ALTERNATIVE FUELS FORUM - YOUNG

*Check against delivery* Mr Mayor, distinguished guests, fellow speakers, ladies and gentlemen thank you for the privilege to join you for today's Alternative Fuels Information Day. Congratulate Mayor Gerry Bailey and the Young Shire Council for organising this event, particularly make mention of Councillor John Drum, a member of the council's Environmental Initiatives Committee - a driving force behind making this information day happen. Ladies and Gentlemen: In January this year, US President George W Bush told the American people in his State of the Union address that "America is addicted to oil", "oil that is imported from unstable parts of the world". Indeed 92% of conventional oil reserves are in unstable nations – with the largest oil reserves in the countries of Iran, Iraq and Saudi Arabia. I don't think our American counterparts are on their own with an addiction to oil, Australia, I believe, is addicted to oil too. According to Australian petroleum industry statistics, the total petrol market for our nation, with a population of just over 20 million people, is about 20 billion litres per year (of which roughly 19 per cent is imported), and the motor diesel market is approximately 16 billion litres per year (of which roughly 39 per cent is imported). And the cost of oil is on the rise too. In 2000-2001 Australia's fuel deficit was 488 million dollars ($488,000,000) and just six years later, in 2005-2006, it had increased to 10 billion, 575 million dollars ($10,575,000,000) an increase of about a 20 times over a relatively short period. They're big figures, so let me put that into a more relevant perspective – the hip pocket perspective. According to the fuel monitoring company FuelTrac the average price for a litre of unleaded petrol in Sydney in June 2001 was 89.7 cents, in a month where it had peaked at 108.9 cents per litre – and in June 2006 the average price for a litre of petrol in Sydney was 138.4 cents (peaking at 152.8 cents per litre) Locally in June 2001 – down the road in Wagga motorists were paying on average $1 per litre (peaking at 101.9 cents) and in Cowra it was 102.1 cents per litre (peaking at 102.9 cents) – then in June 2006 the average price in Wagga per litre was 141.7 cents (peaking at 147.9) and in Cowra it was 142.2 cents per litre (peaking at 147.4) We can reduce our dependence on fossil fuels, and we can do it fairly quickly too - the answer is alternative fuels such as ethanol – made from renewable Australian crops. Today I'll be restricting my discussion to ethanol, but for the record I'm a strong supporter of biodiesel and I know other speakers today will be covering that aspect so I won't steal their thunder. Ethanol is not new to Australia – it's been around for almost 200 years in a variety of guises - today ethanol is used in pharmaceuticals, for the printing of flexible packaging, in the food & beverage sector, for paint product and thinners, for the manufacture of chemicals, aerosols & cosmetics, it's used in laboratories and hospitals and even in household methylated spirits - oh and it's being used as a fuel additive in unleaded petrol too. In fact one business, CSR, has been commercially producing ethanol since Federation in 1901, when it opened its first ethanol distillery in Pyrmont, Sydney The Australian Government is no stranger to ethanol either, in 1927 the government owned Australian National Power Alcohol Factory opened at Sarina, just south of Mackay, in Queensland. The oil companies are no strangers to ethanol, despite the charades of the last few years which might make you think differently. Almost 80 years ago, in 1929, CSR entered into a joint venture with Shell Oil to begin blending ethanol with fuel in Queensland. Surprisingly, the mandating of ethanol blending is not new to Australia either – during the period 1935 to 1957 there was mandatory ethanol blending (using sugar cane) in Queensland. And in 1940 CSR built a second distillery next to its sugar refinery at Yarraville, in Melbourne, to meet the needs of Australia's southern market. CSR is not the only ethanol player. The Manildra Group commenced production of ethanol at its Bombaderry facility near Nowra on the NSW south coast in 1992. Today, there are a great many aspiring ethanol producers gearing up across the country to become players in the ethanol market. But currently there are only three ethanol producers – the Manildra Group at Bombaderry, CSR Distilleries at Sarina in Queensland and Yarraville an industrial suburb in Melbourne, and the Rocky Point Sugar Mill and Distillery at Woongoolba in Queensland, just north of the Gold Coast - and between them they're producing about 42 million litres a year. 42 million litres might sound like a lot, but by