Govt ponders rail access code changes

19 Oct, 2016 10:41 AM
 CBH Group, mining companies and other train operators are expected to respond to a State Government issues paper on the effectiveness of the controversial WA freight rail access regime. CBH is the first organisation to attempt to use the regime to negotiate long-term access for its grain trains.
CBH Group, mining companies and other train operators are expected to respond to a State Government issues paper on the effectiveness of the controversial WA freight rail access regime. CBH is the first organisation to attempt to use the regime to negotiate long-term access for its grain trains.

AN issues paper outlining changes perceived as necessary to improve effectiveness of WA’s freight rail network is being prepared by the State government.

Treasurer Mike Nahan has confirmed the issues paper will seek public comment on the much-maligned Railways (Access) Code 2000 – the set of rules under which network operator Brookfield Rail and rail users such as CBH Group and mining companies negotiate train paths, timetables and cost.

Officers across four government departments – Finance, Treasury, Transport and State Development – are involved in preparing it.

The paper is expected to canvass opinion on 18 changes recommended by the Economic Regulation Authority (ERA) following statutory reviews of the code in 2010 and 2015.

The ERA, which administers the code, is required to conduct a public review every five years, but the government is not bound to react to its recommendations.

A second statutory review, in 2010, resulted in eight mainly procedural recommendations delivered to Treasury in December 2011 but not acted upon.

According to the ERA at the time, its recommendations aimed to improve availability of information for access seekers, prevent delays in access negotiations, improve efficient and effective administration, clarify definitions and develop access proposals for new railways.

The code applies to the standard-gauge interstate line west of Kalgoorlie and all other freight lines in the southern half of the State which were leased out until 2049.

In 2008 a new 620 kilometre iron-ore railway from Port Hedland servicing Andrew Forrest’s Fortescue Metals Group Ltd Christmas Creek, Cloudbreak and Solomon mines and operated by a wholly-owned subsidiary, The Pilbara Infrastructure (TPI), also came under the code, hence review recommendations related to new railways.

A third statutory review last year resulted in 10 recommendations to Treasury in December which were made public on the ERA’s website in February, but so far also not acted upon by government.

In the period between reviews, starting October 2013 CBH group attempted to become the first organisation to use the State’s regime and code provisions to negotiate a 10-year agreement for grain trains.

But following a Supreme Court challenge by CBH, access negotiations became a first test of the code’s dispute resolution processes, including a 90-day period which failed to end CBH’s and Brookfield’s disagreement on pricing and ultimately triggered the current, on-going arbitration process.

Also in the interim, Brookfield closed more than 500km of Tier 3 grain lines, claiming their condition made them unsafe.

In August, a second Pilbara railway, the 344km iron ore line to the Roy Hill mine, majority-owned by Gina Rinehart’s Hancock Prospecting, came under the code.

The principal of the 10 recommendations from the third review argued access for interstate freight traffic on the standard-gauge line west of Kalgoorlie should be consistent with access east of Kalgoorlie that is controlled through an undertaking by operator Australian Rail Track Corporation to the Australian Competition and Consumer Commission (ACCC).

This could be brought about via the government implementing a 2006 Competition and Infrastructure Reform Agreement (CIRA) it signed with all other State governments, the ERA said.

Other recommendations dealt with specific code shortcomings revealed by CBH’s unsuccessful negotiations with Brookfield.

For example, CBH and others submitted a “ceiling price” determined under the code by the ERA in setting parameters for access cost negotiations, was “useless as a meaningful guide”.

They submitted a ceiling price under the code was essentially the cost of building a replacement railway beside the existing railway they wanted to use.

The ERA addressed that issue by recommending a new calculation allowing for depreciation to be considered, and similar responses reacting to other highlighted issues.

Its review summary said its recommendations aimed to make “regulation of Brookfield Rail’s interstate services consistent with the regulation of similar services outside Western Australia”.

Also “to facilitate more timely negotiated outcomes... information from access seekers be provided more promptly and information provided by railway owners to be updated more frequently... and that parties in dispute be involved in the selection of an arbitrator”.

Since those recommendations went to Treasury, certification of the WA freight rail access regime was allowed to lapse in February by Mr Nahan and former transport minister Dean Nalder.

Use of the code and the State’s access regime is now open to potential challenge via an application by any interested party to the National Competition Council to have WA freight lines formally declared, which would allow the ACCC to step in.

Certification of the WA regime had effectively quarantined access disputes west of Kalgoorlie from ACCC intervention for the past five years.

Mr Nahan confirmed the coming issues paper in response to questions submitted by Farm Weekly.

“Officers within the departments of Finance, Treasury, Transport and State Development are preparing an issues paper to seek stakeholder views on potential changes to the Western Australian Rail Access Regime – the Railways (Access) Act 1998 and the Railways (Access) Code 2000,” Mr Nahan said last Friday.

“A decision on timing for consultation and the release of the issues paper has not yet been made.

“Consultation would be open for a minimum of 30 days, as required for any changes to the Railways (Access) Code 2000,” he said.

In a background briefing, his department said while the ERA reviews had recommended improvements, they “did not consider the overall effectiveness of the rail access regime”.

“The planned issues paper is intended to canvass views on the findings of the ERA’s 2011 and 2015 reviews and on additional aspects of the rail access regime that may be inhibiting its effectiveness,” the background information stated.

It said it was not unusual for issues papers to be developed and the Railways (Access) Act required the treasurer to consult on any proposed amendments to the code or the Act.

Since the State government leased the freight rail network out to a private operator in 2000, no access agreement has been successfully concluded under the State’s access regime.

All freight rail users, including interstate rail companies using the standard gauge line west of Kalgoorlie, have so far negotiated private deals outside of the rail code with Brookfield or its predecessors.

Prior to October 2013, CBH also negotiated private access deals and four interim deals it has had to negotiate to keep grain trains running while it attempts to negotiate a longer term agreement under the code, have been done outside the code.

Its dispute over access and pricing is six months into a statutory arbitration process overseen by Sydney-based Queen’s Counsel lawyer and retired Federal Court judge Kevin Lindgren.

That arbitration process is predicted to extend into next year.

As a precaution, CBH has begun direct negotiations with Brookfield over a fifth interim access agreement, to take over from the current interim agreement due to expire on December 31, a CBH spokesperson confirmed last week.

If a satisfactory new interim agreement cannot be negotiated, CBH has the option of asking Mr Lindgren to extend the current agreement, which costs it about $6 million a month in the first-half of the year as it clears grain from regional depots to Kwinana port for export, while arbitration continues.

Just before Farm Weekly went to press a spokesperson for CBH confirmed it expected to make a formal submission on the State government issues paper.

“CBH looks forward to reading the issues paper and as one of the few users of the WA freight rail network to seek access under the code, is likely to make a submission to the process,” the spokesperson said.

Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly


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