UK Bio-Diesel Company Quits NZ Due To “Uneven Playing Field” For Ethanol
August 6th, 2008
Chris Mole, Associate Editor
• Tax break for ethanol “unfair.”
• Domestic bio-diesel can’t compete.
• Argent can’t wait for policy change.
Argent Energy’s NZ Managing Director Dickon Posnett is returning home to the UK next week, after his company pulled the plug on plans to build a $100m bio-diesel plant in this country. Posnett arrived in NZ in 2006, full of optimism about the potential to manufacture bio-diesel from waste tallow. But after almost two years battling with the Govt over its bio-fuels policy, he is quitting NZ, despondent over what he sees as a massive wasted opportunity for the country to develop a domestic bio-diesel industry.
At the heart of Argent’s decision to leave NZ is the Govt’s waiver of excise on ethanol until 2012. Posnett claims this gives oil companies a huge incentive to import ethanol rather than use NZ-made bio-diesel to meet their sales obligation. He adds, “It’s effectively a 42c per litre subsidy for ethanol over bio-diesel.” Argent has tried unsuccessfully to persuade the Govt to tax ethanol, to create a “level playing field” between ethanol and bio-diesel. Posnett says if the Govt added excise to ethanol, it would not affect consumers, who now pay the same tax on petrol anyway. Energy Minister David Parker says the Govt will review the excise on ethanol in 2010, and is unlikely to extend the exemption beyond 2012. But Posnett says Argent can’t wait another four years for a level playing field.
Argent’s proposed plant in NZ would have produced 80m litres of bio-diesel a year from tallow as well as waste cooking oil. Posnett says while the plant has now been shelved, Argent is not shutting the door on NZ completely. It will “keep a close eye on the situation” over the next few years, particularly if a National-led Govt comes to power. At this stage, National hasn’t said whether it would continue to waive the tax on ethanol. Argent will now be looking for opportunities to build bio-diesel plants in other countries. The company has a major plant in Scotland, which has been supplying oil companies in Britain and Europe for more than two years.
Meanwhile, Solid Energy’s bio-fuel subsidiary Biodiesel NZ is pressing ahead with plans to make bio-diesel at a new plant in Christchurch, from canola grown in the South Island. Biodiesel NZ General Manager Paul Quinn agrees with Posnett the excise on ethanol is going to make things tough for bio-diesel suppliers in the short term, but he is confident his company will find a market for its fuel. Biodiesel NZ arguably has an advantage over Argent Energy in being an SOE, which means it doesn’t have to go out to the market place and persuade investors to invest in the company, as Argent would have to. Furthermore, being a subsidiary of coal miner Solid Energy, the company has other incentives for pursuing bio-fuel, such as trying to improve its environmental image.
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