EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 246

Issued by the Authority of the Minister for Climate Change and Energy Efficiency

Renewable Energy (Electricity) Act 2000

Renewable Energy (Electricity) Amendment Regulations 2010 (No. 6)

Section 161 of the Renewable Energy (Electricity) Act 2000 (the Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the Act, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

The Act establishes a Renewable Energy Target (RET) scheme to encourage additional electricity generation from eligible energy sources. The RET scheme is designed to ensure that 20% of Australia’s electricity supply is generated from renewable sources by 2020.

 

Under the Act, wholesale purchasers of electricity (‘liable parties’) are required to meet a share of the RET in proportion to their share of the national wholesale electricity market. The Act provides for the creation of Renewable Energy Certificates (RECs) by generators of renewable energy. One REC generally represents one megawatt-hour (MWh) of electricity from eligible energy sources.

 

The Regulations amend the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations) to support the provisions of the Act that deal with the provision of partial exemptions from liability in respect of the electricity acquired for use in carrying on activities that are defined as emissions-intensive trade-exposed (EITE) for the purposes of the Act. Examples of these activities include the production of silicon, aluminium smelting and printing and writing paper manufacturing. Specifically, the Regulations prescribe additional EITE activities and make other minor technical amendments to the Principal Regulations to support these activities.

 

Details of the Regulations are set out in the Attachment.

 

Consultation

The Department of Climate Change and Energy Efficiency started a formal process for defining and determining the eligibility of EITE activities in February 2009. This has involved stakeholder workshops to assist in the creation of appropriate definitions and boundaries for activities. Activities were then formally defined by the relevant Minister for the purposes of data collection and published on the Department's website. Audited data has been submitted to the Government on the basis of the approved definitions and the activities in these regulations have been determined as eligible by the Minister for Climate Change and Energy Efficiency. Relevant industries who have submitted data to the Government have provided comment on the final wording of the definitions to be included in the Regulations to ensure that the structure of the definitions reflects the conduct of the activities at their individual sites.

 

 

 

Authority: Section 161 of the Renewable Energy (Electricity) Act 2000

Attachment

 

Details of the Renewable Energy (Electricity) Amendment Regulations 2010 (No. 6)

 

Regulation 1 – Name of Regulations

This regulation provides that the Regulations are the Renewable Energy (Electricity) Amendment Regulations 2010 (No. 6).

Regulation 2 – Commencement

This regulation provides that the Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.

Regulation 3 – Amendment of Renewable Energy (Electricity) Regulations 2001

This regulation provides that Schedule 1 amends the Renewable Energy (Electricity) Regulations 2001 (the Principal Regulations).

SCHEDULE 1 AMENDMENTS

Item 1 – Regulation 22A, after the definition of applicant

This item inserts definitions of ASTM, carbon steel, condensate and coke oven coke into regulation 22A.

ASTM is defined consistently with the National Greenhouse and Energy Reporting (Measurement) Determination 2008 as a standard of ASTM International. Many of the estimation methods will be undertaken with reference to documentary standards developed by the American Society of Testing Materials, now known as ASTM International. This is relevant to the production of white titanium dioxide (TiO₂) pigment and the production of polyethylene.

 

carbon steel is defined in relation to a material which contains more iron than any other single element and has a carbon concentration of less than 2% by mass. Carbon steel includes steel alloys.

 

coke oven coke is defined in relation to the National Greenhouse and Energy Reporting Regulations 2008. Accordingly, coke oven coke means the solid product obtained from the carbonisation of coal (principally coking coal) at a high temperature and includes coke breeze and foundry coke.

 

condensate is defined to have the same meaning as in the Excise Act 1901. In that Act condensate means either:

(a) liquid petroleum; or

(b) a substance:

(i) that is derived from gas associated with oil production; and

(ii) that is liquid at standard temperature and pressure.

 

Where “liquid petroleum” is a mixture of hydrocarbons:

(a) that is produced from gas wells; and

(b) that is liquid at standard temperature and pressure after recovery in surface separation facilities; but does not include a substance referred to in paragraph (b) of the definition of condensate.

 

For this purpose “standard temperature and pressure” as defined in the Excise Act 1901 means a temperature of 20° Centigrade and a pressure of one standard atmosphere.

 

Item 2 – Regulation 22A, after the definition of Department of Climate Change and Energy Efficiency

 

This item inserts a definition of eligible petroleum feedstocks into regulation 22A which is relevant to the activity of petroleum refining.

 

Eligible petroleum feedstocks are those products listed in the definition which have not been produced through the carrying on of an emissions-intensive trade-exposed (EITE) activity and are used in the specific processes nominated to carry out an EITE activity of petroleum refining. For example, a catalytic cracker feedstock meeting the density requirement needs to be processed in a catalytic cracker in carrying out the activity to be eligible as a relevant product. Additionally the feedstock cannot have been originally produced from another petroleum refinery in Australia or another EITE activity such as the production of ethene.

 

Item 3 – Regulation 22A, after the definition of referrable to a site

 

This item inserts a definition into regulation 22A of relevant financial year which is used in relation to petroleum refining and integrated iron and steel manufacturing. For all sites other than a new entrant site, this is the financial year which ended 6 months before the application year. For instance, for an application in relation to the 2011 calendar year, the relevant financial year is from 1 July 2009 to 30 June 2010. This is the base year for production to be a relevant product in the calculation in regulation 22ZB. This includes a significant expansion site.

 

For a new entrant site, the allocations are only based upon production in the financial year which began 6 months before the application year and this is the relevant financial year for those sites and applications. For instance, for an application in relation to the 2011 calendar year, the relevant financial year is from 1 July 2010 to 30 June 2011.

 

Item 4 – Regulation 22A, definition of relevant product

 

This item replaces the definition of relevant product with a new definition which reflects the fact that the activity of petroleum refining has electricity baselines associated with inputs to the activity rather than outputs. The effect of the definition is that references to relevant products being produced by an activity (such as in relation to significant expansions and new entrants) includes references to the inputs satisfying the relevant requirements to be counted as a relevant product for the activity of petroleum refining. This is intended to ensure that the proposed Regulations can apply to the petroleum activity in the same manner as for other activities.

Item 5 – Regulation 22A, after the definition of saleable quality

This item inserts definitions of stabilised crude petroleum oil and unleaded petrol into regulation 22A.

Stabilised crude petroleum oil has the same meaning as given by the Australian Taxation Office.

Unleaded petrol means all grades of unleaded petrol meeting Australian or international standards. Accordingly, the full variety of non-proprietary and proprietary forms of unleaded petrol are intended to qualify. It is also noted that in overseas jurisdictions 'gasoline' is synonymous with unleaded petrol and is intended to be included.

Item 6 – Paragraph 22A (9)(b)

This item provides a specific rule for petroleum refining to recognise the role of inputs rather than outputs as a relevant product. In particular, paragraph 22A (9)(b) includes the transfer of intermediate petroleum products produced from the relevant inputs between refineries to produce one of more of the outputs of the activity (such as unleaded petrol, diesel, jet fuel, LPG, aviation gasoline).

Paragraph 22A (9)(c) replicates the existing paragraph 22A (9)(b). In this context, the intermediate products transferred may be a half-finished product or could be a non-final relevant product (such as the relevant product of continuously cast carbon steel which is transferred to another site to be transformed into hot-rolled product).

Items 7 and 8 – Subregulation 22ZB (3)

 

These items replaces the definitions of SP^ia_tfinprev in subregulation 22ZB (3) so that they are subject to proposed subregulations 22ZB (4A) and (4B) as inserted by item 9.

 

Item 9 – After subregulation 22ZB (4)

 

This item inserts new subregulation 22ZB (4A) to provide that where a petroleum refinery has not met the 75% test set out in subclause 662 (2) for a year and comes back the following year as a new entrant site, it is only given an allocation based upon its expected production for the financial year which begins 6 months before the application year (referred to as EASP^ia_tfincurr) and not a double allocation for that production and the production in the previous financial year SP^ia_tfinprev.

 

This item also inserts new subregulation 22ZB (4B) to provide that where a site conducting the integrated iron and steel manufacturing activity has not met the 30% test set out in subclause 656(3)(a) for a year and comes back the following year as a new entrant site, it is only given an allocation based upon its expected production for the financial year which begins 6 months before the application year (referred to as EASP^ia_tfincurr) and not a double allocation for that production and the production in the previous financial year SP^ia_tfinprev.

