Debate resumed from 25 March 2009.

Mr GEOFF PROVEST (Tweed) [10.10 a.m.]: I speak on the Biofuel (Ethanol Content) Amendment Bill 2009. The objects of this bill are to triple the volumetric ethanol mandate of New South Wales to 6 per cent in January 2010, phase out regular unleaded petrol by July 2011 and introduce a 2 per cent volumetric biodiesel mandate, which will rise to 5 per cent in 2012 when supply is available. The Liberal-Nationals Coalition does not oppose this legislation. As stated yesterday by the Leader of The Nationals, the bill highlights some critical issues that need to be addressed to achieve those mandates. Ethanol production in Australia has doubled over the past two years. In November 2007 four ethanol plants operated with a capacity total of 245 million litres per year. Current biodiesel capacity is 246 million litres from five plants. I will focus on the failure of the Government to supply funding to investigate further research into the ethanol two-phase production.

Recently, I spoke extensively with Robert Quirk, who is a colleague of mine. Robert is the Australian representative on the Roundtable for Sustainable Sugar Cane Production and has just been reappointed to that board. He has just returned from Brazil. Brazil uses a large volume of ethanol in its fuel system. Robert informed me that Holden exports its Statesman vehicles to Brazil, but they require changes to the carburettor and fuel lines because of corrosion caused by ethanol. Brazil produces just one litre of ethanol from which it gets six to eight litres of a deoxygenated liquid known as vanass. Currently, Brazil ships deoxygenated liquid through open canals for storage in certain areas in that region. Under current New South Wales environmental proposals the North Coast sugar industry could not participate in ethanol production due to the large amount of vanass it would create. There is no safe way to dispose of it.

Queensland has only one plant at Sarina, which spends large amounts of money to store this deoxygenated liquid before it goes through a rehabilitation process. The Sarina plant has produced ethanol since 1945. This is the big difference between our production of ethanol and the rest of the world. Brazil disposes of this product into many of its rivers. We all know that deoxygenated water in rivers results in large fish kills. The United States Government currently is spending large amounts of money to investigate the manufacture of ethanol through using plants such as switchgrass, which is virtually a weed. The United States is trying to harvest that plant to create ethanol from it.

New South Wales currently uses two methods to produce ethanol. For the first method, sugar crops or starch are grown and ethanol is produced from the fermentation process. For the second method, plants are grown that naturally produce oils like Jatropha and algae. These oils are heated to reduce their viscosity, after which they are used directly as fuel for diesel engines. The problem for the Tweed electorate is that sugarcane production at Condong and Broadwater has invested heavily in partnership with the New South Wales Government and Federal Government in cogeneration. Currently all of our biogas is used in cogeneration. Production at Condong currently supplies electricity for around 45,000 homes. It is a very environmentally friendly process. We also use our tertiary sewage effluent for cooling.

No jobs will be created in northern New South Wales through the increased demand for ethanol. However, within our area is Southern Cross University, which has set up a biofuel cooperative research centre. It is an extraordinarily important centre, but after discussions with key personnel it was revealed that the centre lacks funding for further research because sugarcane is not a viable alternative for ethanol production, as it is in many other countries. We need money for biomass research and for the development of dedicated energy crops and waste stream utilisation. The Feedlot Association opposes the increase to the ethanol mandate because it believes the 10 per cent mandate will divert 45 per cent of New South Wales grain away from food production in time of drought. The last thing we want to do is force up food prices.

A similar thing is occurring in America with much of its corn product being diverted into ethanol. There has been a steep increase of nearly 100 per cent in corn exports to Mexico. That has had a negative effect for the United States. The ethanol mandate is good for the environment, and we need to build up this industry. Members have spoken highly of the positive effect for the environment. We need to ensure the supply of product to enable ethanol production. I live very close to the Queensland border. Similar initiatives have been undertaken in Queensland. The Queensland Government has handled this issue far better by applying a number of resources. Ethanol maidens at petrol stations hand out stickers to patrons. Acceptance by the driving fraternity and users of ethanol in Queensland is far greater than in New South Wales. It has been done in Queensland; it is not hard.

We must increase our research into turning other food or plant products, such as cellulose, into ethanol. The Brazilian example is a clear indicator that we need to research the issue properly and move away from using only sugarcane. We have no spare sugarcane within New South Wales, particularly in the northern region and in my electorate because the biomass generator is used for electricity. While I do not oppose this legislation, I would like the Government to provide proper funding and infrastructure so the industry can be developed in a sustainable way and promote market acceptance. That is what Queensland did. A number of players in the industry have expressed these views to me, mostly from the cane industry, which has experienced fairly hard times recently. In conclusion, I reiterate that further funding must be allocated to research. Otherwise, this process will result in dire consequences for the future of New South Wales.

Mr FRANK TERENZINI (Maitland) [10.19 a.m.]: I support the Biofuel (Ethanol Content) Amendment Bill 2009. The bill implements the second phase of the Government's strategy to promote the production and use of renewable biofuels in New South Wales. This second phase mandates a sustainable level of production of first-generation biofuels that is optimal for use in the current vehicle fleet. It will establish competitive ethanol and biodiesel markets that will provide the stable base on which New South Wales can build to become a leader in the rapidly developing second-generation technologies and feedstocks.

In my electorate of Maitland a local company, Biodiesel Industries Australia [BIA] at Rutherford, makes a substantial contribution to the supply of biodiesel in New South Wales. The BIA site has been operating for the past five years to become a leader in this technology. It has a current capacity for 20 million litres per annum and employs up to 32 people, both directly and indirectly. I have visited the site. It is an excellent operation and it has also gained approval from many stakeholders in the industry. The company is continually working on developing new processes and products, and works with both rural and academic communities.

The volumes of ethanol and biodiesel that the bill mandates can be delivered sustainably because their production can be totally integrated with food production. These biofuels will be produced sustainably, because at current oil and biofuel feedstock prices no biofuel producer can afford to waste any of the energy or nutritional value of the feedstock—it will all be transformed into energy, food, livestock feed or other valuable products. And these biofuels must be produced sustainably. The bill also introduces a new requirement that to be counted under the mandate the biofuels must meet a sustainability standard. The sustainability standards will be detailed in the regulations so they can be kept up to date. I will address this issue further later.

The Manildra Group's Nowra plant is the largest ethanol plant in Australia and is part of an integrated grain processing facility that produces gluten, starch, glucose and liquid carbon dioxide, as well as ethanol for fuel industrial and beverage use. The proposed National Biofuels Group soy processing plant at Port Kembla will produce not only biodiesel but also soy meal to replace the hundreds of thousands of tonnes that are imported annually for poultry and pig food. All other plants that are currently being considered for development in New South Wales integrate food and fuel production to derive the maximum value from the feedstocks used.

