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Key departmental publications, e.g. annual reports, budget papers and program guidelines are available in our online archive.

Much of the material listed on these archived web pages has been superseded, or served a particular purpose at a particular time. It may contain references to activities or policies that have no current application. Many archived documents may link to web pages that have moved or no longer exist, or may refer to other documents that are no longer available.

Department of the Environment and Heritage Annual Report 2002-03

Department of the Environment and Heritage, 2003
ISSN 1441 9335

Reports - Operation of the Product Stewardship Arrangements for Waste Oil 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 Arrangements for Waste Oil from 1 July 2002 until 30 June 2003.

Overview

The Product Stewardship Arrangements for Waste Oil (PSO) came into effect on 1 January 2001, fulfilling the Government's May 1999 commitment outlined in the Measures for a Better Environment package. The PSO has the following objectives:

Further information is available on the Department's web site at www.oilrecycling.gov.au/

Key features of the Product Stewardship Arrangements for Waste Oil

The PSO consists of three elements: the product stewardship levy on oils; product stewardship benefits; and transitional assistance.

The product stewardship levy was introduced on 1 January 2001 at 5 cents per litre and was subject to the same indexation arrangements as other excises (i.e. indexation twice a year in line with movements in the Consumer Price Index). However, in line with changes to the indexation on fuels the automatic indexation of the levy was removed in November 2002 and the rate fixed at 5.449 cents per litre. The levy applies to both domestic and imported oils and is paid by oil producers and importers. Under the levy arrangements, no oil is levied twice, no 'eligible' lubricant escapes the levy, imported and domestic oils are treated equitably (to the extent possible), 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.

Product stewardship benefits are paid to recyclers as volume-based incentives to encourage an increase in oil recycling, with improved environmental outcomes. Eligibility requirements for PSO benefits are set out in the Product Stewardship (Oil) Act, the Product Grants and Benefits Administration Act 2000, and the associated Regulations. Benefits are provided at different rates, depending on the type of product produced - the lowest benefit being provided for basic burner fuels, and the highest for full recycling into a lubricant base oil. The 2002-03 benefit rates are set out in Table 1. A review of the Product Stewardship (Oil) Act and associated benefits is required by the legislation in 2004.

Sourced from the Product Stewardship (Oil) Regulations 2000 (as amended December 2000)

Table 1: 2002-03 product stewardship benefit rates
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 *
50
2: Other re-refined base oils (e.g. chain bar oil)
10
3: Diesel fuels to which the Excise Tariff Act 1921 applies
7
4: Diesel extenders (filtered, de-watered and de-mineralised)
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
* 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 product.

In establishing the PSO, transitional assistance funding of $60 million was allocated over four years commencing on 1 July 2000. The funding was provided 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 the oil recycling industry. (See heading Transitional Assistance)

Legislative basis of the Product Stewardship Arrangements for Waste Oil

The PSO is underpinned by a package of legislation and associated Regulations.

Transitional assistance administration, including general running costs of the PSO and general grant funding, is managed under the Appropriation (Supplementary Measures) Act (No. 2) 1999.

On 27 March 2003, the Minister for the Environment and Heritage introduced the Product Stewardship (Oil) Legislation Amendment Bill (No. 1) 2003 into Parliament. The Bill contains proposed amendments to the Product Stewardship (Oil) Act, with consequential amendments to the Product Grants and Benefits Administration Act which, if passed by Parliament, will provide an exemption from the product stewardship levy for certain users and uses of oils that are outside the policy intent of the PSO.

Financial information

This section reports on the financial arrangements for the PSO for the period 1 July 2002 to 30 June 2003, including levy collections and benefit payments. Information on transitional assistance expenditure is set out under the heading Transitional Assistance.

General operation

The Department, the Australian Taxation Office and Australian Customs Service continue to work together to ensure that the PSO is simple to administer and understand. The general administration of the PSO is progressing well, with five applications for registration during 2002-03, bringing to 42 the number of recyclers registered for benefits as at 30 June 2003. This suggests that the majority of recyclers were identified in the first year of the scheme.

