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Oil Stewardship Advisory Council - 3rd Meeting, 12 September 2001

Present at the meeting were:

Members
Mike Williamson (Chair)
Mark Borlace
Patrick Colmer
Malcolm Forbes (for Phillip Glyde)
Doug Hagen
Cathie Halliday
Wayne Hart
Paul Howlett
Martin Kirwan
Graham McGarry
Bryan Nye
Gary O'Connor
Andrew Poole

Others
Fred Wren (formal instrument of appointment to OSAC made on 15/9/01)
Bruce Male (Environment Australia)
Donna Bond (Secretariat officer)
Christine Wardle (Meinhardt) - present for Item 7 only
Jill Lethleen (Meinhardt) - present for Item 7 only

Summary Record Of Discussions And Resolutions

Item 1: Welcome

Mr Williamson welcomed everyone attending the third Oil Stewardship Advisory Council meeting. Mr Wayne Hart (replacing Ms Adrienne Williams) and Mr Fred Wren (proposed new appointee representing the Independent Australian Oil Recyclers Association subsequently appointed on 15/9/01) were introduced. He also introduced Mr Malcolm Forbes, the Assistant Secretary for the Sustainable Industries Branch, Environment Quality Division, Environment Australia who was representing Mr Phillip Glyde and Mr Bruce Male, who is now the Director of Automotive Waste Resources Section, replacing Mr Graeme Marshall. Mr Williamson announced that Mr Patrick Colmer had formally replaced Mr Mark Jackson as the representative of the Taxation Commissioner as Mr Jackson has moved on to another job within the Australian Taxation Office.

David Braham sent his apologies. He was unable to attend due to a perforated ear drum so was unable to fly.

Standing Items

Item 2: Adoption of the draft Agenda

Mr Williamson explained that Mr Braham had suggested a series of items for the agenda and he had proposed to him that most of these items would be more useful as information items in written format tabled at one of the meetings. Mr Braham was happy to do this.

Mr Williamson suggested that the presentation from Mr Braham and Mr Hagen (agenda item 12) should be postponed due to Mr Braham's absence.

Item 3: Approval of Minutes of the last Meeting

Mr Male raised two items listed in the Action Items regarding the Environment Australia website. He explained that the secure website and the public minutes of the second meeting were still not uploaded due to the website redevelopment delaying proceedings. This problem would again be addressed with the relevant people as soon as possible and hopefully there will be no more delays.

Mr Wren requested for the minutes of the previous meetings to be sent to him.

Item 4: Expression of conflicts of interest in Agenda items

Mr Wren, Mr Hagen and Mr Hart declared that their companies had submitted applications for the transitional assistance bids.

Item 5: Oral report from The Australian Taxation Office on the Product Stewardship Arrangements for Waste Oil (Patrick Colmer)

Mr Colmer reported on the progression of the Product Stewardship Arrangements for Waste Oil from the perspective of the Australian Taxation Office (ATO). There have been 34 registrations for benefits, another one pending, two refused and one cancelled. Originally, 100 registrations were planned for but now it appears that they will never get anywhere near that figure.

Payments for 2001/2002 Financial Year to date have been approximately $1.4 mill. It is anticipated that $8.4 mill will be paid this financial year, which is 25% up from last year. From January-June 2001, about $11.9 million has been collected. There is about $4 million in the budget collected from revenue in July and August 2001.

The program appears to be running fine from the clients' perspective. The objection letter that was discussed at the last OSAC meeting has not progressed any further.

Only paid claims under categories 3,5 and 6 (diesel fuels, high and low grade burners). Haven't paid anything on diesel extenders etc. The ATO doesn't anticipate any major change in the immediate future. Mr O'Connor commented that oil collection had increased in Queensland with more diverse customers eg. farmers etc. Mr Hagen said that he had found that collections had decreased in Tasmania.

Mr McGarry commented that in powerhouses, servicing hours had gone up and oil was being recycled back into the system in Western Australia. Mr Wren asked whether there was scope for users such as this to claim. Mr Male replied saying yes, they could claim if they registered and measured the amount that was being recycled.

Introductions from new Members

Mr Williamson asked that those who were new to OSAC, ie. Mr Hart, Mr Wren, Mr Forbes and Mr Male, introduce themselves.