A number of environmental benefits will flow from increased biofuels usage. Biofuels will reduce greenhouse emissions by replacing fossil fuel with renewable fuel produced from biomass. The greenhouse benefits of biofuels are highly project dependent. The actual greenhouse outcomes depend on the feedstocks used, the processing technology and energy sources, the allocation of greenhouse impacts between the various co-products, and the transport distances and modes involved in the movement of inputs and product. However, based on research done by the CSIRO it is estimated that replacing all unleaded petrol with E10 will reduce the total greenhouse emissions from all petrol-engine vehicles by about 2 per cent. Replacing 5 per cent of our diesel with biodiesel will reduce the total greenhouse emissions from diesel-fuelled vehicles by around 1.3 per cent. The proposed mandates will together reduce carbon dioxide emissions by about 450,000 tonnes per year—that is equivalent to taking 1,900 buses and trucks and 77,000 light vehicles off our roads.

Biofuels also burn cleaner than petroleum fuels, reducing toxic emissions, especially carbon monoxide and particulates. Fine particles are a major cause of illness and death and are responsible for 97 per cent of the health impacts of emissions from vehicles. Federal Government trials have recently demonstrated that E10 petrol will reduce fine particle emissions from petrol-engine vehicles by an average of 33 per cent. Five per cent or B5 blend biodiesel will reduce particle emissions from diesel-engine vehicles by 4 per cent. These reductions are estimated to produce health benefits worth at least $22 million per annum in Sydney alone. The fuel companies can also gain approval for higher biodiesel blends such as a 20 per cent or B20 blend. If much of the volumetric biodiesel mandate requirement is delivered by blending B20 for use in buses and trucks in the metropolitan areas, the reductions in particulate emissions and the consequent health benefits will be much greater again.

I return to sustainability standards. To be eligible to be counted under the mandate the biofuels will be required to comply with sustainability standards. The details of the sustainability standards will be promulgated in the regulations to permit them to be kept up to date with community expectations and international standards. The details of these sustainability standards will be finalised in consultation with stakeholders, including the Federal Government because of international trade issues. Our preferred position is to recognise that the sustainability of Australian biofuels plants is fully assessed during the environmental assessment processes. Domestic producers operating in accordance with the conditions of their approval and any environmental licences should be considered sustainable. Other countries may not apply the same rigorous environmental protections. Imported biofuels will be required to be certified as sustainable in accordance with international standards.

The Roundtable on Sustainable Biofuels is a Swiss-based international initiative bringing together farmers, companies non-government organisations, experts, governments and intergovernmental agencies concerned with ensuring the sustainability of biofuels production and processing. The roundtable's statement of principles and criteria, scheduled to be finalised by June this year, will provide a comprehensive, internationally accepted standard for sustainable biofuels covering legality; consultation, planning and monitoring; climate change and greenhouse gas; human and labour rights; rural and social development; food security; conservation and biodiversity; soil; water; air pollution; economic efficiency, technology and continuous improvement; and land rights. Subject to satisfactory finalisation, these principles and criteria of the Roundtable on Sustainable Biofuels will provide a suitable standard to be met by imported biofuels. The proposed standards are not in any way intended to impede international trade, but simply recognise that Australian biofuels projects are already subjected to rigorous assessment.

With regard to the long-term strategy, we are positioning New South Wales to lead the development of second-generation biofuels in this country. Through the Office of Biofuels and departments such as State and Regional Development, Primary Industries, and Environment and Climate Change, we continue to work with stakeholders in the industry developing proposals for sustainable production using current technology as well as pursuing new technologies and feedstocks. The New South Wales Government already funds research into cellulosic ethanol technologies at a number of tertiary institutions in the State. These technologies will permit any plant matter, agricultural and forestry residues, and even municipal green waste to be converted into ethanol.

We have assisted Ethanol Technologies Limited to establish a cellulosic ethanol pilot plant at Harwood, on the North Coast. We are working with Southern Cross University, in Lismore, to develop a cooperative research centre for bioenergy. We are assisting a number of companies investigating sites adjacent to coal-fired power stations where there is potential to capture the carbon dioxide emissions and use them to grow algae for biodiesel and aviation fuel. This technology has the potential to capture the carbon dioxide emissions at one-tenth of the cost of geosequestration. We will develop a 10-year biofuels strategy to continue to pursue these second and subsequent generation technologies, and will review the strategy every three years to ensure that it remains abreast of current developments and global conditions.

The Biofuel (Ethanol Content) Amendment Bill 2009 builds on what the Government has achieved since 2007. It takes us to an optimal level of biofuels for the current vehicle fleet and first-generation biofuels technologies, and positions us to lead in the development of second-generation biofuels technologies and feedstocks. Through this bill the Rees Government is delivering on its commitment to drive the development of a long-term, sustainable biofuels industry in New South Wales by generating investment and jobs in regional areas such as the Hunter and my electorate of Maitland. The new mandate sends a strong signal to current and potential biofuel producers and investors, and to the fuel industry that the Government is serious about promoting sustainable transport fuels in New South Wales. I commend the bill to the House.

Mrs SHELLEY HANCOCK (South Coast) [10.29 a.m.]: I will speak briefly about the Biofuel (Ethanol Content) Amendment Bill 2009, which seeks to triple New South Wales volumetric ethanol mandate to 6 per cent in January 2010, with the phasing out of regular unleaded petrol by July 2011, and to introduce a 2 per cent volumetric biodiesel mandate that will be increased to 5 per cent in 2012 when supply is available. On 22 June 2007 I spoke in this House in support of the Biofuel (Ethanol Content) Bill 2007 and in particular outlined the benefits to the environment of seeking alternative renewable and sustainable fuel sources, such as ethanol.

This morning I will not add to those remarks because we know the benefits to the environment of ethanol, and I do not wish to delay further the passage of this bill. However, the object of the 2007 bill was to mandate a minimum 2 per cent ethanol content for total petrol sales in New South Wales by requiring primary wholesalers of petrol to ensure that the volume of ethanol sold by them in the form of petrol-ethanol blend is at least 2 per cent of the volume of all petrol sold. At that time there was a threat to name and shame those who did not comply, but we find that the Government is not committed to its own 2007 legislation. Indeed, under freedom of information we have discovered that the Government, despite its spin and rhetoric about ethanol, has failed to ensure that its own targets have been met. They could not be met, and the Government should have known that. No investigators have been appointed, nor have penalty notices been served for breaches of the mandate. Therefore, how can we have any faith that this bill before the House will be enacted, or can be enacted?

Obviously the original legislation was rushed through, but not thought through. Its mandates could not be reached due to some supply issues, and those supply issues can be traced to the Manildra plant in Bomaderry. The plant was part of my electorate in 2003, but the boundaries changed and it is now in the electorate of Kiama. The member for Kiama started to talk about the issues concerning Manildra at approximately the same time he discovered that the boundaries were about to change, and, surprisingly, he became an advocate for ethanol! Notwithstanding some supply issues that occurred in 2008, in reality the Government has done very little to ensure that ethanol is promoted or to ensure that its own mandates, when possible, are achieved.

It should be noted that the Queensland Government has allocated funds to promote the use of ethanol, including the appointment of an ethanol ambassador. Obviously the Queensland Government regards ethanol as an important issue. Queensland is the State that is leading the country in ethanol promotion at the moment. In contrast, the New South Wales Government has been pretty half-hearted in its attempts to promote ethanol and to build a sustainable ethanol industry in New South Wales. In particular, the member for Kiama must be feeling a little embarrassed today. I noted that during his speech last night he was not too embarrassed to continue the self-promotion regarding ethanol while pretending to be its champion. The mandated targets of the 2007 bill, about which the member for Kiama spoke so stridently and strongly, have not been met. Some of the comments made by the member in 2007 should be noted because they are pertinent to the debate. There is no doubt that some of his comments were very pertinent:

The Biofuel (Ethanol Content) Bill 2007 is an important step forward in the history of the biofuel initiative. New South Wales is now leading the nation when it comes to promoting renewable alternative fuels.

