Explanatory Statement
Issued by the authority of the Minister for Climate Change and Energy
Fuel Security Act 2021
Fuel Security (Fuel Security Services Payment) Amendment Rules 2026
Legislative Authority
Paragraph 84(1)(a) of the Fuel Security Act 2021 (Act) provides that the Minister may, by legislative instrument, make rules prescribing matters required or permitted by the Act to be prescribed by the rules.
Section 43 of the Act provides for the amount of the fuel security services payment (FSSP). Subsection 43(1) provides that the number of litres of refined fuel is to be multiplied by the number of cents per litre prescribed, or worked out using a method prescribed by the rules for that FSSP fuel.
Subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to make a legislative instrument, the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
Purpose
The purpose of the Fuel Security (Fuel Security Services Payment) Amendment Rules 2026 (Amendment Rules) is to amend the method for the FSSP prescribed in subsection 12(2) of the Fuel Security (Fuel Security Services Payment) Rule 2021. The Amendment Rules add an adjustment factor that ensures the method prescribed by the rule is still appropriate for Australian market conditions. The adjustment factor is required to ensure the method remains closely aligned with, and consistently implements, fuel security policy outcomes.
Background
The FSSP is a mechanism that supports Australia’s sovereign fuel security by providing payments to domestic refinery operators for the production of refined fuels. It helps ensure refineries can continue operating during periods when refining margins are low, without enabling profit from the payment. Payments are calculated quarterly based on prevailing market conditions, taking into account each refinery’s production and operations. The FSSP provides an adjustable cent per litre payment to refinery operators in return for a commitment to continue refining.
The Amendment Rules give effect to a recommendation of the Fuel Security Services Payment Milestone Review (the Review). The Review was conducted by the Department of Climate Change, Energy, the Environment and Water in accordance with section 14 of the Fuel Security (Fuel Security Services Payment) Guidelines 2021 (Guidelines). Section 14 provides that the method for determining the rate of fuel security services payments will be subject to a milestone report after two years to ensure it is still appropriate for Australian market conditions.
The Review found that the method for determining the FSSP payment rate required adjustment to reflect broader economic changes and the operational impacts which have materialised since the FSSP’s implementation in 2021. The adjustment factor was determined as a result of stakeholder consultation, financial analysis and data validation undertaken throughout the Review.
Consultation
Consultation was undertaken through the Review with the two refiners participating in the FSSP scheme – Ampol Limited’s Lytton Refinery and Viva Energy Australia’s Geelong Refinery, between June 2025 and February 2026. Consultation included:
- input into the Terms of Reference for the Review;
- participation in the discovery stage of the Review, providing commercially sensitive financial and operational information to inform analysis and assessment; and
- providing views on the method and potential impacts of making individual adjustments and the cumulative effect of various potential changes.
Ongoing consultation throughout the Review also included the opportunity for refiners to advocate for change, outline reasons for change, and identify potential impacts on the FSSP payment rate. In February 2026, entities were consulted on the Review recommendations and provided support for the proposed changes and commencement date of the Amendment Rules. Given the extensive consultation throughout the Review, it was not considered necessary to consult on the text of the instrument itself.
Details / Other
Details of the Amendment Rules are set out in ‘Attachment A’.
The Amendment Rules are compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.
The Amendment Rules is a legislative instrument for the purposes of the Legislation Act 2003.
Authority: sections 84 and 43 of the Act.
Attachment A
Details of the Fuel Security (Fuel Security Services Payment) Amendment Rules 2026
Section 1 – Name
This section provides that the name of the instrument is the Fuel Security (Fuel Security Services Payment) Amendment Rules 2026 (Amendment Rules).
Section 2 – Commencement
This section provides for the Amendment Rules to commence on the day after registration.
Section 3 – Authority
This section provides that the Amendment Rules are made under the Fuel Security Act 2021.
Section 4 – Schedules
This section is a machinery provision. It provides that an instrument specified in a Schedule to this instrument, being the Fuel Security (Fuel Security Services Payment) Rule 2021 (Principal Rule), is amended as set out in the applicable items in the relevant Schedule, and that any other item in a Schedule to this instrument has effect according to its terms.
Schedule 1 – Amendments
Fuel Security (Fuel Security Services Payment) Rule 2021
Item 1 – Subsection 12(2)
This item repeals and replaces subsection 12(2) of the Principal Rule. This effectively repeals and replaces the method to calculate the rate of fuel security services payments by inserting a new, modified formula. The difference between the repealed formula and the amended formula is the addition of an adjustment factor that has a value of 3.6 cents per litre.
The adjustment factor was determined through the Fuel Security Services Payment Milestone Review (Review) process, conducted by the Department of Climate Change, Energy, the Environment and Water in accordance with section 14 of the Fuel Security (Fuel Security Services Payment) Guidelines 2021, as the most effective way to implement an update to the formula to align the FSSP payment rate with Australian market conditions.
Applying an adjustment factor does not interfere with the operation of the repealed formula. The amended formula maintains the integrity of the repealed formula as a mechanism to calculate a payment rate that is subject to market variation. Market variation (related to price of oil, price of refined product and transport costs) is captured in the formula through subsections 12(3) - 12(7), which are not changed by the Amendment Rules.
The addition of an adjustment factor improves the accuracy of the formula relative to Australian market conditions in 2026, and accounts for the change from market conditions in 2021 when the formula was established. Changes to market conditions include factors such as the impact of inflation on infrastructure (capital) and operational costs and how these costs impact refinery margins. Accurately accounting for refinery margins through the addition of an adjustment factor ensures refineries can continue operating during periods when refining margins are low and receive an appropriate level of support without enabling profit from the payment.
ATTACHMENT B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Fuel Security (Fuel Security Services Payment) Amendment Rules 2026
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Legislative Instrument amends subsection 12(2) of the Fuel Security (Fuel Security Services Payment) Rule 2021 (Principal Rule) to amend the method for determining the fuel security services payment (FSSP) rate. The FSSP is a mechanism that supports Australia’s sovereign fuel security by providing payments to domestic refinery operators for the production of refined fuels. It helps ensure refineries can continue operating during periods when refining margins are low, without enabling profit from the payment. Payments are calculated quarterly based on prevailing market conditions, taking into account each refinery’s production and operations. The FSSP provides an adjustable cent per litre payment to refinery operators in return for a commitment to continue refining.
The instrument adds an adjustment factor to the method for determining the FSSP payment rate that improves the accuracy of the formula relative to Australian market conditions in 2026, and accounts for the change from market conditions in 2021 when the formula was established. Changes to market conditions include factors such as the impact of inflation on infrastructure (capital) and operational costs and how these costs impact refinery margins. Accurately accounting for refinery margins through the addition of an adjustment factor ensures refineries can continue operating during periods when refining margins are low and receive an appropriate level of support without enabling profit from the payment.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms. The amendments only impact the two refinery operating businesses that are committed to the FSSP scheme.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon. Chris Bowen MP
Minister for Climate Change and Energy