Used Oil Recycling
Environment Australia, 2002
ISBN 0 64254 902 8
ISSN 1446 6422
This chapter reports on the financial arrangements for the PSO for the period 1 July 2001 to 30 June 2002, including levy collections and benefit payments.
Information on Transitional Assistance expenditure is set out in Chapter 4.
Overall, administration of the scheme was relatively smooth and benefited from the adoption of the ATO client manager approach whereby clients deal with the same officer each time they contact the office.
There were 37 recyclers registered for benefits as at 30 June 2002. Only six new claimants applied for registration during 2001-2002, confirming that the majority of recyclers were identified during the first year of the scheme. Therefore, claims administration during the year focussed on the payment of benefits and establishing closer ties with registered recyclers, particularly with regard to advice on category eligibility requirements.
Introduction of the ATO's Generic Payments System has improved the processing of claims and only claims that are incomplete or queried on technical issues experience any sort of delay.
Approval of Excise Manufacturer licences is now a faster process, resulting in fewer delays in the receipt of the first benefit payment. This has helped mitigate an often expressed concern by clients that they were unaware of the need for a licence and more importantly, who to contact in order to apply for one.
The ATO initiated an audit program during 2001-02, focussing on the payment of benefits and targeting the major claimants. The overall findings were that industry has a good understanding of the objectives of the scheme. However, record keeping obligations and non-compliance with the requirement to add the chemical marker to certain recycled products were highlighted through the audit program. This resulted in the ATO incorporating an educational element into its audit program in preference to the imposition of penalties.
Further information on registering for benefit payments can be obtained from the ATO website at www.ato.gov.au.
In 2001-02 total revenue collections from the PSO levy were $25 million. This comprised $21.6 million in excise collection on domestic production and $3.4 million in customs duty on imported oils. The following graph shows levy collections by month.
 |
| Figure 2.1: PSO levy collections by month 2001-02 |
Levy collections are recorded against a number of categories based on the type of oil, and customs duty is recorded under international customs classifications. The following tables show excise and customs tariff collections for 2001-02 by category.
| Item No. | Category | |
|---|---|---|
| 1501 | Lubricant base oil | 5,220,714 |
| 1502 | Prepared lubricant additives | 791,424 |
| 1503 | Engine lubricant | 7,731,915 |
| 1504 | Gear, transmission, transformer and heat transfer oils | 3,443,030 |
| 1505 | Hydraulic and brake fluids | 2,211,031 |
| 1506 | Metal working and process oils | 1,595,406 |
| 1513 | Petroleum based greases & synthetic equivalents | 579,623 |
| Total | 21,573,143 | |
| Item No. | Category | |
|---|---|---|
| 2710.00.91 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | 737,874 |
| 2710.00.92 | Petroleum based greases | 48,612 |
| 2710.19.91 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | 652,871 |
| 2710.19.92 | Petroleum based greases | 34,553 |
| 2710.91.91 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | 22,188 |
| 2710.91.92 | Petroleum based greases | 1,372 |
| 2710.99.91 | Petroleum based oils including lubricants, hydraulic fluids and transformer oils | 113,959 |
| 2710.99.92 | Petroleum based greases | 16,370 |
| 3403.11.10 | Preparations for the treatment of textiles, containing petroleum oils, solid | 1,277 |
| 3403.11.90 | Preparations for the treatment of textiles, containing petroleum oils, liquid | 10,886 |
| 3403.19.10 | Other preparations (eg. cutting oil, anti-corrosion etc) containing petroleum oils, solid | 21,770 |
| 3403.19.90 | Other preparations (eg. cutting oil, anti-corrosion etc) containing petroleum oils, solid | 194,660 |
| 3403.91.10 | Preparations for the treatment of textiles, containing petroleum oils, solid | 8,407 |
| 3403.91.90 | Preparations for the treatment of textiles, not containing petroleum oils, solid | 29,139 |
| 3403.99.10 | Other preparations (eg. cutting oil, anti-corrosion etc) not containing petroleum oils, solid | 86,752 |
| 3403.99.90 | Other preparations (eg. cutting oil, anti-corrosion etc) not containing petroleum oils, liquid | 317,556 |
| 3811.21.10 | Additives for lubricating oil, containing petroleum oils, solid | 4,366 |
| 3811.21.90 | Additives for lubricating oil, containing petroleum oils, liquid | 1,001,619 |
| 3819.00.00 | Hydraulic brake fluids | 49,931 |
| Item 50 & 50(1)(b) - Treatment Code 507 | Customs Duty Concession Item that could be used with T.I 3819.00.00 | 7,407 |
| Total | 3,361,569 | |
A total of $8.2 million was paid as product stewardship benefits to recyclers in 2001-02. The following graph shows PSO benefit payments by month, and Table 2.3 provides a breakdown of payments by product category (from the Product Stewardship (Oil) Regulations 2000).
