Ethanol plant faces closure if subsidy cut

Manildra Group owner Dick Honan has dismissed a report that questions  the effectiveness of the ethanol industry as ‘‘garbage’’ and he has warned if the federal government withdraws  its support, the Bomaderry plant would have to close.

The Bureau of Resources and Energy Economics (BREE) report raised concerns about the ethanol industry that receives $108 million a year from the federal government’s Ethanol Production Grant program.

With predictions of cuts in the May budget, the report has prompted speculation that the subsidy may be scrapped, meaning the ethanol industry could be the next to feel the Abbott government’s hard line on requests for assistance.

The EPG was introduced by the Howard government in 2002 but the BREE report questions the effectiveness of the scheme, saying the subsidies were producing minimal economic or environmental benefit and might even be responsible for higher costs to motorists.

Manildra’s Bomaderry plant, the biggest manufacturer of ethanol in Australia, produces 300million litres a year and receives the lion’s share of the subsidies.

“I’ve seen the report and it is garbage,” Mr Honan said.

He  has warned that the Bomaderry plant would be closed if the federal government withdrew  assistance for the industry.

“It wouldn’t be viable for the renewable fuel industry in Australia if the subsidy was withdrawn,” he said.

“That was bipartisan and we don’t see any change to that.

“We’ve certainly had no communications that that will change.”

Mr Honan said  the Bomaderry plant had 300 employees,  and  there  were   staff at three other locations in Gunnedah, Manildra and Narrandera, which  supply raw materials to the company’s operations.

As well as producing ethanol at its Bomaderry complex, Manildra also produces other products such as starch, gluten, glucose syrup and brewers’ syrup.

There has been more than $600million in capital investment on the site in the past two decades, more than $300million of that in the past six years.

The company uses wheat starch to make about  70per cent of  the total  Australian production of ethanol.

United Petroleum’s plant in Dalby, Queensland, uses red sorghum to make 80million litres of ethanol and Wilmar Bioethanol uses molasses from sugar at Sarina, Queensland to make 60million litres.

The BREE report estimates that Australia’s three producers employ a combined workforce of 200, costing taxpayers between $545,000 and $680,000  per  job.

Ethanol-blended petrol (EBP) accounted for 13.8per cent of total petrol sales in 2012-13. 

“Why should it be altered when there are 58 countries in the world with national mandates?

“The ethanol industry received 38 cents a litre excise exemption but we discount to the oil companies 47 cents, so we give back more than what we receive, how could we be taking a subsidy?”

Mr Honan said suggestions the subsidies for ethanol production may be cut were nothing more than “speculation”.

Manildra facility safe: Sudmalis

Gilmore MP Ann Sudmalis says there is nothing to suggest the subsidies to Manildra will be cut.

Ms Sudmalis said she spent two days looking into the possible subsidy cuts and could find no evidence of any such suggestions.

‘‘It is absolutely safe, there is no reason for the media frenzy that is going on,’’ she said.

‘‘I have talked to senior advisers and three different ministers and there is nothing before cabinet.

‘‘Nothing has come through the back benches into the party room.

‘‘There is no cabinet agenda; we don’t even know who asked for the report. 

‘‘It wasn’t a minister.’’

Ms Sudmalis said Manildra played a vital role in the local community.

‘‘We know how important ethanol and Manildra is. It is 100per cent an integral part of our local community and in terms of an environmental product it reduces carbon emissions when added to fuels,’’ she said.

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