WA's PREFERRED OIL RECYCLING COMPANY

Fred Wren Saluted in Parliament

June 27, 2000 in News

Title: PRODUCT STEWARDSHIP (OIL) (CONSEQUENTIAL AMENDMENTS) BILL 2000:
Second Reading Date: 27 June 2000 Database: House Hansard Speaker: Prosser, Geoff, MP (Forrest, LP, Government) Page: 18329 Proof: No Source: House Stage: Second Reading Type: Speech Context: Bill

Mr PROSSER (Forrest) (4.51 p.m.) ‹I rise to support the Product Stewardship (Oil) Bill 2000, the Customs Tariff Amendment (Product Stewardship for Waste Oil) Bill 2000, the Excise Tariff Amendment (Product Stewardship for Waste Oil) Bill 2000 and the Product Stewardship (Oil) (Consequential Amendments) Bill 2000. Speaking to these bills gives me the opportunity to not only support this initiative but also salute a major oil recycler who has the largest catchment area in Australia, based in my electorate of Forrest in Western Australia. That is Fred Wren of Wren Oil.

We are all aware of the figures. Australian oil refineries produce around 800 million litres of virgin oil, from which lubricant is made. Around 200 million litres of base oil is exported. Domestic users consume some 520 million litres and it is estimated that, of those 520 million litres, some 150 to 165 million litres of domestic consumption is currently recycled. That is a total of 68 to 71 per cent of the annual domestic usage that is out there somewhere. Two hundred and sixty million litres are lost because of combustion of engines, but the remainder could and should be recycled.

Worldwide, the sale of new lubricants rises by about five per cent a year, and so does the volume of waste oil. In 1995 it was estimated that only 44 per cent of waste oil was being collected worldwide. It is a responsible government that acts to rectify this problem. For those who are not aware, lubricants are generally produced from base stocks refined from the heavy fractions of crude oil or other hydrocarbons and then various additives are blended into them. Lubricants are used for a wide range of applications, including as engine and transmission lubricants, hydraulic fluids, insulation and process fluids and, of course, greases. During the application, part or all of the lubricant may be consumed. In layman’s terms, it is like when you check the oil in your car. There is no leak but, of course, the oil has to go somewhere and the fact is that some of that oil is burned in the normal combustion process. In another way, anyone who changes the oil in their car at home, referred to in the industry as the do-it-yourselfer section of the market, will be aware that the balance of the oil that is not consumed is contaminated by water, metal particles, rust, dirt, carbon, lead and other by-products from the combustion process or from the normal wear and tear of an engine.

Used lubricating oil itself has an inherent value. It is currently recycled in Australia as diesel extender, which is predominantly used in remote area power stations, which rely on large combustion engines for power generation. One of these power stations is at the bottom of Western Australia, at Esperance, and a lot of this product goes to it. Fuel diesel is blended with diesel extender, which is made from recycled waste oil. As I said, waste oil is itself also used as an energy source in the production process for goods. The beauty of this scheme is that if manufacturers collect and recycle waste oil, they, too, may be eligible for product stewardship benefits on what they recycle. There are a number of reasons why we should recycle waste oil. It is currently estimated that between 35 million and 50 million litres of waste oil are unaccounted for. It could be in landfill or in the back shed, or dumped on the ground or tipped down stormwater drains. I have a history in the automotive industry and I would not like to see a return to the bad old days, because I think we have recognised the problem and that the collection and processing of waste oils is the responsible way to take care of it. This bill addresses what will happen into the future, and I think that is responsible from not only a government point of view but also an environmental point of view.

According to US EPA studies, just one gallon of used oil leached into ground water can mean one million gallons of water become undrinkable. Marine animals can be affected by oil concentrations as low as one part per million. With pollution, it is often not just the actual loss of animal and plant life per se that is important but also the economic losses of fishing and recreational industries that must be considered as part of the cost. Not to put too fine a point on it, there is one reason why people do not recycle waste oil‹that is, there are little or no tangible economic benefits. For many there was a cost involved in the recycling of waste oil, in an industry where margins are tight and business is volatile. Aside from the fact that waste oil itself has an inherent value, which was previously unrecognised, these bills assign waste oil a monetary value, thereby ensuring that it will be recycled.

