Rail access still up in the air

Certification as an "effective access regime" under the Competition and Consumer Act (CCA) expired last Thursday after five years, exposing rail disputes to potential Australian Competition and Consumer Commission (ACCC) intervention.

The government did not reapply to the National Competition Council (NCC) before the expiry deadline, but Treasurer Mike Nahan has indicated it is still considering whether to do so.

"The government is considering the Economic Regulation Authority's (ERA) recent report on the railways access code and its recommended amendments, and whether to seek another period of certification under the national access regime," Dr Nahan said.

"Any lapse in certification will not make the WA rail access regime invalid.

"It can still be used by infrastructure managers and access seekers that are covered by the regime.''

Dr Nahan said WA had been in this situation before - between 2001 and 2011 rail access regime was not certified and both the national access regime and the WA rail access regime were available.

With certification expiring, the CCA's National Third Party Access Regime became "an additional option to infrastructure owners and access seekers," Dr Nahan said.

The national regime can be applied to the freight network operated by Brookfield Rail and two of the four Pilbara iron ore railways - those operated by The Pilbara Infrastructure and Roy Hill Infrastructure.

"The government is committed to ensuring WA has efficient and fair access arrangements that enable mutually beneficial outcomes for railway owners and access seekers," Dr Nahan said.

He was given the ERA report and recommendations on December 8.

The major recommendation was that the government "consider options" to bring Brookfield's Kwinana-Kalgoorlie interstate line services under regulations consistent with the rest of Australia, in line with the 2006 Competition and Infrastructure Reform Agreement (CIRA).

The ERA also recommended the controversial gross replacement value method of calculating a ceiling price for access be replaced by an established asset base (EAB) method used in other States.

The EAB method allows depreciation of the rail line to be deducted from costings calculations.

Involving the ACCC is a two-stage process that first requires a rail user, operator or third party to apply to the NCC for part or all of the rail network to be declared under Part IIIA of the CCA.

Based on a previous Pilbara rail line access dispute, this could be a potentially lengthy process running into years, requiring the applicant to satisfy five criteria, a cost-benefit analysis and gain ministerial approval.

The minister's decision can also be subject to an appeal to the Australian Competition Tribunal.

Once lines are declared, a potential user can ask the ACCC to arbitrate if access negotiations with the lines operator broke down.

But the ERA report pointed out that without an undertaking similar to that made by the Australian Rail Track Corporation (ARTC) with the ACCC governing access to interstate lines east of Kalgoorlie, there was little difference between the WA and national access regimes.

Farm Weekly has been told the only significant difference between the WA regime and "default settings" of the national regime is in arbitration requirements.

The WA regime has the ERA as administrator which can appoint independent arbitrators to hear access disputes, while the ACCC is both administrator and arbitrator under the national regime.

Standard reference fees for standard freight services and fee increases limited to an annual ACCC-approved rise are elements of ARTC's interstate lines management that attracted WA rail users and WA farmers to the national regime.

But they were elements volunteered by ARTC in its undertaking to the ACCC.

The ERA report explained there was no compulsion for Brookfield Rail to offer such an undertaking on the interstate line or any other lines that may be declared.

By allowing certification to lapse, the State Government may, in fact, have let slip an opportunity to negotiate with Brookfield over an undertaking on the interstate line.

In clauses 97 and 98 of its report, the ERA outlined a case for the government agreeing to remove certification on the standard-gauge line contingent on Brookfield offering an undertaking under the national access regime.

In clause 99 the ERA pointed out should the government adopt its code review recommendations and certification lapsed, as it has, the national access regime would be "more light-handed" and "less prescriptive" than the State regime.

It has been suggested to Farm Weekly that if the government wanted to, it could move quickly to apply for recertification of the rail network, which might forestall any moves by others to have parts of the network declared.

There is a precedent in Queensland where the NCC deferred considering an application for declaration until a pending application for certification had been decided.

Brookfield Rail last week confirmed it was aware certification of the freight rail network had expired.

"We are considering the ramifications of this and all of the various options that are available to us,'' Brookfield said.

"However, no decisions have been made at this time.''