Victorian farmer, Steven Hobbs, has been producing biodiesel and vegetable oil fuel from canola and mustard crops on his farm near Kaniva, in the Wimmera, for five years.
Mr Hobbs has set up a small processing plant on the farm where he crushes the oilseeds to make biofuel for his own use or to sell into the market.
"I am increasing my farm viability and profitability by incorporating lower cost farm inputs that displace higher cost farm inputs," he said.
"At the moment, I am only making small savings because I have to pay tax on all my production.
"It frustrates me that the Government wants to tax the industry at a full tax rate before the industry has even had the opportunity to establish itself in Australia.
"The Government is effectively supporting farmers to continue using fossil fuel and not encouraging them to use renewable fuel."
NSW Farmers Association fuel price task force chairman, Ian McClintock, said the association and other farm lobby groups were pushing for the excise and licensing constraints on biofuels to be lifted because they were impeding the development of the alternative fuel industry.
"Once we overcome the legislative problems there will be all sorts of people keen to get involved, particularly if the price of fuel keeps rising the way it is," he said.
"There is no doubt that in the medium to long-term the price of petroleum fuels has only one way to go and that is up."
Mr McClintock said biodiesel production was an attractive alternative because farmers could grow their own feedstock, the technology for processing and running equipment was relatively simple and it guaranteed producers a supply of biodiesel at a reasonable price.
"If you grow your own oilseed, crush it and convert it into biodiesel, you can produce it for less than $1 a litre," he said.
"I know you get your excise rebate back for diesel on farm, but you would still be able to make biodiesel cheaper than that."
Mr McClintock said the time for alternative fuels had arrived because crude oil consumption worldwide continued to increase at a rate of two and a half per cent a year while known reserves dwindled.
"The writing is on the wall; it is an unsustainable process," he said.
"If we continue to increase the use of crude at the current rate we only have 30 years before we consume the known reserves of oil."
Mr Hobbs produces both vegetable oil and biodiesel fuels to run the vehicles on his Wimmera farm.
Biodiesel, which is essentially refined vegetable oil with the glycerol removed, can be used in any unmodified engine.
On the other hand, vegetable oil, which must be hot to combust, requires modified fuel delivery systems before it can be used successfully.
Engines that run on vegetable oil need to be started with conventional diesel then switched to vegetable oil once they are warm.
At the end of the operation, the fuel system is purged and switched back to diesel.
Mr Hobbs said not all engines were suitable for straight vegetable oil because there were limitations relating to fuel injection pumps.
"The problem in Australia is most of our engines are based on American technology that utilises rotary injection pumps," he said.
"Most of the European technology is based on inline injection pumps that have their own internal mechanism for lubrication whereas rotary injection pumps rely on the fuel itself to lubricate the pump.
"Even when vegetable oil is hot, there is still a difference in viscosity so rotary pumps can tend to cavitate if you run them on pure vegetable oil that leads to premature wear.
"You can overcome the problem by blending a co-solvent such as biodiesel or diesel or kerosene to help reduce the viscosity."
SOURCE: Extract from report in The Land, NSW, October 13