Department of the Environment and Water Resources annual report 2006–07
Volume two
Department of the Environment and Water Resources, 2007
ISSN 1441-9335
Legislation annual reports 2006–07 (continued)
Operation of the Product Stewardship for Oil Programme and the Product Stewardship (Oil) Act 2000
This annual report is prepared in accordance with section 35 of the Product Stewardship (Oil) Act 2000, and covers the operation of the Act and the operation of the Product Stewardship for Oil Programme from 1 July 2006 to 30 June 2007.
Purpose of the programme
The Product Stewardship for Oil Programme came into effect on 1 January 2001, fulfilling the government's May 1999 commitment outlined in the Measures for a Better Environment package. The programme's objectives are to:
- provide economic incentives to increase the uptake and appropriate recycling and use of waste oil
- encourage the environmentally sustainable management and re-refining of waste oil and its reuse
- support economic recycling options for waste oil.
The programme aims to develop different forms of recycling and a diverse range of products and markets for recycled oil to help ensure the long-term viability of the used oil recycling industry in Australia.
Features of the programme
The Product Stewardship for Oil Programme consists of an economic incentives package (levy/benefit scheme) and a transitional assistance grants package.
The product stewardship oil levy was introduced on 1 January 2001 and is currently set at 5.449 cents per litre of lubricant oil produced or sold in Australia. The levy applies to both domestic and imported oils and is paid by oil producers and importers. Under the levy arrangements no 'eligible' lubricant escapes the levy, imported and domestic oils are treated equitably, and exported oil is not levied. The levy is collected as an excise by the Australian Taxation Office and as customs duty by the Australian Customs Service.
While the levy is intended to offset the cost of benefits paid under the Product Stewardship for Oil Programme, it is not directly connected with benefit payments.
Product stewardship benefits are paid to recyclers as a volume-based incentive to encourage increased oil recycling. Benefits are provided at different rates, depending on the type of product—the lowest benefits are provided for basic burner fuels, and the highest for full recycling into as-new, re–refined base oil. Table 1 shows the 2006—07 benefit rates.
Benefit rates do not directly reflect the comparative effort involved in recycling or the environmental benefit achieved. Rates were set by determining the amount of incentive required for industry to undertake and increase each form of recycling. Some forms of recycling require more incentive than others.
| Category | Benefit (cents per litre) |
|
|---|---|---|
| 1. | Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the prescribed criteria 1 | 50 |
| 2. | Other re-refined base oils (for example, chain bar oil) | 10 |
| 3. | Diesel fuels that comply with the Fuel Standard (Automotive Diesel) Determination 2001, as in force from time to time | 7 |
| 4. | Diesel extenders: (a) that are filtered, de-watered and de-mineralised; and (b) that, if combined with diesel fuels, would produce a combined fuel that complies with the determination mentioned in category 3 |
5 |
| 5. | High grade industrial burning oils (filtered, de-watered and de-mineralised) | 5 |
| 6. | Low grade industrial burning oils (filtered and de-watered) | 3 |
| 7. | Industrial process oils and process lubricants, including hydraulic and transformer oils (re-processed or filtered, but not re-refined) | 0 |
| 8. | Gazetted oil consumed in Australia for a gazetted use | 5.499 |
| 9. | Recycled oil mentioned in category 5 or 6 that has been blended with a petroleum product that meets the criteria mentioned in schedule 2 of the Regulations of the Act 2 | 9.557 |
| Additional benefit 1 July 2006 to 30 June 2007 3 | 10.057 | |
| Notes: 1 The Regulations specify a health, safety and environment standard for re-refined lubricants that is consistent with the current requirements for 'virgin' products. The basic requirement of this standard is to produce a non-carcinogenic and non-toxic product. Source: Product Stewardship (Oil) Regulations 2000 (as amended April 2004). 2 Category 9 ceased as of 30 June 2006. Claims may still be submitted if the used oil was recycled and sold for use (or used by the claimant) prior to 30 June 2006. 3 The additional benefit is separate from categories 1 to 9. All category 5 and 6 claimants will be eligible to claim the additional benefit. (See the Regulatory Amendments section below.) |
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In establishing the Product Stewardship for Oil Programme, transitional assistance funding of $34.5 million over seven years (2001—2007) was allocated to stimulate the uptake of environmentally sustainable management and re-refining of waste oil and its reuse. The funding complements the levy/benefit arrangements and is an interim measure to engender change that will ensure the long-term viability of Australia's oil recycling industry.
Legislative basis of the programme
The programme is underpinned by a package of legislation and associated Regulations.