Under these bills, there will be a financial incentive for oil to be collected, recycled and reused. I am confident this will be a great motivator and will result in a substantial amount of unaccounted for oil being recycled and increasing amounts of oil being accounted for. The Product Stewardship (Oil) Bill establishes the eligibility requirements for the benefits and sets out the benefit rates. The bill also sets up a ministerial advisory council, with broad industry and community representation. I think it is important that small independent companies like Wren Oil are soundly represented on this advisory council.

The three consequential bills allow for the collection of the levy on both domestic and imported oil products by amending customs and excise legislation. With the levy set at 5c a litre, to be paid by producers, it is expected to raise around $25 million per year and that the entire amount collected will be distributed back to waste recyclers and the like in the form of benefits. There is currently a 22 per cent wholesale sales tax attached to oil which, upon the introduction of the new taxation system, will be removed and a 10 per cent GST added on. This should mean that, even if waste oil producers pass on the full cost of the levy to consumers, there should still be a reduction in price. There is currently very strong competition in the lubricants market and this factor, combined with the ACCC, is expected to limit price rises.

What I like about this legislation is that it has been done with minimal government interference. By that I mean that the government has corrected a market failure by introducing a financial incentive that the market will respond to. The legislation also recognises that the producer has some responsibility for where the product ends up. Accountability or stewardship rests in partnership with the oil companies, state and federal governments and oil recyclers. I also think it is important to note that the levy will only be used to pay benefits, and the cost of administering the levy will be met by the transitional funds announced by the Prime Minister on 31 May 2000. This will ensure that the levy is kept at the lowest rate possible.

The increased value of waste oil should flow almost immediately to approved recyclers. This will have the effect of improving recyclers’ operating margins, causing them to require greater quantities of oil. Recyclers will be paid by the ATO for each litre of product delivered from waste oil.

I want to touch briefly on the concept of tradeable certificates which will be trialed. A producer of waste oil would be required to hold certificates to show that appropriate recycling occurred for a designated percentage of the product. These certificates would be supplied to recyclers, thus creating a market in the certificates and adding value to the waste oil stream. This system would allow the minister to set target recycling percentages. This is an innovative approach, and I am pleased that it is being trialed, not only because of the potential benefits that it might yield but also so that smaller oil recycling businesses are not exposed to unnecessary risk.

I mentioned Fred Wren of Wren Oil earlier in my remarks. Wren Oil, a waste oil recycler and a recent winner of the South West 3R recycling award, has one of the most extensive used oil collection catchment areas in Australia. Wren Oil is based in Picton, close to Bunbury in the south-west of Western Australia. Wren’s trucks have a pick-up run which goes as far north as Port Hedland‹for those unfamiliar with WA geography, that is 2,000 kilometres away‹and as far south-east as Esperance, which is 600 kilometres from the Wren factory and marks the edge of the Great Australian Bight, and to the goldfields to the east.

Fred was a market gardener and started his oil recycling business from scratch in the early 1980s. He began to collect drums of relatively clean, used hydraulic and gear oil, which he mixed into black sump oil, realising that if oil was clean, someone might be willing to use it. The concept led to a search for processes that would turn waste oil into a product that could be reused in its original application or possibly a new application. Through spare time, research and experimentation, he discovered processes for thin film evaporation and distillation. In 1986, Fred purchased oil cleaning equipment and began selling reconditioned hydraulic and gear oil. A formula was developed to manufacture chainsaw bar oil, and a market developed for both products. With both his sons, Fred began refining sump oil, one drum at a time, on weekends.

In 1992, Wren Oil began to clean black sump oil, utilising chemicals and a centrifuge, which it sold to new users. In 1996, a turnkey module thin filter evaporation distillation re-refinery was installed to recycle oil for new use and eventually back into lubricants. Distillation is at the heart of the re-refining operation. Rather than seeing used oil as a waste product requiring costly disposal, Wren Oil has built its business on the belief that used oil is a fully recoverable resource and should be used again. Wren’s ability to add value to waste oil by using modern refining techniques and to find consumers who are willing to pay a fair price are the only reasons that there is free used oil collection in Western Australia.

