Mackey Moana: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
Mackey Moana: Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill — First Reading Second Reading 
[Volume:651;Page:781] 
MOANA MACKEY (Labour) 
: 
 Goodness gracious me! It is hard to believe that the member who has just resumed his seat was a member of the Local Government and Environment Committee which worked on the Biofuel Bill. To be fair to the member he did turn up to meetings. Unfortunately because he had declared his hand as being opposed to the bill very early on in the select committee process I do not necessarily believe his contribution was nearly as constructive as it could have been. If he had left himself open to the possibility that he did not know everything and that the submitters who came along and told us that they wanted this legislation might have had a point then maybe he could have worked with us and with the Greens to come up with the standards and principles that came out of the select committee. I certainly will not say the member failed to turn up to the select committee because he did attend meetings but he clearly did not listen to a lot of what was being said there. It is astonishing how much of the information that was given to us by officials has been twisted. In that speech coming as it did from someone who claims that climate change debates and environmental debates should be about fact there was not a lot of fact from the former select committee member. 
We are at the second reading of the Energy (Fuels Levies and References) Biofuel Obligation Repeal Bill. We had the first reading half an hour ago and it is always slightly odd to give a second reading speech half an hour after giving one’s first reading speech. But because we are under urgency this is where we pretend that the bill has been to a select committee. This is where we pretend that Mr McNicholl who is losing $10 million worth of investment in a Waharoa biofuel plant—the company’s plant is on two sites—has had the opportunity to come to a select committee and tell members of this House exactly how much money he will lose from the repeal of an Act that gave him some certainty in his business. This is where Mr McNicholl would have been able to come to a select committee and tell members how many jobs will be lost in his industry because of the repeal of Part 3A of the Energy (Fuels Levies and References) Act 1989 and he would have been able to tell the select committee how damaging the repeal of the legislation will be for our environmental performance and more important for the development of a domestic biofuel industry in New Zealand. 
But this bill is being rammed through under urgency. Mr Gerry Brownlee as Leader of the House now has a 100-percent record of bills in this House going through all stages and with none of them going to a select committee—100 percent of the bills passed so far by this new Government have not gone to a select committee. They have been rammed through and the public of New Zealand have not had a single opportunity to come to a select committee and take part in a process that we in New Zealand are very proud of. We know that sometimes there are reasons why bills might not go to a select committee but that is certainly the exception rather than the rule. 
This is important legislation. The Biofuel Bill was with the select committee for a long time because we wanted to get it right because we wanted to work really hard on getting the sustainability principles in place and because unlike National we did not believe in just throwing up our hands and saying that because the oil companies had come to the select committee and put up a few arguments we would scream that the issue was too hard to address and do nothing. We decided that doing nothing was not an option. We listened to the numerous submitters who came along to the select committee. Of course biofuel producers have as much of a vested interest in this issue as oil companies and we took that into account. We are certainly not naive in that regard. But we listened to the submitters and we came up with a bill that we felt balanced the need for a domestic biofuel obligation the need to create a domestic biofuel industry and the need also to not put too much compulsion on the people who are doing that. 
It occurs to me that perhaps the Minister in charge of this bill does not actually know what the principal Act does because the Act is actually extremely flexible. We were at pains to make sure that the level of compulsion in the legislation was limited only to the percentage of biofuel that is required to be sold. I will reiterate: in the first year it is 0.5 percent—0.5 percent—going up by 0.5 percent every year. The original bill had a final obligation of 3.4 percent. Again that is not exactly out of this world but from listening to the Government members speak one would think we had placed a biofuel obligation of 80 percent or 90 percent on the industry. We had an original obligation of 3.4 percent. But we listened to submitters and we listened to the oil companies. We got official advice that told us yes that an ethanol plant they had expected to be developed in New Zealand would not come on stream now and that they thought that perhaps the obligation should be dropped to 2.5 percent in order to reflect that. And we did that—we did that. We listened and we responded to the concerns of those in the oil industry that they would not be able to access enough biofuel in New Zealand to be able to meet their mandatory obligations. Of course that is what select committee processes are for if one is a member of a Government that believes in having them. 
