In another area of Australian life, if a person found a loophole in a legal definition so they could claim single-parent payments when they weren’t a single parent or a disability payment when they didn’t have a disability, we wouldn’t be sanguine about that. We wouldn’t say, ‘That’s clever; good on you for figuring that out and going down that path.’ I’m pretty sure I know how that would be treated in the mainstream media.
Mr Wilson (7:21 pm) — I’m glad to speak in support of the Product Stewardship (Oil) Amendment Bill 2020 and I move:
That all words after “That” be omitted with a view to substituting the following words:
“whilst not declining to give the bill a second reading, the House notes the Government’s slow and inadequate delivery of meaningful regulatory reform for domestic waste management and product stewardship”.
The PSO Act, which this bill amends, is important because it helps achieve the recycling of some 300 megalitres each year of what would otherwise be waste oil and pose risks to the environment. At the outset, I make it clear that Labor will be supporting this bill because it fixes a deficiency in the existing law, a deficiency that has the potential to cost the Commonwealth and therefore the taxpayer a lot of money in the future. Indeed, it has already cost the taxpayer some $8 million. I’m not sure that the loss of that money from the taxpayer to the Caltex oil company is something we should be all that comfortable with, but I’ll return to that in due course.
In essence, this bill amends the existing act to improve the legislative definition of ‘oils’ so it applies only to lubricant oils, fluid oils and other oils and greases manufactured from base oils and to make some corresponding changes to the Excise Tariff Act. That will hopefully mean that the scheme established under these laws can return to normal operation, providing an incentive mechanism through a levy and benefit payment combination to encourage the recycling of non-combustible oils. These changes are being made in response to last year’s Federal Court decision, Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation, which overruled the tax commissioner’s decision to disallow Caltex from claiming benefits under the scheme for the recycling and the subsequent sale of contaminated diesel. As a result, Caltex was successful in receiving an $8 million benefit payment from the Commonwealth. These amendments that we’re dealing with here are absolutely necessary in order to close a legislative loophole that might otherwise allow further claims and further losses. We’re supportive of the bill on that basis, and I’m grateful to the assistant minister for his engagement on the legislation and for the departmental briefings he made available.
For the benefit of the public, it’s worth noting that the term ‘product stewardship’ refers to the very sensible idea that a producer should take some responsibility for the life cycle and impacts of their product, especially in relation to what happens when it’s no longer useful and needs to be disposed of. Where the disposal of a product has inherent risks in terms of damage to the environment or harm to human health, there should be no question about the requirement for producers to take some responsibility to make sure that doesn’t occur. Unfortunately, the fact that this idea would strike almost anyone as being utterly sensible doesn’t mean that such demonstrations of responsibility are par for the course. In fact, there are lots of examples where products have been developed with no particular regard or provision for the safe end-of-life reuse, recycling or disposal of these products by companies that have made a profit without accounting for any related impacts or costs. And there are costs. Notwithstanding the fact that those costs and impacts fall directly or indirectly on the community, on all of us, the practice of product stewardship has been rare, which is unfortunate.
Without an effective concept of product stewardship, what do we tend to see? We see products designed and provided in a way that gives little thought to and takes little care of what happens when the product is done with. It means producers don’t care about and certainly, in some cases, don’t take responsibility for the disposal of their product. That means they don’t take responsibility for the environmental and health consequences, where that’s relevant, and certainly they don’t take responsibility for the waste and resource management costs—because, of course, there are costs involved in even the most benign forms of waste. In many cases, there are also health and environmental impacts. We know that, currently, each year, some 10 million tonnes of plastic waste go into the ocean. Microplastic is accumulating in marine birds and fish. Inevitably, it will be accumulating in us. This scenario—and there are many like it—is a market failure. It’s a failure of corporate social responsibility.
The former Labor government began to address these kinds of market failures in the waste and resource management space by introducing product stewardship laws and related schemes in 2011. It’s certainly time for us to take that framework forward, to expect more of producers and to ensure we’re achieving much better outcomes in terms of waste avoidance, reuse, recycling and related manufacturing. So far, under this government, we’ve not gone very far down the path. I know that there are some reforms coming in the parliamentary weeks ahead, and we look forward to debating those in this place.
In the case of this bill, it amends a law that established the scheme to encourage the sensible recycling and safe disposal of non-combustible oils through a levy and benefit payment arrangement, as I’ve described. Basically, everyone pays a levy on the relevant oils, and then, when you ensure the oil is recycled, you can recoup the levy in the form of a benefit payment. Since the scheme’s introduction, we’ve gone from a situation where basically zero oil of the kind covered was recycled to the situation now where more than 320 megalitres are recycled and properly disposed of each year. That’s more than half of the total volume.
