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Thursday, 11 September 2003
Page: 19868


Mr PROSSER (1:04 PM) —I am pleased to rise in support of the government's Fuel Quality Standards Amendment Bill 2003. This bill amends the Fuel Quality Standards Act 2000 and will allow the government to follow through on its commitment to require the labelling of fuels at the point of sale or otherwise where such labelling would be considered to be in the public interest.

A national regulatory framework for controlling and improving fuel quality was established for the first time in this country by the Howard government's Fuel Quality Standards Act 2000, which enables the Commonwealth to increasingly lift standards to improve environmental and operational results and which, with the amendments under this bill, will allow for uniform national fuel labelling where such labelling is needed in the public interest. This will not only complement the technical fuel standards but also ensure motorists are kept informed about the nature of the fuel they are purchasing.

The push for the use of ethanol fuel blends came from some industry groups eager to maximise their industry's economic potential by increasing ethanol production from agricultural crops, including wheat starch and sugar cane, coupled with the argument that Australia's resources of crude oil are considered to be low. Indeed, studies by Geoscience Australia indicate that Australia's reserves to production ratio of crude oil is below 10 years. Although this does not mean Australia's crude oil reserves will be exhausted within 10 years, because production is offset by successful exploration and development, such a low figure indicates Australia's resources of crude oil will begin to run out in the not too distant future.

The government thought it important, for the reasons I shall outline later, to properly label fuel. Proponents of ethanol put forward the view that for fuel security purposes alternative fuels should be considered that can in part replace petroleum based fuels and so reduce the dependence on petroleum imports and the vulnerability to external supply disruptions. Of the total domestic output of 135 million litres, around 50 million litres of ethanol are used for blending with fuels. Most industry stakeholders have agreed that setting a maximum 10 per cent ethanol content in blended fuel is the most optimal and efficient level because it requires no engine and vehicle modifications. There is broad consensus that damage may occur to vehicle fuel systems and engine components without modifications if blends are above a 10 per cent cap by volume of ethanol use. Such damage could include possible perishing and swelling of elastomeric and plastic materials making up the fuel systems, particularly if you look at the fuel pumps and carburettors used in older vehicles—which I know Deputy Speaker Wilkie is aware of—as well as the potential for corrosion of metal components within vehicles.

The ethanol content in fuel will be the first to be labelled under these amendments, with provisions to set fuel quality information standards whenever it is in the public interest, such as to label biodiesel blends when greater volumes of these come onto the market at a future date. The content and conditions of ethanol labelling will be set in line with the current mechanisms used for petrol and diesel standards. It is being welcomed not only by the petroleum and vehicle industry but also by consumer groups keen to inform the purchasing public about the content of fuel and thus restore consumer confidence in this renewable fuel product. These amendments acknowledge that there are situations where consumers have a right to be informed about the attributes of the fuel they are buying and, in such cases, their need to be confident that this information is considered to be reliable, even as they travel across state borders. This is something that cannot be achieved by relying on the labelling powers of state governments.

Fuel ethanol has been marketed in New South Wales since 1994 and BP began marketing 10 per cent ethanol blend in south-east Queensland in 2002. However, the task of developing and marketing fuel ethanol, even at a generally acceptable 10 per cent ethanol by volume, has been made more difficult by negative press and public comment of late. This has centred on the high ethanol blend fuel being sold in New South Wales by some independent retailers. Where the specific terms of unleaded petrol, ULP, premium unleaded petrol, PULP, and lead replacement petrol, LRP, have been, until recently, sufficient to describe these grades of petrol, individual refiners and marketers have introduced other petrol products that fall outside these parameters—such as Optimax, Ultimate and Synergy 8000. These have been accompanied by promotional campaigns and bowser labelling that clearly distinguish these more specialised fuels.

However, there are some circumstances where a particular fuel blend may change the performance and behaviour of that fuel in vehicles. Perhaps the most familiar example of this is the use of ethanol in petrol. Ethanol has a lower energy density, about two-thirds that of petrol refined from crude oil. This can ultimately translate into lower levels of fuel economy. For example, a blend of 10 per cent ethanol in ULP can result in as much as a 3.5 per cent loss of fuel consumption. This may be masked by driving habits and even factors such as tyre pressures and road conditions. However, a 20 per cent ethanol blend that produces a seven per cent energy loss becomes more of an issue, particularly when the user is unaware of the penalty and where there is no commensurate price differential.

Although countries such as Brazil use ethanol blends higher than 10 per cent, their vehicles have specific fuel line and engine component modifications that allow their cars to run on lighter blends. Mr Deputy Speaker Wilkie, again I recall your experience and knowledge of the automotive industry. You will recall when Holden first introduced their red motor Holdens—the 149 and the 179. In those days there was only standard and super petrol. The 149 ran on standard petrol and the 179 ran on super petrol, thus creating the need to know what vehicle engine designs are about. Engines and engine systems are now designed from the fuel tank to the exhaust pipe. Every component of the combustion chamber, the injection and even the catalytic converter needs to be designed around the fuel quality that is put into that motor vehicle. Virtually every stakeholder in the motor vehicle industry has stated publicly that warranties on motor vehicles and pump dispensing equipment could be put at risk if ethanol blends above 10 per cent are used—and I share that view.

The participants of the Australian and New Zealand Minerals and Energy Council—ANZMEC—downstream petroleum working group who met in 2001 were in agreement on the importance of labelling fuel contents due to the possible ramifications that fuel products, such as ethanol blended petrol and higher sulphur diesel and biodiesel, may have on fuel economy and, of course, the performance of engines and where fuel of a particular additive or a particular source could void vehicle engine manufacturers' warranties.

Much of the recent controversy was related to the use of blends in the range of 20 per cent ethanol marketed by independent outlets in New South Wales. A large part of that controversy related to the non-labelling of petrol containing ethanol and the fact that customers could not determine what, in fact, they were buying. The Howard government is committed to the necessity for fuel labelling that will not only maintain fuel quality standards, but also enable consumers to be confident about the quality of fuel they are purchasing and thus eliminate any future possible incidents of ethanol blends being described as dirty fuel or car-rotting additives being supplied to the market. Therefore, in maintaining those standards, this bill allows the government to enforce substantial penalties for non-compliant fuels.

Ethanol is an alcohol and contains the hydroxyl group, which gives it an affinity with water. If water content of the fuel supply system, distribution system or vehicle storage tank exceeds a threshold content of a couple of percentage points, then phase separation of the ethanol, water and petrol mix can occur, leading to the subsequent vehicle delivery problems and potential engine damage.

Some ethanol blends are unsuitable for non-automotive use, particularly in aviation, boats and a range of hand-held devices such as chainsaws and even the humble lawnmowers. I note the Boating Industry Association of New South Wales, in its advertising campaign last year, warned boat owners that the use of ethanol petrol blends above 10 per cent in outboard motors was considered a marine safety hazard. The penalty provisions contained in this bill are necessary. There are potentially large profits to be made from fuel adulteration, tax evasion notwithstanding. The penalties also avoid direct cost to the community that can arise from noncompliant fuel, such as the costs of repair and replacement of engine and fuel components of motor vehicles—buses, trucks and the like—and equipment. This government's commitment to uniform and enforceable national fuel standards will ensure best practice within the industry, and the combined efforts of the petroleum industry, the motor vehicle industry and consumer groups will ultimately enable consumers to be confident about the quality of fuel they are purchasing from the bowser. I commend the bill to the House.