Mr Wayne Hart introduced himself and said he was replacing Adrienne Williams on OSAC. He is a chemical engineer and the head of three companies - Geocycle (Australia) Pty Ltd, Geocycle (New Zealand) Pty Ltd and Teris (Australia) Pty Ltd. He said that his company in New Zealand looked after the used oil collection and usage in cement kilns in New Zealand and in Australia looked after used tyres and solvent based fuels for cement kilns in Queensland.

Mr Fred Wren introduced himself as an Independent Australian Oil Recyclers Association representative. His company is Wren Oil and they supply remote and regional WA. He hoped that he would be able to represent the other recyclers that face the same problems that his company does.

Mr Williamson enquired as to the status of the two oil recyclers associations ie. the Oil Recyclers' Association of Australia (ORAA) and the Independent Australian Oil Recyclers Association (IAORA). He asked whether they are working together. Mr Wren said that they were trying to work together to eventually speak with one voice. He explained that there was a lot of history and commercial conflicts between smaller and larger companies and it would take more time to bring the two associations together. Mr Hagen added that since 1997 when the first convention was held, many of the smaller companies didn't trust the large operators and set up their own association, ie. IAORA. There are only about 30 companies in the whole industry.

Mr Forbes, who was representing Mr Phillip Glyde, introduced himself as the Assistant Secretary of the Sustainable Industries Branch within the Environment Quality Division (which is headed by Mr Glyde). The issues that he is concerned with are waste management issues and product stewardship. He said that the Oil Product Stewardship arose from his Branch. He is also interested in broader issues and working with industry to encourage them to comply. The Branch is also working with the finance sector and how that sector interacts with industry. Other issues include cleaner production, eco-efficiency and working with the manufacturing sector.

Mr Male has replaced Mr Graeme Marshall in the Automotive Waste Resources Section (AWRS), which is the section that holds the OSAC Secretariat.

Matters arising from previous Meeting

Item 6: Report from Environment Australia on the Transitional Assistance Project Bids (Bruce Male)

Mr Male reported on the progress of the Transitional Assistance Project Bids. He announced that the Minister had returned his decisions in early July on the 106 proposals requesting transitional assistance funding. As expected, he rejected most of the proposals due to them dealing solely with commercial interests without any public benefit to justify the Commonwealth's involvement or related to the provision of company storage facilities for local governments. The Minister has said he prefers to provide such funds directly to local governments to ensure competition and contestability in the collection market.

26 proposals have received either firm or in-principle approval. These proposals have consisted of: 16 projects from local governments to establish or upgrade storage facilities (approved); 3 projects relating to recycling of DIY plastic containers (in-principle approval); 2 R&D projects seeking to improve oil/water separation technology (1 approved, 1 in-principle); 2 projects relating to improving the management of PCB-contaminated transformer oils (in-principle); 1 project relating to improved management of lubricant-contaminated drums (approved); and 2 projects for lube-to-lube refineries (in-principle). Mr Male went on to say that they were not in a position to publicly announce the proponents yet. There are some proposals that haven't been approved or rejected yet as more information on these proposals is being sought. Potentially, up to $15.3 million has been approved, much of it 'in-principle' ie. requires further Ministerial approval. Some of these funds are likely to be expended in FY 2002/2003.

Mr Williamson commented that OSAC had recommended that the funding focus on local government proposals and that it looks like the Minister has taken this into consideration when he made his decision.

Mr Howlett asked how the local government proposals had been split up between metropolitan and regional areas. Mr Male replied that he thought most are in regional areas.

Mr Male also announced that the Minister had approved the development of an integrated communication strategy relating to the management of waste oils, to be implemented with the assistance of State and Territory partners (to be determined). The strategy will include a variety of components relating to, for example, marine and coastal communities, the automotive industry, remote areas, consumers/DIY users etc. Further progress on this matter is not likely to occur until late in 2001. Mr Nye suggested that we may want to contact New Zealand in relation to their communication strategy.

Mr O'Connor asked when the expressions of interest for the second round would take place. Mr Male replied saying that they would like to finalise the funding agreements for the first round before starting the second round. The upcoming election will probably also affect the timing of the second round.

