CBH options likely for grain train fees

12 May, 2016 01:00 AM
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CBH may not have to negotiate another interim arrangement with Brookfield Rail to keep its grain trains running after December 31. It has the option of asking arbitrator Kevin Lindgren to order a status quo extension of the existing interim access arrangement if arbitration on a 10-year agreement is not concluded soon enough.
CBH may not have to negotiate another interim arrangement with Brookfield Rail to keep its grain trains running after December 31. It has the option of asking arbitrator Kevin Lindgren to order a status quo extension of the existing interim access arrangement if arbitration on a 10-year agreement is not concluded soon enough.

BROOKFIELD Rail may have already set its last fee schedule for CBH grain trains for at least the next 10 years.

Even if the recently-begun arbitration process with Kevin Lindgren QC extends beyond a December 31 end date for the current interim access arrangement, Brookfield may not have a free hand in setting future interim fees for CBH.

CBH has confirmed the Commercial Arbitration Act 2012, under which Mr Lindgren is mediating, gives it options in relation to interim measures to keep grain trains running until a long-term access contract is signed.

Up until Mr Lindgren called a meeting with Brookfield and CBH at the start of last month, negotiations between the two had been conducted under WA Rail (Access) Code 2000 and Railway (Access) Act 1998 provisions.

Those provisions enabled Brookfield to set the fee structure for the five interim access arrangements since CBH set out in October 2013 as the first organisation to try to negotiate a 10-year deal under the WA freight rail access regime.

The move under the Arbitration Act would appear to relieve pressure on CBH's negotiating team to conclude arbitration before it has to negotiate a sixth interim access agreement with Brookfield.

Now that the arbitration process has begun CBH has the option of asking Mr Lindgren to set interim access fees and conditions if the 10-year agreement is not signed by December 31.

Part 4A of the Arbitration Act allows CBH, or Brookfield, to ask Mr Lindgren to grant or order "interim measures".

Under the act an interim measure is defined as "any temporary measure" at any time prior to the issuance of the award by which the dispute is finally decided" which is aimed to achieve specified objectives.

The first of those is to "maintain or restore the status quo pending determination of the dispute".

The others relate to preventing "imminent harm or prejudice" to the arbitral process and preserving assets or evidence related to dispute resolution.

The party requesting an interim measure must prove that "harm not adequately reparable by an award of damages" is likely if the interim measure is not ordered or granted.

Potential risk to WA's grain producer reputation and economy if the rapid flow of grain to port were to be disrupted in January, might suffice as proof of harm, it could be argued.

Should the arbitration process look like running beyond December 31 CBH could conceivably ask Mr Lindgren to grant a status quo interim measure as an alternative to negotiating a sixth interim agreement with Brookfield.

Brookfield recently declined to allow the estimated timeframe for arbitration to be made public.

Farm Weekly had approached CBH and Brookfield for their approval to allow Mr Lindgren to make a statement in regard to the expected timeframe - under the Arbitration Act one of his first duties is to establish with the two parties how long arbitration is expected to take.

The approval of both parties is required before any information about the arbitration - including Mr Lindgren's final report - can be made public.

CBH has said it would consider making the timeframe public, if agreed by all parties, but Brookfield declined.

"The arbitration between CBH and Brookfield Rail is subject to extensive confidentiality requirements," it said in response to Farm Weekly's request.

"Brookfield Rail considers all aspects of the subject matter and processes of the arbitration fall within these requirements at this stage," it said.

The complexity of CBH's desired train paths- partly on lines where it is the only user and partly on the standard-gauge line amongst a variety of scheduled users - their timing and the proposed 10-year agreement duration has led to industry speculation arbitration may not be concluded before December 31.

The sources have pointed to an earlier arbitration in the access negotiations as a guide to a likely lengthy process.

In June 2014, CBH notified the Economic Regulation Authority (ERA) it was in dispute with Brookfield over whether capacity existed to run grain trains on some Tier 3 lines which were placed into care and maintenance at the end of that month.

Under the same process as the current arbitration, the ERA appointed an arbitrator who determined in February last year there was capacity, enabling CBH to push - unsuccessfully so far - to have some lines reopened.

The subsequent negotiation of the current interim access arrangement proved difficult.

On May 1 CBH parked its grain train rolling stock for 18 hours on the only bits of the freight rail network it owns - the rail yards at its Avon silos complex near Northam and at its Kwinana grain terminal.

The fourth interim access arrangement had expired at midnight and it had no authority for its trains to use the network.

Negotiations with Brookfield had broken down over a proposed 25 per cent fee increase and a backdating clause exposing CBH to an indeterminable cost.

Hurriedly reconvened negotiations compromised on a lesser fee structure and dropped the backdating clause in return for CBH committing to increased tonnages on the standard-gauge line to Kwinana.

CBH chief executive officer Andy Crane and general manager operations David Capper have since said CBH had "no option" but to accept an unsatisfactory interim agreement to get grain trains running again.

Prior to the trains being parked CBH paid Brookfield between $1.8 and $4.5 million a month to run grain trains.

Under the interim arrangement that was subsequently signed monthly rail costs have peaked near $6m, CBH has said.

That interim access negotiation took place half way through a statutory rail code 90-day negotiating period for the 10-year access agreement which ended with CBH and Brookfield no closer to a deal than they were at the start.

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FarmWeekly
Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly
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READER COMMENTS

boris
3/06/2016 7:24:04 AM, on Farm Weekly

Please sign the long-term agreement CBH. Brookfield does not need to be your enemy anymore now that AGC is part of the landscape. The cost increase per tonne for the long-term agreement is small compared to all the other supply chain costs you charge growers and marketers.

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