The Australian Taxation Office audit program from previous years continued, with a further four companies being subjected to an audit. No significant problems or irregularities were found apart from one case of poor record keeping.

Information on registering for benefit payments can be obtained from the Australian Taxation Office web site at www.ato.gov.au.

Product stewardship levy

In 2002-03 total revenue collected from the product stewardship levy was $28.4 million. This comprised $25 million in excise collection on domestic production and $3.4 million in customs duty on imported oils. An amount of $2.3 million was paid back to clients in the form of drawbacks, where the oils were exported overseas, bringing the balance of revenue from the levy to $26.1 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 2 and 3 show excise and customs tariff collections for 2002-03 by category.

Table 2: Product stewardship levy collection (excise) by category 2002-03
Item no.
Category
$
1501 Lubricant base oil
6 349 256
1502 Prepared lubricant additives
1 063 473
1503 Engine lubricant
9 243 916
1504 Gear, transmission, transformer and heat transfer oils
3 896 400
1505 Hydraulic and brake fluids
2 185 357
1506 Metal working and process oils
1 705 877
1513 Petroleum based greases and synthetic equivalents
560 287
 
Total
25 004 567
Table 3: Product stewardship levy collection (customs tariff) by category 2002-03
Item no. Category
$
27101991 Petroleum based oils including lubricants, hydraulic fluids and transformer oils
1 442 967
27101992 Petroleum based greases
118 000
27109191 Petroleum based oils including lubricants, hydraulic fluids and transformer oils
63 841
27109192 Petroleum based greases
1 850
27109991 Petroleum based oils including lubricants, hydraulic fluids and transformer oils
100 057
27109992 Petroleum based greases
17 469
34031110 Preparations for the treatment of textiles, containing petroleum oils, solid
2 114
34031190 Preparations for the treatment of textiles, containing petroleum oils, liquid
19 403
34031910 Other preparations (e.g. cutting oil, anti-corrosion) containing petroleum oils, solid
36 974
34031990 Other preparations (e.g. cutting oil, anti-corrosion) containing petroleum oils, solid
209 157
34039110 Preparations for the treatment of textiles, containing petroleum oils, solid
14 183
34039190 Preparations for the treatment of textiles, not containing petroleum oils, solid
35 200
34039910 Other preparations (e.g. cutting oil, anti-corrosion) not containing petroleum oils, solid
90 107
34039990 Other preparations (e.g. cutting oil, anti-corrosion) not containing petroleum oils, liquid
247 498
38112110 Additives for lubricating oil, containing petroleum oils, solid
7 763
38112190 Additives for lubricating oil, containing petroleum oils, liquid
940 082
38190000 Hydraulic brake fluids
39 331
Item 50 & 50(1)(b) Customs Duty Concession Item that could be used with Tariff Item 38190000
6 725
 
Total
3 392 721

Product stewardship benefits

A total of $9.67 million was paid as product stewardship benefits to recyclers in 2002-03, an increase of approximately 17 per cent from 2001-02. This is largely attributable to payments being made under Category 1 entitlements for the first time. The volume of oil on which benefits were paid in 2002-03 was 193.87 million litres, compared to 194.57 million litres in 2001-02. Industry estimates indicated that 150 to 165 million litres of oil was being recycled prior to implementation of the PSO. Several more years of data are required to establish any trend in recycling levels.

Figure 2 shows product stewardship benefit payments by month, and Table 4 provides a breakdown of payments by product category (from the Product Stewardship (Oil) Regulations 2000).