We now know that that is not the case. Queensland is leading the country in the promotion of ethanol; New South Wales never did. The member for Kiama was incorrect. He went on to state:

The bill fulfils the Premier's election commitment—a commitment I well remember—when he visited Bomaderry and promised people on the South Coast and the people of New South Wales that the Labor Government was keen and willing to do something about this issue and not just talk about it.

The Government has done only that—talk about it. The Government has done very little to make sure that biofuels is a sustainable industry in New South Wales. The member for Kiama also referred to the 2 per cent mandate being a good start. That is true; it was a good start. He went on to state:

[It is] one that will send a strong signal to investors, producers and motorists alike. The 2 per cent mandate works out to be approximately 125 million litres of fuel sold in New South Wales each year. It is about a fourfold increase from what is sold now.

He then stated:

The supply is there and we are confident that motorists, families and businesses will respond in kind.

Importantly, the mandate is workable.

It turns out that the supply was not there and the mandate was not workable. The legislation passed in 2007 was not workable—far from it. There was no rigour behind the introduction of that legislation in 2007. I have to say I do not have a great deal of confidence in the current legislation before the House, although the Opposition will not oppose the bill. It should be noted that it was the Leader of The Nationals, Andrew Stoner, who introduced an Opposition bill to promote ethanol, but that was opposed by the Government on party political lines. Yet, now the Government certainly is promoting the benefits of ethanol. The member for Kiama also stated:

Coalition members in this Chamber should focus on convincing their Federal colleagues to do more for the Australian ethanol industry.

I wonder what the current Federal Government is doing about promoting the ethanol industry in Australia. I know that the Federal Government has other problems and that those problems certainly are challenging and different from the problems it faced in 2007, but the member for Kiama was being political when he called on the former Federal Coalition Government to do something about the ethanol industry. We now see that the current Federal Labor Government is doing very little, I suspect. I certainly have not heard any mention of its achievements. The member for Kiama continued:

The Government is looking at higher levels of ethanol, and the Premier's E10 task force is investigating this right now.

I call on the member for Kiama and the Premier to give some information about the results of the E10 task force. I have not heard anything about it, and I would like to know what the E10 task force achieved—not much, I suspect. The member for Kiama also said in 2007, "The time for talk about ethanol is over; it is time for action." The Government has been forced to introduce this amending legislation because it was all talk in 2007 and took very little action to promote alternative fuels in New South Wales. The Government's attitude was just to come into this Chamber, introduce legislation, and do very little about it. There is no point in introducing legislation that is not going to work and is not feasible, but that is something that the Labor Government often does. It often happens that legislation has to be amended because it simply was not workable when it was introduced. I hope that is not the case with the bill before the House. I refer to the concluding remarks made by the member for Kiama in 2007:

I commend the bill to the House, and I welcome the Coalition's support—albeit confused

Who is confused now? I am sure the member for Kiama is very confused and humiliated. The Coalition has always supported ethanol. I notice the presence in the Chamber of a former Leader of the Opposition who drives a car that runs on E85.

Mr Peter Debnam: Yes.

Mrs SHELLEY HANCOCK: He has promoted ethanol all along. He, the current Leader of the Opposition and the Leader of The Nationals have been great advocates for this product. The Opposition will not oppose the legislation.

Ms CLOVER MOORE (Sydney) [10.37 a.m.]: I will add briefly to debate on the Biofuel (Ethanol Content) Amendment Bill 2009, which increases the current 2 per cent mandate for ethanol content in total sales to 4 per cent in 2010, 6 per cent in 2011, and provides for increases to reach 10 per cent by July 2011. The bill also introduces a 2 per cent biodiesel mandate, to reach 5 per cent in 2012. I welcome the benefits of biofuels, including the reduced impacts from peak oil, reduced reliance on countries experiencing political instability, new opportunities for New South Wales farmers, air quality improvements, and lower emissions from burning fuel. However, biofuels are associated also with problems that must be addressed if their role in our economy is to increase.

Alarmingly, expansions in the use of biofuels are widely reported to be contributing to reductions in access to food supplies, particularly for the world's poorest communities, as it becomes more profitable to convert food crops to fuel. The Food and Agriculture Organization of the United Nations notes that international food prices have been soaring since late 2006. It notes that poor households that spend large parts of their income on food are worst hit by increasing prices of basic food items, with households headed by females being most vulnerable. Last December the organisation identified 33 countries in food crisis that require external assistance. While other factors, such as drought and rising petrol prices, are also driving up food prices, the World Bank notes that researchers agree that the impact of biofuels on food prices is significant. In fact, in a draft paper the World Bank has suggested that biofuels are responsible for 75 per cent of food price increases.

Last year, United Nations Secretary-General Ban Ki-moon called for a comprehensive review of biofuel policies in response to this problem. An International Food Policy Research Institute report states that drastic expansions to biofuel production from maize will increase food prices by 71.8 per cent; from sugar, by 26.6 per cent; and from wheat, by 20 per cent. The problem is so serious that Jean Ziegler, the United Nations Special Rapporteur on the Right to Food, has declared biofuels a “crime against humanity” and in 2007 called for a five-year ban on biofuels. Oxfam declared biofuels "another inconvenient truth" and World Vision Australia has called for an end to all biofuel subsidies and incentives pending further research on food price impacts. Oxfam believes that the biofuel policies of rich countries have driven more than 30 million people into poverty.

The agreement in principle speech and a number of media statements by the Minister for Lands refer to using waste starch for biofuels, implying that ethanol will be derived wholly from the by-products of food production. But "waste starch" has not been properly defined and I understand that it can contain components that could be used for food production, including livestock feed. I ask the Minister to clarify this point because the reality of this issue is very important and we need to be quite clear as to what we are doing. Second- and third-generation biofuels, which essentially have no impact on food availability, are yet to be commercially available and I am concerned that we are pursuing an increase in the mandate while still having to rely on first-generation biofuels. The Government should invest in second- and third-generation biofuel research and commit to amending the mandate once they are commercially available, so that first-generation biofuels are excluded.

The environmental benefits of biofuels are also debatable because biofuel production can support deforestation for fuel crops. This has been a major problem in South-East Asia—our region—where I understand biofuels are leading to an increase in land clearing. Deforestation is one of the key drivers of global warming and any land clearing to support an increased ethanol and biodiesel mandate in New South Wales would undermine any environmental benefits from this scheme. While biofuels release less greenhouse gas emissions than regular fuel when burnt, the savings can be offset by energy-intensive production. A recent World Food Program report indicates that ethanol production from corn crops produces large amounts of greenhouse gas emissions, and uses large amounts of water, fertiliser and pesticides. Ethanol production from sugarcane is reported to use high levels of water and fertiliser and medium amounts of pesticides.