 

Item 10 – Schedule 6, after Part 18

 

This item inserts a number of additional Parts into Schedule 6. Those Parts define transformations as EITE activities for the purposes of s 5 of the Act and prescribe a classification and electricity baseline for each of those activities which is relevant to the method of calculating the amount of a partial exemption referred to in s 46B of the Act.

 

As with the existing Schedule:

 

•                Division 1 of each Part defines the transformation of input(s) to output(s) which constitutes an EITE activity.

•                Division 2 of each Part classifies each activity as highly emissions-intensive or moderately emissions-intensive. This is relevant to the level of the partial exemption set out in regulation 22ZA.

•                Division 3 of each Part sets out the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of that activity. In doing so, it defines one or more relevant products which each have a particular number of MWh of electricity associated with their production.

The transformations in the Schedule have been found to be EITE activities, classified and had a baseline determined in accordance with the Commonwealth’s EITE assistance program. This program was announced as Commonwealth policy in the White Paper.[1] The Commonwealth has been progressing the formal assessment of potential EITE activities since the beginning of 2009. The core aspects of the program were set out in Chapter 12 of the Commonwealth’s White Paper. Subsequent policy announcements of relevance to the EITE assistance program were made on 4 May 2009 and 24 November 2009. The Commonwealth has consulted on draft regulations to establish the EITE assistance program and define EITE activities in June and December 2009.

 

The assessment of each EITE activity has been in accordance with a Guidance Paper issued by the then DCC in February 2009 and additional supplementary guidance posted on DCCEE’s website. The process for determining initial activity definitions and the selection of relevant products has involved extensive stakeholder consultation to give effect to the announced policy parameters and ensure the technical accuracy of those definitions. The determination of eligibility, classification and baselines for each activity in the Schedule has been described in the paper entitled Establishing the eligibility of activities under the emissions-intensive trade-exposed assistance program October 2010. This explanatory statement does not repeat the analysis and findings in that document which is available on DCCEE’s website. That paper also includes an extensive discussion of the principles underpinning the definition of activities.

 

The requirements in the regulations are intended to be generic so that existing players and new entrants are able to satisfy the Regulator that activities are being conducted. The language of ‘physical’ and/or ‘chemical’ transformations is used to capture the range of ways that inputs may be processed into the appropriate outputs. Accordingly, the words ‘physical transformation’ and ‘chemical transformation’ should be interpreted broadly.

 

The correct amount or volume of an output or other product used as the basis for the calculation of the partial exemption is referred to throughout as the ‘product’ or ‘relevant product’. For each activity, the regulations make clear that each of the relevant products used as a basis for allocation must have been produced by, or otherwise associated with, the carrying out of the EITE activity. For example, if a partly processed product which is not defined as an input in the activity definition is placed in a furnace and an output is produced which meets the general specifications for a relevant product (e.g. the concentration requirement), that output should not be counted in the amount or volume of the relevant product upon which the partial exemptions are calculated. This is because it was not ‘produced by carrying on the EITE activity’ as defined. Where listed inputs and non-listed inputs are co-mingled, an appropriate apportionment of outputs will be necessary to determine the amount or volume of relevant products.

 

Activity definitions also refer to the manufacture of products with certain qualities. For example, to conduct the activity of silicon production, the silicon product must have a silicon concentration of equal to or greater than 98%. It is recognised that production decisions or failures at a facility may mean that some of the output has a concentration of less than 98%. This does not mean that the activity is not conducted at the facility. It simply means that the output which is below 98% concentration should not be included in the amount or volume of the relevant product upon which the partial exemptions are calculated. Some relevant products, such as in the methanol production activity, are calculated on a 100% equivalent basis. In this case, the amount is the mass of the pure product contained within the product which is used as the basis for the calculation of the partial exemption. For methanol, it is the mass of the actual methanol compounds within the solutions of methanol which have a concentration of methanol equal to or greater than 98% with respect to mass.

 

Additional activities will be added to Schedule 6 as the Commonwealth determines them to be eligible in accordance with the criteria in the White Paper and the process set out in the Guidance Paper.

 

The activity definitions and descriptions of products contain technical and specific requirements which have been developed in consultation with industry stakeholders. The Commonwealth recognises that technical aspects of activity definitions, or the definitions of the relevant products, could in the future be interpreted too either too narrowly or too broadly or that an industry could develop in such a way that the policy underlying the assistance becomes impeded by a particular term or phrase in the regulations. The Commonwealth could amend the regulations to clarify the original policy intention behind the delivery of assistance and remove any unnecessary compliance burdens.

 

It should be noted that existing subclause 601(2) sets out two important definitions for the Schedule which are relevant to the EITE activities being added. Paragraph 601(2)(a) provides that, unless the contrary intention appears, a concentration of a substance is expressed as a concentration with respect to mass. This may be relevant to both inputs and outputs. An example of a contrary intention is the production of high purity ethanol which has a concentration with respect to volume. Similarly, paragraph (b) sets out a general rule that moisture content is also expressed as a percentage with respect to mass.

 

Part 19 Tissue Paper Manufacturing

 

Division 1 Tissue paper manufacturing

 

Clause 653 – Tissue Paper manufacturing

 

This clause provides that tissue paper manufacturing is the physical or chemical transformation of wood chips, sawdust, wood pulp and/or recovered paper into rolls of uncoated tissue paper where the product has a grammage range of 13g/m² – 75g/m², a moisture content in the range of 4% to 11% by mass and which is generally useable in sanitary products such as facial tissue, paper towel, bathroom tissue and napkins.

 

The activity as conducted during the period used to assess the eligibility of the activity involved the conversion of woodchips into a pulp slurry using the sulfite process, the conversion of recovered paper into a pulp slurry through a pulping and deinking process and the rehydrating of pulp into a pulp slurry. The pulp slurry was then drained, pressed and dried in a paper machine to form rolls of tissue paper.

 

It is intended that alternative processes of producing pulp from wood sources (such as woodchips) or recovered paper would be considered to fit within the activity description provided it is subsequently used in the manufacture of tissue paper. It is also intended that the production of tissue paper from bought-in pulp is considered to fit within the activity description.

 

The activity has two sub-activity baselines defined: tissue paper production and wet pulp production from woodchips and/or sawdust. The sub-activity baseline of wet pulp production is only applicable where pulp is produced from woodchips and/or sawdust as part of the activity.

 

The inputs of the activity have been defined to include woodchips, sawdust, wood pulp and recovered paper.

 

The output of this activity is saleable rolls of uncoated tissue paper where the product has a grammage range of 13g/m² – 75g/m², a moisture content in the range of 4% to 11% by mass and which is generally useable as a tissue paper product such as facial tissue, paper towel, bathroom tissue and napkins.

 

The activity does not include upstream woodchip preparation or the downstream process of converting rolls of tissue paper into final products (e.g. boxes of tissue). As such, the relevant site for the purpose of the application is that where the output is actually produced and does not extend to separate sites which may conduct upstream or downstream processing but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites will not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

 

Division 2 Classification of activity

 

Clause 654 – Classification of activity

 

This clause provides that tissue paper manufacturing is classified as a moderately emissions-intensive activity.

 

Division 3 Electricity baseline for calculating partial exemption

 

Clause 655 – Electricity baseline for product

 

This clause provides that there are two electricity baselines relevant for the activity of tissue paper manufacturing:

 

•                The electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of tissue paper manufacturing is 1.70 MWh per tonne of rolls of tissue paper.

•                For the production of wet pulp from either or both of woodchips and sawdust as part of dry pulp manufacturing, the basis for calculating the amount of a liable entity’s partial exemption is 0.448 MWh per air dried tonne (applying a 10% moisture content) of equivalent pulp.

The same wet pulp baseline is applied to the activities of dry pulp manufacturing, printing and writing paper manufacturing, packaging and industrial paper manufacturing, and cartonboard manufacturing.

 

The tonnage for both tissue paper and wet pulp should be measured according to ordinary measurement rules applicable in the industry. The use of an equivalent measurement for wet pulp recognises that this product is likely to be in a wet form when measurement takes place (i.e. there is no requirement to produce dry pulp). For this activity pulp production is measured in the wet form and reported on an ‘air dried’ basis which is a term commonly used in the pulp and paper sector meaning when the moisture content of the pulp is 10%.

