Title:
PRODUCT STEWARDSHIP (OIL) (CONSEQUENTIAL AMENDMENTS) BILL 2000:
Second
Reading Date: 27 June 2000 Database: House Hansard Speaker:
Prosser, Geoff, MP (Forrest, LP, Government) Page: 18329 Proof:
No Source: House Stage: Second Reading Type: Speech
Context: Bill
Mr PROSSER (Forrest) (4.51 p.m.) ‹I rise to support the Product Stewardship
(Oil) Bill 2000, the Customs Tariff Amendment (Product Stewardship for
Waste Oil) Bill 2000, the Excise Tariff Amendment (Product Stewardship
for Waste Oil) Bill 2000 and the Product Stewardship (Oil) (Consequential
Amendments) Bill 2000. Speaking to these bills gives me the opportunity
to not only support this initiative but also salute a major oil recycler
who has the largest catchment area in Australia, based in my electorate
of Forrest in Western Australia. That is Fred Wren of Wren Oil.
We are all aware of the figures. Australian oil refineries produce around
800 million litres of virgin oil, from which lubricant is made. Around
200 million litres of base oil is exported. Domestic users consume some
520 million litres and it is estimated that, of those 520 million litres,
some 150 to 165 million litres of domestic consumption is currently
recycled. That is a total of 68 to 71 per cent of the annual domestic
usage that is out there somewhere. Two hundred and sixty million litres
are lost because of combustion of engines, but the remainder could and
should be recycled.
Worldwide, the sale of new lubricants rises by about five per cent a
year, and so does the volume of waste oil. In 1995 it was estimated
that only 44 per cent of waste oil was being collected worldwide. It
is a responsible government that acts to rectify this problem. For those
who are not aware, lubricants are generally produced from base stocks
refined from the heavy fractions of crude oil or other hydrocarbons
and then various additives are blended into them. Lubricants are used
for a wide range of applications, including as engine and transmission
lubricants, hydraulic fluids, insulation and process fluids and, of
course, greases. During the application, part or all of the lubricant
may be consumed. In layman's terms, it is like when you check the oil
in your car. There is no leak but, of course, the oil has to go somewhere
and the fact is that some of that oil is burned in the normal combustion
process. In another way, anyone who changes the oil in their car at
home, referred to in the industry as the do-it-yourselfer section of
the market, will be aware that the balance of the oil that is not consumed
is contaminated by water, metal particles, rust, dirt, carbon, lead
and other by-products from the combustion process or from the normal
wear and tear of an engine.
Used
lubricating oil itself has an inherent value. It is currently recycled
in Australia as diesel extender, which is predominantly used in remote
area power stations, which rely on large combustion engines for power
generation. One of these power stations is at the bottom of Western
Australia, at Esperance, and a lot of this product goes to it. Fuel
diesel is blended with diesel extender, which is made from recycled
waste oil. As I said, waste oil is itself also used as an energy source
in the production process for goods. The beauty of this scheme is that
if manufacturers collect and recycle waste oil, they, too, may be eligible
for product stewardship benefits on what they recycle. There are a number
of reasons why we should recycle waste oil. It is currently estimated
that between 35 million and 50 million litres of waste oil are unaccounted
for. It could be in landfill or in the back shed, or dumped on the ground
or tipped down stormwater drains. I have a history in the automotive
industry and I would not like to see a return to the bad old days, because
I think we have recognised the problem and that the collection and processing
of waste oils is the responsible way to take care of it. This bill addresses
what will happen into the future, and I think that is responsible from
not only a government point of view but also an environmental point
of view.
According
to US EPA studies, just one gallon of used oil leached into ground water
can mean one million gallons of water become undrinkable. Marine animals
can be affected by oil concentrations as low as one part per million.
With pollution, it is often not just the actual loss of animal and plant
life per se that is important but also the economic losses of fishing
and recreational industries that must be considered as part of the cost.
Not to put too fine a point on it, there is one reason why people do
not recycle waste oil‹that is, there are little or no tangible economic
benefits. For many there was a cost involved in the recycling of waste
oil, in an industry where margins are tight and business is volatile.
Aside from the fact that waste oil itself has an inherent value, which
was previously unrecognised, these bills assign waste oil a monetary
value, thereby ensuring that it will be recycled.
