1. Background
1.1 Purpose
The Biofuels exemptions framework and guidelines (the Guidelines) provide information about the exemptions framework that applies under the Biofuels Act 2007 (the Act) and the Biofuels Regulation 2022 (the Regulation).
The Guidelines do not limit nor expand the range of circumstances that may justify the grant of an exemption. The Guidelines set out the approach that will generally be taken to exemption applications, but each application will be considered in relation to its own facts and circumstances.
1.2 What are the biofuels requirements?
The Act and the Regulation require volume fuel retailers to ensure that:
- 6% of the total volume of petrol sold is ethanol (in petrol-ethanol blend)
- 2% of the total volume of diesel sold is biodiesel,1 and
- at each of the volume fuel retailer’s service stations, petrol-ethanol blend is available for sale in a manner that makes it as accessible to customers as regular unleaded petrol or any other type of petrol at that service station.
These 3 requirements are referred to in this document as the minimum biofuels requirements.
A volume fuel retailer is a person who operates or controls the operation of:
- a volume fuel service station, or
- 20 or more service stations, none of which are volume fuel service stations.
A volume fuel service station is a service station at which:
- 3 or more types of petrol or diesel fuel are sold, and
- the total volume of petrol and diesel sold at the service station exceeds 1,800,000 litres over a 6-month period for 2 consecutive periods.
Volume fuel retailers must also register with NSW Fair Trading and provide reports detailing the total volume of fuels sold during each 6-month period.
2. Exemption from the minimum biofuels requirements
A volume fuel retailer who fails to comply with a minimum biofuel requirement is guilty of an offence, unless they hold an exemption. However, there are defences to a prosecution for failure to comply with a minimum biofuel requirement, which are set out in section 9A(2) of the Act.
2.1 Grounds for exemption
A volume fuel retailer may apply for an exemption from a biofuels requirements, including on the following grounds:
- In the case of an exemption from the requirement to sell 6% ethanol, the retailer has taken all reasonable action to:
- upgrade the retailer’s infrastructure to enable it to distribute sufficient petrol-ethanol blend to ensure compliance
- ensure the availability of facilities for the sale of petrol-ethanol blend at the retailer’s service stations
- secure sufficient supplies of ethanol or petrol-ethanol blend to comply (on a continuing basis)
- market petrol-ethanol blend (on a continuing basis), including by ensuring that at each service station at which E10 is sold, the price of E10 is conspicuously displayed on a sign alongside the price of other fuels
- ensure that all E10 sold by the retailer contains at least 9% ethanol (on a continuing basis), or
- In the case of an exemption from the requirement to sell 2% biodiesel, the retailer has taken steps mirroring 1.1-1.4 above.” (See clause 10 of Biofuels Regulation), or
- The retailer has otherwise taken all reasonable steps to comply with the biofuels requirements, or
- In the case of an exemption from the requirement to sell 6% ethanol or offer a petrol-ethanol blend, it is not economically viable for the retailer to comply:
- because the wholesale price of ethanol exceeded the reasonable wholesale price determined by IPART
- because of the price at which the retailer was reasonably able to produce or obtain petrol-ethanol blend for retail sale
- on any other grounds, or
- In the case of an exemption from the requirement to offer a petrol-ethanol blend, it is not economically viable for the retailer to comply because:
- the retailer, despite their best efforts, has not been able to secure finance to install or upgrade infrastructure
- the capital costs of installing or upgrading infrastructure made it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs
- if the service station is in a remote or regional area, the recurrent costs of transporting petrol-ethanol blend to the service station made it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs
- the combination of the costs of infrastructure upgrades and recurrent transport costs (for stations in a remote or regional area) made it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs, or
- In the case of the requirement to sell 2% biodiesel, it is not economically viable to comply:
- because of the price at which the retailer is reasonably able to produce or obtain biodiesel blend for retail sale, or
- on any other grounds, or
- In the case of any of the biofuels requirements that:
- an exemption is reasonable to allow the retailer a period within which to take the steps required to establish a defence for failure to comply
- compliance may result in a risk to public health and safety, or
- There are other extraordinary circumstances justifying the grant of the exemption.
2.2 Exemption application process
2.2.1 Prospective or retrospective
Exemptions can be prospective or retrospective. Prospective exemptions are preferable and provide certainty for a volume fuel retailer.