 

To be eligible as a relevant product, for the sub-activity of tissue paper manufacturing, the outputs are saleable rolls of uncoated tissue paper where the product has a grammage range of 13g/m² – 75g/m², a moisture content in the range of 4% to 11% by mass and which is generally useable as a tissue paper product such as facial tissue, paper towel, bathroom tissue and napkins.

The tissue paper must have been produced by carrying on the activity as defined by clause 653 to be eligible as a relevant product.

 

The tissue paper must be of saleable quality. This is defined by regulation 22C. In particular, any tonnes of tissue paper which are scrapped, lost or discarded are not to be included in the tonnes of relevant product. Additionally, if inputs are transformed into saleable tissue paper which is then recycled prior to being sold, this tonnage should be counted only once for the definition of a relevant product.

 

To be eligible as a relevant product for the sub-activity of wet pulp manufacturing, the pulp must:

 

•                be produced from woodchips and/or sawdust;

•                be used in the integrated process of tissue paper manufacturing; and

•                be produced as part of carrying on the EITE activity as defined by clause 653.

For all pulp and paper activities, an amount of paper or pulp can only be used to calculate one partial exemption. For example, pulp produced from woodchips and/or sawdust cannot be counted towards a partial exemption under both the tissue paper and printing and writing paper activities.

Part 20 Integrated Iron and Steel Manufacturing

 

Division 1 Integrated Iron and Steel Manufacturing

Clause 656 – Integrated Iron and Steel Manufacturing

This clause provides that integrated iron and steel manufacturing is the chemical and physical transformation of iron ore into crude carbon steel products and hot-rolled carbon steel products involving all of the following processes:

 

(a) the chemical and physical transformation of iron ore into agglomerated iron ore, such as iron ore sinter or iron ore pellets;

(b) the carbonisation of coal (principally coking coal) into coke oven coke;

(c) the chemical and physical transformation of either or both of limestone or dolomite, into lime (including burnt lime and burnt dolomite);

(d) the chemical and physical transformation of iron ore feed, including agglomerated iron ore, into molten iron which includes the reduction of oxides of iron using carbon as the predominant reducing agent;

(e) the chemical and physical transformation of molten iron and cold ferrous feed, such as pig iron, flat iron and ferrous scrap, into one or more of the following:

(i) continuously cast carbon steel products;

(ii) ingots of carbon steel;

(iii) hot-rolled carbon steel products, which commenced hot-rolling at a temperature above 800 °C.

 

Note Carbon steel and coke oven coke are defined in regulation 22A.

 

The activity as conducted during the period used to assess the eligibility of the activity involved the production of coke oven coke, lime (including burnt lime and dolomite), iron ore sinter or iron ore pellets all at a single site, which were used as feedstocks to produce molten iron in a blast furnace. Molten iron was subsequently used to produce liquid steel in a basic oxygen steelmaking (BOS) plant and the steel was then cast, with the majority of cast steel hot rolled into long or flat products. The majority of waste gases from the coke ovens and the blast furnace were reticulated and combusted for the purposes of providing energy across the site.

The activity description is not satisfied unless each of the processes in paragraphs 656(1)(a) through to (e) are undertaken. It is the intention that the processes in the activity description are carried out in an integrated manner in accordance with how the activity was conducted during the period used to assess the eligibility. However, it is not necessary that all processes must be carried out at the same site to satisfy the activity description. For example subregulation 22A(9) provides that multiple sites carrying on an activity may constitute an activity group. This provision also needs to be read in the context of subclause 656(2), which sets out that hot-rolled carbon steel products produced at a site may also be considered within the activity where these same products were first produced into continuously cast carbon steel at a different site conducting either the integrated iron and steel manufacturing activity or from the manufacture of carbon steel from cold ferrous feed activity.

It is not intended that it is necessary to produce both iron ore sinter and iron ore pellets to be considered carrying on the activity (i.e. only one form of agglomerated iron ore is required).

It is also not intended that it is necessary to produce either or both long and flat hot-rolled carbon steel to be considered carrying on the activity provided that continuously cast carbon steel products or ingots of carbon steel are produced. Proposed subparagraph 656(1)(e)(iii) sets out that hot-rolled carbon steel products may be produced from molten iron and cold ferrous feed in the integrated iron and steel manufacturing activity. For the avoidance of doubt, this chemical and physical transformation typically proceeds via the intermediate production of continuously cast carbon steel products as the first step, and the second step then proceeds with the physical transformation of continuously cast carbon steel products into hot-rolled carbon steel products. These two intermediate production steps may proceed either at the same site or at different sites.

The activity description is only satisfied where the cold ferrous feed used in the integrated iron and steel manufacturing activity comprises no more than 30% of the total combined mass of molten iron and cold ferrous feed used in the integrated iron and steel manufacturing activity at a site (paragraph 656(3)(a)) or the total combined mass of molten iron and cold ferrous feed used in the integrated iron and steel manufacturing activity at the sites that are part of an activity group (paragraph 656(3)(b)) to produce products of carbon steel over the relevant financial year (the ‘30% test’). For a standard application (including significant expansions) the tests outlined in paragraphs 656(3)(a) and 656(3)(b) are in relation to the financial year which ended 6 months before the application year. Thus, for a 2011 application, the 30% test would need to be satisfied with respect to the period from 1 July 2009 to 30 June 2010.

Proposed paragraph 656(3)(c) provides for circumstances where, because an application may be made prior to the year for which the PECs will apply, it is not possible for a new entrant site to prove that the activity has been conducted over the full relevant financial year given that more than half of that year is in the future. Accordingly, for a new entrant integrated iron and steel manufacturer, the test as outlined is that it is likely that cold ferrous feed comprises no more than 30% of the total combined mass of molten iron and cold ferrous feed likely to be used at a site to produce products of carbon steel over the relevant financial year.

If these tests in subclause 656(3) are not met, the activity is not carried out and no partial exemption certificate may be issued in respect of the relevant application year. The following year the applicant would be eligible to come back as a new entrant site and would be allocated on the basis of 'new and expected additional production.

The inputs of the activity have been defined to include iron ore, coal (principally coking coal), either or both limestone or dolomite and cold ferrous feed, such as pig iron, flat iron and ferrous scrap.

The outputs of this activity are agglomerated iron ore, such as iron ore sinter or iron ore pellets, coke oven coke, lime, continuously cast carbon steel products, ingots of carbon steel and hot-rolled carbon steel products which commenced hot rolling at temperatures in excess of 800 °C. Products such as, but not limited to, iron ore pellets, coke oven coke, lime, pig iron or flat iron produced via the carrying on of the activity are not to be considered relevant products for any other EITE activity. Carbon steel and coke oven coke are defined in regulation 22A.

The activity does not include the upstream processes such as extraction, concentrating, crushing or screening of iron ore, or the mining of coal, limestone or dolomite. The activity does not include cold ferrous feed that is not mixed with molten iron before being subsequently transformed into carbon steel products as in the EITE activity of manufacture of carbon steel from cold ferrous feed nor does it include the manufacture of pig iron which is subsequently sold from the activity boundary without undergoing the transformation into continuously cast steel or steel ingots. The activity does not include downstream processes such as finishing processes, including, but not limited to, cold-rolling, annealing, pickling or coating of carbon steel products. As such, the relevant site for the application is that where the outputs are actually produced and does not extend to separate sites which may conduct extraction, concentrating, crushing or screening of iron ore, the mining of coal, limestone or dolomite, cold-rolling, annealing, pickling or coating of carbon steel products but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

The tonnes of all relevant products reported as produced by this activity must not be used to claim allocations for any other EITE activity including the manufacture of carbon steel from cold ferrous feed.

