Bills Digest No. 36  2000-01 Product Stewardship (Oil) Bill 2000


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details

Passage History

Product Stewardship (Oil) Bill 2000

Date Introduced: 22 June 2000

House: House of Representatives

Portfolio: Environment and Heritage

Commencement: Parts 1, 3 and 4 commence on Royal Assent.(1) Part 2 commences on the later of 1 January 2001 or Royal Assent

Purpose

To establish a product stewardship system for 'waste' lubricant oil so as to encourage increased recycling and reuse.

Background

Waste Oil as an Environmental issue

About 520 ML of lubricant oil is consumed in Australia each year.(2) It is estimated that a maximum of 260 ML of this is consumed or otherwise lost through combustion in engines, use as process and spray oils, and spillage and leakage. Of the remaining 260ML, it is estimated that 150-165 ML of domestic consumption is currently recycled, with a further 60 ML not recycled or otherwise recovered mainly as it is currently uneconomic to do so. This leaves 35-50 ML of used oil unaccounted for. The 95-110 ML of oil in the unrecycled or unaccounted categories presents a potential hazard to the environment because of inappropriate use,(3) storage or through dumping. According to US EPA studies cited in the Parliamentary debate on the Bill, one gallon of waste oil leaching into groundwater can result in millions of gallons becoming undrinkable.(4) Most States and Territories regulate waste oil in some form, but do not provide financial incentives for increased recycling.(5)

The origin of the Bill

The possible effects of the Government's proposal to reduce diesel fuel excise on the waste oil recycling sector was considered by the Senate Environment, Communications, Information Technology and the Arts References Committee Inquiry into the GST and A New Tax System. Evidence presented to the Committee suggested that a potential negative effect of the changes would be to reduce the incentive to recycle oil.(6) For example, the reduction in the excise would make diesel extender (a major product created from recycled oil) less competitive with ordinary diesel fuel. When the Committee presented its report in March 1999, Democrat members of the Committee recommended that:(7)

a levy be introduced on the sale of lubricating oil to fund re-refining and collection infrastructure.

Subsequently on 28 May 1999 the Prime Minister announced:(8)

'The Commonwealth will fund the development of a comprehensive product stewardship arrangement and provide transitional assistance to ensure the environmentally sustainable management and re-refining of waste oil and its reuse. It will support economic recycling options and the development of stewardship arrangements. Any diesel extenders or other products manufactured from recycled oil will be required to meet the relevant Commonwealth environmental standards.

The long term solution to avoiding environmentally damaging disposal of waste oil is the development of an effective product stewardship partnership linking the oil companies, the States and the Commonwealth.

A stewardship programme will see the oil companies progressively assuming a greater share of these costs'.

The Prime Minister also announced funding for industry transitional assistance from 1 July 2000, consisting of $15 million for each of the following four financial years.

Following(9) consultations with State and Local Governments, oil refiners and the waste oil collection and recycling sector, the Commonwealth released a discussion paper in October 1999 and invited comments over a three week period. An expert focus group met on 11 February 2000 to 'validate the efficiency and equity of the draft Bills for the product stewardship system and to consider the implementation issues'. Subsequent to this, two industry seminars were held in Adelaide and Brisbane.

The Bill was introduced in the House of Representatives on 22 June 2000 and passed without amendment on June 27. It similarly passed the Senate without amendment on 29 June.

The Oil Stewardship scheme

The oil stewardship scheme actually consists of three main components. These are:

  • the imposition of a set levy on oil producers
  • the payment of a variable stewardship benefit(10) to oil recyclers, and
  • the trial of tradeable certificates for recycled / reused oil. The introduction of tradeable certificates is not dealt with by this package of Bills(11) and will require future legislative action. However, the Commonwealth has given no commitment as yet that it will proceed with this part of the scheme.

