KEY POINTS:
Major New Zealand fuel companies are expected this year to start selling biofuels as part of the Government's policy to fight climate change and reduce dependence on imported transport fuels.
The obligation will start on April 1 if the legislation is completed on time, although Energy Minister David Parker has indicated the possibility of a delay until July 1 to allow oil companies more planning certainty.
The sales obligation requires companies that sell petrol or diesel to also sell biofuel.
The amount will be set as a percentage of total combined petrol and diesel sales a year.
Gull Petroleum is already selling a blend at the pumps with a 98-octane biofuel. The mixture contains 10 per cent ethanol from the dairy industry blended with petrol. Biofuels will have to be at least 3.4 per cent of total fuel sales by 2012.
Oil companies have not disclosed exactly how they will meet the targets but they could introduce bioethanol petrol blends for 91 or higher octane petrol or biodiesel.
The levels reflect the quantity of biofuel feedstock estimated to be available here.
There is enough tallow from the meat industry to make between 5 and 6 petajoules of biodiesel. A petajoule is a unit of power which corresponds to 23 million kg of oil.
Maize, in addition to small amounts of dairy whey, may also be a potential feedstock for producing bioethanol.
BP, Caltex, Gull, Mobil and Shell will all be expected to comply with the legislation and face penalties if they fail to meet the targets.
If a company is short of its obligation in the first three years, there is a penalty to pay of up to $20 million per petajoule of biofuels.
This goes up to $25 million per petajoule in 2011 and $30 million per petajoule from 2012. In the event that a company sells more than its annual obligation of biofuels, up to 10 per cent can be used to meet all or some of the next year's obligation.
Companies will also not be penalised if, in one year, they undersupply up to 5 per cent of their obligation. This is known as banking and applies to the next year only.
A review of appropriate biodiesel and ethanol specifications is being undertaken, with new standards expected early this year.
- NZ HERALD STAFF