Division 2 Classification of activity

Clause 657 – Classification of activity

This clause provides that integrated iron and steel manufacturing is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 658 – Electricity baseline for product

This clause provides the electricity baselines for calculating the amount of a liable entity’s partial exemption in respect of integrated iron and steel manufacturing are:

•                for iron ore sinter, the baseline is 0.0397 MWh per tonne of iron ore sinter on a dry weight basis that meets the necessary requirements for use in the integrated iron and steel manufacturing process and is produced as part of carrying on the EITE activity;

•                for iron ore pellets, the baseline is 0.0742 MWh per tonne of iron ore pellets on a dry weight basis that meet the necessary requirements for use in the integrated iron and steel manufacturing process and is produced as part of carrying on the EITE activity;

•                for coke oven coke, the baseline is 0.0397 MWh per tonne of coke oven coke on a dry weight basis that is produced as part of carrying on EITE activity;

•                for lime, the baseline is 0.0405 MWh per tonne of lime on a dry weight basis that meets the necessary requirements for use in the integrated iron and steel manufacturing process and is produced as part of carrying on the EITE activity;

•                for continuously cast carbon steel products and ingots of carbon steel, the baseline is 0.145 MWh per tonne of either or both of saleable continuously cast carbon steel products and saleable ingots of carbon steel that is produced as part of carrying on the EITE activity and is not a relevant product for the activity of the manufacture of carbon steel from cold ferrous feed;

•                for hot-rolled carbon steel products which are long products, the baseline is 0.133 MWh per tonne of saleable long products of hot-rolled carbon steel that is in coils or straight lengths, is generally produced in rod, bar and structural (section) mills and has a cross sectional shape such as I, T, Y, U, V, H, C, L, square, rectangular, round, flat, hexagonal, angle, channel, structural beam profile or rail profile; and

•                for hot-rolled carbon steel products which are flat products, the baseline is 0.116 MWh per tonne of saleable flat products of hot-rolled carbon steel that is flat in profile, such as plate and hot rolled coil, is generally produced in hot strip and plate mills, is generally greater than 600 mm in width and is generally less than 150 mm in thickness.

The relevant tonnes of iron ore sinter, iron ore pellets, coke oven coke and lime must be expressed on a dry weight basis. A dry weight estimate for the tonnes of these products is assumed to be represented by a measurement of the product ‘as produced’ (i.e. the tonnes produced immediately leaving the plant, kiln or oven, such that all moisture is assumed to have been driven off). The tonnes of relevant product on a dry weight basis may also be demonstrated in accordance with other ordinary measurement rules applicable in the industry. The iron ore sinter, iron ore pellets and lime may be relevant products even if they are not directly used in the iron and steel making process as long as it can be demonstrated they meet the necessary requirements for use in the integrated iron and steel manufacturing process.

To be eligible as a relevant product, carbon steel products listed at subclauses 658(5) through to (7) must accord with the definition of carbon steel in regulation 22A, as containing, by mass, more iron (Fe) than any other single element and have a carbon (C) concentration of less than 2%. Relevant standards for measuring the carbon (C) concentration in carbon steel include AS3641.1‑1999 Recommended Practice for Atomic emission Spectrometric Analysis, Part 1: Principles and Techniques and AS/NZS 1050.1:1996 Methods for the Analysis of Iron and Steel, Part 1: Sampling Iron and Steel for Chemical Analysis.

To be eligible as a relevant product, such as iron ore sinter or iron ore pellets, coke oven coke, lime, continuously cast carbon steel products and ingots of carbon steel must have been produced by carrying on the activity as defined by the relevant paragraphs of 656(1)(a) through to (e) and subject to the conditions outlined in subclause 656(3). While it is typical for the majority of the relevant product of continuously cast carbon steel products to be used as a feedstock to produce another relevant product (i.e. products of hot-rolled carbon steel), it is not necessary for the total output of continuously cast carbon steel product to be hot rolled within the activity boundary. In particular, continuously cast carbon steel which is then transformed into hot-rolled product may be both a relevant product as continuously cast carbon steel and as hot-rolled carbon steel.

As per proposed paragraphs 658(6)(d) through to (g), 658(7)(e) through to (h) and proposed subclause 658(8), to be eligible as relevant products, hot-rolled carbon steel which are flat or long products, produced from continuously cast carbon steel products must either:

•                be produced through the carrying on of the activity as defined by relevant paragraphs of 656(1)(a) through to (e) to be eligible as a relevant product (whether at a single site or multiple sites through an activity group); and/or

•                be produced through the carrying on of the activity as set out in subclause 656(2) from continuously cast carbon steel products produced through carrying on the activity as defined by relevant paragraphs of 656(1)(a) through to (e) at another site carrying on the integrated iron and steel activity which is outside of the activity group of the activity the subject of the application; and/or

•                be produced from the carrying on of the activity as set out in subclause 656(2) from continuously cast carbon steel products produced through the activity of the manufacture of carbon steel from cold ferrous feed.

 

For example, the integrated iron and steel activity may involve two sites within an activity group, site 1 and site 2 (the first activity group): site 1 may produce continuously cast steel products and some hot‑rolled products and site 2 may conduct the hot rolling of the remaining continuously cast carbon steel produced by site 1. If site 2 also hot rolls continuously cast carbon steel sourced from site 3, which conducts the activity of integrated iron and steel manufacturing or site 4, which conducts the activity of manufacture of carbon steel from cold ferrous feed, the tonnes of hot-rolled product relating to that sourced from site 3 or site 4 may be considered as part of the first activity group providing they were not included as hot rolled tonnes in any applications for EITE assistance considered in relation to sites 3 and 4.

It is also important to note where multiple sites form an activity group, all relevant products produced as part of that activity across those sites must be referred to each site in the activity group in accordance with the rules in regulation 22B. This is the case even where some products (such as sinter, pellets, lime and coke oven coke, continuously cast carbon steel products) are only produced at one of the sites.

It should also be noted that the definitions of long and flat products use the word 'generally' in a number of places to accommodate the possibility of limited exceptions to these requirements being met for every tonne of hot-rolled product where the majority of the hot-rolled product does meet the requirement. However, a tonne of hot-rolled product cannot be both a flat and a long product.

The tonnes of continuously cast carbon steel products, long product hot-rolled carbon steel and flat product hot-rolled carbon steel must be of saleable quality. Therefore, tonnes that are scrapped, recycled, remelted, lost or discarded are not to be included in the tonnes of relevant product.

 

 

 

 

 

 

Part 21 Manufacture of carbon steel from cold ferrous feed

 

Division 1 Manufacture of Carbon Steel from Cold Ferrous Feed

Clause 659 – Manufacture of Carbon Steel from Cold Ferrous Feed

This clause provides that manufacture of carbon steel from cold ferrous feed is the physical and chemical transformation of cold ferrous feed (such as ferrous scrap, pig iron and flat iron) by heating and melting into liquid steel and the subsequent casting of the liquid steel to produce one or more of the following:

 

(a) continuously cast carbon steel products;

(b) ingots of carbon steel;

(c) hot-rolled carbon steel products, which commenced hot-rolling over 800 °C.

 

The activity as conducted during the period used to assess the eligibility of the activity involved the heating and melting of cold ferrous feed such as recycled scrap steel and iron into liquid steel in an electric arc furnace. The steel was then continuously cast or cast into ingot, with the majority of the continuously cast steel hot rolled into long or flat products of hot-rolled carbon steel.

It is intended that any alternative processes of melting cold ferrous feed, such as the use of electric induction furnaces or any other process which does not use electricity as the primary source of energy to produce carbon steel products described in paragraphs 659(1)(a) through to (c) are considered to fit within the activity description.

It is not necessary that all processes must be carried out at the same site to satisfy the activity description. For example subregulation 22A(9) provides that multiple sites carrying on an activity may constitute an activity group. This provision also needs to be read in the context of subclause 659(2), which sets out that hot-rolled carbon steel products produced at a site may also be considered within the activity where these same products were first produced into continuously cast carbon steel at a different site conducting either the manufacture of carbon steel from cold ferrous feed activity or from the integrated iron and steel manufacturing activity.

It is not intended that it is necessary to produce either or both long and flat hot-rolled carbon steel to be considered carrying on the activity provided that continuously cast carbon steel products or ingots of carbon steel are produced. Proposed paragraph 659(1)(c) sets out that hot-rolled carbon steel products may be produced from cold ferrous feed in the manufacture of carbon steel from cold ferrous feed activity. For the avoidance of doubt, this chemical and physical transformation typically proceeds via the intermediate production of continuously cast carbon steel products as the first step, and the second step then proceeds with the physical transformation of continuously cast carbon steel products into hot-rolled carbon steel products. These two intermediate production steps may proceed either at the same site or at different sites.

The input of the activity has been defined to be cold ferrous feed, such as ferrous scrap, pig iron and flat iron. This extends to any iron bearing material and there are no limits on the different classes or categories of iron bearing material which may be used nor a maximum amount of a particular type of iron bearing material that might be used.

The outputs of this activity are continuously cast carbon steel products, ingots of carbon steel and hot-rolled carbon steel products which commenced hot rolling at temperatures in excess of 800 °C. Carbon steel is defined in regulation 22A.

