CHAIR—So I suppose, as well as the economic and specifically cash-flow implications of this legislation for your industry, which others—for example, the paint people—were able to point to, you point to a completely different and additional reason: the environmental externality, if I can put it that way, of the bill.

Mr Pullinger—Absolutely.

CHAIR—Senator Webber, I think it is your turn. Do you have any questions?

Senator WEBBER—No, I know Renoil very well, so I feel very well informed.

CHAIR—Senator Joyce, do you have any more questions?

Senator JOYCE—Just in summary, basically you are saying that the product that you purchase has already had the excise paid on it and that is the reason that you believe you did not need to pay the excise on it again. Because you are going to have to put the excise on it, the price of your product obviously has to go up. Even though the customer has the ability to claim it back, you are dealing with the cash-flow implications of the extension of credit, and it also puts you now at a comparable price to the major oil companies. So there is a likelihood of the switching across to the major oil companies and away from your product.

Mr Pullinger—That is exactly right.

Senator JOYCE—Okay. I am on board. How much capital has your industry outlaid by reason of this current legislative environment? That might also be a question to you, Harold.

Mr Grundell—It is in the order of tens of millions of dollars. We are currently in the process of constructing a facility that will further value-add to used oil to be used as lubricant. The capital used in that facility is of the order of $15 million alone. We have several major processing facilities throughout Australia and have spent tens of millions of dollars to establish that infrastructure. We installed a re-refinery in Sydney about 10 years ago on the back of another material we produce being exposed to excise at all levels, but that rule changed shortly after we committed to that capital and we have been wearing the burden of that change up to this point. This is yet another change in the way our products will be treated from an excise perspective, and it is becoming very difficult for us as a company and as an industry to predict with any certainty what our position in business is going to be like next year, the year after that or five years down the track.
Senator JOYCE—Did you envisage in the past couple of years that this may be on the cards? In your analysis of where your business is, have you taken into account that you are working in a legislative environment that is liable to change?

Mr Grundell—There was no way that we would have foreseen excise being applied to a recovered used oil supplied as an alternative fuel. This material is black and contains significant contaminants and in no way, shape or form could ever be used to power an internal combustion engine. It is something that you would never have foreseen. For it to be caught in the same net is quite astonishing from our perspective and for, I suspect, the industry in general.

Senator JOYCE—So the fundamental premise is that you believe the excise had been paid and that was it: you were dealing with a product that had now been through the excise hoop and was not going to go through it again.

Mr Grundell—That is right. The fact that the very nature of the product which encompassed 90 per cent of what is supplied by the industry does not even permit it to be used as a fuel in an internal combustion engine. Therefore, why would you bother trying to cover it under the excise regime?

Senator JOYCE—Do any of the major oil companies recycle oil?

Mr Pullinger—No.

Mr Grundell—No. Shell and Mobil had an association with Transpacific. They were 25 per cent shareholders each in Nationwide Oil, and their involvement ceased about 18 months ago.

Senator JOYCE—Do they have any plans to go into the recycling oil business, to the best of your knowledge? Is there any information in the marketplace that they may be about to go into that line of production?

Mr Grundell—There is certainly no indication from my perspective. I do not know about you, Bob.

Mr Pullinger—I am exactly the same. In fact, I would doubt that they would go in there because of the contaminants in the product going through their hydrotreater and because it is too small—there is not enough volume there for them.

Senator JOYCE—So you are not in the marketplace and there is obviously a void in the marketplace for this product—

Mr Pullinger—Correct.

Senator JOYCE—Is your industry strongly financed? Does it have, basically, a strong debt position on long-term cash flow? You have talked about the multiple millions of dollars to set up a capital plant—is that generally financed by reason of banks or by reason of equity?

Mr Grundell—From our perspective, it is a mixture of both, given that the Transpacific group has recently floated on the ASX. But I would suggest that for the remainder of the recyclers it would be a debt position.

Senator JOYCE—Where do you source your oil? You made a statement about sourcing it from regional areas; do you get out to regional areas to pick up the product?

Mr Grundell—Absolutely.

Mr Pullinger—We have depots in Canberra, Maitland and Orange and we collect right across New South Wales. We travel to farms; we do the lot.

Senator JOYCE—Does your industry have a number showing how much oil is being recycled at the moment? Is that in your submission?

Mr Pullinger—Most of the oil collected basically goes through some kind of processing treatment; the 200 million litres would be processed in some form or another.

Senator JOYCE—In summary, basically, the legislative environment that you have set up and constructed your business in was a representation to you to basically go to the banks and source money for a long-term cash flow position. And you strongly believe that the outcome of this in its current form could have a more than detrimental effect and could take you out of business and leave you with the debt?

Mr Pullinger—Correct. Especially with a lot of the small- to medium-size collectors who do not have the infrastructure that Harold has in terms of processing or that we have in our business. There are only four of us with refineries. All the rest of the other 20 or 30 people just do settling; all they do is collect the oil, settle it and then sell it out as a fuel to burners.

Senator JOYCE—If this situation is resolved in some way that you are more comfortable with, do you think that you as an independent group have the potential to grow your business with the major oil companies in such a way as to be another strong player in the fuel market?

Mr Pullinger—Absolutely.

Mr Grundell—I think we would, but to a limited