This audit assessed the effectiveness of the Department of the Prime Minister and Cabinet’s management of initiatives to supply low aromatic fuel to Indigenous communities.
Through the Petrol Sniffing Strategy (PSS), the Australian Government has supported initiatives to reduce the incidence and impact of petrol sniffing in remote Indigenous communities since 2005. The key element of the PSS is to subsidise the production of low aromatic fuel (LAF) so that it replaces regular unleaded petrol (RULP) in areas at risk of petrol sniffing outbreaks, without the higher production costs acting as a barrier to its uptake. While there are many underlying causes of petrol sniffing, generally associated with young people from disadvantaged backgrounds and marginalised groups, research results have indicated that the introduction of LAF has been successful in contributing to reductions in the incidence of petrol sniffing. For this reason, additional funding has been made available by the Australian Government to expand the supply and distribution of LAF.
From an initial 41 sites in June 2005, the PSS expanded and, as at January 2015, LAF was available in 138 sites associated with 78 Indigenous communities in Western Australia, Queensland, South Australia and the Northern Territory. Consistent with the policy objective of the PSS, these sites are located in regional and remote areas of Australia. While the number of sites has increased, the overall annual volume of LAF produced has largely remained stable since 2007–08 with approximately 21 megalitres being produced on average each year. No performance targets have been set in relation to the volume of LAF produced and distributed, although contracts with LAF producers allow for an annual production of up to 53 megalitres.
In the most recent expansion of the PSS in 2010–11, the Australian Government provided additional funding to include 39 sites covering 11 communities in Northern Australia, with an associated increase in annual volume of production of LAF. As well as supporting extra production capacity, a significant element of the increased funding was to provide for additional storage facilities as the lack of bulk storage had been identified as the key barrier to expanding the PSS in northern Australia. Following a select tender, the department responsible for providing LAF, the then Department of Health and Ageing (DoHA), entered into contracts with two major fuel producers to supply LAF to different regions of Australia. The development of additional storage infrastructure was initially included by DoHA in the tender for fuel production, however, the department subsequently chose to enter into direct negotiations with the operators of terminal facilities in Darwin. These negotiations were anticipated to have been completed in time to allow for facilities to be operational by 1 July 2012 which, in turn, would enable the contracts for increased production to commence.
Negotiations were lengthy and remained ongoing at the time the responsibility for petrol sniffing initiatives was transferred to the Department of the Prime Minister and Cabinet (PM&C) in September 2013. An agreement for capital works was subsequently executed in December 2013, which enabled work to commence on developing the required storage infrastructure. The storage facility became operational in November 2014, more than two years later than expected. As a result of the delay, implementation of the expansion fell short of the Government’s initial expectations. The facility was also more expensive than first anticipated, with the contracted cost of establishing the bulk storage facility being up to $19.2 million (including GST)—exceeding significantly the initial estimates of up to $12.9 million. Following the establishment of storage facilities, additional production of LAF commenced in late November 2014 and PM&C anticipates that the annual volume of LAF produced in 2015–16 will double.
The department’s processes for managing existing contractual arrangements and for monitoring the delivery of LAF are largely sound. Information collected under the production and distribution agreements enables PM&C to maintain appropriate visibility over the volume of LAF supplied and the locations of sites to which it is supplied. The main approach of the PSS is to reduce the availability of RULP in high risk communities by encouraging fuel outlets serving those communities and outlets in surrounding areas to only stock LAF and create a distance buffer zone around vulnerable communities. Accordingly, PM&C monitors supply information so that sites ceasing to supply LAF can be contacted and encouraged to continue to participate in the PSS. In addition, since 2005, a contracted research provider has assessed a sample of communities periodically for incidences of petrol sniffing and the role of LAF in reducing outbreaks. As a result of these data collection arrangements, PM&C has a reasonable evidence base to support the assessment of LAF in reducing the incidence of petrol sniffing.
Between 2005 and 2009, the supply of LAF was identified as a program in the Health and Ageing Portfolio Budget Statements, and DoHA reported against the number of sites providing LAF as an indicator of performance for the PSS. Between 2009 and 2014 there was no formal reporting on the progress of the strategy. While the PSS has expanded, albeit more slowly than anticipated, there has been little information publicly reported on the effect that the supply of LAF has had on reducing the incidence of petrol sniffing in Indigenous communities. Research indicates that the supply of LAF is making a positive contribution to reducing petrol sniffing. The design of the PSS, however, also acknowledges that there are limitations to taking a single approach and that other actions need to be undertaken in conjunction with the supply of LAF to successfully address the issue of petrol sniffing. In 2014, the PSS was identified in the Prime Minister and Cabinet Portfolio Budget Statements as a specific initiative to be delivered under the Safety and Wellbeing Programme, with the key performance indicator being the number of sites providing LAF. Using this narrowly-focussed indicator alone, however, will provide for only a limited assessment of performance. In view of the PSS’s maturity, it is timely for PM&C to strengthen its PSS-related performance reporting by including a greater focus on assessing the impact of the PSS.
The ANAO has made one recommendation to improve PM&C’s accountability and reporting for the PSS.