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| Figure 2.2: PSO benefit payments by month 2001-02 and 2000-01($) |
| Category | |
|---|---|
| Re-refined base oil (for use as a lubricant or a hydraulic or transformer oil) which meet the specified criteria | nil |
| Other re-refined base oils | 7,378 |
| Diesel fuels to which the Excise Tariff Act 1921 applies | 1,763,796 |
| Diesel extenders (filtered, de-watered and de-mineralised) | Nil |
| High grade industrial burning oils (filtered, de-watered and de-mineralised) | 3,291,712 |
| Low grade industrial burning oils (filtered and de-watered) | 3,103,921 |
| Total | 8,166,807 |
The data above clearly show that revenue collected under the levy for 2001-02 was higher than benefits paid. While this situation is far from ideal, it is a necessary consequence of setting the arrangements so that they could be stable whilst still allowing for longer term change within the industry.
Pre-implementation modelling on the program indicated that a lower levy rate would be required in the early years of the program, and a higher rate would be required for the later years once the quantity and quality of recycling increased. In order to avoid ongoing adjustments to the levy rate, a mid-range rate was set which could remain constant for the first 4-5 years and still raise sufficient funds to cover likely payments in later years (using the transitional assistance funds as a back-up).
It was necessary to set the levy rate such that adequate funds would be available to provide a sufficiently high incentive for operations to establish lube-to-lube recycling. As the capital investment required for such recycling is very high, the Category 1 benefit rate was set at 50 cents/litre - significantly higher than the next highest rate of 10 cents/litre. At the time the modelling was undertaken, it was estimated that some lube-to-lube operations would be established within the second or third financial year of the PSO, hence absorbing most, if not all, of the excess revenue. Environment Australia anticipates that Category 1 payments will commence early in 2002-03 as a consequence of transitional assistance funding to a refinery in rural NSW.
The balance between benefits and revenue will be monitored over the transitional period of the arrangements and adjustments will be made to the program if required.
From the inception of the PSO, there was general recognition that the first twelve to eighteen months would be a period of refinement and review of the arrangements, to identify potential weaknesses and problems and make the necessary adjustments. Experience over the first eighteen months has identified a number of areas which require further examination in this context.
In 2000-01, Environment Australia, the ATO and ACS undertook a detailed examination of all requests for exemption from the PSO levy.
In 2001-02, based on advice developed from that process, the Minister for Environment and Heritage agreed that it was not the original intent of the PSO scheme to capture oils that are not available as waste-oil to be recycled after use and do not present an environmental risk.
The exemptions policy is being implemented in two stages.
Firstly, exemptions for food grade white oil, polyglycol brake fluids and aromatic process oils came into effect on 15 April 2002. These products have characteristics that are distinguishable from other oil products, and as such they are able to be clearly defined as exempt under the Customs Tariff Act 1995 and the Excise Tariff Act 1921.
Notices to alter the Excise Tariff Act 1921 and the Customs Tariff Act 1995 were published in the Gazette on 12 April 2002, and Tariff Proposals were tabled in Parliament on 29 May 2002. The Tariff Proposals will be validated once the relevant Bills pass through Parliament1.
The next stage of the exemptions process is more complex, as it relates to particular uses of oil, rather than specific oil products.
Environment Australia, in conjunction with the ACS and ATO, is now investigating available mechanisms that may provide relief from the PSO levy for specific uses of multi-use oils. Examples of products and uses that may be considered for levy relief include oils used as ingredients in paints and inks, as lubricants for metalworking, and as mould release agents.
An important consideration in the granting of levy relief for particular uses of oil is that the integrity of the PSO arrangements is not threatened.
When the PSO levy was established, it was agreed that, for the sake of consistency, it would be subject to the same indexation arrangements as other excises (ie indexation twice a year in line with movements in the Consumer Price Index). Consequently, in 2001-02, the PSO levy was indexed on 1 August 2001 from 5.2 to 5.299 cents per litre, and on 1 February 2002 it was raised to 5.363 cents per litre2.
However, in line with changes to the indexation on fuels, the Prime Minister, Treasurer and the Minister for Justice and Customs have agreed to abolish the automatic indexation of the levy3.
With only eighteen months experience it is difficult to categorically determine how recycling rates have been affected by the PSO at this time, but the figures are trending in the desired direction. Original figures provided by industry suggested that approximately 165 million litres of oil were being recycled each year, with a further 250 million litres in storage. Based on payments reported by the ATO, approximately 65 million litres of recycled oil products were sold during the first half of 2001 (ie potentially 130 million litres for the year 2000-01). Based on payments reported by the ATO for 2001-02, approximately 194 million litres of recycled products were sold during 2001-024. This is approximately a 50% improvement on the 2000-01 result.