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Department of the Environment and Heritage annual report 2005–06

Volume two
Department of the Environment and Heritage, 2006
ISSN 1441 9335

Legislation annual reports 2005-06 (continued)

Operation of the Fuel Quality Standards Act 2000

This annual report is prepared in accordance with section 71 of the Fuel Quality Standards Act 2000. It covers the operation of the Act from 1 July 2005 to 30 June 2006.

Purpose of the Act

The purpose of the Act is to regulate the quality of fuel in Australia in order to:

The Fuel Quality Standards Regulations 2001 cover the regulation of fuel and fuel additives, the operations of the Fuel Standards Consultative Committee, the publication of notices relating to entries in the Register of Prohibited Fuel Additives, enforcement, and record keeping and reporting obligations.

Regulation of fuel quality

Petrol and diesel—environmental standards

Specific fuel quality standards have been set as Fuel Standard Determinations for diesel and petrol. These determinations were implemented on 1 January 2002, and include environmental and engine operability standards for a range of parameters. The limits for a number of key parameters regulated under the petrol and diesel standards were either introduced or tightened from 1 January 2006 including:

Biodiesel

The limit for sulfur levels in biodiesel under the Fuel Standard (Biodiesel) Determination 2003 was reduced to 10 milligrams per kilogram to take effect on 1 February 2006. Because biodiesel is relatively low in sulfur, the industry had few concerns about early introduction of the lower standard.

Ethanol labelling

The Fuel Quality Information Standard (Ethanol) Determination 2003 was amended to replace the existing E10 fuel label (petrol with 10 per cent ethanol) with more simplified labelling requirements. These new requirements came into effect in January 2006.

Future fuel standards—research and consultation

Phase 2 operability standards for petrol and diesel

Operability standards are standards enabling more effective operation of engines. The Department of Industry, Tourism and Resources is managing the development of phase 2 operability standards.

In June 2006 consultations began with industry on draft guidelines for managing the following operability parameters:

The draft guidelines were prepared by the Australian Institute of Petroleum in consultation with the Federal Chamber of Automotive Industries. As part of this process, the Department of Industry, Tourism and Resources completed a regulatory impact statement for the phase 2 operability standards for diesel and petrol in 2005, and commissioned Hawkless Consulting Pty Ltd to conduct a study on how to manage diesel acidity, following recommendations made in the regulatory impact statement. The draft guidelines are currently being reviewed.

Olefin content of petrol

A discussion paper relating to the future management of olefins in petrol was released for public comment in June 2005. The paper was prepared in response to a request by the Australian Institute of Petroleum for a degree of flexibility in setting olefins specifications. The paper examined the current management trends for olefins and considered options for future management. The Australian Institute of Petroleum submitted that the limit of 18 per cent for all grades, which came into effect on 1 January 2005, would put pressure on refineries in meeting the standard.

Submissions failed to adequately address the costs and benefits of the different options presented. In response, the department commissioned Economic Associates to undertake a cost-benefit analysis of the related options. The Fuel Standards Consultative Committee will consider their analysis and provide advice to the minister in September 2006.

Diesohol

On 27 May 2004 the Department of the Environment and Heritage released a discussion paper for public comment on setting a fuel quality standard for diesohol. Diesohol is defined in the Fuel Quality Standards Regulations 2001 as a blend primarily comprising diesel and an alcohol. Also known as E-diesel, M-diesel and Oxy-diesel, the fuel is used in compression ignition engines as an alternative to diesel fuel. Diesohol is not subject to any formal or accepted industry quality standards, either in Australia or internationally. Work on management options for diesohol will continue in 2006–07.

Ethanol

The department released a paper for public comment in July 2005 stating the Australian Government’s position on an ethanol standard. The government is in favour of setting a standard for ethanol to ensure that the environmental and vehicle operability objectives of the Act are met, and to assist in building consumer confidence in the fuel by ensuring a high quality is available.

Before setting a standard, the department is awaiting developments in the United States, where their standard setting body, the American Society for Testing and Materials, is developing a test method for measuring sulfates in ethanol and is considering setting a limit on sulfates in ethanol–petrol blends. The department expects to finalise the ethanol standard in 2006–07.

Testing the operation of Australian vehicles on ethanol blend fuels

The Biofuels Taskforce report was released on 22 September 2005. As part of the Australian Government’s response to the report, the department has engaged Orbital Australia to test vehicles in the Australian market to assess how they operate using E5 (fuel with 5 per cent ethanol and 95 per cent petrol) and E10 (fuel with 10 per cent ethanol and 90 per cent petrol) ethanol blends. A selection of vehicles will be tested on E5 and E10 fuel blends. The study will focus on vehicle operability and performance, materials compatibility of engine components and engine durability issues. This study will assess the suitability of E5 and E10 blends for the existing Australian vehicle fleet and produce reliable information on the suitability of these blends for wider use. Results will also inform decision-making on whether E5 fuel blends may be sold unlabelled.

