No result in grain rail negotiations

25 Jun, 2015 11:53 AM
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This is 4200 growers negotiating through CBH for access to a key state asset at a fair price...

NINETY days of negotiations between CBH Group and Brookfield Rail over freight rail access ground to a no-result halt yesterday with a low-key phone call, rather than heated debate or a handshake across a table.

Head of the CBH negotiating team, general manager operations David Capper said there were no face-to-face meetings over the last few days, each side having previously stated its final position on pricing and performance and there was nothing left to say.

“There were a few formalities to be finalised on the last day and then it was a call at the end of the day to Brookfield to conclude the negotiations and to thank Brookfield’s (negotiating) team for their participation,” Mr Capper said.

CBH would now “step back” and take time to consider it options, he said.

“For the past 90 days our focus has been 100 per cent on trying to achieve an agreement under the (railway access) code,” he said.

“We will now step back and take some time to consider what our next step will be towards achieving a long-term agreement.

“It is way too early to speculate what that move might be.”

He said CBH had not made a formal decision to seek arbitration.

As outlined in this week’s Farm Weekly, CBH can now ask Railway (Access) Code 2000 administrator, the Economic Regulation Authority (ERA), to appoint one or more independent arbitrators to determine a pricing structure and terms of access for its grain trains to use parts of the State’s southern freight rail network operated by Brookfield.

CBH wants some closed Tier 3 grain lines reopened as part of that access.

Both CBH and Brookfield have acknowledged the arbitration process could take more than a year before a determination – binding on Brookfield but discretionary for CBH – is delivered.

For the past few months CBH has been paying Brookfield about $6 million a month to run its grain trains on higher-traffic Tier 1 and Tier 2 lines while it clears last season’s above-average harvest from its regional grain receival and storage network to meet export shipping targets and clear the way for this season’s harvest.

It has an interim agreement negotiated with Brookfield outside of the code – the fourth interim agreement since attempts to use the code to achieve a 10-year access agreement began in December 2013 - which allows grain trains to run to December 31.

In negotiating that agreement, Brookfield backed its initial 25 per cent price increase off to a 14.5 per cent increase after the third interim access agreement ended and CBH parked its grain trains for 18 hours on May 1.

Mr Capper acknowledged that a fifth interim agreement would be needed to ensure the movement of this season’s harvest to port was not interrupted.

He said determining CBH’s next step towards achieving a long-term agreement would be the priority, before beginning discussions outside of the railway code on a fifth interim access agreement.

“We will consider our options and then we will need to start informal discussions (with Brookfield on another interim agreement) in good time to ensure there is no interruption to this season’s harvest,” he said.

CBH would prefer to negotiate a new agreement for after December 31 rather than extend the existing one, Mr Capper said.

“Our preferred position would be to move to an agreement that included a CPI (Consumer Price Index) escalation, as we did in January last year.

“The existing (interim) agreement was signed under duress and involved a punitive price increase.”

CBH chief executive officer Dr Andy Crane confirmed the co-operative would consider its next step and explained its position.

“We entered into this process in 2013 on behalf of growers because the deal presented by Brookfield Rail for access to vital grain lines was completely unreasonable,” he said.

“Paying significantly more for fewer tracks is inexplicable and damaging to the sustainability of the WA grains industry.

“This dispute has been wrongly characterised as two large players failing to agree on commercial terms.

“The issue here is far deeper than that. This is 4200 growers negotiating through CBH for access to a key state asset at a fair price and minimum acceptable performance.

“At the end of the 90-day negotiation period Brookfield wants WA growers to pay about double their current access rates.

“The margins in farming are increasingly tight, an increase in the tens of millions of dollars each year could have a devastating impact on growers and we will not sign up for that.

“We have been negotiating in good faith but we cannot allow Brookfield Rail to force WA growers into a deal they cannot afford,” Dr Crane said.

Brookfield Rail chief executive officer Paul Larsen said the company was “disappointed” an agreement had not been negotiated and acknowledged that further interim access agreements would be needed by CBH before a long-term agreement was achieved.

“Brookfield Rail is disappointed a deal has not been reached and that CBH has already flagged taking the matter to arbitration,” Mr Larsen said.

“Brookfield Rail is of the view a mutually-acceptable agreement could have been negotiated without resorting to arbitration.

“Even with the best of intentions from both parties, an arbitration process could take anywhere between 12 months and two years, which will mean the negotiation of further interim agreements during this process.

“While we will continue to abide by the processes of the Railways (Access) Code 2000, Brookfield Rail remains ready and willing to negotiate a deal with CBH that will deliver the performance, safety, reliability and efficiency they have requested.

“As we have said previously, in order to deliver on CBH’s requirements, which include long-term access to the Miling line and some Tier 3 lines, access fees must increase to underpin the required maintenance and capital investment.”

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Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly

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