the Biofuels Mandate applied to "Major Retailers"had a more narrow definition than a volume fuel retailer.
Compliance, registration and reporting
The new laws require volume fuel retailers (among other persons) to be registered on an online register of volume fuel retailers maintained by NSW Fair Trading. The registration forms are found on the NSW Fair Trading website.
Volume fuel retailers must also report on a quarterly basis to NSW Fair Trading by lodging with NSW Fair Trading "returns" for the quarter, which must show:
- petrol sold (including petrol-ethanol blend);
- ethanol sold (in petrol-ethanol blend form);
- diesel fuel sold (including biodiesel blend);
- biodiesel sold (biodiesel blend); and
any other information required by Regulations. Standard forms for submitting returns can be accessed from the NSW Fair Trading website.
Volume fuel retailers that fail to furnish returns or keep records may be found guilty of an offence under the Act to a maximum penalty of up to $110,000 per offence.
Exemptions may be available
Volume fuel retailers who do not meet the Biofuels Mandate can apply to NSW Fair Trading for an exemption. NSW Fair Trading may grant an exemption to a volume fuel retailer if one or more of the following circumstances exist and an exemption is justified:
- it is uneconomic for the volume fuel retailer to comply with the requirement because of the price at
- which they are reasonably able to obtain ethanol or biodiesel;
- the volume fuel retailer has taken, is taking, or will take all reasonable steps to comply with the Biofuels Mandate;
- compliance may result in a risk to public health or safety; or
- other extraordinary circumstances demonstrated by the volume fuel retailer.
Repercussions for the service station industry
All stakeholders of the industry are likely to feel the impact of the reforms and compliance as the Biofuels Mandate will be contingent on the habits of consumers. The IPART findings published in late 2015 which Madison Marcus Law Firm commented upon in January 2016 recommended a public awareness campaign of the benefits of ethanol-blend petrol and biodiesel.
It would appear that Parliament have implemented the new laws deliberately to require the market participants (i.e. service station operators) to use other market forces (i.e. price) to change buying habits of consumers in NSW. Volume fuel retailers may have difficulty in complying with the Biofuels Mandate if consumer confidence in ethanol-blended petrol and biodiesel does not increase.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.