The activity does not include the upstream processes which may include the production of cold ferrous feed such as the production of pig iron from iron ore or from other ferrous-bearing products. Cold ferrous feed used to supplement molten iron that is subsequently transformed into carbon steel products in the EITE activity of integrated iron and steel manufacturing is not to be considered an input to this activity. The activity does not include downstream processes such as finishing processes, including, but not limited to, cold-rolling, annealing, pickling or coating of carbon steel products. As such, the relevant site for the application is that where the outputs are actually produced and does not extend to separate sites which may conduct cold ferrous feed production from iron ore, cold-rolling, annealing, pickling or coating of carbon steel products but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

The tonnes of continuously cast carbon steel products, ingots of carbon steel and hot-rolled long or flat products reported as produced by this activity must not be used to claim allocations for any other EITE activity including integrated iron and steel manufacturing.

Division 2 Classification of activity

Clause 660 – Classification of activity

This clause provides that manufacture of carbon steel from cold ferrous feed is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 661 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of manufacture of carbon steel from cold ferrous feed are:

•                for continuously cast carbon steel products and ingots of carbon steel, the baseline is 0.532 MWh per tonne of either or both of saleable continuously cast carbon steel products and saleable ingots of carbon steel that is produced as part of carrying on the EITE activity and is not a relevant product for the activity of integrated iron and steel manufacturing;

•                for hot-rolled carbon steel products which are long products, the baseline is 0.133 MWh per tonne of saleable long products of hot-rolled carbon steel that is in coils or straight lengths, is generally produced in rod, bar and structural (section) mills and has a cross sectional shape such as I, T, Y, U, V, H, C, L, square, rectangular, round, flat, hexagonal, angle, channel, structural beam profile or rail profile; and

•                for hot-rolled carbon steel products which are flat products, the baseline is 0.116 MWh per tonne of saleable flat products of hot-rolled carbon steel that is flat in profile, such as plate and hot rolled coil, is generally produced in hot strip and plate mills, is generally greater than 600 mm in width and is generally less than 150 mm in thickness.

To be eligible as a relevant product, carbon steel products listed at subclauses 661(1) through to (3) must accord with the definition of carbon steel in regulation 22A, as containing, by mass, more iron (Fe) than any other single element and have a carbon (C) concentration of less than 2%. Relevant standards for measuring the carbon (C) concentration in carbon steel include AS3641.1‑1999 Recommended Practice for Atomic emission Spectrometric Analysis, Part 1: Principles and Techniques and AS/NZS 1050.1:1996 Methods for the Analysis of Iron and Steel, Part 1: Sampling Iron and Steel for Chemical Analysis.

To be eligible as a relevant product, continuously cast carbon steel products and/or ingots of carbon steel must have been produced by carrying on the activity as defined by the relevant paragraphs of 659(1)(a) through to (c). While it is typical for the majority of the relevant product of continuously cast carbon steel products to be used as a feedstock to produce another relevant product (i.e. products of hot-rolled carbon steel), it is not necessary for the total output of continuously cast carbon steel product to be hot rolled within the activity boundary. In particular, continuously cast carbon steel which is then transformed into hot-rolled product may be both a relevant product as continuously cast carbon steel and as hot-rolled carbon steel.

As per paragraphs 661(2)(d) through to (g) and 661(3)(f) through to (h) and proposed subclause 661(4), to be eligible as relevant products, hot-rolled carbon steel which are flat or long products, produced from continuously cast carbon steel products must either:

•                be produced through the carrying on of the activity as defined by relevant paragraphs of 659(1)(a) through to (c) to be eligible as a relevant product (whether at a single site or multiple sites through an activity group); and/or

•                be produced through the carrying on of the activity as set out in subclause 659(2) from continuously cast carbon steel products produced through carrying on the activity as defined by relevant paragraphs of 659(1)(a) through to (c) at another site carrying on the manufacture of carbon steel from cold ferrous feed activity which is outside of the activity group of the activity the subject of the application; and/or

•                be produced from the carrying on of the activity as set out in subclause 659(2) from continuously cast carbon steel products produced through the activity of the integrated iron and steel manufacturing.

 

For example, the manufacture of carbon steel may involve two sites within an activity group, site 1 and site 2 (the first activity group): site 1 may produce continuously cast steel products and some hot‑rolled products and site 2 may conduct the hot rolling of the remaining continuously cast carbon steel produced by site 1. If site 2 also hot rolls continuously cast carbon steel sourced from site 3, which conducts the activity of manufacture of carbon steel from cold ferrous feed or site 4, which conducts the activity of integrated iron and steel manufacturing, the tonnes of hot-rolled product relating to that sourced from site 3 or site 4 may be considered as part of the first activity group providing they were not included as hot rolled tonnes in any applications for EITE assistance considered in relation to sites 3 and 4.

It is also important to note where multiple sites form an activity group, all relevant products produced as part of that activity across those sites must be referred to each site in the activity group in accordance with the rules in regulation 22B. This is the case even where some products (such as continuously cast carbon steel products) are only produced at one of the sites.

It should also be noted that the definitions of long and flat products use the word 'generally' in a number of places to accommodate the possibility of limited exceptions to these requirements being met for every tonne of hot-rolled product where the majority of the hot-rolled product does meet the requirement. However, a tonne of hot-rolled product cannot be both a flat and a long product.

The tonnes of continuously cast carbon steel products, long product hot-rolled carbon steel and flat product hot-rolled carbon steel must be of saleable quality. Therefore, tonnes that are scrapped, recycled, remelted, lost or discarded are not to be included in the tonnes of relevant product.

Part 22 Petroleum Refining

 

Division 1 Petroleum refining

Clause 662 – Petroleum refining

This clause provides that the activity of petroleum refining is the chemical and physical transformation of stabilised crude petroleum oil, which may be supplemented with 1 or more of condensate, tallow, vegetable oil, eligible petroleum feedstocks and other petroleum feedstocks, to produce a range of refined petroleum products through the following processes:

a)      the distillation of stabilised crude petroleum oil, condensate, tallow, vegetable oil or other petroleum feedstocks;

b)      the adjustment of the molecular weight and structure of hydrocarbons (such as that which occurs through catalytic or hydro-cracking, steam or catalytic reforming, polymerisation, isomerisation or alkylation);

c)      the blending of products from distillation and adjustment of molecular weight and structure to produce Australian and international standard diesel, jet fuel and unleaded petrol;

d)      the production of two or more of the following refinery products saleable in Australian or international markets: hydrogen, ethane, propane, refinery grade propylene, polymer grade propylene, liquefied petroleum gas, butane, naphtha, aviation gasoline, before oxygenate blend, kerosene, heating oil, solvents, lubricant base stocks, leaded petrol, waxes and bitumen.

 

While each of the processes in (a) to (d) must be conducted within the relevant financial year to be considered conducting the EITE activity, it is not necessary that all four processes need be conducted in relation to every output listed in items (c) and (d) above.

 

The terms condensate, eligible petroleum feedstocks, stabilised crude petroleum oil and unleaded petrol are defined in regulation 22A.

It is not intended that any alternative processes to produce any of the products listed in (c) and (d) fit within the activity description.

The activity description is not satisfied through the processing of other feedstocks not listed as inputs to the petroleum refining activity. The activity is also not satisfied in the undertaking of the production of carbon black or ethene (ethylene) as defined under the clauses 611 and 665 respectively. Petroleum refining as defined in the regulations is not satisfied by crude oil or natural gas exploration, production, transmission or distribution, waste oil reprocessing or by only blending oil or other feedstocks to produce any of the final products.

The activity would not be satisfied where the total kilolitres of Australian and international standard diesel, jet fuel, unleaded petroleum, bitumen or lubricant base stocks are not equal to or greater than 75% of the total eligible inputs to the activity (the '75% test'). For a standard application (including significant expansions) the test outlined in 662 (2) (b) (i) is in relation to the financial year which ended 6 months before the application year. Thus, for a 2011 application, the 75% test would need to be satisfied with respect to the period from 1 July 2009 to 30 June 2010. If these tests in subclause (2) are not met, the activity is not carried out and no partial exemption certificate may be issued in respect of the relevant application year. The following year the applicant would be eligible to come back as a new entrant site and would be allocated on the basis of 'new and expected additional production'.