This bill isn’t, unfortunately, a further instalment or a genuine expansion of our product stewardship arrangements, but it’s important because it fixes a shortcoming or a loophole that has emerged in the current framework. While the intention of the law, and the scheme it creates, is clearly to deal with non-combustible oils—and while that’s a matter of commonsense, to the extent that oils that combust don’t present the same kind of disposal issue—it wasn’t written in a way that effectively excluded combustible oils. How do we know that? We know it because the Caltex oil company came to the view that it could apply for a benefit payment in relation to diesel fuel. As part of its operations, it used diesel as a kind of cleaning agent in flushing out crude oil from tanks and pipes. The diesel was then cleaned through a further process that allowed it to meet Australian standards and be sold as fuel. But because, in Caltex’s view, this could be seen as a kind of recycling, they decided to seek for the first time a benefit payment from the Australian tax office.
There isn’t any doubt that the Product Stewardship for Oil Scheme was not established to cover diesel fuel in this way and that the relevant levy is not charged or paid in relation to diesel, which has its own excise arrangements. I think it’s quite understandable and I think the public would find it understandable that Caltex was initially rebuffed by the Australian tax office when it sought a benefit payment, but the company decided to take the matter to the Federal Court, and they won. That means they received $8 million from the Commonwealth. As far as I’m aware, no other company in a similar line of business has sought to pull that trick.
Labor has, in examining this bill, sought some information from the government and from elsewhere about whether consideration was given to how the money might be recouped from Caltex. If the definition of ‘oils’ within the act is wide enough to allow Caltex to claim the benefit, it seems to follow that the government could also apply the relevant levy to the same quantity of diesel and thereby perhaps recoup the funds in the opposite direction to the way the scheme is supposed to work. The advice we’ve received is simply that this approach wasn’t considered likely to succeed. We’ve asked some questions in trying to better understand whether all the options were explored and why any of those options, if they existed, weren’t pursued. That’s something for the government to explain.
I want to briefly raise the issue of Caltex’s approach in this matter. It’s not clear to me why Caltex pursued this payment. I think it’s a very reasonable question to ask, and we don’t yet have the answer to that question.
TUESDAY 25 AUGUST 2020
Mr Wilson (12:11 pm) I’m glad to speak in continuation in support of the Product Stewardship (Oil) Amendment Bill 2020, the Excise Tariff Amendment Bill 2020 and the amendment that’s been moved in my name.
These bills deal with the Product Stewardship for Oil Scheme. There are two pieces of legislation that give effect to that scheme. It’s a scheme designed to see non-combustible oils recycled. If that didn’t occur, those oils would be at risk of contaminating the environment. They present a risk to the environment and to human health to some degree, so it’s right that we have product stewardship arrangements in place that encourage producers to take responsibility for those oils. Since it was introduced in 2011 by the former Labor government, it’s been a very effective scheme. Prior to that time, there was effectively no recycling of non-combustible oils. It’s now the case that some 320 megalitres of oil get recycled and properly disposed of each year. That’s about half of the total volume of such oil, so it’s a very good community, environment and public health outcome.
The reason we are dealing with these bills is that a deficiency has emerged in the scheme and in the legislation that gives effect to the scheme. That became apparent last year when Caltex, soon to be Ampol, decided to see if it could receive a benefit payment under the scheme that it hadn’t previously received. In fact, no similar entity had previously sought the kind of benefit that Caltex was interested in pursuing. The scheme works as a levy and benefit payment combination. There’s a levy that is applied to all of the relevant oils, and then, when you, as a producer, achieve the proper recycling of the relevant oils, you can claim the benefit payment. So the scheme washes its own face, as some say.
In this case, Caltex believed that a definitional looseness within the legislation might allow them to claim the benefit payment for diesel. They use this diesel to clean pipes and tanks of crude oil. They then put the diesel through a cleansing process and are able to make it reach the Australian standards that allow it to be sold as fuel. It doesn’t have the levy applied to it, ordinarily, so it’s clearly outside the scope of this scheme. But they came to the view that the law wasn’t drafted sufficiently tightly to exclude them from the benefit payment, and they sought that benefit payment. They were initially rebuffed by the Australian tax office, as we might expect. They then pursued it in the courts. The Federal Court found that there was this loophole, and so they received $8 million—$8 million of Commonwealth money; $8 million of taxpayers’ money—that is, on any analysis, outside of the intention and purpose of that scheme.
Whether there was any opportunity for the Commonwealth to recoup that money is not entirely clear. The government has advice that suggests it couldn’t do that, even by the amendments that we are considering in this legislation. I think that’s a great shame. I know that my colleague and friend the member for Mackellar will be making a contribution in the debate. He has an interest, in his role as the Chair of the Standing Committee on Tax and Revenue—and just a general interest, I’m sure. The fact that $8 million of revenue has been lost from the Commonwealth in this instance should be a matter of interest and concern to everyone. I assume that he will speak about that.