Wren Oil adds value, seeks niche markets and, by competing with new fuel and lubricant products, gains the resources to reinvest. Wren Oil is seeking to place recycled oil on the shelf, but there are still some elements, such as colour bodies and carryover elements from re-refined base oil, which need to be eliminated. Wren Oil collects and recycles about 12 million litres per annum, or about 40 per cent of the reported waste sump oil in Western Australia. Oily waste from the Bunbury region industry and mining companies was also accepted when an abatement notice from the WA EPA meant that it could no longer be sent to landfill. Wren Oil also recycles waste from ship bilge pumps‹one to 1.5 million litres each year.

To their credit, they also recycle used oil filters from the mining industry. These large filters contain about half a litre of sump oil and were previously being buried. Wren Oil crushes the thousands of filters, removes the oil, and sends the metal to scrap recyclers. In doing so, they prevent over 300 tonnes of metal from going to landfill every year. Fred Wren has been at the cutting edge of policy in this area and has been involved in the development of the legislation being discussed today.

Fred Wren and Wren Oil support this legislation and have actively pursued stewardship at all levels of government and industry. Wren Oil is an active supporter of the concept that responsibility lasts for the entire life of the product. Through research and development, production, distribution, utilisation and, finally, recycling and appropriate waste management, Wren Oil successfully and safely takes responsibility for recycling and waste management components. Wren Oil intends to continue to upgrade its plant and storage capabilities, completing the installation of equipment that will result in a facility which will be able to process between 25 and 30 million litres per year. This figure is significant because it is WA’s total reported amount of waste oil.

Competition from the gas industry and the threat that lower priced gas supplies present to recyclers are what ultimately drive the market and Wren Oil to prepare for the ultimate investment: placing recycled oil back on the shelf‹which is, of course, the best form of recycling.

Title: PRODUCT STEWARDSHIP (OIL) (CONSEQUENTIAL AMENDMENTS) BILL 2000: Second Reading Date: 27 June 2000 Database: House Hansard Speaker: Stone, Dr Sharman, MP (Murray, Parliamentary Secretary to the Minister for the Environment and Heritage, LP, Government) Page: 18339 Proof: No Source: House

Dr STONE (Murray‹Parliamentary Secretary to the Minister for the Environment and Heritage) (5.35 p.m.) ‹in reply‹In summarising this debate on the Product Stewardship (Oil) Bill 2000, let me thank all of the members who have participated. It has been one of those occasions in the House when each member understood and was supportive of a major new environmental initiative for this country, a country that has seen an inappropriate use of many thousands‹perhaps even millions‹of litres of oil over the last 100 or so years. There have been all sorts of uses of oil‹not all of them good for the environment. When I was younger, I spent many an hour painting stockyards with sump oil. I now understand that that was very bad for my health, and it certainly did not do much for the environment. Those sorts of scenes, hopefully, will be gone with this new and very important initiative.

This package of innovative legislation represents the realisation of a commitment made by the government in the course of negotiations for a new tax system. It contains measures for a better environment. The member for Wills could not resist a bit of a dig while he was complimenting this piece of legislation. In the last few days of panic, the opposition could not resist a reference to the new tax package. Let me remind him that under Labor’s regime there was a 22 per cent wholesale sales tax attached to oils and greases. That goes and we have a 10 per cent tax replacing that. And, if you are in business, that is all refundable back to you as part of the cost of doing business. Not only is this an exceptional piece of legislation in terms of the environmental impacts; it is also very good for the economy, like all things that this government does. I refer now to the contribution made by the member for Forrest, a Western Australian member. He very rightly applauded the work of Mr Fred Wren, an absolute pioneer in the recycling of oil, in particular in that part of remoter Australia. Mr Wren has established a very important and significant business, beginning in a very small way, as the member for Forrest described. He has been very much part of the consultation that has developed this very practical legislation and, we expect, very effective bill. I think it is entirely appropriate that we do acknowledge that in countries like Australia there are lots of small battlers out there who begin with the kernel of a good idea and over the years they do a great job all by themselves. But, when we come to a situation as significant as this, with the need to recycle vast quantities of oil, we have to move beyond small operators in regional parts collecting up oil, sometimes for nothing, given to them by garages and seeing that end up in stockpiles because there is no market for that product and certainly no great incentive to see it moved into a cleaner, recyclable state.