The Government has said that all ethanol and biodiesel sold in New South Wales will need to comply with a standard prescribed by the regulations on sustainable manufacturing. These standards must be drafted using the most up-to-date scientific information. They must rule out consumption of biofuels that could have been used for food production, including livestock feed, or that are grown in regions following deforestation. They must take a holistic approach to the pros and cons of biofuels. We live in a global society and policies adopted in New South Wales can affect communities in the world's poorest nations and, indeed, in our region. I am very concerned about the global implications of expanding biofuel use in New South Wales. I believe we can address global warming, peak oil, and air-quality issues associated with transport through expanding public transport, cycling and pedestrian infrastructure to give people real choice and the option not to drive their cars in our cities—where, of course, the majority of Australians live—and by developing second- and third-generation biofuels that do not support converting food to fuel or deforestation.

Mrs DAWN FARDELL (Dubbo) [10.43 a.m.]: I speak to the Biofuel (Ethanol Content) Amendment Bill 2009. As we saw with the legislation that amalgamated the rural lands protection boards—which I supported at the time—the devil is in the detail. Many of the details that emerged following assent of that bill are abhorrent to my community. I do not fully support some aspects of the Biofuel (Ethanol Content) Amendment Bill 2009, and I wish to raise the concerns of some of the people who have contacted me. Many members of the House have heard of Mr Geoff Ward—I agree with many of his statements—and I place on record some of his comments regarding this bill. He wrote:

Many people would agree with me that the conversion of grains to biofuels, through its impact on world food security, is morally repugnant. To have governments mandating and subsidising the development of this industry, adding to the quantity of the world's grain taken for biofuels, is even worse. These governments are actually helping this industry to outbid the world's poor for food.

I agree with him. He continued:

Many people would know that sugar cane is a much superior ethanol feedstock to grain, both economically and environmentally. The production of sugar cane ethanol has a much lesser impact on world food security than grain ethanol.



The problem with our State and Federal governmental support for biofuels is easy to see. We have a one policy fits all approach. Mandates and excise rebates do not differentiate between the scenarios The conversion of grain to biofuel receives the same governmental mandate and excise rebate support as sugar cane, ethanol and second and third generation biofuels. Grain biofuel advocates know that this policy allows for the picking of low hanging fruit. The industry is not new, the apes probably left food to ferment as it made them 'happy' when they ate it. For minimal investment they can tap into mandated, subsidised production, an investors dream.



The problem can be easily solved. Withdraw governmental support for any further development of the grain biofuel industry and extend the excise rebates and import protection post 2011 for sugar cane ethanol and second/third generation biofuels. The current grain biofuel industry is still small and should not be allowed to hold the development of preferred biofuel options to ransom.



Those who are advocates for the E10 mandate have been trying to distance the establishment of the grain ethanol industry needed to fill the E10 from the impact it will have on food production. They have gone to extraordinary lengths with Minister Tony Kelly even stating in Parliament that 'ethanol is a by-product from the manufacture of distiller's grain'. Others are saying that using feed grain such as sorghum to produce ethanol does not impact food supply. The area used to grow the sorghum ethanol feedstock could be used to grow food crops so of course converting this sorghum to ethanol impacts food supply. Yet again they are claiming that most of the ethanol to fill the E10 will be made from waste starch. Why has one million tonnes of waste starch suddenly appeared in the agricultural inventory of NSW? It has only appeared because these people are redefining waste starch to suit their purpose. There is very little starch produced in NSW that cannot be used for food or animal feed, therefore very little starch that could be used for ethanol production without impacting food supply.



The list of misinformed spin from these advocates just goes on and on.

The NSW E10 mandate will cost taxpayers from all States about $230 million annually in fuel excise forgone. I cannot see Federal Minister handing over these millions to NSW without deducting it from other payments to this State. I do not think politicians from other States will let him.
There are two possible scenarios. The $230 million will be deducted from the NSW budget, impacting our nurses and teachers, or NSW motorists will have to pay it in higher petrol prices.

Finally, with the global economic downturn our governments are going to be strapped for money for years to come. The $230 million will be able to be spent in much better ways than supporting a useless grain ethanol industry that will be converting grain in the face of decreasing world food security.

In my area there is a large feedlot at Eugowra owned by Andrew and Tess Herbert. Prior to 2007, the Herberts, the Hon. Ian Macdonald, the Hon. Tony Kelly and I lobbied former Minister Debus to have the Herberts' cattle feedlot licence increased. The Herberts do wonderful work in my area and take in the cattle of other farmers during times of drought. In fact, on one occasion they were fined for feeding another farmer's cattle. The report entitled "Impact of ethanol policies on feedgrain users in Australia", which was prepared on behalf of the Australian beef industry—I have many beef producers in my electorate—addressed the question of what the impact of such a policy regime would be on supply and demand in the Australian feed-grain market, and on livestock producers who compete in world markets. The report states:

Australia's livestock industries are both directly and indirectly dependent on feedgrain security.

Intensive feeding industries such as cattle lotfeeding—

the Herberts own another large feedlot, in Coonamble in my electorate—

pigs, dairy, chicken meat and eggs directly consume either wholegrain or compound grain products.

Other livestock industries such as extensive beef, sheep and wool also rely on feedgrains for supplementary feeding through droughts.

The extensive industries are also linked to the intensive industries through the sale of feeder stock—the most notable being the strong linkage between pasture fed beef and the lotfeeding industry.

The report also states:

Access to affordable grain underpins the capacity of the livestock industries to remain reliable suppliers to global markets, and lotfeeding allows the Australian beef industry to distinguish itself from lower cost beef producers in, for example, South America.

The lotfeeding sector allows Australia to compete head-to-head with the US in supplying high quality product to the Japanese and local markets.

Many other feedlots in Australia are owned by Japanese companies. The report continued:

Lotfeeding also allows the finishing of pasture fed cattle, to attain suitable sale weights during drought periods. Experience has shown that the presence of the lotfeeding industry has held up cattle prices in times of drought. Its presence has provided a kind of insurance for the grass fed beef industry.

A loss of reliability and competitiveness in the grain fed market may have impacts on customer loyalty and confidence in domestic as well as export markets.

Price is not the only aspect of access to grain: the nutritional content is also a key factor. While production of ethanol from grain produces a meal by-product (distillers grain), its energy content is very low. Advice from leading nutritionists suggests that it could only provide 10 to 20 per cent of feeding rations on a dry weight basis, and would need to compete on price with other protein options to meet feedlot requirements.

If prices rise sufficiently, grain users in metropolitan areas—mainly chicken meat and egg producers—could import grain. Most likely this would be US corn.

However, this option is not currently available for inland users due to quarantine protocols.

Some grain fed to cattle is made with American corn. The feedlot in Eugowra uses a meter to measure the smell coming from the feedlot. The Herberts are good, community citizens. They use meters to keep the odour level down. However, corn produces a higher odour level; therefore, people such as the Herberts in my area will receive more complaints from neighbours down the road and more fines from the Environment Protection Authority. The Government should have considered that when it introduced the bill. The document continued:

The impact of a sustained increase in demand for feedgrains would especially increase the vulnerability of all other feedgrain users to the impact of drought.

