The state government announced Monday it would not go ahead with the ban, under which regular unleaded in NSW was to be replaced by E10, a petrol-ethanol blend that contains between 9% and 10% ethanol by volume.

Stuart Johnston, owner of the town’s Caltex service station, said owners of older cars and farm equipment unable to use E10 fuel will be happy with the decision.

Mr Johnston joined a petition campaign asking the NSW government to call for an independent review of the Biofuels Act 2007, which required service stations to replace all regular grade unleaded petrol with E10.

The ban would have disadvantaged owners of older cars as their models would have been unable to take E10 fuel, forcing them to buy more expensive premium petrol, he said.

He said owners of older cars unable to use E10 will not have to pay 10c a litre extra for premium petrol.

The NSW government said that most cars manufactured since 1986 to run on regular unleaded petrol (ULP) are recommended by their manufacturer as E10 compatible.

However owners of older vehicles, boats and other engines that are not ethanol-compatible would have needed to use premium petrol after 1 July 2012.

Mr Johnston said he no longer has to install protective lining in his service station’s underground petrol tanks so it can hold E10 fuel, which he estimates would cost $13 000.

“It’ll be a lot better for me. I haven’t got to outlay that money for the protective lining.”

Mr Johnston said he is glad he waited to see if the E10 requirements would change before installing the protective lining.

For two weeks in May Mr Johnston said his business would have been hurt, as while the lining would have been installed Boorowa Caltex would have been unable to sell unleaded petrol.

E10 is around three cents cheaper than regular petrol, reduces exhaust smoke particles, results in 30-40% less CO2 emissions than petrol, and is required to meet the same national quality standard as ordinary petrol, according to the NSW government.