- The Product Stewardship (Oil) Act 2000 is the primary piece of legislation that establishes the general framework and benefit entitlements. The policy settings for the stewardship arrangements are established and governed by the Minister for the Environment and Water Resources. The Act also establishes the Oil Stewardship Advisory Council (see Table 2).
- The Product Stewardship (Oil) Regulations 2000 prescribe the product stewardship benefit rates.
- The Excise Tariff Amendment (Product Stewardship for Waste Oil) Act 2000 and the Customs Tariff Amendment (Product Stewardship for Waste Oil) Act 2000 and associated Regulations establish the product stewardship levy.
- The Product Stewardship (Oil) (Consequential Amendments) Act 2000 contributes to the establishment of the levy and the general administrative provisions in the Product Grants and Benefits Administration Act 2000.
- The Product Grants and Benefits Administration Act 2000 sets out eligibility criteria and establishes the administrative mechanisms used by the Australian Taxation Office to pay benefits to recyclers.
- Transitional assistance administration, including general running costs of the Product Stewardship for Oil Programme and general grant funding, is managed under the Appropriation (Supplementary Measures) Act (No. 2) 1999.
Regulatory amendments to the product stewardship benefits
The Product Stewardship (Oil) Regulations 2000 were amended in December 2006 to increase the rate of additional benefit for categories 5 and 6. The extra benefit will ensure that the oil recycling industry has time to adapt to changes arising from the Australian Government's Fuel Excise Reform. The definitions of category 3 (diesel) and category 4 (diesel extender) were also changed to make it clear that these products must comply with the Fuel Standard (Automotive Diesel) Determination 2001 in order to be eligible for product stewardship benefits.
In 2006—07 the Australian Government announced an extra $10.6 million over three years for the additional product stewardship benefits for categories 5 and 6. All category 5 and 6 claimants are eligible to claim the benefit. Eligible recyclers received an extra 10.057 cents per litre from 1 July 2006 to 30 June 2007, and will receive 6.7 cents per litre from 1 July 2007 to 30 June 2008 and 3.3 cents per litre from 1 July 2008 to 30 June 2009. The additional benefits will cease after 30 June 2009.
Oil Stewardship Advisory Council
The Oil Stewardship Advisory Council provides advice to the Minister for the Environment and Water Resources on the product stewardship mechanisms and their operation, on the oil recycling and oil production industries and on markets for recycled used oil products. Part 3 of the Product Stewardship (Oil) Act 2000 establishes the council. Members are drawn from a range of backgrounds so that the oil producing and recycling industries, state and local governments, consumers, and other non-government organisations can contribute to formulating advice on the Product Stewardship for Oil Programme. The Department of the Environment and Water Resources and the Commissioner of Taxation represent the Australian Government.
| Member | Representing |
|---|---|
| Mr Mike Williamson | Chair |
| Mr Rory Collins | Commissioner of Taxation |
| Ms Lynden Ayliffe | Department of the Environment and Water Resources |
| Mr Paul Barrett | Australian Institute of Petroleum |
| Mr Bob Pullinger | Australian Oil Recyclers Association |
| Mr Gary O'Connor | Environment Protection and Heritage Council |
| Mr Mark Borlace | Royal Automobile Association of South Australia |
| Mr Paul Howlett | Waste Management Association of Australia |
| Mr Harold Grundell | Additional member (oil recycler) |
| Mr Fred Wren | Additional member (oil recycler) |
The council met in Canberra on 6 June 2007.
Financial information
This section reports on the financial arrangements for the Product Stewardship for Oil Programme for the period 1 July 2006 to 30 June 2007, including levy collections and benefit payments. Transitional assistance expenditure is reported under the Transitional Assistance Grants Programme.
General operation
The Department of the Environment and Water Resources, the Australian Taxation Office and the Australian Customs Service continued to work together to ensure that the programme is simple to administer and understand. Administration of the programme is progressing well. There were seven applications for registration during 2006—07: one under category 4, one under category 5 and five under category 8. There were 78 recyclers registered for benefits, and 48 active recyclers, as at 30 June 2007.
The Australian Taxation Office audit programme from previous years continued, with two audits finalised in 2006—07.
Information on registering for benefit payments can be obtained from the Australian Taxation Office fuel schemes website at www.ato.gov.au/businesses .
Product stewardship levy
In 2006—07 total revenue collected from the product stewardship levy was $25.2 million, comprising $19.3 million in excise collection on domestic production and $5.9 million in customs duty on imported oils. An amount of $1.9 million was paid back to clients in the form of drawbacks (for export) and refunds, bringing the balance of revenue from the levy to $23.3 million.