If grain production fell by 50 per cent in 2010, as it did in 2002-03, total availability of grain would fall to around 14 million tonnes.

In this situation grain prices could rise as high as $450 per tonne. This would seriously affect livestock industries that compete directly with other countries on world markets and would have the potential to shut down parts of our leading export oriented industries including beef and dairy.

I have received a letter from the Herberts, who run the Gundamain feedlot, in which they say they have had a good year but they are concerned about the effects of E10. They will not be subsidised, but other feedlots will. The letter states:

It is probably the issue of grain prices that prompts us to write to you. Feed grains are the biggest single cost for a feedlot operation. Usually (in a normal season) 80% of Australia's east coast grain production is used by intensive animal feeding industries. The feedlot sector is in turn the largest user among these, using 3.7 million tones of grain.

The feedlot industry does not however receive Government assistance yet we compete directly with the government assisted ethanol sector for grain—

that is most unjust—

NSW Cabinet has increased its mandate of ethanol content in fuel from 2% to 10%. This will have a significant impact on the feedlotting industry and our two feedlots. These impacts will flow on to our local community. Grain prices will be inflated by 25% if a 10% mandate goes ahead. Our capacity to maintain a viable cattle feeding business is threatened by a 25% increase in costs.

Both Coonamble and Gundamain feedlots each spent over $5 million dollars on grain last year. Nearly $11 million dollars went back into these communities with no government assistance for either feedlot. If the mandated ethanol is implemented 21% of the grain supply will be immediately removed from the market. The competition for the remaining grain would be intensified and prices would rise significantly as a result. In a dry year with less grain production a higher proportion would be removed, having a potentially greater negative impact on feedlots. Feedlots are a method of drought proofing—to an extent they can survive the ups and downs of normal seasonal fluctuations. The introduction of ethanol plants into the grain buying market will distort the grain market and lead to the closure of numbers of feedlots.

Gundamain Feedlot is the largest employer in Eugowra. From our association with you, you are aware of the contribution a feedlot can make to a community—direct and indirect employment, grain markets, markets for hay, markets for other commodities (lime, cottonseed, stock feed), markets for cattle, use of local suppliers for fuel, machinery, tools etc. An ethanol plant may provide employment but it is employment subsidized by the taxpayer. You are also aware of our level of community involvement and sponsorship from sporting teams to the local show, local events (Picnic Trots and Draught Horse Society) and community institutions like both local schools, Preschool, Pony Club and Swimming Pool.

There will always be a market, both domestic and export, for high quality, consistent beef and grain-fed beef is best situated to supply these markets. Feedlots are a sustainable and long term industry while ethanol plants across the United States have been rapidly closing, the environmental cost of producing ethanol is significantly greater than the environmental cost of replacing conventional fuel.

We would like you to consider the impact of the ethanol mandate on existing successful independent industries—

I do not believe that issue has been addressed in this House—

We hope that the NSW Government appreciates the long term effect the mandate will have on the larger agricultural picture and reconsiders its decision to increase the ethanol mandate.

Mr PETER DEBNAM (Vaucluse) [10.54 a.m.]: I must say at the outset that I think I am depressed; listening to the member for Sydney and the member for Dubbo took me back to 1991 to 1995, when New South Wales started going backwards. We had a hung Parliament and it was run by the Independents—it is no wonder nothing happened! Talk about a lot of whinging, whining and carping! Wow! The member for Tamworth is probably about to get up and say the same things. I hope not. When I conceded defeat on election night two years ago I told the Government that our policies, which had been laid out, would fix the problems in New South Wales. When the Labor Government adopts Coalition policies I congratulate it. I am here to congratulate the Government. There are some problems. My colleague the Leader of The Nationals laid out the problems with this legislation. I suppose in the end we do not believe the Government will follow through on its press releases.

Mr Robert Coombs: We'll follow through.

Mr PETER DEBNAM: If the Government does follow through, good on it! It is not the first time the Government has adopted some of the Coalition's policies, and it is important to acknowledge that.

Ms Angela D'Amore: Name them!

Mr PETER DEBNAM: I will give the member for Drummoyne a couple of examples. In a speech I made recently I said the Government had adopted a few Coalition policies on policing, including increasing police numbers, changing the name of the police service back to Police Force—that was a significant change—and confiscating hoons' cars. Thirteen years ago in 1996 I said hoons should have their cars confiscated, and the Government finally adopted my legislation on that in late 1996. For a long time—at least a couple of years—the Government also fought against establishing a Middle Eastern crime squad but then it did establish such a squad. Since the election the Government has started to use rhetoric about the bureaucrat recruitment freeze, and that is good. However, I have not seen the Government do anything about it.

Ms Angela D'Amore: Point of order: My point of order relates to relevance. I ask you to draw the member for Vaucluse back to the content of the bill. We would like to hear his comments on the bill, rather than irrelevant rhetoric.

ACTING-SPEAKER (Mr Thomas George): Order! I will listen further to the member for Vaucluse. I remind him to refer to the bill in his future comments.

Mr PETER DEBNAM: My point is that it is great to see a bill introduced that implements Coalition policy—although we do not believe the Government will fulfil the policy. But at least the Government is headed in the right direction. That is something we heard a lot about previously. It is great that the Government is encouraging ethanol use. The Government is looking at offloading lazy assets, such as NSW Lotteries and waste services. Good on you! We put that policy to the people of New South Wales and they embraced it; now the Government is talking about doing it. It is great that the V8 Supercars will use ethanol. Where did that event come from? It came from the Coalition before the election. The Government, before the election, refused to adopt that major event strategy but now it has adopted it. Part of that strategy included the V8 Supercars using ethanol, and it is good to see that that will happen. It is great that the Government is starting to adopt at least the headlines of Coalition policies. The question is: Will the Government follow through on it and implement it? We hope that the Government's strategy will be consistent and that it will do something about the whole policy. The overview of the bill states:

The object of this Bill is to amend the Biofuel (Ethanol Content) Act 2007 as follows:

(a) to provide for increases to the mandated minimum ethanol content for total petrol sales in NSW (currently 2%),

(b) to make provision for a mandated minimum biodiesel content for total diesel fuel sales in NSW,

(c) to provide that such mandates will apply to major retailers, in addition to primary wholesalers, of petrol and diesel fuel,

(d) to provide that from July 2011 regular unleaded petrol sold in NSW by primary wholesalers must contain 10% ethanol.

Importantly, it renames the Biofuel (Ethanol Content) Act the Biofuels Act. The point I make again: Where did all this come from? We just have to go back a couple of years. On 20 July 2006, nine months before the election, the Leader of The Nationals, Andrew Stoner, and I held a conference in Parliament House to basically heavy the oil industry. We invited the oil industry and Morris Iemma, as Premier, to talk about establishing a biofuel strategy in New South Wales. We were well aware that the oil companies were very reluctant to get involved and embrace the idea. But we made it very plain to them at the conference that if they did not come back with a viable strategy in August 2006, when we had convened a second conference, we would mandate and force them to get on with it.

