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Federal Minister for the Environment and Heritage
The Hon Dr David Kemp, MP

ABC – Queensland Country Hour
Wednesday, 19 February 2003

Subject: BP’s decision to stop production of ethanol-blended fuel

Well, the fledgling Queensland biofuels industry has been dealt a blow, with BP halting production of its 10% ethanol blended fuel, E10. BP says sales have slumped since publicity over the damage petrol and ethanol blends of up to 20% have done to vehicle engines in New South Wales.

But biofuel groups and cane growers claim the scare campaign was generated by the oil companies, as mirrors battles fought and won by alternative fuel supporters in the United States and Brazil. Australian Biofuels Association Executive Director, Bob Gordon, says while the bail-out by BP is disappointing, it could also push forward calls for the Federal Government to mandate the use of ethanol in Australian fuels.

Dr Gordon:
All of the reports that were coming from BP was that the response by their customers and the limited number of service stations that were putting it out was very positive. We understood that they were going to embark on an ethanol promotion program, and again, obviously, that’s been put on the shelf as well.

So what killed it off in your opinion?

Dr Gordon:
Well, there has been an active and nationwide anti-ethanol campaign by the oil majors. And with respect to BP, on the one hand they were promoting ethanol in Brisbane, and they had brochures to that effect. Then their subsidiary companies, like Reliance Petroleum, are out there actively bagging it out in areas where there’s no prospect of any ethanol being sold for some time.

So it’s - in that sense, it’s probably a self-fulfilling prophecy.

Queensland, though, has suffered because of problems that were perhaps going on in New South Wales, where there were perhaps higher blends - and that’s illegal in Queensland, so really we here - or the industry here - has suffered because of that. Would that be correct?

Dr Gordon:
It shouldn't have suffered from that much. The first - in the first instance, there’s very little ethanol available up in Queensland, and this scare campaign, for example, has had an extraordinary impact.

There’s no - for example, there’s no ethanol being sold in South Australia. However, there was a - South Australia is awash with ethanol scare campaign. And it took substantial resources and efforts on our industry’s part to calm that down.

How do you begin to calm that down?

Dr Gordon:
Well, the best thing is to try and deal as much as you can with the facts. And interact with - with the community. We’ve got a hard job ahead of us, but this is the same job that the industry had in America 20 years ago, when this same battle was going on.

At that time, America was introducing ethanol for the first time in its transport fuel market, and the only companies that would use it were the independent oil companies. The oil majors refused to buy it, until Government came forward with the US Clean Air Act, about 15-16 years ago, and forced the introduction of renewable fuels.

Just on that, do you think the Australian Government is dragging the chain on its decision?

Dr Gordon:
Well, we would like to see the Government move forward more aggressively to make these decisions. We know that they’re considering making policies which will assist our industry grow - renewable fuel industries in Australia - and all the benefit that brings to the environment, in terms of dramatic new jobs and economic growth in regional and rural communities.

It would have a major impact in the sugar industry, and also in rural Queensland, as well as rural Australia. Now, the quicker the Government makes a decision, history tells us, in America, is the sooner this anti-ethanol campaign will stop.

In fact, BP also blamed, as well as the scare campaign, lack of a promised marketing campaign for ethanol.

Dr Gordon:
Well, I’m not sure that we can expect Government to do the marketing campaign. I think BP would be the one to do the marketing campaign, with our industry working with them.

Do you think they’ve given up a bit too easily?

Dr Gordon:
It’s surprising. The reality was there was - they were never buying enough fuel to stimulate industry growth in Queensland, and that was of concern to us. But we were looking forward to the time when they would start to buy ethanol in sufficient amounts to stimulate that new investment we need to make our industry grow. But they never reached that point.

And they - in fact, they pulled up before they could reach that point.

Compere: Australian Biofuel Association’s Bob Gordon.

BP says the trial conducted at six service stations in Brisbane, was a technical success, which proved E10 could be blended, stored, and sold safely, and had no adverse effect on car engines. So why not continue with the trial, and combat the negative publicity?

