Memorandum submitted by Semple Fraser
LLP for and on behalf of the Fuel Producing Group of Waste Oils
Recovery/Recycling Companies (Waste 72)
CRISIS FOR WASTE OILS COLLECTION AND RECOVERY
IN THE UK
I represent the leading companies who form the
Fuel Producing Group in the UK waste oils collection, recovery
and recycling sector. These companies are OSS Group Ltd; Oil Salvage
Ltd; Duston Oils Ltd; Waste Oils Services Ltd; and Enva Northern
Ireland.
Between them these companies are responsible for
the collection, treatment, recovery and environmentally beneficial
re-use of the vast majority of waste oils generated in the UK.
OSS themselves have for some years led the industry in two respects:
(a) in the amounts of waste oils they collect, treat, recover
and provide for such beneficial re-use; and (b) in pioneering
best available technology and expertise in research, development,
chemistry, engineering and production of new generation products
from these intractable, toxic wastes.
I am instructed to draw the Committee's attention
to a hazardous waste problem for the UK which has now reached
crisis proportions. The key facts are:
(1) "Waste oils" are a hazardous waste
comprising used transformer oils, gearbox oil, engine oils, fuel
oils, solvents and other hazardous waste materials which emerge
from a variety of industrial sources, but primarily from automotive
garages and similar establishments which produce residues of lubricant
oils from cars, buses, trucks, trains, ships and aircraft, as
well as from some non-automotive industrial sources such as engineering
workshops, coal mines, brickworks, and steelworks.
(2) The proper collection and processing of such
wastes has for years been, and remains, a major problem for the
UK. Thus, a European Commission Study reported in 2000 that more
than 804,000 tonnes of lubricant products were purchased for use
in the UK, of which around 484,000 tonnes were unaccounted for
at the end of their useful life, and therefore that the majority
of the hazardous wastes are either lost to the environment and/or
illegally burnt.
(3) The only viable alternatives in the UK to
such uncontrolled illegal disposal into our drains and soil, air
and water environments are—(i) combustion in the Tata owned
Corus blast furnace at Redcar, and/or (ii) proper processing into
genuine recovered/recycled fuels.
(4) The Corus option is of highly dubious provenance,
since it is incorrectly exempted by the UK from EU waste incineration
laws. However, for the moment, that is irrelevant, because the
Corus option has ceased for the foreseeable future, the use of
waste oil as a fuel having been terminated by Corus in December.
(5) This only exacerbates the problem. Even with
its dubious legal and environmental status, the Corus options
prevented c. 2000 tonnes per week of waste oil from being illegally
dumped. With that option removed, the glut of waste oils with
no viable recovery or disposal option has been massively increased,
and will have been exploited by rogue operators for a number of
weeks now.
(6) The so-called "regeneration" option—of
processing waste oils to a base oil—is an energy and investment
intensive process that has been proven not to work, technically
or commercially in the UI: like the Corus option, it is not a
viable solution in the foreseeable future.
(7) The fuel recovery/recycling option has always
been the optimum environmental and resource efficient option in
the UK, and in recent years it has become an even better option,
as the leaders in the industry have invested heavily to improve
the quality of the end product—such that, in some instances,
we are now dealing, not with mere wastes converted to fuels, but
with genuine "next generation" secondary raw materials
which pass the ECJ/Court of Appeal test for end of waste = optimum
result for the environment and resource conservation, and firmly
in line with the key objectives of both waste framework directives
(2006/12/EC and 2008/98/EC); so what is the problem?
(8) The UK is required by EU law to levy a fuel
duty on recovered/recycled fuel oils at a minimum rate set down
by the EU. The problem is that the UK has chosen to levy this
duty at nearly 10 times the rate applied in most of the EU member
states. Aside from the incredulous position of the UK industry
being put at such a competitive disadvantage by its own government,
the accumulating and mounting effects of the recession + the duty
= the end of this small but vitally important industry, imminently.
(9) Global oil prices have collapsed, and margins
are tight to non-existent. Into that toxic economic mix, the imposition
of this excessive rate of duty is the death knell, which destroys
any prospect of this industry surviving the recession. The industry
is realistic enough to accept that some duty has to be paid, and
the industry could have coped with a competitive rate of duty,
but not one levied at 10 times what its competitors pay in Europe.
(10) It should also be borne in mind that the
relevant EU duty directive (2003/96/EC) actually expressly encourages
Member States to apply differentiated rates of duty commensurate
with increased product quality, recourse efficiency and environmental
benefit. These are precisely the benefits which flow from the
commercial manufacture from hazardous wastes of genuine "next
generation" secondary fuel products. We have been pleading
with HM Treasury and Defra for many months to see this glaringly
obvious distinction, and we have warned them (long before the
financial crisis) of the inevitable outcome for the UK environment;
but they have refused to take the necessary action.