Setting standards for biodiesel blends

Standards already exist under the Act for 100 per cent biodiesel (B100) and for petroleum diesel, but not for blends of the two. Blends have proliferated on the Australian market and presently include such variations as B5, B20 and B49. The department has let a tender to assess technical parameters and issues associated with setting a fuel quality standard for B20 (blends containing 20 per cent biodiesel and 80 per cent diesel), and to identify appropriate labelling arrangements for B20 and B100. The department will use this information to prepare a discussion paper for public comment. The setting of standards for biodiesel blends also forms part of the government’s response to the Biofuels Taskforce report.

Statutory review of the Fuel Quality Standards Act 2000—implementing recommendations

The statutory review of the Act was completed in April 2005. This year the department began drafting a proposal to implement the review’s recommendations. The proposal will inform the legislative amendments to the Act, and will address a number of other issues that have arisen independently of the review through the day-to-day administration of the Act.

The public consultation process is expected to commence early in 2007 with the necessary amendments to the Act finalised in late 2007. A number of the issues to be addressed, however, raise complex legal questions which need to be resolved before a course of action can be determined.

Fuel Standards Consultative Committee

Section 24 of the Act establishes a Fuel Standards Consultative Committee as a formal consultation mechanism. The committee is required to include one representative from each state and territory, and the Australian Government. It must also include at least one person representing fuel producers, one representing a non-government body with an interest in the protection of the environment and one representing the interests of consumers. The minister may also appoint other members to the committee, which to date includes representatives from the motor vehicle manufacturing industry, independent fuel importers and suppliers, the alternative and renewable fuels industry, and the trucking industry.

Table 1 lists members of the committee during 2005−06.

Under section 24A the minister must consult the committee before:

The committee provides written recommendations to the minister on the above matters. In relation to granting approvals under section 13 (that allows for specific variations to the fuel standards for specified periods), the committee made recommendations for 14 new approvals (see Table 2).

Monitoring and compliance

A monitoring programme continued during 2005–06 to test fuel industry compliance with the fuel quality standards. Fuel samples were taken in all states and territories of all grades of fuel covered by standards. The monitoring programme aims to take representative samples in each of the fuel markets around Australia as well as responding to complaints made by consumers about fuel.

The Australian Government runs a fuel sampling programme to monitor the quality of fuels sold in Australia. Fuels are sampled throughout the fuel supply chain, including at service station forecourts.

The Australian Government runs a fuel sampling programme to monitor the quality of fuels sold in Australia. Fuels are sampled throughout the fuel supply chain, including at service station forecourts. Photo: Alastair Betts

Fuel sampling is undertaken at distribution terminals, depots, service stations and other outlets. Samples are tested for compliance with the standards at an independent laboratory accredited by the National Association of Testing Authorities, Australia. Testing methods are accredited to international standards.

This year the department established its own fuel sampling capability resulting in a record number of samples being taken. Inspectors took 1 054 petrol and diesel samples from approximately 530 sites nationwide. A total of 160 compliance incident reports were received. In comparison, 869 samples were taken during 2004–05 from 427 sites, and 120 compliance incident reports were received.

Test results indicate a high level of compliance with the fuel standards. Where non-compliance with a standard is detected, further investigation is undertaken with a view to prosecution where an offence can reasonably be proven. Two cases are before the Director of Public Prosecutions.

Procedures for sampling liquefied petroleum gas (LPG) in accordance with the requirements of the Act were implemented.
As part of the government’s response to the Biofuels Taskforce report, additional funding has been made available over four years from 2006–07 to increase fuel quality compliance inspections to ensure ethanol blends meet fuel quality standards. Increased inspections will help detect any fuel adulteration, increasing consumer confidence and furthering the current cooperative arrangements between the oil, automotive and ethanol industries. Extra inspections will also help prevent poor quality fuel getting into the marketplace and having negative impacts on vehicle operability and on the environment through increased pollutant emissions. Planning and capacity building is under way to allow for a significant increase in monitoring and compliance activities from 2006–07.

Administrative Appeals Tribunal

The Administrative Appeals Tribunal did not receive any applications under section 70 of the Act for the review of a decision.

Communication with stakeholders

The department produced three issues of the Clean Fuels Bulletin, an electronically distributed newsletter. Officers of the department presented papers at two seminars in Australia and attended two international fuels conferences, one in Belgium and one in China. A major market research project was undertaken to increase understanding of the level of knowledge within the industry of the Act and its requirements.