That leads me to the contribution of the member for Calare, who expressed the concern that there are a lot of small regional operators, some of whom have come to him, he tells us, concerned that their small operations collecting this used oil might be jeopardised with a new era where there are incentives to recycle this product and where perhaps you would expect to see greater competition for the used oil, as there is a benefit for the processing and recycling of that oil. The member for Calare also made the comment in passing that he felt he had been somewhat pressured by the time frame of the introduction of this package of bills last Thursday and being debated in the House the following Tuesday. A lot of people wish we would do more of our work in this timely and time efficient fashion.

Let me deal with that issue a bit further and say, before he really does get concerned that he was out of the loop, that in fact there was a very comprehensive process of consultation that went on with this particular piece of legislation which included forums and consultation papers, and the member for Dunkley held up one of those in the House. There was a great deal of one-to-one interaction, including with some of the constituents referred to by the member for Calare. There was also a web site to try and make sure that the industry was fully informed and in fact engaged in the development of this package of bills. I guess we can be very proud and pleased that we have had that time, over six months of very close work with industry, and we have come up with such a practical and we believe very workable bill that is receiving support from both sides of the House. So the member for Calare can be assured that there was an extended period of consultation. It seems a shame that he missed that. Certainly the particular individual with concerns that he referred to was one of those who engaged directly with Environment Australia and was given personal advice, support and information, and he would be more than welcome to continue with that interaction as time goes by if he continues to have concerns.

The member for Calare was anxious that there are stockpiles of unrecycled oil now, and that related to the concerns of some of his small regional collectors. Yes, we are aware that there are these stockpiles of waste oil in storage, and that is one of the reasons why we believe this bill is going to be effective. There has been no incentive for that oil to be moved, sometimes a considerable distance, to get proper reprocessing treatment. So the economic and financial modelling used to design the arrangements has taken this stored oil into consideration. We want to see this oil flushed out and used appropriately. We consider that this will be recycled during the first six months of operation of the new schemes. The benefits system is not about collectors; it is about processing this product and moving it back into the marketplace. So the system does not provide benefits for stored oil but when the oil is moved on to recycling and onsold for use. That is the crux of this new system and that is why we believe it will be far better than the old system, where there might have been some incentive to collect it but not in fact to go on to the next stage.

We are, of course, concerned about the smaller operators out there who have been, as the member for Calare described, doing a very good job, perhaps on quite low margins, collecting used oil, and sometimes from remote locations. We want them to continue to be in business. The particular constituent that the member for Calare referred to, Chris Newcombe, is amongst a number. We have had other representations here today from regional members concerned that those little collectors could go out of business. We can assure you that we believe that people like Mr Newcombe will be financially better off under this new system because there will be recyclers who will be prepared to pay more for the product they are collecting. There will be a market that will be created through the other special green, alternative fuel initiatives that are in the system, which were referred to by the member for Dunkley, and so under our new system Mr Newcombe will be better off, along with other regional families who have taken on a similar sort of business to his.

So what I am explaining is that it is expected that this balanced approach will expand the competition for waste oil, including in particular in remote Australia. Existing waste oil recyclers, with increased financial support under these arrangements, will be in a position to expand their collection services, whether they directly collect or subcontract this service. Prospective new recyclers such as lubricant refiners have indicated that they are also likely to seek waste oil in remote Australia. As I say, this government of all governments is very cognisant of the difficulties that rural Australians face in the tyranny of distance, and we understand the special difficulties of managing waste oil when it is a long way from a major centre and when the costs arising from isolation constrain local solutions to this problem. In response to people like Mr Newcombe and others, we have a transitional assistance fund which will be used to develop ways to improve the acquisition of waste oil in rural Australia. We will build strategic partnerships so that as far as possible we develop best practice rural waste oil acquisition and we will aim to solve remote area barriers so that as much oil as possible is recycled not just close to major centres but in remote regions, too. All of us are aware that one of the major blots on the landscape is the old rusting oil drum leaning hazardously against some old garage wall.

Informal expressions of interest in this area have already been received from jurisdictions and industry members. Once the arrangements commence, we will comprehensively seek partnerships of representatives of rural communities, states and territories, waste oil collectors and recyclers. It is an extraordinarily important thing that we do in ensuring preservation and conservation of the environment of Australia. I thank all those contributors who, with the government today, are very grateful that we have taken this step. I commend the bill to the House.

Question resolved in the affirmative.
Bill read a second time.
Message from the Governor-General recommending appropriation announced.

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