2.2.2 How to apply
Exemption applications must generally be made using the online portal available to service station operators. A link to the online process is available on the NSW Fair Trading website here
2.2.3 The Biofuels Expert Panel
All exemption applications are referred to the Biofuels Expert Panel established under the Act.
The Expert Panel meets half-yearly to consider such applications.
The Expert Panel is currently chaired by the Commissioner for Fair Trading and includes expert representatives from Government and the biofuels and fuel industry.
2.2.4 Timeframes
A final decision on an exemption application is usually made within 60 days of its receipt.
2.2.5 Exemption duration
The maximum period for which an exemption may be granted is 2 years.
This does not prevent a further application from being lodged upon expiry of an exemption and another exemption from being granted.
Where the retailer is already complying with section 8 of the Act by offering a petrol-ethanol blend at their volume fuel service stations exemptions will ordinarily be granted for a 12-month period.
Where the retailer is not complying with section 8 of the Act – that is, failing to offer a petrol-ethanol blend at their volume fuel service stations - exemptions will typically only be granted for a 6-month period.
There may be exceptions to the above duration periods.
The Expert Panel will consider any relevant factors in making a recommendation regarding the duration of an exemption.
2.2.6 Conditions
An exemption can be granted subject to conditions. It is an offence to contravene a condition of an exemption.
2.2.7 Partial exemptions
An exemption can be granted as a partial exemption specifying a percentage that is less than the 6% ethanol mandate or the 2% biodiesel mandate.
2.2.8 Variation or revocation of an exemption
An exemption that has been granted, or a condition of an exemption, can be varied or revoked at any time by notice in writing to the volume fuel retailer concerned.
2.2.9 Publication of exemption data
General information regarding the exemptions that have been granted is made available by NSW Fair Trading.
3. Supporting documentation for exemption applications
3.1 General documentation requirements
In order to avoid retailers being required to attach large quantities of documentation to exemption applications, volume fuel retailers will be asked to declare certain facts that support the application, but generally will not be asked to attach supporting documentation.
Retailers will, however, be required to sign an online declaration that they either hold or can readily obtain the relevant documentation to support the facts stated in their exemption application.
NSW Fair Trading may carry out spot checks to check the claims made in exemption applications and may request production of supporting documentation in particular cases.
3.2 Specific requirements – grounds for exemption
Ground 1
Exemption from requirement to sell 6% ethanol where the retailer has taken all the steps set out below.
Step 1. Taking all reasonable action to upgrade the retailer’s infrastructure to enable it to distribute sufficient petrol-ethanol blend to ensure compliance
The retailer will need to declare that it has provided tanks and bowsers capable of holding and delivering petrol-ethanol blend. This may include replacement of a tank if necessary.
If the retailer has an exemption from the requirement to make petrol-ethanol blend as accessible as any other type of petrol, information about this exemption will need to be provided.
Step 2. Taking all reasonable action to ensure the availability of facilities for the sale of petrol-ethanol blend at the retailer’s service stations
The retailer will be asked to declare that it has provided tanks, bowsers and nozzles for delivering petrol-ethanol blend to retail customers and that it has complied with the requirement to make petrol-ethanol blend as accessible as any other type of petrol at the service station.
Data in FuelCheck showing that E10 and/or E85 is being offered can be checked, as well as information about the number of bowsers and nozzles in the retailer’s half-yearly return.
If the retailer has an exemption from the requirement to make petrol-ethanol blend as accessible as any other type of petrol, information about this exemption will need to be provided.
Step 3. Making all reasonable efforts (on a continuing basis) to secure sufficient supplies of ethanol or petrol-ethanol blend to comply
The retailer will be asked to declare that it is making these efforts on an ongoing basis.
This claim may be checked against data on FuelCheck, which shows petrol-ethanol blend being offered, and the half-yearly returns showing the amount of ethanol sold, along with the number of bowsers and nozzles.
If a petrol-ethanol blend is not being offered, and there is no exemption from the requirement to offer a petrol-ethanol blend, the retailer will need to have evidence that it has attempted and continues to attempt to obtain sufficient ethanol and an explanation of why a petrol-ethanol blend is not being offered.
The retailer is expected to be able to have evidence of supply contracts or supply quotes if requested but is not expected to breach the terms of existing supply contracts by seeking supply elsewhere.