I want to briefly raise the issue of the approach that Caltex-Ampol have taken. I’m not sure why they pursued this benefit payment. Nothing in the briefings or the material that has been shared by the government in relation to these bills makes it clear why they did that. That company would know that it’s not the purpose for which the scheme was established. They’d never previously sought a benefit payment. Other companies have not sought that payment. Caltex apparently support the change we are making here to ensure that this doesn’t happen again, but they made no submission to the Senate inquiry into these bills. So, unless something very strange is going on, it’s pretty clear that the Caltex-Ampol business model doesn’t depend on this benefit payment, and they mustn’t believe it’s a payment they deserve going forward. Why did they seek it in the first place? We don’t know. It seems the answer is that they thought that they could, that some clever person—or clever-clever person—figured out that this was a loophole that they might be able to exploit. We know the Federal Court found that they’re legally entitled to the payment. They are legally entitled to it, but does that make it right? I’m not sure that it does.
I think most people in Australia understand the distinction between the letter and the spirit of the law. Most of us understand that there might be something you can get away with for your own benefit but you wouldn’t do that if it was to the detriment of the community as a whole. In this case, it seems that Caltex-Ampol have come to the view that they can help themselves to $8 million of taxpayers’ money through a legal manoeuvre that is clearly outside the sensible public purpose of the law in question. That’s what we have to fix with these bills. I’ve not heard anything that explains why Caltex thought this was a justified course of action. I’ve not heard anything that explains how using a loophole to get $8 million of taxpayers’ money is consistent with the spirit of the law in question, which is designed to achieve the effective recycling of what would otherwise be toxic, environmentally harmful oil. I’m not sure how Caltex’s course of action is in keeping with corporate social responsibility or with the Australian sense of fairness.
On its website, Caltex lists five key corporate values, and the fifth one is:
Never stop caring
Act with integrity, constantly challenge each other to be better and always be safe.
I’m not sure how much integrity there is to be found in exploiting a loophole to enrich yourself at the expense of the Commonwealth. The company also describes itself as ‘proudly Australian’. It says:
We’re a business that’s proudly Australian and our commitment has never been more focused on playing a leading part in our country’s future.
I’m not sure how comfortably the conduct we’re addressing with the passage of this legislation sits with that sentiment. Eight million dollars is a lot of money. It might not seem like a lot of money when you’re a $10 billion corporation. I can tell you that, in the world of public and community services and related funding, it’s a lot of money. On that basis, I do believe that Caltex-Ampol should reflect on their conduct. If there’s something I’m missing, something the government is missing, that explains why exploiting a loophole to help yourself to $8 million that you’ve never before received—and none of the other companies in the fuel-refining and retail business have ever sought or received—is a form of honourable conduct, then I guess that’s for Caltex-Ampol to explain. They haven’t so far, and it doesn’t look like that.
I’d make the general point that we—all of us, especially in this place—need to be very careful that we don’t go along with a kind of moral whitewashing, when it comes to corporate conduct that seems highly technical and occurs through clever accounting ploys and legal manoeuvres but is, in effect, not any different from an individual realising that they can get something they don’t need, that they don’t really merit, at the expense of the community’s best interests and with the loss of its common wealth.
In another area of Australian life, if a person found a loophole in a legal definition so they could claim single-parent payments when they weren’t a single parent or a disability payment when they didn’t have a disability, we wouldn’t be sanguine about that. We wouldn’t say, ‘That’s clever; good on you for figuring that out and going down that path.’ I’m pretty sure I know how that would be treated in the mainstream media. So I do hope Caltex Ampol gives this matter some further consideration and provides an explanation, if there is one. If there’s a good reason why they sought and received the payment, they should say so. If there isn’t a good reason, and the only reason is that they thought there was a tricky legal loophole they could exploit to the tune of $8 million, I really hope that the company leadership would consider doing something different now, doing what I would regard as the right thing now.
Eight million dollars is a lot of money, when it comes to funding our healthcare needs, our aged-care needs, our recovery from bushfires, our efforts to do more to address homelessness and domestic violence, especially in the circumstances we currently face. If Caltex Ampol isn’t convinced about the rightness of seeking and receiving that benefit payment—I’m not talking about the legality; I’m talking about the rightness of it—I’m sure there are courses of conduct open to them that would put that right. There are a lot of organisations in Australia that could benefit from a show of corporate responsibility, that would be quite different from what Caltex seems to have done to date. In my view, and I’m confident it would be the public’s view, any company that took such a course would be thanked for that. It would be to their credit.
In conclusion, Labor supports these amendments bills. They’re necessary to ensure that the product stewardship scheme, in relation to the recycling and proper disposal of oils, works as it was intended to work and to prevent the recurrence of a significant loss of taxpayers’ money that, on the facts, as we understand them, probably shouldn’t have occurred in the first place.