FOREIGN: Australia - Warning on dodgy biodiesel

THE rush into biofuels caused by high oil prices has left the fuel industry open to exploitation and error, according to a leading insurance broker.

The pressure to adopt biofuels, especially biodiesel, had outstripped the ability of governments to regulate the industry, Grant Stillman of Oamps, said.

"We thought biodiesel would be nice and clean and easy, until we started talking to reinsurance companies," Mr Stillman said.

"Then we found there were a lot of issues with it in relation to what it can do to motors, what it does in certain climates and what can happen if it is not stored properly."

While the Federal Government has set standards for the production of ethanol, there were no guidelines and regulations for the blending of it with regular diesel fuel.

"If the Government wants to push this, they need to get some rules in place," he said.

He said Oamps' clients included many fuel distributors who, along with everybody else in the country, are being encouraged to use and promote more biofuel use.

"They are being coerced into buying and distributing this product, but some are buying it from people who aren't blending it properly or who do not explain the downside."

Fuel distributors could find themselves liable for engine damage caused by improperly blended biodiesel if truck manufacturers refused to recognise warranty claims.

For example, Volvo only warrants its engines for use with fuel that is 5 per cent biodiesel.
"We know of people who are flogging biodiesel all over the place, into the Sydney market and into the Adelaide market, and there are no blending specifications.

"It is so open to people who are unscrupulous who are just trying to gain an advantage in the market," Mr Stillman said.

The lack of a standard for blending means that the ratio of biodiesel to oil-derived diesel could vary enormously.

Mr Stillman said a mixture of about 20 per cent biodiesel might work well in a warm climate such as Queensland's but if the truck were driven to central NSW, the owner could find the fuel may freeze. In the US, trucks have to be fitted with warmers to keep the fuel liquid in the fuel lines and tanks.

He said the biodiesel issue was similar to the ethanol issue 14 years ago — the Government allowed but the industry was not ready for it.

In the ethanol case, the car makers had not changed their warranties to accommodate it.
"We are back where we started with ethanol. The exact same thing happened and we went through the process and it took so long.

"It was only when governments said they would not buy police cars unless they could handle ethanol that Ford and Holden changed their warranties," Mr Stillman said.

"We have got ethanol pretty tidy now. We have no problems providing insurance for ethanol providing the Government regulations are met."