Fuel Tax Bill 2006 and Biodiesel

**Robert** · 21st June 2006, 02:17 AM

Firstly, I must apologize for the late posting of some of this. I've not been keeping as up to date as I should have on the biodiesel new recently.

The BAA have sent me some info on current submissions to senate committees which are presently being debated.

This was sent to me last week:

FUEL TAX BILL 2006

The Fuel Tax Bill 2006 is being debated in Federal Parliament today June 13.

If the Bill goes ahead in its current form, biodiesel will be seriously disadvantaged in comparison with hydrocarbon diesel. Off road markets will
become totally unviable for biodiesel as is illustrated in the comparison document attached.

Also attached are documents which illustrate the representations made to date.

BAA has made a number of submissions to the Government via Senate Committees and we consider that there is support from some quarters to maintain the intent of the legislation which is to SUPPORT the development of the biodiesel industry.

We urge you to contact your local member, senator or any political contacts you may have IMMEDIATELY by sending them the text of the producer grant letter as below:

Any questions please contact the BAA

Making the Fuel Tax Bill 2006 work for Biofuels.

The promised Stimulus to promote the growth of the biofuels (Biodiesel and Ethanol) industry in Australia

The producer grant was established in 2003 by the Senate Economics Committee Provisions of the Energy Grants (Credits) Scheme Bill 2003 and the Energy Grants (Credits) Scheme (Consequential Amendments) Bill 2003 and proposed and accepted by the government as stimulus package to encourage the growth of a National biofuels industry to the benefit of the rural community and our balance of payments deficit additionally to reduce our reliance on imported fossil fuel.

The stimulation package has proved successful to the initiation and rapid growth of the biodiesel industry in Australia with now four ASX listed
biodiesel companies who portrayed to the public the nature and structure of the stimulus package put in place by the government attracting significant public investment into these companies who between them raised in order of $130 million.

The current proposed form of the Fuel Tax bill will all but eliminate this stimulus and stunt the growth of biofuel Industry within Australia.

The senate Economics Committee review of the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 the Chair of the committee, Senator George Brandis, confirmed to representatives of treasury on Monday the 5th of June 2006 the producer grant was intended as a stimulus to the encourage the growth of the biofuels industry, as treasury had denied this was the case.

Here is the extract from the Senate Economics committee 5th June 2006;

"CHAIR: Senator George Brandis
Mr Colmer General Manager - Indirect Tax Unit (Treasury)
Mr Harms Fuel Credits Unit - Indirect Tax Unit (Treasury)
Mr Free Manager - Excise Unit - Indirect Tax Unit (Treasury)

CHAIR- All right, we will go to the next topic, which I thought was the one that exercised most of the controversy today in relation to biofuels. There
are two quite separate issues. The first was the claim made by all of the biofuels witnesses that the effect of this scheme on them would be to
nullify completely the benefit to the industry of the Energy Grants (Cleaner Fuels) Scheme Bill 2003 and, more specifically, the offsetting of the excise payments by producer rebates. What do you say about all of that?

Mr Colmern -I think the best thing I can do about that is to read to you from the letter that Dr Humphreys tabled earlier today, which sets out the
government's intention around the cleaner fuels scheme. This is a letter from Mr Mal Brough, the previous Assistant Treasurer, dated 15 June 2005. It is addressed to Dr L Humphreys, chief executive officer. I quote:

The cleaner fuels grant was not intended as a stimulus package for the biodiesel industry.

CHAIR-Well, it was. Mr Brough might have thought that, Mr Colmer, but I chaired the inquiry of this committee, and Senator Webber, Senator Murray, Senator Stephens and Senator Watson-everybody you see before you-were participants. Mr Brough might think that; but, if he does, he does not know, because it was. The recommendations this committee made to the government-which were accepted by the government and which I wrote-were for that specific purpose.

Mr Colmer-Can I also quote from the explanatory memorandum of the Energy Grants (Cleaner Fuels) Scheme Bill 2004. It states:

The grant will offset the excise and customs duty payable on biodiesel from 18 September 2003 and continue the current effective excise rate of zero for 100% biodiesel until 30 June 2008. The grant will also be payable on fuel blends containing biodiesel, extending an effective excise rate of zero to the biodiesel component of fuels blends for the same period.

There is nothing there that says that the package was intended to be a stimulus for the biodiesel industry. The stimulus for the biodiesel industry-

CHAIR-Mr Colmer, let us not kid ourselves. The whole point of the package was to provide a stimulus.

The request from the biodiesel/Ethanol Industry is quite simple please honor the Stimulus as intended by the Economics review committee and re-confirmed last week, that the producer grant is a stimulus to encourage the development of a biofuels Industry in Australia.

As such the producer grant is a grant not an offset for tax and as such should be viewed by treasury that net tax has been paid.

Then it will be entitled to same treatment under the user tax rebates envisaged in the current draft of the Fuel Tax Bill. The Bill can stand as
drafted no changes are requested other than recognition that the Producer Grant is a Grant to stimulate the biofuels industry and not a tax offset.

Under the current tax offset scenario with the new Bill, Treasury are viewing that no net tax has been paid and as such will not qualify under the
user tax rebate schemes envisaged in the Fuel tax bill.

This will immediately close the door to biofuels competitive access to over 75% of the available market for biodiesel. Stunting any new investment in
this highly sustainable industry if only given the chance to get onto its feet and grow to a critical mass where it would not need support.

No new legislation needs to be created. The change of intention for the Energy Grants (Cleaner Fuels) Scheme Bill 2003 from an offset for excise to
a grant for the production of the cleaner fuel will ensure a net excise has been paid for the biofuels and allow the industry to keep the current stimulus as planned by the government under the producer grant package.

This change will ensure the viability and success of the announced biofuel projects, creating more than a billion litre a year industry. Along with the
fuel production comes the expansion of the rural and regional economies to meet the additional demand.

If the change does not go ahead, the viability of currently operating plants will be marginal and new projects will be scrapped or move off-shore.

There has already been precedent set for this type of change with the introduction of support for BPs proposed new type of Biofuel plant under the
same scheme without consultation to the existing biofuel industry. This changed the stated intent of the Energy Grant (Cleaner Fuels) Bill 2003.
Quoted from the Explanatory Memorandum, "The amendments define cleaner fuels for which grants will be payable as biodiesel, ethanol, compressed natural gas, liquefied natural gas, methanol and liquefied petroleum gas."

We seek your support in this nationally critical matter and to remind the government if its commitment made to the Biofuels industry in 2003.

**Robert** · 21st June 2006, 03:03 AM

This was sent to me from the BAA today:

The Fuel Tax Bill (2006) amendments affecting Biodiesel and biofuels will be debated Wednesday.

There appears to be some support building for biodiesel in the Senate with the understanding that the impact of the Fuel Tax Bill will be to make all locally produced biofuels uncompetitive and even promote cheaper imports of biofuels into Australia rather than build an Australian Biofuels Industry.

When questioned on Alan Jones about this situation, Costello responded with "Well, if they can do it cheaper, then let’s import all fuels into Australia"
The solution is quite straight forward; it is outlined in the attachments. If this change is made to the Fuel Tax Bill, biodiesel will be deemed to have paid excise and it will be cost competitive to diesel again, right through to 2015.

We still need to spread the word on the change and the impact.

Unfortunately, a good news story on ABC TV Sunday Morning is being used by anti-biodiesel/biofuels groups to say that "look all is rosy, they don't even mention the bill, therefore it cannot be a problem!"

Darryl Butcher, of Australian Renewable Fuels, did mention the Bill and its impact in his interview, it was not included in the short story that went to air.