comparison to Brazil it's not even a drop in the ocean – in Brazil they're producing more than 42 million litres of ethanol per day, I'll say that again, Brazil is producing more than 42 million litres of ethanol per day - giving them an annual production rate of about 16.5 billion litres. And they export about 2.4 billion litres of ethanol a year. In Brazil ethanol is made from sugar, and about half of that country's annual sugar production of 50 million tonnes of raw sugar goes into ethanol production. Brazil's shift from fossil fuels to ethanol was a matter of necessity or more importantly economics because of a distorted global sugar market and the rising price of oil. Brazil's total production of fuel ethanol represents almost half, or more accurately 45.2 per cent, of the total global production of fuel ethanol. Not surprisingly, Brazil's motor vehicles are well suited to ethanol too. Many of the vehicles in Brazil are flexible fuel vehicles (FFVs), which are designed to run on petrol or a blend of up to 85 per cent ethanol (E85). Except for a few engine and fuel system modifications, these flexible fuel vehicles are identical to petrol-only models. On average, Brazil is selling 75,000 flexible fuel vehicles per month, which represents about 85 per cent of all motor vehicles sales in the Brazilian market – and next year 100 per cent of vehicles produced for the Brazilian market will be flexible fuel vehicles. The US market isn't really that far behind Brazil either, albeit the US predominantly uses corn grain to produce ethanol. They produce about 16 billion litres of fuel grade ethanol annually, and about 35 million tonnes of corn grain contributes to that production. Thirty per cent of all petrol in the United States is blended with ethanol, and about 225 million cars and 4WDs capable of using ethanol blended fuel. In fact in the state of California there are 25 million cars alone driving on ethanol blends. Today across the United States there are more than 80 ethanol plants in operation and more than 20 plants are under construction. Back to Australia In 2002-03 consumer confidence in ethanol was severely damaged, courtesy of a high-profile scare campaign involving the major oil companies, the motoring associations, and the Australian Labor Party – stemming from the alleged distribution of higher concentration (20-30 per cent) ethanol blended fuels around Sydney and claims that ethanol blended fuel would damage a car's engine. Unfortunately, the much of the media swallowed this scare campaign – hook, line and sinker! Not only were consumers concerned that ethanol could damage their vehicles, 44 per cent of consumers were so concerned they wouldn't have used ethanol even if it was given away. The fact that Petrol stations, across the country, were displaying "no ethanol" signs also reinforced low consumer confidence. In 2002 the Liberal-National Federal Government started taking steps to turn consumer confidence around, and BP received a grant under the Greenhouse Gas Abatement Programme for the production and marketing of E10 in the Brisbane and in May of that year BP started selling of E10 at six Brisbane service stations. The trial was technically successful, with about 10 million litres of E10 sold. However, BP suspended the trials early in 2003 because of public concerns over possible vehicle damage coming out of Sydney. The Government announced a 10 per cent ethanol limit in April 2003, which came into force on 1 July 2003 as an amendment to the fuel quality standard for petrol. To assist building consumer confidence, the Liberal-National Government established the Ethanol Confidence Working Group which led to the Federal Chamber of Automotive Industries release of detailed advice as to which vehicles could use E10 blends. That list, an authoritative statement from manufacturers, provided advice from individual vehicle manufacturers and importers on vehicle models that would and wouldn't operate satisfactorily on E10. The Federal Chamber of Automotive Industries endorsed the list with the statement that "most new and many pre-1986 vehicles can run on E10 petrol blends". A further step to build consumer confidence took effect on 1 March 2004 with the introduction of labelling for E10 fuel bowsers, thus reinforcing the fact that E10 was suitable for use in most post-1986 vehicles. The Government announced in July 2003 its intention to provide a capped amount of $37.6 million to fund one-off capital grants for projects that provide new or expanded biofuels production capacity. The Biofuels Capital Grants Program aims to increase the availability of biofuels for the domestic transport market. Grants have been provided at a rate of 16 cents per litre for new or expanded projects producing a minimum of 5 