Item 7: Report from Environment Australia on the progress of the "Missing Oil" Consultancy (Bruce Male and consultants from Meinhardt)

A contract was signed on 29 August with Meinhardt (NSW) Pty Ltd to undertake the waste oil in Australia project (commonly called the oil gap analysis or missing oil project).

In general, the aim is to investigate, quantify and analyse the scope and nature of the waste oil problem in Australia. Specifically, we are looking to identify the quantity of unaccounted for waste oil in Australia and the reasons or issues as to why it is unaccounted/uncollected.

The report will comprise 4 main parts:

Meinhardt propose to forward the draft report in mid October to stakeholders and OSAC to verify the information. The final report is due at the end of October and it will be made publicly available.

Christine Wardle and Jill Lethleen from Meinhardt were present at the meeting to discuss the proposed methodology they intend to use to produce this report. They explained that they intended to quantify oil more accurately than had been done in the past and find out the reasons why some of it is not collected. Ms Lethleen said that they wished to look at imports, sales etc for each type of oil. She said that they would do as much research as possible first before ringing members of OSAC and other relevant people for their input so as to minimise the time taken for each phone call. She asked if there were any questions or any issues that they needed to consider.

Mr Hart asked if they were considering work that has been done overseas and said that there was a lot of information on the Internet. Ms Lethleen replied that they had used the study done in Australia in 1991 for background.

There was general discussion regarding getting information on a confidential basis from retailers and the large oil companies. There was concern about how to find out information from the 20-25% of the market which is not made up of the major companies. The DIY market is what most OSAC members are mainly concerned with. Mr Wren also suggested that farmers should be included in the DIY market even though many buy their oil in 205 litre drums and not the 4 litre packs as most of the DIY market do.

OSAC also discussed whether or not to identify information on a State basis. This was generally considered inappropriate as all the States and Territories vary so much. Mr McGarry thought it would be useful to find out the amount of oil going into WA and the amount collected in WA. He believes a lot of the oil is in the powerhouses and is getting recycled and this does not get taken into account. Mr Poole also commented that metropolitan areas were harder to quantify than regional areas because there were a more diverse number of companies involved.

Item 9: Report from Environment Australia on Tradeable Certificates (Bruce Male)

Mr Male explained that a contract was let on 28 June to Energy Strategies, in conjunction with Kenney Lin and Associates, to examine the appropriateness and feasibility of introducing a tradeable certificate (TC) system to improve waste oil management in Australia. The study will consider current theory surrounding tradeable instrument systems, experience with systems in practice, and the structure and nature of the oil industry, in forming recommendations on whether or not it is possible to design a TC system for waste oil in Australia; and whether such a system would deliver benefits (in the form of more/improved recycling and/or lower costs) over and above the current levy-benefit system; and if so, what should such a system look like. Mr Male said that some OSAC members may have already been contacted by the consultants regarding the matter.

The consultants are due to provide a final report by Friday 14 September. The recommendations of the report will then be reviewed, and an overall recommendation (either to continue with the design and trial of a system or to proceed no further) will then be provided to the Minister. The Department is open to the most appropriate recommendation ie. they have no pre-conceived ideas as to what we want to happen regarding the future of a tradeable certificate system.

Mr Male asked whether OSAC would like the consultants to provide a verbal report on their findings at the next meeting if it is considered appropriate.

Mr Male explained that there were a series of steps to go through if we were to change to a tradeable certificate system and the election could affect this. If it's decided to go ahead with it, a trial will be designed and set up, which would take about 6 months. The trial would be no cost and no loss of opportunity. Then 6-12 months to conduct the trial. Following that period would be the evaluation of the trial and advice given to the ministers. Progression at each point is dependent on what further consideration is warranted.

Mr Nye asked whether they would be given another chance to comment and that the Petroleum industry didn't think it was feasible.

Mr Poole agreed that it wasn't feasible and he didn't think it would do what was desired.

Mr Forbes said it was always worth looking at Tradeable Certificate schemes. They are in their infancy and have not been used much worldwide. He said that Environment Australia had an open mind about it.

Mr Nye said that he was happy that there was full consultation on the matter. He thought the market was not mature enough for a tradeable certificate system and the cost of administering it would be huge.

