Department of the Environment and Heritage, 2006
ISSN 1441 9335
Legislation annual reports 2005-06 (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 2005 to 30 June 2006.
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.
For more information on oil recycling see www.oilrecycling.gov.au
The 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 oil is levied twice, 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, the levy 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.
Benefit rates do not directly reflect the comparative effort involved 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 significantly more incentive than others. Development of different forms of recycling will result in a diverse range of products and markets for recycled used oil, which in turn will contribute to the long-term sustainability of the used oil recycling industry in Australia. Table 1 shows the 2005–06 benefit rates.
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(a)||
|2.||Other re-refined base oils (for example, chain bar oil)||
|3.||Diesel fuels to which the Excise Tariff Act 1921 applies||
|4.||Diesel extenders (filtered, de-watered and de-mineralised)||
|5.||High grade industrial burning oils (filtered, de-watered and de-mineralised)||
|6.||Low grade industrial burning oils (filtered and de-watered)||
|7.||Industrial process oils and process lubricants, including hydraulic and transformer oils (re-processed or filtered, but not re-refined)||
|8.||Gazetted oil consumed in Australia for a gazetted use||
|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||
|(a) 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).
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.
- Regulatory amendments to the product stewardship benefits during 2005–06
- Oil Stewardship Advisory Council
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 Heritage. The Act also establishes the Oil Stewardship Advisory Council (see Table 2).
- The product stewardship benefit rates are prescribed in the Product Stewardship (Oil) Regulations 2000.
- 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.
This year the Australian Government announced additional funding of $30.1 million over three years, to be provided through the Product Stewardship for Oil Programme, to help industry adjust to the new excise arrangements introduced as part of the government’s Fuel Excise Reform. Eligible recyclers will receive 7.557 cents per litre from 1 July 2006 to 30 June 2007, five cents per litre from 1 July 2007 to 30 June 2008, and 2.5 cents per litre from 1 July 2008 to 30 June 2009. The additional benefits will cease after 30 June 2009. The Regulations were amended by 1 July 2006, in line with the start of the new excise arrangements.
Category 9 ceased on 30 June 2006. Category 9 was introduced to offset an excise change in 2004.
The Oil Stewardship Advisory Council provides advice to the Minister for the Environment and Heritage 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 Heritage and the Commissioner of Taxation represent the Australian Government.
|Mr Mike Williamson||Chairman|
|Mr Rory Collins||Commissioner of Taxation|
|Ms Lynden Ayliffe||Department of the Environment and Heritage|
|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 held two meetings in 2005–06, one in Darwin on 18 October 2005 and the other in Canberra on 20 June 2006.
This section reports on the financial arrangements for the Product Stewardship for Oil Programme for the period 1 July 2005 to 30 June 2006, including levy collections and benefit payments. Information on transitional assistance expenditure is set out under the heading Transitional Assistance Grants Programme.
The department, the Australian Taxation Office and the Australian Customs Service continue to work together to ensure that the programme is simple to administer and understand. The general administration of the programme is progressing well, with seven applications for registration during 2005–06, the majority of which are claimants under category 8. There were 71 recyclers registered for benefits, and 47 active recyclers, as at 30 June 2006.
The Australian Taxation Office’ audit programme from previous years continued, with one audit being finalised during 2005‑06.
Information on registering for benefit payments can be obtained from the Australian Taxation Office fuel schemes website at www.ato.gov.au/businesses.
In 2005–06 total revenue collected from the product stewardship levy was $25.9 million, comprising $21 million in excise collection on domestic production and $4.9 million in customs duty on imported oils. An amount of $1.4 million was paid back to clients in the form of drawbacks (for export) and refunds, bringing the balance of revenue from the levy to $24.5 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 2005–06 by category.