BP’s Marketing and Insurance Manager, Peter McCuspey, told ABC’s AM program it’s now up to the Government to take control of the situation.

Peter McCuspey:
I think probably the key takeout for us is that what needs to happen is some action by the Federal Government in terms of clearly labelling ethanol at petrol pumps throughout the country, and secondly setting a predetermined limit on the amount of ethanol that should be used in fuel.

And if those two things are done, I think you will find that it will be possible to go back and talk to consumers and explain to them the benefits of ethanol fuel. But until that happens, I think it’s going to be very difficult to actually put that side of the story.

Peter McCuspey, from BP.

The Canegrowers’ body has also today called for expediency on a decision on mandating use of ethanol in Australian fuels, so with all fingers pointing towards the Government, when will a decision be made?

To answer that question, and some others, we’re joined on the line by Dr David Kemp, Federal Environment Minister.

Good afternoon, Minister.

Dr Kemp:
Good afternoon.

Compere: Dr Kemp, you heard most of that story, I believe, you were on the line there. What is the Government doing to move forward, as Dr Bob Gordon put it, more aggressively on this issue?

Dr Kemp:
Well, the Government has undertaken the first scientific study that has ever been put in place to provide the basis for a soundly based decision about a cap on the - or a standard on the level of ethanol in petrol that is regarded as satisfactory and safe for motor vehicles.

This study is currently underway. We already have some preliminary results from this study, as they test small engines, as well as automobile engines, and what these studies have shown is that 20% blends do have adverse effects on small motors.

In fact they affect operability and durability, with some corrosion of metal components. What this highlights is the need for labelling, and I fully agree with those who say that there is a need for consumers to be informed now what the amount of ethanol may be in the petrol blends that they’re buying.

The full power to require labelling is not, however, in the hands of the Federal Government. And I think perhaps those who are calling for labelling don’t fully realise that the complete power to deal with this issue is in the hands of the states.

But what is in the hands of the Federal Government is making a decision on the mandatory use of ethanol in fuel. When will you be ready to make a decision on that?

Dr Kemp:
Well, there’s been no undertaking by the Federal Government at all to mandate ethanol in petrol. That’s a very big decision, and it relates to many, many factors, including the supply of ethanol, where that ethanol might come from, and whether that is an appropriate course to go.

What the Federal Government is considering at the moment is a standard for ethanol blends in petrol, and the scientific study that we’re currently undertaking will provide a basis for that.

We’ve called on the automobile manufacturers, and the oil majors, to provide us with any scientific evidence they have that would lead us to a quick and early conclusion...

And Minister, when would...

Dr Kemp:
...about what the appropriate level of that standard should be, and so far we have received no such evidence from any of the companies, and therefore we’re undertaking this testing for ourselves, and that’ll provide the sound basis for a decision as to a standard for ethanol.

But until that time, consumers now need to know how much ethanol there may be in the petrol they’re buying. That means there should be proper labelling. The power to label lies with the states. I warned the states before Christmas that this situation could develop unless they acted to require labelling from petrol retailers, and so far they haven’t done so.

Minister, sorry to interrupt, we’re almost out of time, I just wonder when will you be ready to make a decision on that standard then, in use of ethanol.

Dr Kemp:
Well, we’ll be ready to make it when we receive information from the scientific study, and from a consideration of all the material that’s before us. But at present we don’t have even preliminary information that might allow us to take that decision.

I would expect we’ll be getting preliminary information in the near future, but the study is designed to go over 18 months, and this again underscores the need for the states to stop resisting their obligation to provide consumers with proper information by labelling of ethanol blends at the pump.

Alright, Minister...

The Commonwealth only has limited powers.

Minister, apologies, we are out of time. I’m sure there’s much more to be dealt with on this issue, and perhaps we can talk to you again on some of those other issues. Thanks for your time this morning.

Dr Kemp:
Good. Thank you very much.

Compere: Environment Minister Dr David Kemp, talking to us about ethanol.


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