Transparency trend in ERA rail submissions

30 Apr, 2015 01:00 AM
Brookfield Rail chief executive officer Paul Larsen with a kalamazoo, a lever-operated, three-wheeled rail trolley that was 'rowed' along by a 'ganger' to inspect the lines in the early days of WA rail, in the foyer of the freight rail operator's head office.
Brookfield Rail chief executive officer Paul Larsen with a kalamazoo, a lever-operated, three-wheeled rail trolley that was 'rowed' along by a 'ganger' to inspect the lines in the early days of WA rail, in the foyer of the freight rail operator's head office.

CALLS for greater transparency and information disclosure on the operation of the State's freight rail network were the province of the Economic Regulation Authority (ERA), network operator Brookfield Rail has claimed.

In a submission to the ERA on a third statutory review of the Railway (Access) Code 2000, the CBH Group, which is attempting to negotiate a 10-year grain train access agreement with Brookfield under the code, has called for immediate changes.

It wants changes to "address the information asymmetry between a railway owner and an access seeker".

As reported in Farm Weekly last week, CBH initiated Supreme Court action in January last year, near the start of a 16-month process so far to secure long-term rail access, to obtain information from Brookfield on aspects of the freight rail network operation.

The action was settled quickly and the information subsequently provided.

The WAFarmers' submission to the code review also called for greater transparency in access arrangements.

A Department of Transport (DoT) submission has called for "clarity" on low volume Tier 3 grain lines.

Brookfield closed more than 500 kilometres of Tier 3 lines on June 30 last year, placing them into care and maintenance and claiming that was the directive from government after the 2009 Strategic Grain Network Review report.

The DoT submission stated it "agrees with the principle of transparency of information", but cautioned commercial-in-confidence information needed to be respected when there was a possibility it could be made public.

In its submission to the review, Brookfield has argued against the code being changed to give the ERA "discretionary power" in classifying information as confidential or making it publically available.

Brookfield argued the Railways (Access) Act 1998 required "an effective regime" designed to protect confidential information relating to access seekers' operations from being disclosed.

"Without assurance that information deemed confidential will be treated as such, parties providing that information - the railway owner and others, including access seekers - may be more circumspect in providing that information to the ERA," Brookfield's submission warned.

Last Friday, in an interview with Farm Weekly, Brookfield chief executive officer Paul Larsen said the company, which like CBH is negotiating under the code for the first time, had always provided the information it was required to.

"We've always met all our obligations in relation to information provision or exchange, and in some cases we've provided more than we were required to," Mr Larsen said.

"When changes have been made to ensure the amount of information exchange is appropriate to the needs of the parties involved, we've made those changes."

Mr Larsen described the Supreme Court action taken by CBH as stemming from "a difference of opinion as to the level of information to be exchanged".

When asked how the conflict between need-to-know operational information and the commercial-in-confidence rights of both access seekers and Brookfield could be resolved to make the process more transparent, Mr Larsen said that was up to the ERA to decide.

"There has to be a balance between the need for transparency and the need to respect commercial confidentiality," he said.

"It is the ERA's job to determine what is the right balance of information exchange."

All of Brookfield's access agreements with customers, so far negotiated outside of the code, were confidential, he said.

Mr Larsen confirmed two "parallel lines" of negotiation were being conducted with CBH, one to establish a 10-year access agreement and the second for a temporary agreement to allow grain trains to run beyond today on Tier 1 and 2 lines.

He also confirmed Brookfield had sought price rises for both long-term and temporary agreements.

He described the negotiations as "professional" and said he was "confident" grain trains would continue to run after today, when the current temporary agreement expires, with Brookfield looking to sign a new temporary agreement until the end of the year.

Mr Larsen pointed out the price rises sought could not apply on some lines until 2017.

After the Strategic Grain Network Review 2009, in which CBH and the grain industry participated, the State Government had invested funds in improving the grain roads network and $165 million had been spent upgrading some Tier 1 and 2 lines.

Subsequent amendments to the 49-year lease agreement between the Public Transport Authority (PTA) and Brookfield in 2010 - to reflect the grain network review outcome - allowed for the "winding down" of the Tier 3 lines after the government indicated no further money would be available for them, Mr Larsen said.

Those amendments put a cap on access fees until the end of next year on lines the government had invested in, which comprised 33 per cent of the total volume - determined by weight and distance - sought by CBH in its request for access, he said.

The amendments also introduced a profit-sharing arrangement with the PTA above a certain level, but Mr Larsen confirmed no payment had been made to the PTA under that arrangement.

He said that in response to CBH's request for 10-year access, Brookfield had made a price offer "between the bookends" of floor and ceiling prices determined by the ERA.

Mr Larsen confirmed the offer included an amount required to "restore the Tier 3 lines (that CBH requested to use) to operational capacity".

"The amount reflects the cost of returning those lines to the standard that they (CBH) have requested in their access request and to maintain those lines to that standard for a decade," he said.

"It's not the cost of a Band Aid.

"We are responsible for the safe and efficient operation of those lines for that period."

Mr Larsen said the amount of "capacity" that CBH had sought for its grain trains was equivalent to one third of the total capacity of the freight rail network.

Apart from the standard gauge line, on most of the lines it wanted access to, CBH would be Brookfield's only customer, he said.

While it was negotiating with CBH, Brookfield was also closely watching the price of iron ore, Mr Larsen confirmed.

At some 32.5 million tonnes a year carried on rail - from Perenjori to Geraldton port and the Yilgarn to Kwinana and Esperence ports, but excluding Pilbara mining operations - iron ore customers comprised between 40 and 45 per cent of Brookfield's business.

The combined effects of a production glut and reduced Chinese demand saw the iron ore price sink to $US47 a tonne recently then recover last week to $US57.80, but at that price most of the State's iron ore mining operations were still unsustainable.

"We are working with our iron ore customers to help them get more tonnages through," Mr Larsen said.

Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly


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