(11) Now we are in a different world altogether.
As a direct result of this excessive rate of duty, combined with
the global oil price collapse and the dire effects of the recession,
there is no commerce in the collection of waste oils, far less
in their (highly regulated) treatment and processing. There is
no point, if these highly regulated operations run at a loss.
The rate of duty imposed by the UK has been the tipping point.
The rate of duty itself now exceeds the value of the waste oil.
(12) As a direct result, collections of waste
oils are grinding to a halt, and very shortly they will cease
altogether. Increasing amounts of waste oils are now log-jammed
at their point of collection. This will open up the market even
wider for those operating illegally who will see an opportunity
for massive commercial exploitation of the current situation.
More uncontrolled, unregulated, illegal dumping (to the significant
and irrecoverable detriment of human health, biodiversity and
the wider environment) is the inevitable and imminent outcome.
(13) In this context, a duty at 10 times the
EU rate is an exercise in madness. It is all the more puzzling
when one considers that, prior to the onset of the financial crisis;
the UK Government actually lobbied the EU to continue with a total
derogation from the duty directive for recovered/recycled fuel
oils. This lobbying was ill-conceived for three reasons: (i) it
did not emphasise critical environmental benefit criteria; (ii)
it ignored the fact that EU law demands a minimum rate of duty;
and (iii) in any event, it also ignored the fact that the Member
States have the power to apply a light touch to duty on recovered/recycled
fuel oils by setting the minimum EU rate. This is what the vast
majority of other Member States have done. The UK applied a rate
almost 10 times greater, and they applied it to coincide with
the onset of economic meltdown in all commercial sectors of the
UK!
(14) We and our clients have been pleading with
HM Treasury and Defra for months to see the reality of this ludicrous
situation. We have submitted detailed papers to Ministers, and
we have the support of a cross-party body of very concerned MPs
who have sought a response from the government, all to no avail.
The industry is being ignored.
(15) Moreover, this is not simply a commercial
disaster. It is socially and morally irresponsible. This over-taxation
of the waste oils recovery/recycling industry in the UK flies
in the face of the obligations of Member State under the waste
framework directives to do all they can to encourage and nurture
industries and technologies which produce secondary raw materials
from waste and conserve the use of natural resources such as fossil
fuels; as such, aside from reversing the Government's "green
agenda", it is strongly arguable that it is a breach by the
UK of Article 10 of the EC Treaty.
(16) The revenue generated by HM Treasury from
this duty is the proverbial "drop in the ocean". The
Government could reduce the rate of duty to EU rates without any
impact whatsoever registering. Conversely, the effect of the duty
rate on the (legal) collection and processing industry is catastrophic
to the point of extinction: the environmental consequences will
be viewed as a lamentable disregard by the UK state of its duties.
(17) Meanwhile, this highly regulated, but seemingly
doomed industry views with exasperation the daily rush by government
to pump inordinate amounts of tax-payers' money into propping
up certain sectors of the economy, whilst not moving at all to
alleviate a rate of duty which is minor in UK revenue terms but
which has such dire consequences for industry and the environment
if not alleviated.
This is all avoidable at little if any cost.
The financial crisis is unprecedented in our
times, and all businesses are struggling. However, this industry
is not holding out the begging bowl; it is simply drawing attention
to an issue of gross unfairness and environmental insanity.
This industry is the last bulwark against complete
meltdown of the environmentally responsible collection of waste
oils and an endemic uncontrolled dumping of waste oils which will
swamp any resources the Environment Agency or SEPA are able to
apply to it.
All we have been asking the UK authorities (Defra,
the Agency, HM Treasury and HMRC) to do is to co-operate to alleviate
the worst effects of this crisis by making an adjustment in the
rate of duty to a rate commensurate with that paid by our competitors
in the EU.
At the very least, they could easily, and with
marginal impact on revenue, defer the application of the current
high rate of duty by way of an extra-statutory concession which
is seen to be both (a) responding to the extra-ordinary circumstances
of the recession, but which also (b) critically (and unlike the
massive government hand-outs to other sectors) has a major environmental
benefit for the UK.
The sort of concession of deferment which might
breathe new life into this industry before it is too late is of
the order of a duty rate of, say, 1p to 2p per litre, rather than
the current 9.7p per litre.
Instead, we understand that there is a planned
further increase in duty from 1st April this year.
Some of our parliamentary supporters have suggested
that we draw the plight of this industry to the attention of your
Committee, and this is the purpose of this letter.
We would respectfully request that the matter
be considered as soon as possible by the Committee. It is vital
that the Government accept the compelling nature of this proposition,
in the interests of keeping alive an industry which is vital to
a key area of UK environmental protection.
Thank you for your assistance and time.
Vincent Brown
Semple Fraser LLP for and on behalf of the Fuel Producing
Group of Waste Oils Recovery/Recycling Companies
January 2009
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