Mr Wren was trying to see how it would work. He thought that one problem was that there was only so much oil out there and the levy system probably does the same thing as what the TC system proposes.

Mr Male agreed that there were two main issues: the feasibility of the system and the cost.

Mr Williamson summarised by saying that the general view was that if the Tradeable Certificate system was found to be not feasible by the consultants then to leave it at that but if it is feasible then the consultants should attend the next OSAC meeting to discuss their findings.

New Items

Item 10: Report from The Chair on issue of exemption for biodegradable oils (Mike Williamson)

Mr Williamson told OSAC that he and Mr Poole had met with Fuchs a few weeks beforehand to discuss their biodegradable oils and the possibility of granting them an exemption from the oil levy. They had a lengthy discussion with them, listened to what they had to say and advised them of what OSAC thought of the matter. They discussed whether biodegradable oils were in fact good for the environment. Mr Poole said there were two kinds of biodegradable oils ie. those from vegetable oil and those that are synthetic and from non-renewable resources. He said that he told Fuchs if they wanted his support then they would have to prove that their oil wasn't harmful in its used state, not just in its pristine state. Mr Williamson added that Fuchs needed to describe their oils very accurately and make a case that there were substantial benefits. They would also have to prove that it would not cost too much to administer their exemption. They agreed that the current levy does not affect their operation very much but if the levy went up this could have a substantial effect.

Fuchs said that their biodegradable oil could be re-refined without any problems. However there is a problem with engine oils because they are unsure what impurities would be in it. Disposal of the biodegradable oil is also an issue.

Mr Williamson said that they didn't want to discourage people from making biodegradable oils but they needed more information before an exemption would be granted.

Mr Hagen said that his plant had tried to treat biodegradable oil but there were emulsions that they could not break. Mr Wren said that sometimes burning the tight emulsions (for energy) was the best answer.

Mr Nye believed that sometimes people get carried away with the notion of biodegradable products and they often end up emitting more carbon dioxide than the refined product.

Mr Male added that the potential environmental effects eg. from oil spillages, probably resulted in the same damage to marine environments from oil spills whether it was caused by biodegradable or other oils.

Mr Williamson said that he had said to Fuchs, on behalf of OSAC, that they could make a short powerpoint presentation at the next OSAC meeting and OSAC would take it on board, however, they would have to show that they are really hard done by from the oil levy.

Item 11: Preparation of the PSO Annual Report (Bruce Male)

Mr Male explained that under Section 35 of the Product Stewardship (Oil) Act 2000, it states that 'as soon as practicable after the end of each financial year, the Minister must cause to be laid before each House of Parliament, a report relating to:

  1. the operation of the product stewardship arrangements for oil (including this Act); and
  2. any other matters that the Minister thinks relevant.'

He said that the report had now been drafted and will shortly be provided to the ATO and ACS for comment. Once it is cleared by those Departments, it will be cleared within Environment Australia and then presented to the Minister for clearance and approval to proceed with tabling. Due to the onerous publication requirements, it is expected that the process from Ministerial approval to tabling will take between 1 and 2 months. The election may shift the tabling into 2002.

Mr Williamson asked whether members of the Council should have input into the report. Mr Male replied that the report included input from the minutes of the Council's meetings.

Mr Borlace asked if the Opposition came into Government following the election, whether the existence of OSAC was threatened. Mr Forbes and Mr Male both said that they were not expecting it to be an issue as there was bipartisan support when the Act passed through the Parliament. It was listed as an non-controversial item and went through Parliament very quickly.

Item 12: Address and presentation by David Braham on the Waste Oil Industry (with assistance by Doug Hagen)

Item postponed to the next meeting that Mr Braham will be in attendance.

Other Business

Item 14: Next Meeting

It was agreed to next meet on Wednesday 5 December in Melbourne and again have a dinner the evening before.

Some members thought it was important to discuss the outcomes of the Oil Gap Study before December so it was agreed that all interested members would send their comments electronically to Mr Male when the draft was sent out for comment before it is finalised. Then a week after this a teleconference would be held to discuss any pertinent issues.

Summary of Follow-Up Activities

Secretariat

Council