At the conference on 20 July 2006 we talked with the oil industry, service stations, ethanol producers and the NRMA about all aspects of the strategy, and we had a very productive meeting. We then announced that the second conference would be held on 24 August 2006. Lo and behold, one day before 24 August 2006 Morris Iemma woke up and realised that he had better do something. He made an announcement that day that he was going to move on an ethanol strategy. As I indicated at the outset, we congratulated Morris Iemma on his late awakening on ethanol. The following day, 24 August 2006, we held an extremely productive meeting with the oil industry, the service stations and the NRMA. We talked about the stepped plan—2 per cent in 2007, 4 per cent in 2008, all the way up to 10 per cent in 2011. We talked about upgrading the production and distribution infrastructure. We talked about the sale of E10 at up to 500 service stations across New South Wales. As the Leader of The Nationals emphasised yesterday, and a number of my colleagues have indicated, we talked about a strong marketing plan. The Labor Party and one or two media outlets had undermined ethanol for some years, and there was reluctance in the community to embrace it. It required a very strong marketing plan to increase the demand for ethanol. We talked about the State taking a leadership role in alternative fuels.

That was the plan laid out at the conference and, to some extent, implemented in the legislation of 2007 and further in this bill. The concern remains whether the Government is serious about this issue or is just putting the bill through the House for theatrics and will not follow up with political commitment. It is very important that the Government is committed to this strategy. In 2006 we noted that one of the Government's own reports focused on air quality in Sydney and its impacts, not only the financial costs in health but also the death rate. Sydney has a huge air pollution problem. Ethanol is a significant relief for the air pollution problem. Using the Government's own documents three years ago, we highlighted a very significant health reason to get on with this strategy.

If the Government is serious, as it has indicated today—and that will become apparent over the next six months—then I applaud it. It will be one of the first things it has done to produce a result from a consistent policy, albeit it has taken three years for the Government to adopt most of our policies. I say to the Government, make sure it works. There will always be critics, whether it is to refine the bill or to argue, as the member for Sydney and the member for Dubbo have, that philosophically it does not make sense. New South Wales is suffering. The Government has to get on with it and make it successful. This is one policy that can become successful within the next six to 12 months. Then the Government should look at the rest of our policies. I applaud the Government for adopting the policy. But the Government should not just adopt the headline; it should adopt the whole thing.

Mr PETER DRAPER (Tamworth) [11.04 a.m.]: I support the Biofuel (Ethanol Content) Amendment Bill 2009, as it is an important step forward in promoting renewable biofuels in New South Wales. The Biofuel (Ethanol Content) Act 2007 has seen a 2 per cent mandate successfully implemented, despite the predictions and campaigns by vested interests that ethanol would cause massive damage to people's vehicles. Hopefully we have seen the last of that scare campaign. However, I am aware that there are many different points of view on this subject. By way of compromise, we can score a lot of positives. As can be seen from my inaugural speech in this place on 7 May 2003, the introduction of a biofuels industry has been a passion of mine. In that first speech I noted that during my doorknocking campaign in Gunnedah I learned the potentials of a biofuels industry to our farming communities and the local economy.

I do not apologise for having a strong view supporting the development of a biofuels industry and encouraging its development within the electorate of Tamworth because I can see many benefits for the region that I believe far outweigh the arguments I have heard against it. There have been many arguments for and against a biofuels industry in Australia over the years. Yet we appear to be a long way behind much of the rest of the world in developing a renewable biofuels industry that has environmental pluses and can help break our dependence on foreign energy resources. I acknowledge that even within the farming community in the electorate of Tamworth there are differing opinions. For example, feedlot operators have concerns about a market where they have to compete for feed grain. There are implications involving the world food chain in the development of a biofuels industry. These issues have to be addressed from both a local and world perspective. However, they should not prevent Australia from being realistic in looking after our interests.

I note the policy of the New South Wales Farmers Federation on this issue. While I dispute its failure to support a mandatory percentage target for biofuels in liquid fuel, the rest of its policy deserves careful consideration and can help to address some of the concerns. Although I believe we need a mandatory percentage, it would be sensible to consider a simple mandate for alternative fuels to be available if it allowed the possible use of E20 or E30 blends, or even higher. I agree with the New South Wales Farmers Federation that we need to encourage the development of biodiesel products by way of tax concessions and other incentives. I would encourage State and Federal authorities to ensure they work in partnerships towards those objectives. The suggestion to establish a biofuels co-operative research centre to research the development of biofuel-specific crops to maximise yield potential and fuel production efficiency should be adopted. Research and development are essential if we are to be world leaders rather than followers, and this initiative is an opportunity to proactively address some of the concerns in relation to the world food chain.

There is also merit in the proposal to rationalise the legislation so that biodiesel produced for individuals' off-road use is exempt from the payment and rebate of excise so they can develop a cottage industry that supports environmental concerns. In June 2003 I spoke about a proposal by Primary Energy to develop an ethanol plant in north-west New South Wales. The initial impetus for the proposal started a year earlier when plans were first unveiled for a $55 million ethanol plant in Gunnedah, which had been selected as the preferred site. Following many proactive talks and high hopes throughout the electorate, the council provided land free of charge for the plant's development. By mid-2003 the developers announced they were looking at building a bigger plant than they had originally planned. The plan was upgraded to a $70 million facility, almost triple the size of the first proposal. It would create about 50 permanent jobs in Gunnedah and around the district. On top of that, there is scope for 180 indirect jobs and 450 jobs during construction. For a town like Gunnedah, this is a very attractive proposition.

The proposal attracted $1.1 million in Federal funding as part of the Namoi Valley Structural Adjustment Package. However, there was still not enough whole-of-government support to enable the proponents to gain the necessary financial backing to get the project off the ground. I am hopeful that this legislation, which will increase the volumetric ethanol mandate to 4 per cent by the end of 2009, then 6 per cent by the end of 2010, as well as the requirement for all regular grade unleaded petrol to be blended with ethanol by 1 July 2011, will give further impetus to the project. Earlier this week I spoke to Primary Energy's Matthew Kelley, who said:

If you can support this bill it is tremendous. It is a gutsy stance being taken, it has been well thought through and it is really going to benefit regional areas.

I agree with him. Mr Kelley said there had been many technological advances since the plan was first mooted, allowing for a more efficient and environmentally friendly facility. He said that the multistage facility would produce a range of human consumption products and produce ethanol as a by-product of that process. The proposed development in Gunnedah will combine Delta-T ethanol plant technology as stage one with anaerobic digester technology and green electricity production as stage two. Stages one and two will result in the processing of up to 220,000 tonnes of grain per year to produce 80 million litres of fuel grade ethanol annually, 43,000 tonnes of fertiliser, 5,000 tonnes of aqueous ammonia and approximately 100 gigawatt hours of green electricity.

I mentioned that an increased use of biofuels could have a positive impact for the economy. The CSIRO has undertaken a life-cycle analysis of the greenhouse gas emissions associated with the production of ethanol, green electricity, fertiliser and ammonia from the proposed bio-refinery. The life-cycle analysis included growth, harvest and transport of raw materials required for the production of ethanol, the manufacture of ethanol, green electricity, fertiliser and ammonia, the transport of the products off-site and the use of ethanol in a 10 per cent fuel blend with petrol, or E10. The greenhouse assessment provided by the CSIRO indicates that the proposed development will be a negative greenhouse gas emitter.