Levy collections are recorded against a number of categories based on the type of oil, and customs duty is recorded under international customs classifications. Tables 3 and 4 show excise and customs tariff collections for 2006—07 by category.
| Item number | Category | Levy collected |
|---|---|---|
| 15.1 | Petroleum based oils (including lubricant/fluid/oil/products) and their synthetic equivalents but not greases | $18,176, 763 |
| 15.2 | Petroleum based oils (including lubricant/fluid/oil/products) and their synthetic equivalents, recycled for use as oils (including lubricant/fluid/oil products) but not greases | $512,314 |
| 15.3 | Petroleum based greases and their synthetic equivalents | $285,163 |
| 15A | Lubricant base oils | $299,801 |
| 15B | Lubricant base oils (recycled) | $11,009 |
| 15C | Petroleum based greases and their synthetic equivalents | $4,700 |
| Total | $19,289,750 | |
| Note: 15A, 15B and 15C relate to old codes which were changed in July 2006. Total amount may differ slightly from the sum of the components due to rounding. | ||
| Item number | Category | Levy collected |
|---|---|---|
| 27101991 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | $3,386,813 |
| 27101992 | Petroleum based greases | $440,038 |
| 27109191 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | $17,691 |
| 27109192 | Petroleum based greases | $439 |
| 27109991 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | $57,629 |
| 27109992 | Petroleum based greases | $30,192 |
| 34031110 | Preparations for the treatment of textiles, containing petroleum oils, solid | $5,712 |
| 34031190 | Preparations for the treatment of textiles, containing petroleum oils, liquid | $4,970 |
| 34031910 | Other preparations (for example, cutting oil, anti-corrosion) containing petroleum oils, solid | $42,528 |
| 34031990 | Other preparations (for example, cutting oil, anti-corrosion) containing petroleum oils, solid | $419,482 |
| 34039110 | Preparations for the treatment of textiles, containing petroleum oils, solid | $7,388 |
| 34039190 | Preparations for the treatment of textiles, not containing petroleum oils, solid | $17,379 |
| 34039910 | Other preparations (for example, cutting oil, anti-corrosion) not containing petroleum oils, solid | $108,475 |
| 34039990 | Other preparations (for example, cutting oil, anti-corrosion) not containing petroleum oils, liquid | $336,357 |
| 38112110 | Additives for lubricating oil, containing petroleum oils, solid | $81,823 |
| 38112190 | Additives for lubricating oil, containing petroleum oils, liquid | $831,216 |
| 38190000 | Hydraulic brake fluids | $69,484 |
| Total | $5,857,616 |
Product stewardship benefits
A total of $31.9 million was paid as product stewardship benefits in 2006—07, with $30.7 million paid to recyclers for recycling used oil. This is an increase of $16.7 million in benefits for recycling compared to 2005—06 and is attributable to the introduction of the additional benefit for categories 5 and 6.
The volume of oil on which benefits were paid in 2006—07 was 219 million litres, compared to 211 million litres in 2005—06. Figure 1 shows the annual volume of used oil recycled since the programme began. Industry estimates that 150—165 million litres of oil were being recycled annually before the Product Stewardship for Oil Programme began in 2001.
Figure 1: Annual volume of oil recycled since the Product Stewardship for Oil Programme began
Note: The pre-PSO programme value is an industry estimate. Programme benefits commenced in January 2001, therefore the 2000—01 value was extrapolated from only six months data.
Figure 2 shows the annual volume of used oil claimed in each category since the programme began. Table 5 provides a breakdown by product category for 2006—07, indicating volumes recycled and benefit payments.
The volume of used oil claimed in category 1 in 2006—07 decreased slightly, after increasing gradually since the programme began. The volume claimed in category5 has grown steadily since the programme began while the volume in category 6 increased slightly after a two-year decline. The sharp decline in the volume of category 3 is attributable to the changes to the definition of category 3 and the additional benefit for categories 5 and 6. It is likely that these changes have led to recycled oil previously claimed under category 3 now being claimed under categories 5 or 6.
Note: Categories 2 and 4 reported volumes are too small to chart. Categories 8 and 9 including the additional benefit do not contribute to the overall volume of used oil recycled. Programme benefits commenced in January 2001, therefore the 2000—01 value was extrapolated from only six months data.
