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Review of the Rural Petrol Stations Grant Scheme Final Report

SUMMARY

Introduction

The Rural Petrol Stations Grant Scheme (RPSGS) was introduced in 1998 following research that had identified rural petrol stations as being particularly vulnerable to closure. Its stated objective is to "support the retention of a sustainable and accessible network of fuel supply throughout rural Scotland". Subject to eligibility criteria of minimum distance to next nearest petrol station, maximum fuel sales volume and minimum drive time to an urban area, the grant is available to petrol stations for up to 50% of the cost of essential capital expenditure on fuel supply infrastructure.

In 2000, the scheme was extended to assist with the installation of tanks and dispensers for the provision of Liquid Petroleum Gas (LPG) at rural petrol stations. The scheme is administered on behalf of the Scottish Executive by Highlands & Islands Enterprise (HIE) and Scottish Enterprise (SEn), through the network of Local Enterprise Companies (LECs).

Study Method

Following an extensive survey and consultation process, we considered the scheme's social, economic and environmental benefits and evaluated its funding mechanism. We then identified and appraised options for the future of the scheme. Findings are summarised below.

Examination of Funding Mechanism

• There is strong support, and justification, for maintaining the current role of the LECs in handling RPSGS applications.
• No consistent nationwide marketing of the scheme has been undertaken since scheme introduction and there is significant lack of awareness of the scheme.
• RPSGS is highly successful in enabling the introduction of LPG supply. An estimated 95% of those LPG stations in rural Scotland are in place only because of the grant.
• None of the businesses surveyed had been awarded a lower grant than had been applied for, suggesting that there is limited rigour in the assessment of applications. On average, businesses reported that 65% of total works cost had been covered by the grant, when the maximum permissible should be 50%.
• Eleven percent of all grant recipients stated that they could have funded all of the works costs through other means and a further 8% that they could have funded a higher proportion of costs from other sources.
• For all projects, including those for LPG, 53% of applications (representing 48% of funds awarded) contain some element of deadweight expenditure, such that either the benefits arising would have occurred if the grant scheme was not in place or could have been obtained for reduced grant expenditure. For non-LPG works, some deadweight is apparent in 24% of applications (representing 35% of funds).

Social Benefits

• Many local residents would be affected by the closure of a rural petrol station.
• There would be direct impacts on employment and the financial cost of increased travel costs associated with fuel costs would average about 0.5% of net earnings.
• The biggest impacts would be felt by older people and those on low incomes who are car dependent.
• Many petrol stations provide a range of other services to the local community and these are vulnerable to closure if fuel sales cease

Economic benefits

• Quantified benefits of projects funded to date are, on average, more than five times greater than the net cost to government. This demonstrates a good level of return on investment compared to many transport projects.
• Closure of a rural petrol station would not lead to significant changes in total expenditure at a regional level, but would in general cause a net migration of some expenditure from the rural to the urban economies.
• Closure would lead to increased transport costs to other local businesses.
• Closure of an individual petrol station would not significantly alter tourist behaviour.

Environmental benefits

• There is no evidence that the RPSGS has produced local environmental benefits for reduced groundwater pollution or vapour emissions over and above the minimum required by legislation.
• Retention of a rural petrol station will, on average, save 280,000 miles per annum in total, this being around 5% of the total mileage in the vicinity of the petrol station site.

Note that the above assessment of benefits relates to a typical rural petrol station, in a location where customers could access an alternative site within a reasonable cost/time limit. Some petrol stations in Scotland are highly isolated (especially those that are the only site on a particular island). In these instances, the social and economic costs of closure are much greater than those indicated above. In these instances, the effects of closure of the only fuel station could have an immediate effect on the ability of residents to continue with current activity patterns.

Recommendations

A wide variety of options for change to the scheme have been identified. These options have been appraised against scheme objectives and those options that can provide benefits are put forward as recommendations for change below.

• It is recommended that the RPSGS continues.
• RPSGS should remain for investment in fuel supply infrastructure only and not be expanded to cover revenue support for businesses or business enhancements such as forecourt improvements, canopies or related services, such as shops.
• The formal fixed thresholds for minimum distance to the neighbouring petrol station and maximum fuel sales should be removed. In their place, a framework should be developed that enables a wider range of criteria to be assessed according to local circumstances. More strategic sites or those otherwise providing greater benefits can thereby be prioritised for investment.
• LECs should retain their role on working with businesses to identify investment need, but greater rigour applied in challenging businesses as to alternative sources of funding in order to reduce deadweight in applications. Close consideration should be given as to need in any case where more than 50% of works cost is applied for as grant.
• All grant applications should be audited by another member of staff at the LEC or other appointed third party.
• As demand for LPG is currently at a low level, more specific analysis of the benefits of LPG grants should be made. Bids should be invited from all petrol stations in an area defined as potentially benefiting from an LPG supply in order to achieve benefits at minimal cost to the scheme. No grants for LPG should be awarded where the likely long-term benefits cannot be justified against the installation and on-going supply costs of the site.
• All successful applicants should be viable in the long-term with the ability to return a reasonable operating profit.
• In conjunction with these changes, a co-ordinated marketing campaign for the grant should be undertaken to ensure that no communities miss out on the benefits that the scheme can provide.

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