Hodgson Pete: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
Hodgson Pete: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
[Volume:651;Page:777] 
Hon PETE HODGSON (Labour—Dunedin North) 
: 
 This legislation remains a mistake. It remains a muddle. It has no logic in it that would withstand even a cursory examination—it is a crock. The Minister Gerry Brownlee who has just resumed his seat has shown again with the tantalising illogic of his contribution that he does not believe even half of the things that he is saying. This legislation puts ideology ahead of common sense. It puts low-grade politics ahead of any progress. It makes our economy dumber. It makes our economy more vulnerable and it is a part of a package of environmental regression that we have seen over the past week or two that is staggering in its extent. 
The point is that even if we forget about climate change—let us play that game ever so briefly—oil is running out. It is a finite resource. When we have used it once it is gone it does not come back it is not available to be used time and time again. Oil is non-renewable. And if this speech is sounding like something resembling a Norwegian parrot sketch then it is because I think that point needs to be made time and time again to a Government that appears to believe unlike any other Western Government in this world that oil can somehow go on forever—it cannot. It cannot so oil will be substituted one way or another sooner or later around the world. As the price goes up the substitution will begin and as the price goes up higher the substitution will quicken and so on. Electricity will be part of that substitution inevitably but so will biofuels. 
The difference between biofuels and oil is twofold. The first feature is that biofuels will be a range of products not one product—not just crude oil. It will be a range of products. It will be this that or the other feedstock used to produce some sort of alcohol and this that or the other feedstock used to produce some sort of lipid. We will have a range of technologies in the same way for example that electricity around the world is produced country to country by using a different set of technologies or a different mix of technologies. 
The second feature about biofuels that we know—this is not guesswork; this is known—is that the production of biofuels will be quite highly distributed. It will not be centralised. It will not focus on the small number of high oil - producing nations. Again like electricity it will be widely distributed across a nation or across the world just like agriculture is distributed across many nations across the world. Nearly every nation—I can think of one or two that may not—will be involved in the production of biofuels in my lifetime and most of them are now. Most of them are just starting off. 
But there are some impediments to biofuels. The biggest impediment the underlying reason for the sales obligation is that if the capital invested is to have certainty then investors need to know that it will be sold and because the person who produces the biofuels is not an oil company then they need to know that the oil company will step up to sell it. That means that oil companies will have to invest in this that or the other bit of kit in order to do that and oil companies do not like doing that sort of thing. 
As Jeanette Fitzsimons pointed out oil companies did not like it when we told them that we needed to take lead out of oil because it was addling our kids’ brains. Oil companies did not like it when we asked them to take some sulphur out of our petrol because the sulphur content is now so high that some new cars cannot run on it. Those cars have been designed for a much much lower sulphur content. The oil companies said that they could not do that. A negotiation was entered into and finally the capital investment at Marsden Point was made. Sulphur was reduced from 5000 parts per million to 500 parts per million and then to 50 parts per million and it is on its way to 15 parts per million—so-called zero sulphur. 
It was the same for benzene when the benzene level in this country rose to the point where the ambient benzene levels were known to be a cause of myeloid leukaemia where the link between the amount of benzene inhaled and the advent of that particular cancer is a straight line graph. It is one of the closest causes and effects in any cancer research that one could ever find. When we said that our benzene levels in New Zealand were too high and that they would cause a known amount of cancer the oil companies said that they could not help but now they have. 
So too with biofuels. The oil companies came to the select committee and said that it was 7c or 8c. The Minister in his first reading speech delivered that as evidence. It was wrong. It was wrong just like the oil companies always make their estimates wrong because it is in their interests to do so. The are behaving rationally when they go for a high level in their figures. The oil companies have made their point and the new Government has swallowed it hook line and sinker. In doing so it has delayed the inevitable. 
What is more when we find the situation arising where we are in a position where we need to produce some serious biofuels we will not be starting from level 1 or level 2 but we will be starting from scratch. We know that the legislation that is about to be repealed is modest enough. We know that by 2012 we would have got ourselves all the way up to 2.5 percent and that we would still be 97.5 percent dependent on fossil fuels but we would have begun to have some kit in place and we would have had some companies that were doing OK and if you will refining their production because of their research and development and their learning by doing. We knew that would be the case. We knew that there would be a competitive market. Therefore we can forget about any arguments about compulsion somehow raising the ability of a non-competitive approach because there would have been an international biofuels market. Whether or not the Greens preferred that it would be that way. That issue was not going to arise. 
The one issue that did arise was that none of the oil companies except Gull Petroleum wanted it. The oil companies did not say so because they knew they would be unpopular and they are already unpopular enough because they are making very substantial profits. They would prefer that their profits around the world continued. They would prefer to do biofuels themselves when their own product mineral oil became woefully unaffordable. That would be their preference when people stopped buying their product to then start making their own. But you see the future of biofuels will not necessary involve oil companies and they know it. They know it. In the same way that supermarkets are not particularly involved in agriculture so too would oil companies not be particularly involved in biofuels. 
Then there is another issue. In New Zealand the future of biofuels almost certainly will not be substantially around tallow and it will not be substantially around bio-diesel produced from algae although those will be important technologies. A still more important one will be biofuels produced from our woody biomass our trees and there we bring in a very interesting new dimension which is the patient capital of Maoridom. That seems to me to be a potential future—in fact it is more than a potential future—as the science is moving enormously quickly on that. I toured it in North America just about 4 months ago. For example on the issue of enzymes there is progress beyond belief. It is astonishing. The smart money of Silicon Valley has gone out of biotechnology and into biofuels just as this Government is heading in the opposite direction. 
We now have a Government in this country that is putting our country—inadvertently perhaps but doing so none the less—into reverse. This is regression. This is not progress. This is a dumb future not a smart future and this is very very dumb legislation.