Australian biodiesel industry struggles with tax reform

By | October 13, 2006
Australia's biodiesel industry, still in its infancy, needs more favorable policy settings to grow, according to Bob Gordon, executive director of Renewable Fuels Australia. The industry is still reeling after a tax reform law passed in June. "The industry was caught by surprise by the impact of that, potentially on the capacity of biodiesel to enter into the petroleum fuel market," he told Biodiesel Magazine.

With the policy change, the relatively small industry went from 100 percent access to the entire petroleum diesel market to potentially being restricted to less than 10 percent of the petroleum diesel market. Biodiesel projects that already had financing in place are still moving forward, but other potential investors have turned their attentions outside of Australia-at least until the "policy mess" is sorted out. "To the best of our knowledge, [the result of the policy] was never intended," Gordon said. "But it had the impact of bringing any new biodiesel production to a shuddering halt in the country until this issue is resolved."

Still, Gordon is hopeful about the future of the biodiesel industry in Australia. "We're hoping that we can get over those remaining barriers for getting ethanol and biodiesel into the main transport fuel markets," he said.

Currently, the country has two operating biodiesel facilities, with a third nearing completion. The Australian Biodiesel Group Limited (ABG) operates a 10.5 MMgy plant on the Central Coast in New South Wales and recently completed construction on a 42 MMgy facility near Narangba, Queensland. Natural Fuels Darwin Biodiesel Plant, a 40 MMgy plant, is expected to begin production soon, possibly in October, Gordon said.

The National Roads and Motorists' Association (NRMA) in Australia considers both biodiesel and ethanol essential for the country's future, according to association President Alan Evans. The country's fossil fuel resources are declining, meaning it is now a net importer of oil, rather than an exporter. Alternative fuel sources need to be developed, he said.

The NRMA supports the idea that the Australian Competition and Consumer Commission should have greater powers to monitor petroleum prices. Major oil companies are gaining increasing profit margins in refinery, retail and wholesale sectors on the back of crude oil prices, Evans said.

For biodiesel to gain acceptance with motorists, it must be demonstrated that it won't have a negative effect on engine life. Also, availability of the alternative fuel needs to be expanded. "If it's not available, people aren't going to use it," Evans said.

The NRMA uses a biodiesel blend for its own truck fleet. However, there are currently no service stations that offer biodiesel in Sydney, Australia, where the association is headquartered. The nearest major oil company offering a biodiesel blend is about 62 miles away, Evans said.
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