|Item number||Category||Levy collected|
|1501||Lubricant base oil||$4 168 011|
|1502||Prepared lubricant additives||$860 640|
|1503||Engine lubricant||$9 778 660|
|1504||Gear, transmission, transformer and heat transfer oils||$2 948 032|
|1505||Hydraulic and brake fluids||$1 803 313|
|1506||Metal working and process oils||$485 877|
|1507||Lubricant base oils (recycled)||$538 322|
|1508||Prepared lubricant additives (recycled)||0|
|1511||Hydraulic fluids and break fluid||$5 415|
|1512||Metal working process oils||$981|
|1513||Petroleum based greases and synthetic equivalents||$465 598|
|Total||$21 054 848|
|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||$2 745 717|
|27101992||Petroleum based greases||$284 343|
|27109191||Petroleum based oils including lubricants, hydraulic fluids and transformer oils||$13 568|
|27109192||Petroleum based greases||$655|
|27109991||Petroleum based oils including lubricants, hydraulic fluids and transformer oils||$54 185|
|27109992||Petroleum based greases||$2 417|
|34031110||Preparations for the treatment of textiles, containing petroleum oils, solid||$2 979|
|34031190||Preparations for the treatment of textiles, containing petroleum oils, liquid||$3 996|
|34031910||Other preparations (for example, cutting oil, anti-corrosion) containing petroleum oils, solid||$46 928|
|34031990||Other preparations (for example, cutting oil, anti-corrosion) containing petroleum oils, solid||$279 501|
|34039110||Preparations for the treatment of textiles, containing petroleum oils, solid||$8 311|
|34039190||Preparations for the treatment of textiles, not containing petroleum oils, solid||$18 454|
|34039910||Other preparations (for example, cutting oil, anti-corrosion) not containing petroleum oils, solid||$94 271|
|34039990||Other preparations (for example, cutting oil, anti-corrosion) not containing petroleum oils, liquid||$240 444|
|38112110||Additives for lubricating oil, containing petroleum oils, solid||$3 727|
|38112190||Additives for lubricating oil, containing petroleum oils, liquid||$1 018 594|
|38190000||Hydraulic brake fluids||$71 847|
|Total||$4 889 936|
|Total amount may differ slightly from the sum of the components due to rounding.|
A total of $17.2 million was paid as product stewardship benefits in 2005–06, with $14 million paid to recyclers for recycling used oil. This is an increase of almost 10 per cent from 2004–05. This increase is attributable to an increase in benefit claims in most categories, and especially category 8.
The volume of oil on which benefits were paid in 2005–06 was 211 million litres, compared to 220 million litres in 2004–05. While this constitutes a slight drop in overall volumes of used oil recycled, more time is required to establish a reliable long-term trend. Industry estimates that 150 to 165 million litres of oil were being recycled annually prior to commencement of the Product Stewardship for Oil Programme in 2001.
Figure 1 shows the annual volume of used oil recycled since the programme began. 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 2005–06, indicating volumes recycled and benefit payments provided.
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: Annual volume of recycled oil in each category since the Product Stewardship for Oil Programme began
Categories 2 and 4 reported volumes are too small to chart. Categories 8 and 9 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.
The intent of the benefit rates is to encourage an increase in the volume of used oil recycled within each category. Category 1 has shown a very slow start and a slow increase over time. Volumes claimed under category 1 are expected to continue to increase over the next few years. Category 5 claims have grown steadily since the commencement of the programme, with category 6 figures decreasing slightly, suggesting a shift from category 6 to category 5.
|1.||Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) which meets the specified criteria||$5 053 730||10 107 460|
|2.||Other re-refined base oils||0||0|
|3.||Diesel fuels to which the Excise Tariff Act 1921 applies||$1 416 697||19 898 322|
|4.||Diesel extenders (filtered, de-watered and de-mineralised)||0||0|
|5.||High grade industrial burning oils (filtered, de-watered and
|$5 362 978||107 169 566|
|6.||Low grade industrial burning oils (filtered and de-watered)||$2 204 318||73 401 270|
|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||$2 563 284||47 041 373|
|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||$569 668||5 960 736|
|Used oil recycled (excludes categories 8 & 9)(a)||$14 037 723||210 576 618|
|Total||$17 170 675||263 578 727|
|(a) Benefits paid under categories 8 and 9 do not contribute to the overall volume of used oil recycled.|
- Collection infrastructure
- Raising public awareness
- Remote and Indigenous projects
- Operating expenses
Under the Product Stewardship for Oil Programme, transitional assistance funding of $34.5 million has been provided over seven years (2001–2007) to facilitate projects that remove structural barriers to oil recycling, such as lack of adequate infrastructure or technology.
