Two per cent of the total volume of petrol sold in NSW must now be ethanol.

Legislation guided through the NSW Parliament by Regional Development Minister, Tony Kelly, became effective recently.

Mr Kelly noted the early support from independent retailers and said more recently there had been decisive action from the oil majors:

• BP launched its first E10 service station in Sydney at Rozelle in August and signed a 40 million litre supply deal with the Manildra Group;
• Caltex opened its 100th E10 bowser in NSW at Penrith in August;
• Shell launched an ethanol blending facility at Parramatta in September; and
• Mobil launched its first E10 station in Sydney in September.

"Endorsement and uptake by the oil majors is important to secure a stronger domestic ethanol industry in Australia," Mr Kelly said.

"But crucial to the development and survival of our local ethanol industry is protection from a flood of cheap foreign imports.

"Any plan to remove such protections and slash biofuel subsidies from July 2011 will have disastrous consequences."

Mr Kelly said most of the ethanol produced in NSW was made from wheat starch waste at the Nowra Manildra Group plant.

"The Nowra plant is essentially using a waste product of the flour production process," he said.

"According to a recent CSIRO report, ethanol made from wheat starch waste can lead to a reduction of 37 per cent in greenhouse gas emissions, compared to ordinary unleaded petrol."

Research into so-called second generation technologies is exploring the viability of ethanol produced from nonfood crops, timber waste and even algae.

"As demand for ethanol grows and biofuel technology advances - particularly in producing second generation fuels - opportunities will expand for farmers," Mr Kelly said.

"Income from crops less dependent on water, or the chance to convert a spoilt wheat crop into ethanol, are just a couple of options which may open up for farmers.

"It’s an exciting time for everyone involved in this important developing industry, which, with the right support, can mature and develop to provide significant long-term benefits to farmers and motorists, right across NSW."