Under the levy component, all new and high grade recycled lubricant that is produced for domestic consumption will be subject to a five cent a litre / a kilo excise. Lubricant that is imported will be subject to a similar five cent a litre / a kilo customs duty. This essentially covers the anticipated cost of stewardship rebates.(12)

Under the stewardship benefit component, once the lubricant is used and subsequently recycled, recyclers may claim a variable financial benefit according to the type of product the waste oil is recycled into. For example, recycling the waste oil to a standard that it could re-used as engine lubricant would attract a rebate of 50c a litre. If the recycled product were suitable only to be reused as a low grade industrial burning oil, the rebate would only be 3 cents a litre.(13)

Implementation of the Oil Stewardship scheme

At the time of writing (August 2000), a number of matters regarding the implementation of the scheme have not been decided by the Commonwealth. However, this section provides whatever details are available.

The levy will be collected by the Australia Taxation Office (ATO) using its existing administrative and compliance systems for excise and duty collection of other petroleum products. The levy will be placed on the finished product only.

With regard to the stewardship benefit, the actual legal mechanism underpinning the administration of this aspect of the scheme has already been established under separate legislation. That legislation is the Product Grants and Benefits Administration Act 2000 (the PG&BA Act). While the PG&BA Act was established primarily to administer the fuel grants scheme designed to counteract the effect of the GST on petrol prices in regional and remote areas, it also provides the basis for administering other relevant grant schemes.(14)

While Part 2 of the Bill contains clauses about entitlement to claim stewardship benefits, it appears that the details regarding eligibility criteria have yet to be developed. For example, Environment Australia has stated that:(15)

The definition of 'recyclers' will be developed under the legislation. Industry will be invited to assist government in determining "what is recycling", with the best available science, initially through determining mandated codes of practice for waste oil collection and use, and ultimately in determining mandated product standards. The code of practice is likely to be in effect at the commencement of the system, with the standards to be developed over the first year of the four-year implementation period.

Provisions for codes, standards and differentiation will be reviewed and revised to take account of:

  • emerging environmental performance requirements and information relating to waste oil utilisation; and
  • new technologies in the utilisation of waste oil.

There are two other major implementation matters waiting resolution.

The first is the Oil Stewardship Advisory Council (the Advisory Council). The membership and function of the Council is discussed in the Main Provisions. However, it is understood that members should be appointed within a few months.

The second matter is how the foreshadowed $60 million of transition funds will be used. Potential uses already flagged by the Government include:(16)

setting up costs for the Minister (especially incremental costs of an Australian Taxation Office database), R&D, public information and education, infrastructure development, setting of codes of practices, standards, assistance to States and Territories in waste oil tracking and regulatory practices etc...They might also possibly be used meet financial shortfalls (in the first few years of operation, when the effect of existing stored waste oil is most evident) in the unlikely event of levy disbursements exceeding levy income (despite the modelling and data gathering effort).

The Advisory Council will also presumably provide input on the use of the transition funds.

In relationship to the possible trial of a tradeable certificate system, the Explanatory Memorandum comments:

The Minister would trial the certificates by issuing certificates to recyclers based on their product output volume. The Minister would set a target recycling percentage for virgin oil producers and importers to achieve in an accounting period. At the end of the accounting period producers and importers/blenders would be required to hold certificates to the volume that represents this percentage of their production. Producers and importers would be able to purchase certificates through the Minister or authorised third party broker. Due to the relatively new nature of tradeable certificates in environmental policy, it is proposed to trade the certificates initially at a zero or nominal value until there is less volatility in the market and storage issue have been resolved. The tradeable certificate trial results would be presented to government prior to implementation.

The system will entail outsourcing appropriate components to independent third parties, eg the management of the tradeable certificates system could be administered by a broking firm.

As already mentioned, the Government has however given no commitment to proceeding with a trial of tradeable certificates.

Main Provisions

Part 1 covers preliminary matters.