The inputs of the activity have been defined to include stabilised crude petroleum oil, condensate, tallow, vegetable oil, eligible petroleum feedstocks (as defined in regulation 22A) and other petroleum feedstocks (such as feedstocks which would not meet all of the criteria to qualify as eligible petroleum feedstocks but are nonetheless used in the process). However, only certain inputs are relevant products in accordance with proposed clause 664 (1).

The outputs of the activity, namely diesel, unleaded petrol, jet fuel, hydrogen, ethane, propane, refinery grade propylene, polymer grade propylene, liquefied petroleum gas, butane, naphtha, aviation gasoline, before oxygenate blend, kerosene, heating oil, solvents, lubricant base stocks, leaded petrol, waxes and bitumen are all to be of standard acceptable either for sale in Australia or internationally. Other by-products may also be produced (such as fuel oil and intermediate products).

The activity does not include the upstream exploration, extraction, and any production or processing of stabilised crude petroleum oil, condensate, tallow, vegetable oil or other petroleum feedstocks prior to its introduction to the activity. Any eligible petroleum feedstocks reported as relevant products are not to have been produced by undertaking any EITE activity as defined in these regulations, such as another instance of petroleum refining or high purity ethanol production. As such, the relevant site for the application is that where the stabilised crude petroleum oil, condensate, tallow, vegetable oil and eligible petroleum feedstocks are actually processed in the conduct of petroleum refining and does not extend to separate sites which may conduct the production of these inputs or the further refining of any petroleum products at a separate facility but not the activity as described. It also does not extend to storage of either the inputs or final products at any remote sites. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9).

Subparagraph 662 (2) (b) (ii) outlines the 75% test appropriate for the carrying out of the activity in the event of a new entrant site. This clause provides for circumstances where, because an application may be made prior to the year for which the PECs will apply, it is not possible for a new entrant site to prove that the activity has been conducted over the full relevant financial year given that more than half of that year is in the future. Accordingly, for a new entrant petroleum refinery, the test as outlined is that it is likely that the combined volume of diesel, jet fuel, unleaded petrol, lubricant base stocks and bitumen, at 15 °C and 1 atmosphere, will be equal to or greater than 75% of the total kilolitres of the inputs of stabilised crude petroleum oil, condensate, tallow, vegetable oil and eligible petroleum feedstocks. An applicant would be expected to present probative evidence to establish this.

Subclause 662 (3) is a clarification to the clause which provides that not every process needs to be conducted in relation to each output. For instance, some products are only distilled without the adjustment of the molecular weight and structure.

Subclause 662 (5) defines the concept of application year in relation to the scheme year to which the partial exemption applies (which may begin after an application is submitted).

Clause 663 – Classification of activity

This clause provides that the activity of petroleum refining is classified as a highly emissions-intensive activity.

Clause 664 – Electricity baseline for calculating partial exemption

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of petroleum refining is 0.0421 MWh per kilolitre of stabilised crude petroleum oil, condensate, tallow, vegetable oil and eligible petroleum feedstocks.

To be eligible as a relevant product the combined volume of diesel, jet fuel, unleaded petrol, lubricant base stocks and bitumen, at 15 °C and 1 atmosphere, that is produced from the relevant products listed above is equal to or greater than 75 % of the total kilolitres of those inputs used in the financial year relevant to the calculation of the partial exemption in regulation 22ZB. Where 'new or expected additional production' is involved, a financial year is used which will not have ended at the time of the application (the financial year which begins 6 months before the application year). In this situation the test is whether the amounts are likely to be equal to or greater than 75%. Where the test is not met for a financial year, no relevant product is used to calculate partial exemptions. This is a necessary condition as petroleum refining is different to other activities in that the calculation is on the basis of inputs to the processes rather than outputs.

 

For example, a site, which is not a new entrant, may meet the 75% test in the relevant financial year but not in the next financial year (the one that begins 6 months before the application year). In that situation, the applicant could not apply for an allocation as a significant expansion as the year used to estimate 'new and expected additional production' would not meet the 75% test.

 

The stabilised crude petroleum oil, condensate, tallow, vegetable oil and eligible petroleum feedstocks must have been processed by carrying on the activity as defined by proposed clause 662 to be eligible as a relevant product. That is, to be reported as the relevant products the input must be distilled and/or have had their molecular weight and structure adjusted. Subsequently the products of these two processes must be either blended into Australian or International standard diesel, unleaded petrol and jet fuel, produced into the products listed in 662 (d) or transformed into another petroleum by-product (such as fuel oil). Accordingly, an input which is just used in blending without distillation or the adjustment of molecular weight and structure (e.g. a blendstock) would not be included as a relevant product.

Part 23 Production of ethene (ethylene)

Division 1 Production of ethene (ethylene)

Clause 665 – Production of ethene (ethylene)

This clause provides that the production of ethene is the chemical transformation of hydrocarbons to produce ethene (C₂H₄, ethylene), where the concentration of ethene (C₂H₄, ethylene) is equal to or greater than 99% with respect to mass.

 

The activity as conducted during the period used to assess the eligibility of the activity involved steam cracking ethane to produce ethene (ethylene) with supplemental feedstocks used at times, including naphtha, liquefied petroleum gas or its components propane and butane. In this period by-products of the activity including refinery grade propene (propylene) and pyrolysis gasoline were also produced.

 

It is intended that the alternative production process of catalytic cracking to produce ethene (ethylene) where the concentration of ethene (ethylene) is equal to or greater than 99% with respect to mass would be considered to fit within the activity definition. It is also considered that ethene produced at a petroleum refinery through downstream processing of hydrocarbons, where the concentration of ethene is equal to or greater than 99% with respect to mass fits within the activity description and is a separate activity to petroleum refining.

 

This activity is not satisfied through the undertaking of ethene production that does not produce ethene that is equal to or greater than 99% with respect to mass. The production of and further refining of refinery grade propene (propylene) into polymer grade propene (propylene) is not considered part of this activity.

 

The activity does not include the upstream extraction or production of the input/s to the activity including the production of ethane, propane, butane, LPG, naphtha or other hydrocarbon feedstock. Further, the activity does not include the downstream processing of ethene (ethylene) to polyethylene, nor the processing of any by-products from the production of ethene (ethylene) such as pyrolysis gasoline or refinery grade propylene. As such, the relevant site for the purpose of the application is that where the ethene (ethylene) is actually produced and does not extend to separate sites which may conduct upstream or downstream processing of either the ethene (ethylene) or any relevant by-products but not the activity as described. Generally, it is expected that where upstream extraction or production processes or downstream polymerisation processes are carried out at separate sites, those sites will not be regarded as carrying out the EITE activity of the production of ethene (ethylene) for the purpose of subregulation 22A(9). However, it is understood that some downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

 

Division 2 Classification of activity

Clause 666 – Classification of activity

This clause provides that the production of ethene (ethylene) is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 667 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of ethene is 0.275 MWh per tonne of 100% equivalent ethene (ethylene).

The 100% equivalent ethene (ethylene) is that contained within the ethene (ethylene) where the concentration of ethylene is equal to or greater than 99% with respect to mass.

To be eligible as a relevant product the ethene (ethylene) the ethene (ethylene) must be:

 

•                produced by carrying on the EITE activity; and

•                of saleable quality.

 

The relevant standards for determining the concentration of ethene in the final saleable product include:

•                ASTM D86-09^e1 Standard Test Method for Distillation of Petroleum Products at Atmospheric Pressure

•                ASTM D2504 - 88(2004)^e1 Standard Test Method for Noncondensable Gases in C2 and Lighter Hydrocarbon Products by Gas Chromatography

•                ASTM D2505 - 88(2004)^e1 Standard Test Method for Ethylene, Other Hydrocarbons, and Carbon Dioxide in High-Purity Ethylene by Gas Chromatography

•                ASTM D4052 - 09 Standard Test Method for Density, Relative Density, and API Gravity of Liquids by Digital Density Meter; and

•                ASTM D6159 - 97(2007) Standard Test Method for Determination of Hydrocarbon Impurities in Ethylene by Gas Chromatography

The ethene (ethylene) must have been produced by carrying on the activity as defined by clause 665 to be eligible as a relevant product. Accordingly, the ethene (ethylene) must have been produced to have a concentration of equal to or greater than 99% from the relevant inputs to be included in the tonnes of relevant product.

The ethene (ethylene) must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of ethene (ethylene) which are recycled, vented or flared are not to be included in the tonnes of relevant product.