The proposed ethanol bio-refinery will result in a net greenhouse gas reduction compared with the use of regular unleaded petrol of approximately 200,000 tonnes of carbon dioxide equivalent per annum. This indicates that there will be negligible environmental risk associated with greenhouse and energy, and to my mind it is a win-win situation. The proposed development will have significant beneficial socioeconomic impacts for both the town of Gunnedah and the local region. I have already mentioned the potential for employment. The production of human consumption products with 80 megalitres of fuel grade ethanol as a by-product at the proposed development will also benefit the suppliers of raw materials by opening up additional markets and sources of income.

Statistics show the world's ethanol production will pass 75 billion litres in 2012 and that Australia ranks very lowly on the world scale. The United States of America and Brazil are leading the world in the production of ethanol, while there is an emergence of new ethanol producers in Asia and Latin America. Factors driving ethanol markets include high oil prices, national energy security considerations, ethanol tax incentives, improved technology allowing lower costs of ethanol production, and climate change concerns. We have a long way to go to catch up with other parts of the world on this important issue.

Production of ethanol from raw materials is renewable, unlike petroleum products from crude oil, which is a finite resource and is linked to the global marketplace. Increased ethanol production will extend and supplement our declining crude oil reserves. The Centre for Agricultural and Regional Economics has undertaken studies on regional impacts of ethanol production. With ethanol being a renewable resource, the centre found that where there is a ready availability of raw material, communities could establish a plant and gain economic benefits, with potentially some 30 plants able to be established in regional areas of New South Wales.

From a health perspective, using ethanol-blended petrol reduces vehicular tailpipe emissions of carbon monoxide, total hydrocarbons, 1,3-butadiene, benzene, toluene, xylenes and, in some cases, nitrogen oxides. Associate Professor Ray Kearney from the University of Sydney stated in a paper that long-term particulate matter exposure is proven to be associated with respiratory and cardiovascular disease, as well as 20 per cent of lung cancer cases. That is an enormous public health impact. To think that we can achieve a 30 per cent reduction in these cancer-causing particulates by blending ethanol and petrol makes the current moves even more important.

Professor Kearney has developed images of the lungs of non-smokers in the city versus the country, and it really is startling to see the difference in a normal lung of a healthy rural resident compared with the lung of a Sydney city resident, which of course is exposed to pollutants from many motor vehicles. If these pollutants can be reduced by 30 per cent there will be a significant saving for our public health system and diminished suffering for people with lung cancer and other lung diseases. Adding ethanol to petrol enables the particulates to be completely burned because it assists the combustion process and substantially reduces the particles in the emissions from motor vehicles.

It should be noted that government agencies around the world are taking action to reduce the particle emissions from fossil fuels, especially from motor vehicles, and introducing more ethanol into fossil fuels will enhance progress in that direction. Foreign car manufacturers are now producing motor vehicles that can be computed automatically to run efficiently on biofuel with a blend as high as 85 per cent ethanol. I mentioned Brazil before as a major biofuels producer. In the mid-1970s, the Government of Brazil launched the National Fuel Alcohol Program, or PROALCOOL, which aimed at increasing the share of domestically produced fuels in the country's fuel pool. Employing various forms of support, the program proved to be spectacularly successful.

By 1980 ethanol had a larger market share in the transportation sector than gasoline. Even though the lead has been lost since then, ethanol has managed to keep a significant market share in this segment until today. In fact, due to the high gasoline prices in recent years, the market share of ethanol has increased further and is likely to continue to do so. Over the period from 1975 to 2002 fuel ethanol use helped to replace around 210 billion litres of gasoline, saving Brazil around $US52 billion. The attractive price of ethanol from Brazil has resulted in the country becoming the largest exporter of this commodity. The second largest exporter of ethanol is the United States of America. Ethanol producers in the United States distilled a record quantity of more than 10.6 billion litres in 2003, mostly derived from corn. At the Federal level there is a tax incentive in place, which aims at promoting fuel ethanol production. Additionally, a number of ethanol producing States have introduced incentives of their own.

The various tax incentives have certainly helped the ethanol industry in the United States to get off the ground. However, the real boost came with the introduction of mandated or captive markets in the early 1990s. The Clean Air Act mandated the use of cleaner burning fuels in the dirtiest cities in the United States. In order to achieve that, the legislation enforces the addition of oxygen to gasoline. For a long time petrol derived methyl tert-butyl ether [MTBE], a flammable liquid which is used as an additive in unleaded gasoline, was the oxygenate of choice, but this is changing now and explains the amazing growth in ethanol use in recent years. Starting in January 2004, California banned MTBE from its fuel pool, as did the States of New York and Connecticut. That opened the way for ethanol. There are several other States in the United States planning to ban MTBE.

In Canada prospects for the ethanol industry improved substantially after the government in Ottawa pledged financial support to the tune of $CAD100 million for the sector in the framework of its Kyoto commitments. Under the plan, EI0 blends are to achieve a 35 per cent market penetration by 2010, a figure that represents 1.33 billion litres per year. With a carbon dioxide reduction of 40 per cent for grain ethanol, this equates to the replacement of 532 million litres of gasoline or 1.33 megatonnes of carbon dioxide—just over one-half of 1 per cent of the 240 megatonnes of greenhouse gases Canada is committed to achieve.

In the European Union fuel ethanol production has not really taken off to the same extent, although it is likely to do so, with the main drivers being two biofuel directives by the European Commission. Member states will now have to try to achieve a 5.75 per cent share for renewables by the end of 2010. The basis for reference will be the energy content of all gasoline for transport placed on the market. Nearer to home, Thailand's interest in establishing a large-scale bioethanol industry using feedstock such as cassava, sugar cane and rice started in 2000 and reflected the nation's rising import bill for oil. Thailand is 90 per cent reliant on imports, so high-energy prices were adversely impacting the economy at that time.

At the same time low prices for commodities such as sugar and cassava were a matter of concern for the Government. The Thai Government moved swiftly to support the ethanol opportunity, with the rising oil import bill as the swaying reason for pursuing the bio-ethanol program. More recently, the role of ethanol in replacing MTBE has been offered as another justification for the ethanol program. The National Ethanol Development Committee has estimated that if 10 per cent ethanol were blended with petrol or diesel to replace MTBE, about 2 million litres of ethanol would be required on a daily basis.

China is now home to the world's largest fuel ethanol plant. The Jilin Tianhe Ethanol Distillery has an initial capacity of 600,000 tonnes a year, or 2.5 million litres per day. Potential final capacity can be raised to 800,000 tonnes per year. A plant designed to produce 300,000 tonnes of fuel ethanol annually was constructed also in Nanyang, Henan Province. The project, built by the Tianguan Ethanol Chemical Group Co. Ltd. [TICG], combined with the company's existing facility, saw TICG's total fuel ethanol capacity reach 500,000 tonnes a year. Fuel ethanol has already been in trial use in China for some time. Many provinces have been experimenting with using ethanol as a vehicle fuel. China has promoted ethanol-based fuel on a pilot basis in five cities in its central and north-eastern regions, a move designed to create a new market for its surplus grain and to reduce oil consumption.