Figure 2: Product stewardship benefit payments by month for 2000-01, 2001-02 and 2002-03

Figure 2: Product stewardship benefit payments by month for 2000-01, 2001-02 and 2002-03


Table 4: Product stewardship benefit payments by category 2002-03
Category
$
litres
1. Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) which meet the specified criteria
1 520 087
3 040 175
2. Other re-refined base oils
16 326
163 264
3. Diesel fuels to which the Excise Tariff Act 1921 applies
1 828 772
26 125 317
4. Diesel extenders (filtered, de-watered and de-mineralised)
Nil
Nil
5. High grade industrial burning oils (filtered, de-watered and de-mineralised)
3 414 332
68 286 634
6. Low grade industrial burning oils (filtered and de-watered)
2 887 582
96 252 740
Total
9 667 099
193 868 130

Exemptions from the product stewardship levy 2002-03

In response to issues identified by industry the Government has introduced a Bill into Parliament to modify the Product Stewardship (Oil) Act to exempt certain products from the product stewardship levy.

The Product Stewardship (Oil) Legislation Amendment Bill (No. 1) 2003 was introduced into Parliament by the Minister for the Environment and Heritage on 27 March 2003. The Bill proposes an effective exemption from the levy for certain 'dual use' oils that do not create a recyclable waste oil stream and are considered to pose a low level of risk to the environment. Oils such as those used in the manufacture of printing inks have already been identified as suitable for exemption.

Under the Bill, a new category of benefit, to be known as Category 8, would be created and paid, at a rate equivalent to the levy, to eligible claimants. The new benefit would be made available from the date of introduction of the Bill.

This mechanism would allow the Government to provide exemptions for oils that are outside the policy intent of the PSO both now and in the future. This follows the establishment of exemptions for some single-use oils (food grade white oil, polyglycol brake fluids and aromatic process oils) under the Excise Tariff Amendment Act (No. 1) 2002 and the Customs Tariff Amendment Act (No. 2) 2002.

Indexation of the product stewardship levy

When the levy was established it was agreed that, for the sake of consistency, it would be subject to the same indexation arrangements as other excises (i.e. indexation twice a year in line with movements in the Consumer Price Index). However, in line with changes to the indexation on fuels the Prime Minister, Treasurer and the Minister for Justice and Customs agreed in November 2002 to abolish the automatic indexation of the levy and it will now remain at 5.449 cents per litre.

Oil Stewardship Advisory Council

The Oil Stewardship Advisory Council provides advice to the Minister on the product stewardship mechanisms and their operation, the oil recycling and oil production industries and markets.

Part 3 of the Product Stewardship (Oil) Act establishes the council. Members are drawn from a range of backgrounds so that the oil producing and recycling industries, state and local government, consumers and other non-government interests are appropriately represented and can contribute to formulating advice on the PSO. The Environment and Heritage portfolio and the Commissioner of Taxation represent the Commonwealth.

Several members retired during the course of the year due to their appointments lapsing, and were either replaced or the membership position lapsed due to the position no longer being required. These members were Mr David Braham, Mr Doug Hagen and Mr Andrew Poole. The membership of the council as of 30 June 2003 is as follows:

Member
Representing
Mr Mike Williamson (Chair) Independent Chair
Mr Peter Holt Commissioner of Taxation
Mr Peter Burnett Environment and Heritage portfolio
Mr Ewen McPherson 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
Ms Catherine Halliday Additional member (community representative)
Mr Harold Grundell Additional member (oil recycler)
Mr Martin Kirwan Additional member (oil recycler)
Mr Fred Wren Additional member (oil recycler)

The council held three meetings in 2002-03: in Sydney on 15 October 2002, in Canberra on 11 February 2003 and 26 June 2003.

Transitional assistance

As part of Measures for a Better Environment, the Government allocated $60 million in transitional assistance to stimulate the uptake of environmentally sustainable management and re-refining of waste oil and its reuse for four years, 2000 - 01 to 2003 - 04. In the 2003-04 Budget the Government, in collaboration with the Australian Democrats, announced that transitional assistance funding would be reduced from $60 million to $34.5 million and extended to 2006-07. The balance of the original funding was reallocated to new urban environmental initiatives under the Sustainable Cities package. The experience of the oil product stewardship scheme indicates that the scheme's objectives can be met within the revised transitional assistance allocation. The remaining funds have been re-phased as follows:

Table 5: Transitional assistance funding allocations ($m)
 
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Initial allocation
15.00
15.00
15.00
15.00
-
-
-
Revised allocation
1.33
2.58
10.00
6.40
5.50
4.20
4.47

Transitional assistance is intended to provide funding for projects that remove structural barriers to oil recycling, such as lack of adequate infrastructure or technology. Additionally, the funds are used to cover the operating costs of the PSO, including the relevant running costs of the Department, the Australian Taxation Office and the Oil Stewardship Advisory Council, and to underwrite the stewardship benefits in the event of revenue shortfalls.