Under
these bills, there will be a financial incentive for oil to be collected,
recycled and reused. I am confident this will be a great motivator and
will result in a substantial amount of unaccounted for oil being recycled
and increasing amounts of oil being accounted for. The Product Stewardship
(Oil) Bill establishes the eligibility requirements for the benefits
and sets out the benefit rates. The bill also sets up a ministerial
advisory council, with broad industry and community representation.
I think it is important that small independent companies like Wren Oil
are soundly represented on this advisory council.
The three consequential bills allow for the collection of the levy on
both domestic and imported oil products by amending customs and excise
legislation. With the levy set at 5c a litre, to be paid by producers,
it is expected to raise around $25 million per year and that the entire
amount collected will be distributed back to waste recyclers and the
like in the form of benefits. There is currently a 22 per cent wholesale
sales tax attached to oil which, upon the introduction of the new taxation
system, will be removed and a 10 per cent GST added on. This should
mean that, even if waste oil producers pass on the full cost of the
levy to consumers, there should still be a reduction in price. There
is currently very strong competition in the lubricants market and this
factor, combined with the ACCC, is expected to limit price rises.
What
I like about this legislation is that it has been done with minimal
government interference. By that I mean that the government has corrected
a market failure by introducing a financial incentive that the market
will respond to. The legislation also recognises that the producer has
some responsibility for where the product ends up. Accountability or
stewardship rests in partnership with the oil companies, state and federal
governments and oil recyclers. I also think it is important to note
that the levy will only be used to pay benefits, and the cost of administering
the levy will be met by the transitional funds announced by the Prime
Minister on 31 May 2000. This will ensure that the levy is kept at the
lowest rate possible.
The
increased value of waste oil should flow almost immediately to approved
recyclers. This will have the effect of improving recyclers' operating
margins, causing them to require greater quantities of oil. Recyclers
will be paid by the ATO for each litre of product delivered from waste
oil.
I want to touch briefly on the concept of tradeable certificates which
will be trialed. A producer of waste oil would be required to hold certificates
to show that appropriate recycling occurred for a designated percentage
of the product. These certificates would be supplied to recyclers, thus
creating a market in the certificates and adding value to the waste
oil stream. This system would allow the minister to set target recycling
percentages. This is an innovative approach, and I am pleased that it
is being trialed, not only because of the potential benefits that it
might yield but also so that smaller oil recycling businesses are not
exposed to unnecessary risk.
I mentioned Fred Wren of Wren Oil earlier in my remarks. Wren Oil, a
waste oil recycler and a recent winner of the South West 3R recycling
award, has one of the most extensive used oil collection catchment areas
in Australia. Wren Oil is based in Picton, close to Bunbury in the south-west
of Western Australia. Wren's trucks have a pick-up run which goes as
far north as Port Hedland‹for those unfamiliar with WA geography, that
is 2,000 kilometres away‹and as far south-east as Esperance, which is
600 kilometres from the Wren factory and marks the edge of the Great
Australian Bight, and to the goldfields to the east.
Fred
was a market gardener and started his oil recycling business from scratch
in the early 1980s. He began to collect drums of relatively clean, used
hydraulic and gear oil, which he mixed into black sump oil, realising
that if oil was clean, someone might be willing to use it. The concept
led to a search for processes that would turn waste oil into a product
that could be reused in its original application or possibly a new application.
Through spare time, research and experimentation, he discovered processes
for thin film evaporation and distillation. In 1986, Fred purchased
oil cleaning equipment and began selling reconditioned hydraulic and
gear oil. A formula was developed to manufacture chainsaw bar oil, and
a market developed for both products. With both his sons, Fred began
refining sump oil, one drum at a time, on weekends.
In
1992, Wren Oil began to clean black sump oil, utilising chemicals and
a centrifuge, which it sold to new users. In 1996, a turnkey module
thin filter evaporation distillation re-refinery was installed to recycle
oil for new use and eventually back into lubricants. Distillation is
at the heart of the re-refining operation. Rather than seeing used oil
as a waste product requiring costly disposal, Wren Oil has built its
business on the belief that used oil is a fully recoverable resource
and should be used again. Wren's ability to add value to waste oil by
using modern refining techniques and to find consumers who are willing
to pay a fair price are the only reasons that there is free used oil
collection in Western Australia.