million litres of biofuel per annum. Grants were limited to a maximum of $10 million per project. Successful applicants under the two rounds of the Biofuels Capital Grants Program were: CSR Distilleries, an ethanol plant at Sarina, Qld ($4.16m); Biodiesel Industries Australia, a biodiesel plant at Rutherford, NSW ($1.28m); Schumer Pty Ltd (Rocky Point Sugar Mill and Distillery), an ethanol plant at Woongoolba, Qld ($2.4m); Biodiesel Producers Ltd, a biodiesel plant at Barnawartha, Vic ($9.6m); Australian Renewable Fuels, a biodiesel plant at Port Adelaide, SA ($7.15m) Riverina Biofuels Pty Ltd, a biodiesel plant at Deniliquin, NSW ($7.15m); and Lemon Tree Ethanol Pty Ltd, an ethanol plant at Millmerran, QLD ($5.85m). Since taking the steps I've just mentioned to build consumer confidence in ethanol blended fuels, the Liberal-National Government and most state government's have made policy commitments that government vehicle fleets would run on E10 where possible, based on E10 availability. The Liberal-National Government announced in December 2003 new arrangements for applying fuel tax to all fuels used in internal combustion engines based on energy content of the fuel. The amount of fuel tax applied to ethanol was 38.143 cents per litre, however this amount was offset for domestically produced ethanol with a production subsidy of 38.143 cents per litre, in effect making ethanol tax-free until 1 July 2011 when an effective fuel tax will begin to be applied incrementally. This fuel tax measure was applied to give the domestic ethanol industry a kick-start. Ethanol blended fuel can provide immediate price relief to motorists – because today ethanol receives a 38.143 cents per litre subsidy. That means motorists who chooses to use E10 blended fuels should be able to buy E10, where it is available, at about 3 – 4 cents per litre cheaper than the bowser price of standard unleaded fuel. And if you could combine that with a shopper-docket discount … woo hoo… a greater saving! The Howard-Vaile Government announced in December last year a Biofuels Action Plan that would underpin the future for a sustainable biofuels industry in Australia. The intention of the Biofuels Action Plan was to focus industry on achieving the Liberal-National Coalition's biofuels target policy of 350 million litres by 2010. In August this year I called on the Government to release the six-month review into industry biofuels targets, to allow open and thorough scrutiny of what appears to be a considerable failing of the major oil companies to meet agreed volumetric targets. I believe if the oil companies are not meeting the targets voluntarily, the Government should look to mandate volumetric targets. Until recently there's been a distinct lack of will by the oil companies to make ethanol widely available. In August this year, of the nation's 6,300 service stations only 260 were selling E10, which is less than two per cent. The oil companies agreed to meet voluntary annual biofuels targets and for this year the minimum was 89 million litres. While there has been no official advice issued on where the targets are up to, it appears the oil companies will come nowhere near meeting this target based on figures currently available. If the only thing standing in the way of greater availability of ethanol or E10 blends in the marketplace is the oil companies who are not taking it up enough, then we need to make them take it up. Whilst I acknowledge the biofuels action plan volumetric targets incorporate both ethanol blends and biodiesel, it should be remembered that it is the ethanol component, not the biodiesel component, which will deliver cheaper fuel to Australian motorists. The independent service stations, such as Independent, have been leading the way on E10 supply, and of late BP and Caltex have been slowly lifting their game, but Shell are doing very little. The focus should now be placed firmly on the major oil companies and their responsibilities in not only meeting, but exceeding the biofuels action plan targets. An increase in ethanol demand will be good news for rural and regional areas across Australia. Currently the ethanol industry employs about 500 people across rural and regional Australia. Higher home-grown ethanol demand will help to stimulate regional development, leading to increased job opportunities and significant economic growth, while addressing health concerns, which would clearly be of benefit to all Australians. The Nationals are strong supporters of a domestic ethanol industry. At every NSW Nationals state conference since 2001 NSW Nationals have put forward policy positions in support of a sustainable long-term domestic ethanol industry, and we're not about to change!

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