By Tony Gill, Director, Co-operative Development Services Ltd

This is a case study of how one remote Australian community saved their town after a major oil company decided to decommission their only retail fuel outlet in 2004.

The Victorian town of Kaniva is located 400 km west of Melbourne on the Western Highway to Adelaide, and is the last town before the South Australian border. The nearest town is Nhill, 40 km to the east.

Like other small Australian rural towns, the continuing centralisation of services to larger towns and regional centres has had a severe impact on the distances Kaniva residents faced to access these services.

Community leaders feared that losing the town's only fuel outlet would increase the population drift from Kaniva to other larger rural centres, threatening businesses and jobs needed to sustain the long-term viability of the community.

In mid 2002, an administrator was appointed to run Balgee Oil, a Ballarat based regional fuel distributor, which operated Kaniva's petrol station for Mobil Australia. In April 2004, the administrator decided to close the business after failing to find a buyer for the site.

The closure of the petrol station would have resulted in Kaniva’s 900 residents having an 80km round trip to purchase fuel from the nearest outlet in Nhill.

In response to community concern, the Shire of West Wimmera brokered a deal between Scotts Petroleum of Mount Gambier and Mobil to keep the site open while a buyer was found. Eighteen Kaniva residents and businesses formed a group to take the position of "buyer of last resort" if a buyer could not be found.

Following a burglary at the petrol station in September 2004, Scotts Petroleum withdrew from the business. With no buyer coming forward, the group, acting on legal advice, formed a proprietary limited company, Kaniva Community Roadhouse Pty Ltd (KCR), to buy the site. Members of the group contributed $82,000 towards the estimated $400,000 needed to purchase and retank the site and fund the business.

After reviewing the financial position of the business, KCR entered into a contract with Mobil to purchase the site. Mobil then signed an agency agreement with KCR for the supply of fuel until settlement took place, after the removal of the old fuel tanks later that year.

The limitations of a proprietary limited company soon became apparent and threatened to scuttle the project. And although 200 Kaniva residents, businesses and community groups had previously offered financial support for a community-owned petrol station, they became aware that the maximum number of non-employee shareholders of a proprietary limited company is 50. A proprietary limited company is also prohibited from inviting the public to buy shares.

With the prohibitive cost of forming an unlisted public company, the KCR board decided to explore the idea of forming a cooperative. A co-operative does not have the same restrictions; there is no maximum number of members, it is less costly to form than a public company, and can raise funds from the public.

After seeking advice from Co-operative Development Services Ltd (CDS) (CDS), the KCR board decided to form a trading co-operative to give the 1,000 Kaniva residents, businesses and community organisations the opportunity to become members and share in the benefits of being owners of the town's only petrol station.

The preferred option was to convert the company to a co-operative, however, due to anticipated time delay in deregistering the company, the board decided to form a new co-operative to meet the deadline imposed by Mobil for purchasing the site.

Over 200 people attended the formation meeting of the co-operative on 7 December 2004 and pledged over $280,000 to the enterprise.

Registration of the Kaniva Community Co-operative Ltd took place on 14 December 2004. The board of directors, elected at the formation meeting, then set about raising the remaining funds needed to reopen the petrol station.

As KCR had previously entered into a contract with Mobil to buy the site, the co-operative bought out the existing shareholders of KCR and the company became a subsidiary of the co-operative, holding title to the land and building.  The petrol station was reopened in May 2005 as a community-owned co-operative enterprise.

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