Part 24 Production of Polyethylene

 

Division 1 Production of polyethylene

Clause 668 – Production of polyethylene

This clause provides that the production of polyethylene is the chemical transformation of ethene (C₂H₄, ethylene) to produce polyethylene with a standard density of equal to or greater than 0.910 g/cm³ where the standard density refers to the density of the material moulded to a thickness of 1.9 mm using Procedure C of Annex A1 of ASTM D4703.

 

The activity as conducted during the period used to assess the eligibility of the activity involved polymerisation of ethene (ethylene) with additives, including comonomers, resins and other additives to produce linear low density polyethylene, low density polyethylene and high density polyethylene.

It is intended that alternative polymerisation processes, the use of different comonomers, resins and other additives to those used during the baseline period or the production of other forms of polyethylene such as medium density polyethylene where the polyethylene’s standard density is equal to or greater than 0.910 g/cm³ would be considered to fit within the activity description.

This activity is not satisfied through the undertaking of polyethylene production that does not produce polyethylene that is equal to or greater than 0.910 g/cm³. It does not extend to the production of ethene (ethylene) co-polymers and is not intended to include other polymerisation processes which use any monomer that is not ethene (ethylene) such polypropylene manufacture.

The activity does not include the upstream production of ethene (ethylene). Further, the activity does not include the downstream processing of polyethylene following the pelletisation process including any moulding, blowing or shaping of plastic products. As such, the relevant site for the purpose of the application is that where the polyethylene is actually produced in its pelletised form and does not extend to separate sites which may conduct upstream or downstream processing but not the activity as described. Generally, it is expected that where upstream production processes or downstream production processes are carried out at separate sites, those sites will not be regarded as carrying out the EITE activity for the purpose of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 669 – Classification of activity

This clause provides that the production of polyethylene is classified as a moderately emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 670 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of polyethylene is 0.646 MWh per combined tonne of pelletised polyethylene with a standard density of equal to or greater than 0.910 g/cm³.

The standard density of the polyethylene product should be measured using material moulded to a thickness of 1.9 mm using Procedure C of Annex A1 of ASTM D4703. As ASTM D4703 is updated, it is intended that the updated procedures will apply to the density measurement.

To be eligible as a relevant product, the tonnes of polyethylene should be reported on a combined tonnes of saleable pelletised polyethylene basis, that is the tonnes of polyethylene reported as the output of the activity.

The polyethylene must have been produced by carrying on the activity as defined by clause 668 to be eligible as a relevant product. Accordingly, the polyethylene must have been produced to have a standard density of equal to or greater than 0.910 g/cm³ measured in accordance with the procedures specified for the relevant product, that is Procedure C of Annex A1 of ASTM D4703.

The polyethylene must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of pelletised polyethylene which are recycled, lost or discarded are not to be included in the tonnes of relevant product. Additionally, if inputs are transformed into saleable polyethylene but then that polyethylene is remelted and reshaped, their tonnage should be counted only once for the definition of a relevant product.

Part 25 Production of synthetic rutile

 

Division 1 Production of Synthetic Rutile

Clause 671 – Production of Synthetic Rutile

This clause provides that the production of synthetic rutile is the chemical transformation of ilmenite ore (ore containing FeTiO₃) through the reduction of iron oxides in order to increase the titanium dioxide (TiO₂) concentration to produce synthetic rutile that has a titanium dioxide (TiO₂) concentration of equal to or greater than 88% and less than 95.5%, and has an iron (Fe) concentration of greater than 0.5 %.

The activity as conducted during the period used to assess the eligibility of the activity involved removing the contained iron in ilmenite to produce synthetic rutile using the Becher process. In the Becher process ilmenite (containing 55% to 65% TiO₂) was fed to a rotary kiln to reduce the iron oxide to metallic iron. Ilmenite grains were then converted to porous synthetic rutile grains with metallic iron and other impurity inclusions. The iron was precipitated as hydrated iron oxide from the synthetic rutile grains and a mild acid treatment was used to dissolve the impurities and any residual iron.

The production of synthetic rutile and the production of white titanium dioxide pigment occur within the same production chain. Because of the requirement for synthetic rutile to have an iron concentration of greater than 0.5%, the activities of the production of synthetic rutile and the production of white titanium dioxide pigment cannot both be conducted to produce the same tonne of output.

It is intended that alternative processes of the Benelite process to produce synthetic rutile would be considered to fit within the activity description. In the Benilite process ilmenite is partially reduced in a rotary kiln, followed by a multi-stage hydrochloric acid leach under pressure to remove impurities. The leached product is calcined to produce a synthetic rutile.

The activity description is not satisfied through the undertaking of mining and concentrating (including wet and dry concentrating and electrostatic separation) of natural rutile.

The inputs of the activity have been defined to include any grade of ilmenite ore (ore containing FeTiO₃).

 

The output of this activity is saleable synthetic rutile directly produced from ilmenite ore (ore containing FeTiO₃), where synthetic rutile has a content of equal to or greater than 88% and less than 95.5% titanium dioxide, and an iron concentration of greater than 0.5%.

The activity does not include the upstream extraction (mining) and separation of ilmenite from other minerals or the downstream production of white titanium dioxide pigment. As such, the relevant site for the application is that where the synthetic rutile is actually produced and does not extend to separate sites which may conduct upstream or downstream processing but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the EITE activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 672 – Classification of activity

This clause provides that the production of synthetic rutile is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 673 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of synthetic rutile is 0.304 MWh per tonne of saleable synthetic rutile directly produced from ilmenite ore (ore containing FeTiO₃) which results from carrying out the activity as described, where synthetic rutile has a content of equal to or greater than 88% and less than 95.5% titanium dioxide (TiO₂), and an iron (Fe) concentration of greater than 0.5%, with respect to mass.

The tonnage of the relevant synthetic rutile should be measured accordingly to ordinary measurement rules applicable in the industry.

To be eligible as a relevant product, the synthetic rutile must:

(a) have a titanium dioxide (TiO₂) concentration of equal to or greater than 88% and less than 95.5% with respect to mass; and

 

(b) have an iron (Fe) concentration of greater than 0.5% with respect to mass; and

 

(c) be produced by carrying on the emissions-intensive trade-exposed activity; and

 

(d) be of saleable quality.

 

The synthetic rutile must have been produced by carrying on the activity as defined by clause 671 to be eligible as a relevant product. For instance, where imported synthetic rutile is blended with product produced from the activity, only the domestically produced synthetic rutile would be included in the tonnes of the relevant product.

The synthetic rutile must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of synthetic rutile which are scrapped, lost or discarded are not to be included in the tonnes of relevant product.

Part 26 Production of manganese

 

Division 1 Production of Manganese

Clause 674 – Production of Manganese

This clause provides that the production of manganese activity is the physical and chemical transformation of manganese (Mn) ore into manganese sinter (Mn₃O₄); and/or manganese ore and/or manganese sinter into ferromanganese alloy and/or silicomanganese alloy.

The activity as conducted during the period used to assess the eligibility of the activity involved an electric arc furnace (EAF) process where manganese ore was smelted to create manganese ferroalloys (ferromanganese and silicomanganese). Before smelting, smaller sized particles of manganese ore were sintered in a sintering downdraft strand to produce manganese sinter, either for use in the EAF or for external sale. The use of sinter in the process reduced the overall energy intensity of the EAF furnaces.

It is intended that alternative processes such as the use of a blast furnace to produce manganese ferroalloys from manganese ore would be considered to fit within the activity description. It is also intended that the production of any combination of the manganese products, including producing each product on a stand-alone basis, would qualify as undertaking this activity. For example, a stand-alone sinter producer which did not produce either ferromanganese or silicomanganese would be considered to be undertaking the activity, as would a stand-alone ferromanganese producer or silicomanganese producer that did not produce sinter.

The activity description is not satisfied through the undertaking of the production of manganese where the final product is not:

–               manganese sinter with a concentration of manganese equal to or greater than 40% with respect to mass;

–               ferromanganese alloy with a concentration of manganese equal to or greater than 67% manganese with respect to mass; and/or

–               silicomanganese with a concentration of manganese equal to or greater than 60% with respect to mass and a concentration of silicon (Si) equal to or greater than 12% with respect to mass.

The inputs of the activity have been defined to be manganese ore and/or manganese sinter. However, it is intended that slag from a ferromanganese furnace can be used as an input into silicomanganese smelting if the ferromanganese smelting occurs on the same site as the silicomanganese smelting. However, silicomanganese produced from bought-in ferromanganese slag is not considered to be an output of the activity or a relevant product.