Step 4. Taking all reasonable action (on a continuing basis) to market petrol-ethanol blend, including by ensuring that at each service station at which E10 is sold, the price of E10 is conspicuously displayed on a sign alongside the price of other fuels
The retailer will be asked to declare that the price of E10 is displayed on a price board so that it is readily seen by motorists approaching the service station as required by the Fair Trading Regulation 2019. The retailer will also be asked to declare that it is taking other reasonable steps to market petrol-ethanol blend and outline what these steps are.
Step 5. Taking all reasonable action (on a continuing basis) to ensure that all E10 sold by the retailer contains at least 9% ethanol
A retailer will be asked to declare that they have taken all reasonable action to satisfy themselves that the product they obtain and sell that purport to be E10 contains at least 9% ethanol and complies with one of the sustainability standards prescribed in the regulation.
Ground 2
Exemption from requirement to sell 2% biodiesel on the basis that the retailer has taken steps 1-4 above (mirroring biodiesel in place of E10).
A biodiesel blend that contains up to 5% biodiesel in Australia does not need to be labelled as biodiesel. It can be labelled and marketed simply as diesel. Accordingly, any retailer who sells diesel will not necessarily need to upgrade infrastructure to sell biodiesel but can sell a B5 blend.
The retailer will need to declare that it is making all reasonable efforts on an ongoing basis to secure sufficient supplies of biodiesel blend.
When there is a significant shortage of biodiesel, the Panel will take this into account.
Ground 3
Exemption from the requirement to sell 6% ethanol or 2% biodiesel or to offer a petrol-ethanol blend on the ground that the retailer has otherwise taken all reasonable steps to comply with the biofuels requirement.
The retailer will need to explain how it has otherwise taken all reasonable steps to comply.
Ground 4
Exemption from the requirement to sell 6% ethanol or offer a petrol-ethanol blend on the ground that it is not economically viable for the retailer to comply:
- because the wholesale price of ethanol exceeded the reasonable wholesale price determined by IPART
- because of the price at which the retailer was reasonably able to produce or obtain petrol-ethanol blend for retail sale.
The retailer will need to provide information about the price at which it can obtain petrol-ethanol blend and about its supply contracts.
A retailer is not expected to breach the terms of existing supply contracts by seeking supply elsewhere.
Ground 5
Exemption from the requirement to offer a petrol-ethanol blend on the grounds that it is not economically viable for the retailer to comply because:
- the retailer, despite their best efforts, has not been able to secure finance to install or upgrade infrastructure
- the capital costs of installing or upgrading infrastructure made it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs.
The requirement to make petrol-ethanol blend as accessible as any other type of petrol will be taken to mean that, nozzles of petrol-ethanol blend are conveniently located across the forecourt of the service station, and in comparable numbers to the other most available petrol product being offered for retail sale.
An exemption on the basis of inability to secure finance for infrastructure costs or excessive costs for infrastructure upgrades will only be considered in relation to the most cost-effective means of compliance with the biofuels requirements at that site. For example, flushing out an existing tank and using it to supply E10 would be a more cost-effective means of compliance, where this is possible, than installing a new tank. It will be up to the retailer’s discretion to decide which product to replace with E10, if the retailer chooses this means of compliance.
The retailer will need to explain whether the use of existing tanks to offer a petrol-ethanol blend is possible and which aspects of the infrastructure at the service station will need to be upgraded to comply with the biofuels requirements.
The retailer will also be asked about the terms of any franchise or commission agent agreement they are a party to, in particular how the cost of infrastructure upgrades due to regulatory changes would be apportioned. If the costs are to be borne by someone other than the volume fuel retailer, then the retailer will be unlikely to receive an exemption on the grounds of finance for or costs of infrastructure upgrades.
In the case of an exemption for inability to obtain finance, the retailer may be asked to obtain 2 quotes for finance and provide a declaration that either the finance applications were rejected, or finance was offered on unaffordable terms.
For an exemption on the grounds that the costs of installing or upgrading infrastructure make compliance economically unviable, the retailer will be asked to provide a declaration containing information about the retailer’s net average annual profit for the last 2-year period. The retailer will also be asked to obtain 2 quotes for the necessary infrastructure changes and provide a declaration about these quotes.
If the cost of upgrades is more than 25% of average net annual profit over the last 2 year period, the Panel will closely consider providing an exemption, especially if the retailer is a small business. The retailer will also be asked to provide any further information which may assist the Panel to determine whether an exemption is appropriate. This could include information about the retailer’s long and short term assets and liabilities.