Wren
Oil adds value, seeks niche markets and, by competing with new fuel
and lubricant products, gains the resources to reinvest. Wren Oil is
seeking to place recycled oil on the shelf, but there are still some
elements, such as colour bodies and carryover elements from re-refined
base oil, which need to be eliminated. Wren Oil collects and recycles
about 12 million litres per annum, or about 40 per cent of the reported
waste sump oil in Western Australia. Oily waste from the Bunbury region
industry and mining companies was also accepted when an abatement notice
from the WA EPA meant that it could no longer be sent to landfill. Wren
Oil also recycles waste from ship bilge pumps‹one to 1.5 million litres
each year.
To
their credit, they also recycle used oil filters from the mining industry.
These large filters contain about half a litre of sump oil and were
previously being buried. Wren Oil crushes the thousands of filters,
removes the oil, and sends the metal to scrap recyclers. In doing so,
they prevent over 300 tonnes of metal from going to landfill every year.
Fred Wren has been at the cutting edge of policy in this area and has
been involved in the development of the legislation being discussed
today.
Fred
Wren and Wren Oil support this legislation and have actively pursued
stewardship at all levels of government and industry. Wren Oil is an
active supporter of the concept that responsibility lasts for the entire
life of the product. Through research and development, production, distribution,
utilisation and, finally, recycling and appropriate waste management,
Wren Oil successfully and safely takes responsibility for recycling
and waste management components. Wren Oil intends to continue to upgrade
its plant and storage capabilities, completing the installation of equipment
that will result in a facility which will be able to process between
25 and 30 million litres per year. This figure is significant because
it is WA's total reported amount of waste oil.
Competition
from the gas industry and the threat that lower priced gas supplies
present to recyclers are what ultimately drive the market and Wren Oil
to prepare for the ultimate investment: placing recycled oil back on
the shelf‹which is, of course, the best form of recycling.
Title: PRODUCT STEWARDSHIP (OIL) (CONSEQUENTIAL AMENDMENTS) BILL
2000: Second Reading Date: 27 June 2000 Database: House
Hansard Speaker: Stone, Dr Sharman, MP (Murray, Parliamentary
Secretary to the Minister for the Environment and Heritage, LP, Government)
Page: 18339 Proof: No Source: House
Dr
STONE (Murray‹Parliamentary Secretary to the Minister for the Environment
and Heritage) (5.35 p.m.) ‹in reply‹In summarising this debate on the
Product Stewardship (Oil) Bill 2000, let me thank all of the members
who have participated. It has been one of those occasions in the House
when each member understood and was supportive of a major new environmental
initiative for this country, a country that has seen an inappropriate
use of many thousands‹perhaps even millions‹of litres of oil over the
last 100 or so years. There have been all sorts of uses of oil‹not all
of them good for the environment. When I was younger, I spent many an
hour painting stockyards with sump oil. I now understand that that was
very bad for my health, and it certainly did not do much for the environment.
Those sorts of scenes, hopefully, will be gone with this new and very
important initiative.
This package of innovative legislation represents the realisation of
a commitment made by the government in the course of negotiations for
a new tax system. It contains measures for a better environment. The
member for Wills could not resist a bit of a dig while he was complimenting
this piece of legislation. In the last few days of panic, the opposition
could not resist a reference to the new tax package. Let me remind him
that under Labor's regime there was a 22 per cent wholesale sales tax
attached to oils and greases. That goes and we have a 10 per cent tax
replacing that. And, if you are in business, that is all refundable
back to you as part of the cost of doing business. Not only is this
an exceptional piece of legislation in terms of the environmental impacts;
it is also very good for the economy, like all things that this government
does. I refer now to the contribution made by the member for Forrest,
a Western Australian member. He very rightly applauded the work of Mr
Fred Wren, an absolute pioneer in the recycling of oil, in particular
in that part of remoter Australia. Mr Wren has established a very important
and significant business, beginning in a very small way, as the member
for Forrest described. He has been very much part of the consultation
that has developed this very practical legislation and, we expect, very
effective bill. I think it is entirely appropriate that we do acknowledge
that in countries like Australia there are lots of small battlers out
there who begin with the kernel of a good idea and over the years they
do a great job all by themselves. But, when we come to a situation as
significant as this, with the need to recycle vast quantities of oil,
we have to move beyond small operators in regional parts collecting
up oil, sometimes for nothing, given to them by garages and seeing that
end up in stockpiles because there is no market for that product and
certainly no great incentive to see it moved into a cleaner, recyclable
state.
