Oil recycler faces collapse in face of proposed subsidy cut

THE nation's largest oil recycler, which employs 160 people in Gladstone and Wagga, is facing collapse if the Abbott government proceeds with recommendations to slash a subsidy the oil recycling industry depends on.

Southern Oil, which owns an oil re-refinery in Wagga, is due to start operating a new $65 million refinery in Gladstone in coming weeks, with 70 employees already on its books.

The business, which managing director Tim Rose said handles 80% of all oil recycling in Australia, relies on a subsidy paid to oil recyclers of 50 cents a litre, a subsidy facing potential cuts in the Abbott government's first budget.

A recent review of the Product Stewardship Oil scheme last year recommended slashing that subsidy by half, a recommendation which is now being considered by the government as it prepares the May Budget.

But Mr Rose said if the subsidy was halved, it would make the entire oil recycling scheme in Australia unviable.

"The Gladstone plant is only the fourth refinery in Australia, and we own two of them - it's not a big money spinner, so people aren't generally investing in the sector," he said.

"If you take half the subsidy away, you take something that was a line ball investment decision and turn it into something that's not commercially viable.

"We've spent three years getting this new plant built, but if the government goes ahead with the department's recommendations, we will shut down and no one will build another."

Mr Rose said the company had mortgaged their plant in Wagga to fund the Gladstone refinery, but the entire company, and its 160 employees in both regional centres, would be at risk if the subsidy was cut.

"We've had some promising statements from the government that they want to help business confidence, but we were given assurances years ago that this would continue and we're just about to turn the thing on," he said.

"I've already employed about 40 people at the Gladstone refinery and 30 more in the community to pick up and deliver the oil and now they and our employees in Wagga are on tenterhooks."

Mr Rose said he hoped the government would ensure their promises for business certainty would continue, but he had not received any specific pledge from the Environment Minister.

Minister Greg Hunt's office has previously said the department's review and industry response would be considered before any response would be released.