Priority areas identified for funding include:

The transitional assistance funds may be provided through specific grants or projects, consultancies and/or strategic partnerships for the provision of goods and services.

Projects and grants 2002-03

Recognising that the lack of adequate waste oil collection facilities, particularly in rural Australia, was a major barrier to the collection and recycling of greater amounts of waste oil, the Minister for the Environment and Heritage approved the establishment of the Local Government Waste Oil Collection Infrastructure Small Grants Program. Since the inception of the program in 2001, 244 grants have been awarded to 282 local government organisations, totalling just over $6 million. The grants are for the purchase and installation of waste oil collection facilities that meet relevant environmental regulations. Many of these facilities have been completed and are operational. A list of the grant recipients is at www.oilrecycling.gov.au/

The Government continued to work with the states and territories, with the aim of completing the waste oil collection infrastructure network over 2003-04 and 2004-05. In 2002-03, $550 000 was awarded to EcoRecycle Victoria, $1 489 400 to the Queensland Environmental Protection Agency and $1 633 547 to the Western Australian Local Government Association to enable a co-ordinated approach to the purchase and installation of waste oil facilities by local government in those states.

Other grants awarded in 2002-03 were as follows:

Proponent: Warnken Industrial and Social Ecology
Title: Characterisation and assessment of waste oil utilisation as a fuel for heating in the hydroponics and greenhouse industries
Grant: $31 900
Description: Investigate the current use of waste oil as a heating fuel in the greenhouse and hydroponic industries and potential environmental and/or health issues.
Proponent: Bennett Brooke Catchment Group
Title: Malaga industrial survey
Grant: $9075
Description: Survey 110 small to medium size automotive enterprises in the Bennett Brook Catchment Area (north-east Perth) to determine how difficult it is for such businesses to responsibly dispose of their waste oil.
Proponent: Loongana Lime
Title: Pyrolysis pilot plant
Grant: $30 000
Description: Develop and trial a processing plant for grease generated at remote mine sites.
Proponent: Dubbo City Council
Title: Local treatment of oily water
Grant: $6250
Description: Enable the separation of oil from oil-contaminated water. The collected waste oil can then be more economically transported to a metropolitan processing plant.
Proponent: Auto Parts Recycling Association of Australia
Title: Improving waste oil outcomes in the automotive dismantling and parts recycling industry
Grant: $48 500
Description: Increase awareness of waste oil management issues in the automotive dismantling industry, which processes 500 000 end-of-life vehicles a year, and encourage appropriate responses at the individual business level.
Proponent: Alice Springs Town Centre
Title: Waste oil recovery system Alice Springs region
Grant: $105 050
Description: Conduct an oil audit, consolidate research into existing waste oil, establish a waste oil recovery and consolidation facility in Alice Springs, conduct a pilot program to establish logistical requirements and finalise research on waste oil recovery from remote communities.
Proponent: Kangaroo Island Council
Title: Multi-use waste oil collection facilities on Kangaroo Island
Grant: $34 100
Description: Collect and transport waste oil to the mainland for processing.

Operating expenses

The Department's operating costs for 2002-03 were $703 404. This covers all costs associated with running the PSO, including staff salaries and allowances, consultancies, advertising (e.g. for tenders) and other related expenses.

The Australian Taxation Office's operating costs were $465 300. This includes the costs of processing registrations and claims for benefits, compliance monitoring and client liaison.

The Oil Stewardship Advisory Council's operating costs were $62 161. This includes all costs related to the activities of the 14-member advisory council including venue hire, sitting fees, air fares and other travel costs and allowances.