Clause 3 sets out the objectives of Bill. These are:

(a) to develop a product stewardship arrangement for waste oils

(b) to ensure the environmentally sustainable management, re-refining and reuse of waste oil, and

(c) to support economic recycling options for waste oil.

Clause 4 provides that the Bill applies in all external Territories.

Clause 5 provides that the States and Territories are bound by the Bill but cannot be prosecuted for an offence under the Bill.

Clause 7 provides that the Commissioner of Taxation is responsible for administering the Bill. The effect of this is that the Bill becomes a 'taxation law' under the Taxation Administration Act 1953.

Part 2 covers entitlements to stewardship benefits.

Clause 8 requires that a person claiming a stewardship benefit must be registered, or have applied for registration under the PG&BA Act.

Clause 10 relates to the making of regulations to prescribe the amount of benefit applicable to the various recycled oil products. In particular, subclause 10(4) requires that the Minister must consider the following matters before the regulations are made: the amount raised by the levy under the Customs Tariff Act 1995 and Excise Tariff Act 1921,(17) and any relevant environmental matters related to recycling. In addition, the Minister may also take into consideration advice from the Advisory Council proposed to be established under Part 3 of the Bill.

Part 3 Establishes the Advisory Council.

Clause 12 sets out the Advisory Council's functions. Essentially these are to advise the Minister on various aspects of the scheme, including any matters specifically requested by the Minister.

The Council consists of a least 10 members: subclause 13(1)

Subclause 14(2) states that the Minister 'must ensure' that the Council includes members representing groups with interests in the oil and oil recycling sector(18). However subclause 13(3) provides that 'the performance of a function...is not affected' if one or more of the groups listed under subclause 14(2) is in fact not represented on the Council. Subclause 14(3) specifies that no more than half of the Council can be in the employment of the Commonwealth or a Commonwealth agency. The Council Chair cannot be employed by the Commonwealth or a Commonwealth agency: subclause 15(2).

Clause 16 covers terms of office. Members, including the Chair, are appointed on a part-time basis for a term specified in the instrument of appointment. This term cannot exceed three years, although there seems to be no bar to reappointment at the end of this term.

Clause 21 sets out the grounds for termination of appointment by the Minister. Paraphrasing the main grounds, they are: misbehaviour or physical or mental incapacity, bankruptcy, excessive absence from Council meetings without being granted leave of absence, ceases in the Minister's opinion to be an appropriate representative of a (subclause 14(2)) group, failure (without reasonable excuse) to comply with the disclosure requirement of a direct or indirect pecuniary interest in a matter being considered by the Council.

The Council must meet at least once a year, but more frequently if 'necessary for the efficient performance of its functions': subclauses 22(1) and (2). Meetings must also be convened upon the request of five of more members or when required by the Minister: subclauses 22(3) and (4). Issues are decided at meetings by majority voting: clause 25.

Clause 26 provides that the Council may, subject to other provisions in the Bill, determine its meeting procedures.

Under clause 27 issues may also be decided without convening a normal meeting if a majority of Council members sign an identical document stating they are in favour of the relevant resolution set out in that document.(19)

Clause 29 covers disclosures of interests. Subclause 29(1) provides that a Council member who has a direct or indirect pecuniary interest in a matter due for consideration at a meeting must disclose the nature of the interest at a meeting 'as soon as possible after the relevant facts have come to the member's knowledge'.(20) The Council may then decide whether or not that member should be excluded from any deliberation and decision on the matter: subclause 29(2). The Minister may however either direct the Council to rescind a decision to exclude a member or, where the Council has not yet made a decision, direct that it not exclude them: subclause 29(4).

Clause 31 protects members from any civil suit in relation to their Council activities, providing members act in good faith.

Part 4 deals with miscellaneous matters

Clauses 33 and 34 allow for the Secretary and Minister(21) respectively to delegate their powers to a senior executive service (SES) officer.(22) This person is still subject to the direction of the Secretary and Minister.

