KEY POINTS:
Oil company giant BP said petrol and diesel could rise at least 7c a litre at the pump if new biofuel requirements came into force on July 1.
Energy and Climate Change Minister David Parker admits introducing lower emission biofuels means there will be "unavoidable" costs for consumers - alongside other mounting consumer costs associated with climate change issues and policies.
BP New Zealand managing director Peter Griffiths told the local government and environment select committee yesterday the Biofuel Bill before Parliament would see the company's costs "skyrocket".
"We will have no choice but to pass these on to our customers."
The bill requires oil companies to sell a minimum percentage of biofuels from July. Oil companies would be initially required to sell 0.53 per cent biofuels, rising to 3.4 per cent in 2012.
"While on the face of it, 3.4 per cent does not sound like a very high target, the way in which it is calculated [on energy content] and must be implemented means more than 90 per cent of petrol and 30 per cent of diesel will need to contain a bio content in order to meet the mandate," Mr Griffiths said.
"The infrastructure required, additional raw bio material product costs, implementation and compliance costs will see our overall costs sky-rocket."
It was one of the highest biofuels targets in the world and could not be delivered "at the moment", he said.
"In addition, the mandate is too high, too fast and fails to deliver any of the three main aims of the bill: sustainability, security of supply and carbon reduction."
Mobil told the committee that to meet the Government targets in 2011, it would have to decide by the middle of 2009 which biofuels it would offer and which fuel terminals it would modify.
The 2011 requirements would force Mobil to build storage tanks and blending facilities in three or four terminals simultaneously - a "significant burden".
The company would like to see 3.4 per cent biofuel sales obligation (BSO) cut back to 2.5 per cent.
Oil companies face multimillion-dollar penalties if they fail to reach the Government targets, although the $60 million/petajoule penalty originally proposed has been reduced to a maximum of $20 million in 2010, and a maximum of $30 million for defaults in 2012.
Mobil warned even a simple interruption of ethanol shipments could leave it facing a penalty of $1.75 million to $2.25 million.
In an emailed response Mr Parker said: "There is an infrastructure cost involved to the country that we face if we want to introduce biofuels into New Zealand. That cost is unavoidable."
A spokeswoman said on Mr Parker's behalf that he had "stepped away" from discussing issues while they were before a select committee.
She added the Government would later consider all issues raised by the oil companies.
BP yesterday proposed a biofuel target starting at 0.23 per cent and rising to 3.23 per cent, but added three years to the proposed target in biofuel delivery, from 2012 to 2015. BP said its proposal would reduce compliance costs and allow time for more biofuel- compatible cars to be introduced and for local biofuel production to develop.
BP also noted the average age of a New Zealand vehicle was 12 years and less likely to be compatible with biofuels.
- OTAGO DAILY TIMES, NZPA
