Up to 320 megalitres of oil that may have otherwise been stored behind car mechanic buildings or washed down the drain is now recycled annually under the scheme which includes lubricant oils, hydraulic fluids, brake fluids and greases.
But in June 2016, Caltex made a claim under the scheme for almost $8.4 million. It had used diesel to clean the walls of the ships it used to bring crude oil into the country.
Under the scheme, there is no special levy imposed on diesel. No company before had sought to bring diesel into the scheme. But Caltex sought a payment because it had recycled the so-called “slop” diesel to a level it could be used as a fuel.
The tax office rejected the claim and Caltex went to the Federal Court to fight the decision. It was there on November 14 last year that almost two decades of agreed law was turned on its head.
A key issue was the way the legislation back in 2000 was framed. For the sake of the levy, and the benefit payment back to the company, oils were defined as “petroleum-based oils”.
The term was then followed, in parentheses, by a list of oils that began with the word “including”.
According to Justice Jennifer Davies, the ATO’s plan to prevent Caltex from claiming back the $8.4 million faltered in part because the words in parentheses following “including” were not an exhaustive list of the oils and greases that could qualify for the scheme. Plenty of non-fuel oils that could be recycled had failed to make the list back in 2000.
And while the scheme was aimed at lubricants that were not fuels, Justice Davies said there were examples of oils that could be burned to power engines.
“Just as some oils which are not used primarily for fuel can be and are used for fuel, some oils which are used primarily for fuel can have other uses, creating waste oil and becoming apt for recycling. Petroleum is such an example,” she found.
According to Justice Davies, while the original act was aimed at providing a financial incentive to recycle waste lubricants, the way it was written meant waste oils such as Caltex’s slop diesel could qualify.
It meant a financial windfall for Caltex and a possible multimillion-dollar headache for the Morrison government unless the loophole was closed.
So, as the government dealt with the fallout from the coronavirus pandemic in May, Environment Minister Sussan Ley gave a short speech to introduce the Product Stewardship (Oil) Amendment Bill.
Diesel, blends of diesel or “goods ordinarily used as a fuel” would be banned from qualifying for the scheme, while more power would be given to the responsible minister to issue regulations to extend payments to other oils.
Just a handful of MPs spoke to the bill, including the Assistant Minister for Waste Reduction and Environmental Management, Trevor Evans, who noted the original scheme now supported 11 oil recycling facilities that employed 600 people around the country.
He also pointed out that the government had spent $7 million to support the local recycling market because the coronavirus pandemic had forced the closure of some of those recycling facilities.
Labor’s assistant environment spokesman, Josh Wilson, went further, noting that while Caltex had been found to be legally entitled to the $8.4 million, that did not make it right.
“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,” he said.
“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.”
Four years, one Federal Court case, a Senate inquiry and a parliamentary debate since the tax office tried to stop Caltex’s $8.4 million claim, a small legal loophole was finally closed.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.