| Category | Benefit payments | Litres | |
|---|---|---|---|
| 1. | Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the specified criteria | $3,962,531 | 7,925,063 |
| 2. | Other re-refined base oils (for example, chain bar oil) | 0 | 0 |
| 3. | Diesel fuels that comply with the Fuel Standard (Automotive Diesel) Determination 2001, as in force from time to time | $202,958 | 2,899,404 |
| 4. | Diesel extenders: (a) that are filtered, de-watered and de-mineralised (b) that, if combined with diesel fuels, would produce a combined fuel that complies with the determination mentioned in item 3 |
0 | 0 |
| 5. | High grade industrial burning oils (filtered, de-watered and de-mineralised) | $6,567,543 | 131,350.851 |
| 6. | Low grade industrial burning oils (filtered and de-watered) | $2,319,727 | 77,324,219 |
| 7. | Industrial process oils and lubricants, including hydraulic and transformer oils (re-processed or filtered, but not re-refined) | 0 | 0 |
| 8. | Gazetted oil consumed in Australia for a gazetted use 1 | $1,174,949 | 21,562,663 |
| 9. | Recycled oil mentioned in item 5 or 6 that has been blended with a petroleum product that meets the criteria mentioned in schedule 2 of the Regulations of the Act 1 | $4,593 | 48,060 |
| Additional benefit 1 July 2006 to 30 June 2007 2 | $17,695,514 | 175,952,212 | |
| Amount of used oil recycled (excludes categories 8 & 9 and the additional benefit) | 219,499,537 | ||
| Total | $31,927,815 | 417,062,472 | |
| Notes: 1 Benefits paid under categories 8 and 9 including the additional benefit do not contribute to the overall volume of used oil recycled. 2 The additional benefit is separate from categories 1 to 9. All category 5 and 6 claimants will be eligible to claim the additional benefit. The additional benefit is the only benefit payment that may be claimed if another category of benefit payment (categories 5 or 6 only) has been claimed for the same recycled used oil. |
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Transitional Assistance Grants Programme
The last round of transitional assistance grants was conducted in 2006—07 with the minister approving $0.91 million for 24 projects. In all, $34.5 million was provided from July 2000 to June 2007 for grants, projects, consultancies and partnerships for the provision of goods and services.
One aim of the grants programme was to remove structural barriers to oil recycling, such as lack of adequate infrastructure or technology. Funding also covered the operating costs of the Product Stewardship for Oil Programme, including the relevant running costs of the department, the Australian Taxation Office and the Oil Stewardship Advisory Council.
Grants were paid for the following:
- used oil collection infrastructure
- raising public awareness
- developing technology
- remote and Indigenous projects
- developing markets for used oil products.
Collection infrastructure
From 2001 to 2007 transitional assistance grants of $9.8 million helped to establish more than 950 waste oil collection units across Australia.
In 2006—07 more than $0.8 million was approved for used oil collection infrastructure, adding 40 waste oil collection units to the national network. Another grant will provide six units in the Lower Gwydir Valley.
The location of waste oil collection units is shown at www.oilrecycling.gov.au .
Raising public awareness
The department updates its public online database of waste oil collection facilities to ensure accurate information continues to be available to the Australian public. Grants recipients are also required to provide information to the public through websites and signage on waste oil collection units.
Technology
Over the life of the transitional assistance grants programme, more than $4.1 million has been provided for technology projects including:
- Wren Oil's processing plant that will enable distillation residue from recycled oil to be used in road bitumen
- the Australian Institute of Petroleum's nationwide infrastructure project for the collection and recycling of household plastic oil containers
- Transpacific Industries' hydrogenation plant in the Hunter Valley to re-refine used oil.
Remote and Indigenous projects
Since November 2004, when the programme was extended to remote and Indigenous communities, more than $1 million has been provided for projects in these communities. The projects contribute to improved environmental health and Indigenous employment opportunities. They include used oil and integrated waste management projects on the Anangu Pitjantjatjara lands in South Australia and on Warabar Island in the Torres Strait.
In 2006—07 $0.16 million was provided for waste oil collection units in the Barkley Tablelands and a bulk storage facility at Alice Springs, in the Northern Territory.
Markets
In 2006—07 the programme provided more than $100,000 to the Australian Oil Recyclers Association to develop standards for burner oil to meet the requirements of both manufacturers and users and to develop a website that will make the standards available to industry. The aim is to facilitate trade in one of the products made from used oil.
Operating expenses
The department's 2006—07 operating costs for the Product Stewardship for Oil Programme, including staff salaries and allowances, consultancies, advertising and other related expenses, were $773, 000.
The Australian Taxation Office's operating costs for the programme were $289,800. Services provided by the Australian Taxation Office include processing registrations and claims for benefits, compliance monitoring and client liaison.
The department provided the Australian Taxation Office with an additional $50,000 from transitional assistance grants funding to cover costs associated with implementing the regulatory changes developed this year.
The Oil Stewardship Advisory Council's operating costs were $36,400. This includes all costs related to the activities of the council including venue hire, sitting fees, air fares and other travel costs and allowances.
Monitoring and evaluation
In February 2007 the department commissioned a review of the Product Stewardship for Oil Programme's effectiveness following changes to excise arrangements for recycled oil. The review is expected to be completed early in 2007—08.
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