That leads me to the contribution of the member for Calare, who expressed
the concern that there are a lot of small regional operators, some of
whom have come to him, he tells us, concerned that their small operations
collecting this used oil might be jeopardised with a new era where there
are incentives to recycle this product and where perhaps you would expect
to see greater competition for the used oil, as there is a benefit for
the processing and recycling of that oil. The member for Calare also
made the comment in passing that he felt he had been somewhat pressured
by the time frame of the introduction of this package of bills last
Thursday and being debated in the House the following Tuesday. A lot
of people wish we would do more of our work in this timely and time
efficient fashion.
Let
me deal with that issue a bit further and say, before he really does
get concerned that he was out of the loop, that in fact there was a
very comprehensive process of consultation that went on with this particular
piece of legislation which included forums and consultation papers,
and the member for Dunkley held up one of those in the House. There
was a great deal of one-to-one interaction, including with some of the
constituents referred to by the member for Calare. There was also a
web site to try and make sure that the industry was fully informed and
in fact engaged in the development of this package of bills. I guess
we can be very proud and pleased that we have had that time, over six
months of very close work with industry, and we have come up with such
a practical and we believe very workable bill that is receiving support
from both sides of the House. So the member for Calare can be assured
that there was an extended period of consultation. It seems a shame
that he missed that. Certainly the particular individual with concerns
that he referred to was one of those who engaged directly with Environment
Australia and was given personal advice, support and information, and
he would be more than welcome to continue with that interaction as time
goes by if he continues to have concerns.
The member for Calare was anxious that there are stockpiles of unrecycled
oil now, and that related to the concerns of some of his small regional
collectors. Yes, we are aware that there are these stockpiles of waste
oil in storage, and that is one of the reasons why we believe this bill
is going to be effective. There has been no incentive for that oil to
be moved, sometimes a considerable distance, to get proper reprocessing
treatment. So the economic and financial modelling used to design the
arrangements has taken this stored oil into consideration. We want to
see this oil flushed out and used appropriately. We consider that this
will be recycled during the first six months of operation of the new
schemes. The benefits system is not about collectors; it is about processing
this product and moving it back into the marketplace. So the system
does not provide benefits for stored oil but when the oil is moved on
to recycling and onsold for use. That is the crux of this new system
and that is why we believe it will be far better than the old system,
where there might have been some incentive to collect it but not in
fact to go on to the next stage.
We
are, of course, concerned about the smaller operators out there who
have been, as the member for Calare described, doing a very good job,
perhaps on quite low margins, collecting used oil, and sometimes from
remote locations. We want them to continue to be in business. The particular
constituent that the member for Calare referred to, Chris Newcombe,
is amongst a number. We have had other representations here today from
regional members concerned that those little collectors could go out
of business. We can assure you that we believe that people like Mr Newcombe
will be financially better off under this new system because there will
be recyclers who will be prepared to pay more for the product they are
collecting. There will be a market that will be created through the
other special green, alternative fuel initiatives that are in the system,
which were referred to by the member for Dunkley, and so under our new
system Mr Newcombe will be better off, along with other regional families
who have taken on a similar sort of business to his.
So what I am explaining is that it is expected that this balanced approach
will expand the competition for waste oil, including in particular in
remote Australia. Existing waste oil recyclers, with increased financial
support under these arrangements, will be in a position to expand their
collection services, whether they directly collect or subcontract this
service. Prospective new recyclers such as lubricant refiners have indicated
that they are also likely to seek waste oil in remote Australia. As
I say, this government of all governments is very cognisant of the difficulties
that rural Australians face in the tyranny of distance, and we understand
the special difficulties of managing waste oil when it is a long way
from a major centre and when the costs arising from isolation constrain
local solutions to this problem. In response to people like Mr Newcombe
and others, we have a transitional assistance fund which will be used
to develop ways to improve the acquisition of waste oil in rural Australia.
We will build strategic partnerships so that as far as possible we develop
best practice rural waste oil acquisition and we will aim to solve remote
area barriers so that as much oil as possible is recycled not just close
to major centres but in remote regions, too. All of us are aware that
one of the major blots on the landscape is the old rusting oil drum
leaning hazardously against some old garage wall.
Informal expressions of interest in this area have already been received
from jurisdictions and industry members. Once the arrangements commence,
we will comprehensively seek partnerships of representatives of rural
communities, states and territories, waste oil collectors and recyclers.
It is an extraordinarily important thing that we do in ensuring preservation
and conservation of the environment of Australia. I thank all those
contributors who, with the government today, are very grateful that
we have taken this step. I commend the bill to the House.
Question
resolved in the affirmative.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.