|Financial year||$ million|
|2000–01 (Jan to June 2001 only)||1.323|
Priority areas identified for funding include:
- improving the environmentally responsible management of waste oil
- general waste oil market development and expansion
- related environmental issues such as handling and management of filters, drums and ‘do it yourself’ packaging
- community and industry awareness of waste oil management issues.
In addition, funds are used to cover 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.
Transitional assistance funds may be provided through specific grants or projects, consultancies and strategic partnerships for the provision of goods and services.
Major initiatives funded under the transitional assistance component include:
- collection infrastructure
- public awareness raising
- remote and Indigenous projects.
This initiative aims to establish a nationwide network of used oil collection facilities throughout Australia. It comprises two components—direct grants and grants to state agencies under the State Partnership Programme.
To date $7.9 million has been spent on the Local Government Waste Oil Collection Infrastructure Small Grants Programme to establish 528 collection facilities across 324 local governments throughout Australia.
The State Partnership Programme also funds collection infrastructure. Multi-year grant agreements were signed with Victoria, Western Australia and Queensland in 2002–03 and a grant was provided to South Australia in 2004–05. The combined number of facilities funded as at 30 June 2006 was 325, well above the 230 facilities originally envisaged.
This year the minister approved grants worth $1 349 906 for used oil collection infrastructure. This will add 81 used oil collection facilities to the national network and will result in the collection of an estimated extra 688 000 litres per year. It will also pay for bulk storage facilities for used oil on Kangaroo Island and in Alice Springs. Information about the locations of used oil collection facilities is available at www.oilrecycling.gov.au.
This year the department developed a new factsheet on the environmental and health impacts of used oil, after consulting with the Australian Government Department of Health. Three factsheets are now available online at www.oilrecycling.gov.au/publications.html.
The department is currently updating its public online database of used oil collection facilities to ensure accurate information continues to be available to the Australian public.
This year Wren Oil received a multi-year grant of $400 000 for a processing plant that will enable distillation residue from recycled oil to be used in road bitumen. In 2004–05 a $2.5 million multi-year grant was provided to the Australian Institute of Petroleum to help establish nationwide infrastructure for the collection and recycling of household plastic oil containers. This project will continue until 2007.
Grants paid in previous years to assist industry to develop re-refining plants will eventually produce about 40 million litres of group 1 and group 2 base oils from used oil.
In November 2004 the Minister for the Environment and Heritage approved the extension of the Product Stewardship for Oil Programme to Indigenous communities in remote Australia and endorsed its broadening to manage used oil in conjunction with other waste streams.
In 2005–06 the department provided $955 806 for four projects in remote and Indigenous communities. These include used oil and integrated waste management projects on the Anangu Pitjantjatjara lands and on Warabar Island in the Torres Strait. These projects will also contribute to improved environmental health and Indigenous employment opportunities.
The department’s 2005–06 operating costs for the Product Stewardship for Oil Programme, including staff salaries and allowances, consultancies, advertising and other related expenses, were $1.28 million.
The Australian Taxation Office reports that its operating costs for the programme were $251 000. 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 $43 310. This includes all costs related to the activities of the 10-member advisory council including venue hire, sitting fees, air fares and other travel costs and allowances.
Two independent reviews of the Product Stewardship for Oil Programme (reviews of the legislation and of the transitional assistance element) were tabled in parliament on 17 November 2004. The reports are available at www.oilrecycling.gov.au/publications.
The government response to the recommendations from the two independent reviews of the programme is ongoing. The government has responded to some of the recommendations and expects to address others during the coming year.
The next review will be conducted in 2008.