Despite many controversies about biofuel production, the outlook for fuel ethanol is bright, and strong rates of growth in both production and trade can be expected over the next few years. As can be seen, Australia has played only a small role in this process worldwide, which is why I strongly support the Biofuel (Ethanol Content) Amendment Bill 2009 as a step in the right direction. Its benefits to rural communities such as Gunnedah cannot be understated, and tied with economic, environmental and public health benefits it is a course we should pursue vigorously. I commend the bill to the House.

Mr ROB STOKES (Pittwater) [11.18 a.m.]: I speak on the Biofuel (Ethanol Content) Amendment Bill 2009. The objects of the bill are to provide for increases to the mandated minimum ethanol content for total petrol sales and the biodiesel content for total diesel fuel sales in New South Wales, and to ensure that these minimums apply not just to primary wholesalers but also to major retailers of petroleum. There is nothing new about ethanol, or ethyl alcohol; it has been around for a very long time. In fact, the use of ethanol in motor vehicles has been around as long as motor vehicles. Henry Ford's first car was designed to run on pure ethanol and his Model T could run on petrol, ethanol or a combination of both.

It has been demonstrated in research that the overwhelming majority of petrol engines work well with mixtures of 10 per cent ethanol and that is why legislation in this country imposes a 10 per cent cap on the concentration of fuel ethanol blends. There is much to commend the use of ethanol in petrol-driven vehicles and vehicles powered by other fuels. That is because it is a renewable fuel source in that feedstocks or even algae are used as raw materials. The processing of ethanol will inevitably result in the release of greenhouse gases. However, when compared with petroleum processing, ethanol processing produces fewer greenhouse emissions. The member for Tamworth spoke at length about the fact that, unlike burning petrol, burning ethanol does not release particulate matter, which causes air pollution. Given the release of statistics about the dangers of air pollution in western Sydney, the use of ethanol is surely to be encouraged.

The food versus fuel debate has been ongoing and some leaders in South American and Central American countries—Fidel Castro and Hugo Chávez, in particular—claim that the diversion of croplands to produce feedstock for ethanol will lead to higher food prices and could exacerbate climate change. While these claims may be worth debating in that context, they have no bearing on the situation in New South Wales, where ethanol production does not involve land clearing and does not impact on the production of cereals for human consumption. It is worth considering the role of ethanol in the context of global use of fuel. World oil consumption is about 4 billion tonnes per annum compared with ethanol consumption of about 13 million tonnes per annum. It is a tiny drop in the ocean compared to the use of oil, but the use of ethanol is increasing.

The member for Tamworth talked about the United States and Brazil as leading producers of ethanol. I understand that the United States has recently overtaken Brazil. Nevertheless, Brazil and the United States account for three-quarters of total global ethanol production, followed by China and India, which, as the member for Tamworth also said, are aggressively looking for new opportunities to develop ethanol processing. Australia does not even rate in the top 15 countries for ethanol production. We clearly have a long way to go. Australia has only three commercial producers of fuel ethanol, all based in either New South Wales or Queensland. The only new South Wales plant is at Nowra. The combined capacity of all the ethanol processing facilities in Australia has been estimated at less than 150 million litres per annum.

That compares interestingly with the Federal Government's voluntary target of 350 million litres per annum of biofuels to be used by 2010. Clearly there is a long way to go before that target is reached. In that context, I note the comments made previously by the member for Vaucluse, who is a passionate supporter of the use of ethanol as a renewable fuel alternative. His comments relate to the fact that it is all very well to legislate targets for ethanol use in motor vehicles, but legislation by itself does not constitute leadership. It is all very well to legislate a target, but it is another thing to provide the support necessary to encourage investment in continuing sources of production. My community is concerned about the use of ethanol and biofuels in petrol and diesel-powered boats. My electorate has a huge number of moorings. In fact, I understand that it has more moorings than Sydney Harbour. It is certainly a major recreational boating port.

Mr Barry Collier: Bring back the caravan park.

Mr ROB STOKES: Bring back the caravan park at North Palm Beach is the cry from the other side. Without commenting on that—

Mr Barry Collier: You just have.

Mr ROB STOKES: Back to biofuels. A number of issues have been raised with me by members of the boating industry, including the Boating Industry Association of New South Wales and the Boat Owners' Association of New South Wales, relating to the use of biofuels in boats. In fact, it has been confirmed by both Caltex and BP that biodiesel is not recommended for marine applications. Therefore, we have real concerns about mandating the level of biofuel usage in petrol and diesel-powered engines and the impact that could have on the boating industry. The concerns are twofold and they both relate to the special qualities of ethanol. First, because ethanol is an excellent solvent it can do a great job of cleaning out the entire fuel system of a boat. That is a great quality in many ways, but it can also clean out all the rubbish in the bottom of a fuel tank and any residue stuck in the lines and filters. Ultimately, all that mucky soup can find its way into the injectors or the carburettors. If that occurs, unsurprisingly the engine stops working. That is a real problem in the boating context because we do not want boat engines to stop working out at sea.

Ethanol's special solvent qualities also mean that it can be corrosive. If left in fuel lines, it can cause corrosion and fuel leaks can occur. My brother-in-law and sister-in law's boat exploded at Booker Bay a couple of years ago. There was a leak in the fuel line and they had to jump overboard with their two toddlers at the last moment. I am very well aware of the dangers of corrosion in fuel lines, so that is a real concern. The hydroscopic qualities of ethanol also mean that it attracts water; that is, it absorbs moisture. Again, that is not a problem in cars, but in boats—particularly when they are not used everyday—it can lead to a phase separation. The water will separate from the fuel as a non-combustible layer of liquid in the bottom of the tank. When that is sucked into the motor the engine can stop, which is a real risk in the boating environment. Similar concerns relate to both ethanol-blended petrol and biodiesel-blended diesel. I note that these concerns are indirectly addressed by clause 16, which provides:

(2) An E10 exemption entitles the person to be sold regular unleaded petrol that is not E10 and, accordingly, a primary wholesaler does not commit an offence under section 8 by selling regular unleaded petrol that is not E10 to the holder of an E10 exemption in accordance with any conditions of the exemption.

That also relates to clause 16 (1) (b), which provides:

(b) a person who sells petrol by retail in the course of carrying on a business if the Minister is satisfied that the person sells petrol wholly or predominantly for the fuelling of vessels or watercraft (such as at a marina).

If primary wholesalers are required to supply a certain amount of E10 blended petrol, will that impose additional costs? Because that is such a small market, will the wholesaler incur extra costs to provide such a small amount and will that have an impact on the cost of fuel for boat owners? I am concerned about that. I am also concerned that it is a bureaucratic process whereby marina operators will have to apply for an exemption. That application will have to be considered by the Minister. I note the Minister has to send it to the expert panel—this Government loves panels, there are panels everywhere now—but there is nothing expert about the panel itself. New section 24 provides that the expert panel will consist of a number of departmental heads, but nothing suggests those departmental heads are experts in the use of ethanol. I raise that as a concern, and I seek clarification in the Minister's reply about any impacts this might have on the cost of fuel for boat owners.

Debate adjourned on motion by Mr Barry Collier and set down as an order of the day for a future day.