Ground 6
Exemption from the requirement to offer a petrol-ethanol blend on the ground that it is not economically viable for the retailer to comply because the service station is in a remote and regional area, and the recurrent costs of transporting petrol-ethanol blend to the service station make it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs.
For an exemption from the requirement to offer a petrol-ethanol blend on this ground, the retailer will be asked to provide a declaration about the costs of transporting ethanol or petrol-ethanol blend to the service station from the closest available source.
The retailer may be asked to obtain a quote from 2 transport providers if this is feasible.
Ground 7
Exemption from the requirement to offer a petrol-ethanol blend on the ground that it is not economically viable for the retailer to comply because the combination of the costs of infrastructure upgrade and recurrent transport costs (for stations in a remote or regional area) made it not economically viable to comply, considering the price that would have to be charged for the petrol-ethanol blend to recover those costs.
Refer to the relevant information contained in Grounds 5 & 6 above.
Ground 8
Exemption from the requirement to sell 6% ethanol or offer a petrol-ethanol blend on the grounds that it is not economically viable for the retailer to comply on any other grounds.
Grounds that may justify an exemption in this category include:
- other significant regulatory compliance costs have been incurred in the last 2 years and further substantial costs for infrastructure upgrades will be necessary to comply with the requirement to offer a petrol-ethanol blend
- infrastructure upgrades will require closure of a service station for 28 or more days, or
- any other grounds that mean it is not economically viable to comply.
The retailer will need to explain why it is not economically viable to comply and make a declaration about the financial basis of this claim. The retailer may be asked for documentary evidence to support this declaration.
Ground 9
Exemption from the requirement to sell 2% biodiesel on the ground that it is not economically viable for the retailer to comply because of the price at which the retailer is able to produce or obtain biodiesel blend for retail sale.
The retailer will be asked to provide information about the price at which it can obtain biodiesel or biodiesel blend and about its supply contracts.
A retailer is not expected to breach the terms of existing supply contracts by seeking supply elsewhere.
Ground 10
Exemption from the requirement to sell 2% biodiesel on the ground that it is not economically viable for the retailer to comply on any other grounds.
The retailer will be asked to provide a declaration about these grounds and why they mean it is not economically viable to comply, and to hold evidence to support this declaration.
Ground 11
Exemption from any of the biofuels requirements on the ground that an exemption is reasonable to allow the retailer a period within which to take the steps required to establish a defence for failure to comply.
An exemption on this ground may be appropriate when a service station becomes subject to the biofuels requirements for the first time and needs time within which to take all reasonable steps that will be necessary to comply or to establish grounds for an exemption.
The retailer will need to provide an explanation of why it is reasonable to provide time within which to take these steps.
Ground 12
Exemption from any of the biofuels requirements on the basis that compliance may result in a risk to public health and safety.
An exemption on these grounds may be justified, for example, in situations where disturbance of an underground fuel tank is unsafe, or in any other situation where compliance may result in a risk to public health and safety.
The retailer will be asked to provide a declaration as to the grounds on which the exemption is sought and should hold evidence to support that declaration.
Ground 13
Exemption from any of the biofuels requirements on the grounds that there are other extraordinary circumstances justifying the grant of an exemption.
Examples of circumstances that may justify the grant of an exemption on this ground could include:
- that the retailer requires development approval to comply, and that approval has been refused, or the retailer is awaiting that approval
- infrastructure upgrades are necessary to comply, but cannot commence for a specified time period because, despite their best efforts, the retailer has been unable to engage a contractor at this time to undertake the upgrades
- the retailer or their site has recently been subject to a natural disaster or other catastrophic event, and this has affected their ability to comply
- closure of the service station for the period necessary to carry out upgrades will cause hardship to the local community, for example, because the retailer is the sole fuel supplier in a remote or regional location
- the retailer cannot obtain appropriate insurance to cover upgrade works
- the retailer leases a service station site, and the lease will expire in the near future
- the constraints of a service station site make infrastructure upgrades impractical
- where tank replacement is necessary, the remaining useful life of the tank, as estimated by an appropriately qualified expert, would likely exceed four years, or
- the retailer is a specialist supplier, for example of marine fuel.
Footnote
- Only ethanol or biodiesel that complies with the sustainability standards prescribed in section 4 of the Biofuels Regulation 2022 can be counted towards the percentage of ethanol or biodiesel sold.