The outputs of the activity are manganese sinter, which is commonly further refined to produce manganese or manganese ferroalloy, and ferromanganese and silicomanganese alloys commonly used in the production of steel.

The activity does not include the mining and pre-processing of manganese ore, the production of any other manganese products apart from manganese sinter, ferromanganese alloy or silicomanganese alloy, or the post-cast rolling, extruding, re-forming or alloying of ferromanganese or silicomanganese. As such, the relevant site for the application is that where the manganese sinter, ferromanganese alloy or silicomanganese alloy are actually produced and does not extend to separate sites which may conduct mining and pre-processing of manganese ore, the production of any other manganese products, or the post-cast rolling, extruding, re-forming or alloying of ferromanganese or silicomanganese but not the activity as described. Generally, it is expected that where these processes are carried out at separate sites those sites would not be regarded as carrying out the emissions-intensive trade-exposed activity for the purposes of subregulation 22A(9). However, it is understood that some upstream or downstream processing or ancillary processes may be conducted at the same site as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 675 – Classification of activity

This clause provides that the production of manganese activity is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 676 – Electricity baseline for product

This clause provides that the electricity baselines for calculating the amount of a liable entity’s partial exemption in respect of the production of manganese activity are:

–               for manganese sinter, 0.030 MWh per tonne of manganese sinter with a concentration of manganese equal to or greater than 40% with respect to mass;

–               for the production of ferromanganese alloy, 2.61 MWh per tonne of ferromanganese alloy with a concentration of manganese equal to or greater than 67% manganese with respect to mass; and

–               for the production of silicomanganese, 4.31 MWh per tonne of silicomanganese alloy with a concentration of manganese equal to or greater than 60% with respect to mass and a concentration of silicon (Si) equal to or greater than 12% with respect to mass.

The tonnage of the relevant outputs should be measured according to measurement techniques in practice in the industry.

To be eligible as relevant product:

(a)    the manganese sinter, ferromanganese alloy or silicomanganese alloy must be produced by carrying on the emissions-intensive trade-exposed activity; and

(b)   the manganese sinter, ferromanganese alloy or silicomanganese alloy must be of saleable quality; and

(c)    the manganese sinter, ferromanganese alloy or silicomanganese alloy must have been produced by carrying on the activity as defined by clause 674 to be eligible as a relevant product.

The manganese sinter, ferromanganese alloy or ferromanganese alloy must be of saleable quality. This is defined by regulation 22C. Manganese sinter, ferromanganese alloy or silicomanganese alloy which is discarded or reprocessed because it does not meet output specifications is not of saleable quality.

Part 27 Production of clinker

 

Division 1 Production of Clinker

Clause 677 – Production of Clinker

This clause provides that the production of clinker is the physical and chemical transformation of calcium carbonate compounds (CaCO₃, limestone), other calcium carbonate (CaCO₃) feedstocks; and either or both of clay, silicon dioxide (SiO₂, silica), iron (Fe) and/or aluminium oxide (Al₂O₃, alumina) feedstocks. These feedstocks are fused together at a temperature greater than 1000ºC into Portland cement clinker that has a concentration of calcium silicates equal to or greater than 60% by mass, has a concentration of magnesium oxide (MgO) less than or equal to 4.5% and is useable in the making of Portland cement.

The activity as conducted during the period used to assess the eligibility of the activity involved the fusing together of calcium carbonate compounds and either clay and/or silicon dioxide and/or iron and/or aluminium oxide in a kiln to create a concentration of calcium silicates that form clinker.

Saleable Portland cement clinker is the solid material produced by fusing calcium carbonate and other feedstocks in a kiln that has sintered into nodules. Clinker can later be ground with calcium sulfate dihydrate (gypsum) and other additives to become Portland cement clinker. The activity description is not satisfied through the undertaking of clinker production where the final product is not Portland cement clinker.

The inputs to the activity have been defined to include calcium carbonate sources (including limestone and shell sand), clay, silicon dioxide, iron and aluminium oxide feedstocks.

The activity does not include the extraction of raw materials, crushing or grinding of raw material inputs that are not contiguous with the clinker production process or the downstream processing of clinker including rolling, milling and blending processes into cement. However, it is understood that some processing or ancillary processes excluded from the definition may be conducted at the same sites as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

 

Division 2 Classification of activity

Clause 678 – Classification of activity

This clause provides that the production of clinker is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 679 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of clinker is 0.0709 MWh per tonne of Portland cement clinker that consists of at least 60% by mass of calcium silicates, a maximum magnesium oxide (MgO) mass content of 4.5% and is useable in the making of Portland cement.

The tonnage of the relevant of Portland cement clinker must be weighed on a dry weight basis in accordance with ordinary measurement rules applicable in the industry.

To be eligible as a relevant product, the clinker must:

(a) be produced as part of carrying out an EITE activity; and

(b) be of saleable quality.

The production of clinker must have been produced by carrying on the activity as defined by clause 677 to be eligible as a relevant product.

The clinker must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of clinker, which are scrapped, lost or discarded are not to be included in the tonnes of relevant product. Additionally, if inputs are transformed into saleable clinker which is then recycled prior to being sold, this tonnage should be counted only once for the definition of a relevant product.

Part 28 Production of lime

 

Division 1 Production of Lime

Clause 680 – Production of Lime

This clause provides that the production of lime is the physical and chemical transformation through the calcining process of calcium and magnesium sources (e.g. calcium carbonate (CaCO₃) and magnesium carbonate (MgCO₃)) into lime produced to saleable quality with a calcium oxide (CaO) and/or magnesium oxide (MgO) content equal to or greater than 60% by mass.

The activity as conducted during the period used to assess the eligibility of the activity involved the burning of limestone or shell sand in a rotary kiln, shaft kiln or fluidised bed kiln to create lime.

The activity description is not satisfied through undertaking production of lime where the final product does not have a calcium oxide (CaO) and/or magnesium oxide (MgO) content equal to or greater than 60% by mass. The activity is also not satisfied by the production of pulverised limestone, commonly called agricultural lime.

The inputs of the activity have been defined to include calcium carbonate and magnesium carbonate sources such as limestone, dolomite and shell sand.

The activity does not include the extraction of raw materials, crushing or grinding of raw material inputs that are not contiguous with the production of lime process or the downstream processing of lime including the production of hydrated lime. However, it is understood that some processing or ancillary processes excluded from the definition may be conducted at the same sites as an EITE activity and these processes do not impact the eligibility for partial exemptions of the EITE activity itself.

Division 2 Classification of activity

Clause 681 – Classification of activity

This clause provides that the production of lime is classified as a highly emissions-intensive activity.

Division 3 Electricity baseline for calculating partial exemption

Clause 682 – Electricity baseline for product

This clause provides that the electricity baseline for calculating the amount of a liable entity’s partial exemption in respect of the production of lime is 0.0476 MWh per tonne of lime with a concentration of calcium oxide (CaO) and/or magnesium oxide (MgO) equal to or greater than 60% by mass. For example, the lime may have a calcium oxide content of 60% by mass (and no magnesium oxide) or a 30% concentration of calcium oxide by mass and a 30% concentration of magnesium oxide by mass.

The tonnage of the relevant lime must be weighed on a dry weight basis in accordance with ordinary measurement rules applicable in the industry.

To be eligible as a relevant product, the lime must:

(a) be produced as part of carrying out an EITE activity;

(b) not be a relevant product for the EITE activity of integrated iron and steel manufacturing; and

(c) be of saleable quality.

The production of lime must have been produced by carrying on the activity as defined by clause 680 to be eligible as a relevant product.

The lime must not be part of an integrated iron and steel manufacturing activity and thus be eligible for the electricity baseline for lime production in that activity. However, where lime is produced independently of an integrated iron and steel manufacturing activity but later used in that activity, it may still be a relevant product for the activity of lime production. Most significantly, lime produced within the integrated iron and steel production process may only be allocated under that EITE activity and no tonne of lime can be a relevant product twice.

The lime must be of saleable quality. This is defined by regulation 22C. In particular, the tonnes of lime, which are scrapped, lost or discarded are not to be included in the tonnes of relevant product. Additionally, if inputs are transformed into saleable lime which is then recycled prior to being sold, this tonnage should be counted only once for the definition of a relevant product.