The NSW ethanol mandate will be ”appropriately enforced”, the Premier, Barry O’Farrell, has assured Australia’s biggest ethanol producer, Manildra, after the company reacted to his decision to dump a ban on regular unleaded fuel by suspending the expansion of its Nowra plant.
The chairman of Manildra, Dick Honan, told the Herald yesterday he was ”disappointed” at the announcement by Mr O’Farrell that the government would reverse an earlier cabinet decision to ban regular unleaded fuel from July 1 to encourage use of an ethanol blend, E10.
Mr Honan said the decision, announced on Monday night, meant the market for ethanol has ”shrunk” because the oil companies had ”run a very successful scare campaign” against the proposed ban on regular unleaded.
He said Manildra had invested $300 million in the Nowra plant in the past five years to expand its capacity to meet the state government’s ethanol mandate, whereby petrol companies must ensure 6 per cent of all fuel sold in NSW is ethanol.
But in light of the decision he would visit the plant today ”to assess what has to be stopped and what contractual arrangements we have. But a lot of the major expansion will not happen.”
It was ”obvious” that some of the 70 subcontractors working on the plant would lose work as a result.
Mr Honan claims the ethanol mandate ”has never been enforced” by Labor and Coalition governments.
Australian Consumer and Competition Commission data shows petrol companies managed to lift ethanol sales to 3.5 per cent during the period when the mandate was set at 4 per cent. It was lifted to 6 per cent last year but Mr Honan said figures from last November showed ethanol sales had only risen to about 3.6 per cent.
Responding to Mr Honan’s comments, Mr O’Farrell said ”investment decisions are a matter for individual companies but the NSW government is committed to the 6 per cent ethanol mandate”.
But the Greens MP John Kaye accused Mr Honan of ”trying to shake the government down” with the threat of lost jobs. ”Even with the 4 per cent mandate, Dick Honan’s company has the lion’s share of a 240 million-litre-a-year market locked in by legislation,” he said. ”That’s worth more than $300 million a year at the bowser.”
The oil companies argue current ethanol supply is inadequate for them to achieve the mandate. Mr O’Farrell has asked the Independent Pricing and Regulatory Tribunal to examine the issue to guide government policy on exemptions that should be in place.
”The NSW government will ensure the mandate is appropriately enforced,” he said.
The government’s backdown came a week after a cabinet leak revealed it planned to push ahead with the ban despite being advised it would increase petrol prices.
The Herald had revealed up to 750,000 motorists would pay more than $150 a year extra as they would be forced to use premium fuel because their cars were incompatible with E10.
The Manildra companies have been among the biggest donors to both sides of state politics, giving more than $600,000 each to the Coalition and the Labor Party since 1999.
How affordable fuels bit into food
When the US government decided to encourage its corn industry to produce more ethanol fuel, one of the unintended side effects was that the price of corn tortillas in Mexico doubled.
The incident highlighted some of the problems with putting mandates on biofuels - including the NSW government’s intention to stick with plans for a 6 per cent ethanol content in petrol - that cause flow-on effects in agriculture.
Critics in Australia and overseas point out that it puts the demand for fuel and the demand for affordable food crops in competition for the limited amount of arable land.
”If regular unleaded is phased out, a repeat of the 2002-03 drought, for instance, will lead to 23 per cent of the state’s average grain crop being diverted to ethanol, meaning that the cost of bread, beef, dairy, pork, poultry and eggs will rise,” the president of the Australian Lot Feeders’ Association, Jim Cudmore, said.
Other food producers who rely on wheat, or on other products that rely on wheat, have added their voices to the argument.
The policy has also caused a rare alignment of viewpoints between the oil industry and the NSW Greens. Oil companies have never supported the policy of subsidising fuel additives that reduce greenhouse gas emissions from vehicles. The Greens say the mandate should remain at 4 per cent unless an audit on the full greenhouse gas emissions from Australian ethanol producers justifies further use.
Australia’s main ethanol producer, Manildra, mainly serves the needs of NSW - the only state with a mandated level of ethanol in unleaded petrol.
The NSW Office of Biofuels says that Manildra told it that last year 80 per cent of the company’s ethanol came from starch waste. In 2007, the chairman of Manildra, Dick Honan, told a Victorian parliamentary inquiry that about half its ethanol came from waste.
In a 2009 NSW Supreme Court case, it was revealed that between 2006 and 2009 the amount of flour Manildra exported fell 50 per cent and the amount diverted to ethanol production increased 80 per cent.
Tom Beer, formerly a biofuels researcher at the CSIRO, wrote a 2005 report that suggested Manildra’s ethanol was responsible for few greenhouse emissions. But he told the Herald that he no longer believed that was the case.
”When they started out it was brilliant. They took a product no one wanted but they found a use for it,” Dr Beer said.
”The problems have started to arise that fairly large industries are starting to be built on it. If people are doing it with millions of litres then it’s not waste any more.”