Clause 35 provides for an annual report on the product stewardship scheme to be tabled in Parliament.

Clause 36 provides that an independent review on the operation of the Bill (including the extent to which its objects have been achieved) and related Customs and Excise legislation must be undertaken within four years of the Bill commencing. Further reviews must occur at least every four years. The review report must be tabled in both Houses of Parliament within 15 sitting days of receipt by the Minister. An 'independent review' is defined in subclause 36(4) as a review 'undertaken by 2 or more persons who, in the Minister's opinion possess appropriate qualifications to undertake the review and include one or more persons who are not Australian Public Service employees'.

Endnotes

  1. Royal Assent was given on 6 July 2000.
  2. The following figures on consumption and recycling are taken from the Explanatory Memorandum to the Bill, p. 3.
  3. Such as use on unpaved roads to reduce dust.
  4. The Hon Mr Geoffrey Prosser, House of Representative Debates 27 June 2000 p. 16901
  5. Explanatory Memorandum to the Bill, p. 7.
  6. Senate Environment, Communications, Information Technology and the Arts References Committee, Inquiry into the GST and a new Tax System, Paragraphs 3.146-3.158. See http://www.aph.gov.au/senate/committee/erca_ctte/gst/chp3.htm
  7. Ibid. Recommendation (a) under the heading The Environment - other measures. See http://www.aph.gov.au/senate/committee/erca_ctte/gst/chp7.htm
  8. Measures for a better Environment, Statement by the Prime Minister 28 May 1999.
  9. The following information on consultation is taken directly from the Environment Australia electronic publication 'Issues and frequently asked questions: Product Stewardship Arrangements for Waste Oil' at http://www.environment.gov.au/epg/oilrecycling/faqs.html Published March 2000.
  10. The stewardship benefit is effectively a type of rebate or grant.
  11. That is, the Product Stewardship (Oil) Bill 2000, Product Stewardship (Oil) (Consequential Amendments) Bill 2000, Excise Tariff (Product Stewardship for Waste Oil) Bill 2000, Customs Tariff (Product Stewardship for Waste Oil) Bill 2000,
  12. Second reading speech, the Hon Sharman Stone, Senate Debates, 22 June 2000, p. 18027.
  13. According to Environment Australia, this 'hierarchy' of rebates 'broadly reflects the recycling effort and investment required to make products of better quality and with improved environmental outcomes. In determining appropriate benefit categories the principle is that benefits should only be paid where they might serve as an incentive for increased recycling activity - that is, not be simply rewarding existing good practice.' See http://www.environment.gov.au/epg/oilrecycling/updateaug.html
  14. More information on the PG&BA Act can be found in the relevant Bills Digest at http://www.aph.gov.au/library/pubs/bd/1999-2000/2000BD157.htm
  15. See 'Issues and frequently asked questions: Product Stewardship Arrangements for Waste Oil' Op. cit.
  16. Ibid.
  17. Presumably this is directed towards keeping the scheme as cost neutral as possible to the Government over the longer term.
  18. The membership must include representatives of: the Taxation Commissioner, the Commonwealth, a national organisation representing oil producers, a national organisation representing oil recyclers, the users of recycled oils, the Australian and New Zealand Environment and Conservation Council, local government, a national consumer organisation, and a national non-governmental organisation that has a substantial interest in sustainable industry.
  19. There is no requirement in the Bill specifying that all members must be consulted where a resolution is being considered without convening a normal meeting. Presumably this would be covered by procedures adopted by the Council under clause 26.
  20. It therefore appears that the disclosure need not be done immediately upon it becoming known to the member.
  21. The Minister can also delegate to the Secretary, who is technically not a SES officer.
  22. This includes someone acting in the SES position.

Contact Officer and Copyright Details

Angus Martyn
11 September 2000
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 2000

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Published by the Department of the Parliamentary Library, 2000.

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