Table 1: Members of the Fuel Standards Consultative Committee in 2005–06
Member Representing Term(a)
Ms Lynden Ayliffe, Chair Department of the Environment and Heritage From 27 August 2005
Mr John Bortolussi Truck manufacturing industry From 3 February 2004
Dr David Bowman Environmental non-government body From 22 May 2004
Mr James Hurnall Consumers From 3 February 2004
Mr Mike McCullagh Independent fuel producers and importers From 3 February 2004
Mr Scott McDowall Queensland Environmental Protection Agency From 22 May 2004
Mr Paul Barrett Australian Institute of Petroleum From 27 August 2005
Mr Steven Payne Department of Industry, Tourism and Resources From 22 May 2004
Mr David Quinlan Australian Capital Territory Department of Urban Services From 22 May 2004
Mr Nigel Routh New South Wales Department of Environment and Conservation From 22 May 2004
Dr Stephen Schuck Alternative and renewable fuels industry From 3 February 2004
Mr Keith Seyer Vehicle manufacturing industry From 22 May 2004
Mr Kelvyn Steer Tasmanian Department of Arts, Tourism and Environment From 22 May 2004
Mr Fred Tromp Western Australian Department of Environment From 22 May 2004
  South Australian Environment Protection Authority Vacant
Mr Geoff Latimer Environment Protection Authority Victoria From 13 October 2004
Mr Steve Sanderson Northern Territory Department of Infrastructure, Planning and Environment From 20 April 2005
(a) Members are appointed for three years. Unless otherwise stated, members served on the committee for the whole of 2005–06.
Table 2: New approvals granted in 2005−06
Name of approval holder Period of operation Variation approved
Mobil Oil Australia
Shell Company of Australia
BP Australia
Caltex Australia
6 June 2006 –
31 December 2006
Variation of the Fuel Standard (Automotive Diesel) Determination 2001 with respect to viscosity, density and lubricity to allow the supply of ‘wintermix’ diesel. Conditions attached
Department of Transport and Regional Services 6 June 2006 –
31 December 2006
Variation of the Fuel Standard (Automotive Diesel) Determination 2001 with respect to density, distillation and PAH(a)
Shell Company of Australia 30 March 2006 –
31 December 2006
Variation of the Fuel Standard (Automotive Diesel) Determination 2001 with respect to sulfur
Gene Cook Race Engines 30 March 2006 –
31 December 2006
Variation of the Fuel Standard (Petrol) Determination 2001 to permit the supply of petrol with a lead content of greater than 0.005g/L. Conditions attached
Advanced Vehicle Operations Australia 30 March 2006 –
31 December 2006
Variation of the Fuel Standard (Petrol) Determination 2001 to permit the supply of petrol with a lead content of greater than 0.005g/L. Conditions attached
Allica’s Motorcycles 30 March 2006 –
31 December 2006
Variation of the Fuel Standard (Petrol) Determination 2001 to permit the supply of petrol with a lead content of greater than 0.005g/L. Conditions attached
Caltex Australia Petroleum Pty Ltd 1 January 2006 –
31 March 2006
Variation of the Fuel Standard (Petrol) Determination 2001 with respect to benzene content
Caltex Australia Petroleum Pty Ltd 1 January 2006 –
31 March 2006
Variation of the Fuel Standard (Automotive Diesel) Determination 2001 with respect to sulfur content
IOR Energy Pty Ltd 17 October 2005 –
31 December 2011
Variation of the Fuel Standard (Automotive Diesel) Determination 2001
Shell Global Solutions Ltd 17 October 2005 –
1 December 2005
Variation of the Fuel Standard (Petrol) Determination 2001 with respect to MTBE(b) content
ET Racing Fuels and Lubricants Pty Ltd 17 October 2005 –
31 December 2006
Variation of the Fuel Standard (Petrol) Determination 2001 with respect to aromatic content
Department of Transport and Regional Services 17 October 2005 –
31 December 2006
Variation of the Fuel Standard (Automotive Diesel) Determination 2001 with respect to sulfur content
Gaseng Petroleum Ltd 17 October 2005 –
31 August 2006
Variation of the Fuel Standard (Petrol) Determination 2001 with respect to MTBE, induction period, benzene, boiling point, sulfur and lead content
Martini Racing Products Pty Ltd 18 July 2005 –
31 December 2006
Variation of the Fuel Standard (Petrol) Determination 2001 to permit the supply of Martini Motorsport 110 specialist racing fuel

Variation of the aromatics and oxygen parameters
(a) PAH = polycyclic aromatic hydrocarbons
(b) MTBE = methyl tertiary-butyl ether

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