I will talk about the biofuel obligation because a number of Government members have got up and talked about this issue being all about what is sold at the pump. In fact nothing in the Act states biofuel has to be sold through the pump. I am not sure whether the Minister is aware of that. A number of direct sales of 100 percent biofuel have already been done. We must remember there is a limit at the pump on the level of blend that can go through: a maximum of 10 percent ethanol and 5 percent bio-diesel. But companies can sell higher blends than that of up to 100 percent direct to customers if they want to and it does not even have to go through the pump. We did not tell the oil companies that they had to sell biofuel across the whole country and we did not tell them that they had to do so only in Auckland or Wellington. It was left up to them to decide how they implemented their obligation according to whom their clients were and what their existing infrastructure was. Let us not forget that a number of oil companies already import ethanol because they sell it. The oil company I worked for sold ethanol. Any claim that there is no infrastructure for the selling of solvents and for blending fuels is not true because oil companies currently sell ethanol as a solvent. Some oil companies already have the infrastructure there although others may have to develop it. 
But one of the advantages of bio-diesel and one of the reasons why we wanted to create legislation that would support the development of a local biofuel industry that would be predominantly bio-diesel is that there are not the storage requirement issues that one has with regard to ethanol. Ethanol is more dangerous than bio-diesel and requires a lot higher safety standards—a lot more double-skinned tanks and things like that. Those things are not required for bio-diesel which uses the same systems as diesel. Another advantage of the Act was in trying to create a local biofuel industry that we knew would be predominantly bio-diesel. It would mean that the obligation could be met from domestic production and that would as I said before eliminate a number of the concerns about sustainability. 
When we think about compulsion we need to remember that the Act is very very flexible. It allows the oil companies to implement their obligation how they best see fit and where they determine it needs to be implemented. The oil companies told us during the select committee process that they simply could not access enough biofuel to meet the original obligation of 3.4 percent. However when we looked into that using the oil companies’ own figures which they had provided to the select committee we found that with all the development that was in progress they could meet the original target of 3.4 percent. To say they could not meet the target when we had dropped the obligation in the Act down to 2.5 percent seems slightly ridiculous. 
Mr Brownlee likes to talk in terms of litres. Of course the obligation uses units of energy not of volume. To meet the 2.5 percent obligation requires 5.5 petajoules of biofuel; for the 3.4 percent obligation it was 8 petajoules. We were told that the potential for domestic production over the period to 2012 was for up to 4 petajoules of bio-diesel from tallow 2 petajoules of bio-diesel from rapeseed oil and 0.3 petajoules of biofuel from ethanol. That is enough to meet the original obligation of 3.4 percent in the bill but because the legislation was designed to provide certainty and to provide the basis for a domestic biofuel industry we did not feel the need to push that target and we took the officials’ advice. 
We have heard a lot about the impact of the biofuel obligation on the price of fuel. Dr Smith is choosing simply to quote the oil companies and not the official advice that we received at the select committee. 
Hon Dr Nick Smith 
: What’s your figure? 
MOANA MACKEY 
: Of course one of the difficulties about saying how much this measure will cost is that we need to take into account the price of oil the price of biofuels the exchange rate in relation to imports and also how the obligation will be implemented. If the oil companies chose to sell 100 percent biofuel direct to customers and none of it through the pump there would not be any impact on the price of fuel at the pump. Every week at the select committee Dr Smith would ask the officials to go away and do some more crystal ball - gazing and every time they came back with advice he would say it was not good enough because they could not accurately predict the figures. As Dr Smith knows—and I hate to think of all the grey hairs he gave the very young officials from the Ministry of Economic Development we had at that time—the officials came up with a group of tables that took into consideration a number of scenarios. Those tables said that for petrol it could possibly be a negative number which meant it would be cheaper— 
Hon Dr Nick Smith 
: If it’s cheaper why do you need compulsion? 
MOANA MACKEY 
: Oh my Lord! The tables also said that for Gull Petroleum which currently sells biofuels more cheaply than the other oil companies sell their regular petrol with bio-diesel the price could possibly go up by 1c to 3c per litre.