When Fortescue Metals Group began its battle to win third party access to the Pilbara’s railway lines in November 2007, the company succeeded in ruffling a few feathers.
Nine months on and Fortescue’s appeal to the National Competition Council (NCC) to have the rail networks, operated by Rio Tinto Iron Ore (RTIO) and BHP Billiton, opened to third parties is beginning to heat up.
The NCC has called for public comments on a draft recommendation that Fortescue be given access to certain Hamersley and Robe River rail lines operated by Rio Tinto.
Responding to the call, RTIO’s chief executive Sam Walsh said a multi-user system would impede Rio Tinto’s ability to expand.
“Rio Tinto has spent, or has committed to spend $8.6 billion since 2003 upgrading its infrastructure and expanding its mine-to-port network,” he said.
“The likelihood that new capacity would be available to others would discourage further investment.”
It seems unlikely Rio Tinto will block Fortescue from gaining access to its Pilbara rail network.
A precedent was set on 5 October 2007 when BHP Billiton’s appeal to stop Fortescue from gaining access to its Mt Newman railway line was dismissed by the Full Federal Court.
Fortescue has been active in trying to get access to rail operated by BHP and Rio Tinto, but recently completed its own 345 km long railway from Cloud Break mine site to Port Hedland.
Nevertheless, the company, which is ramping up production to 45 Mtpa, is still evaluating plans for its Solomon deposit which lies relatively close to rail lines operated by Rio Tinto.
In a bid to diffuse the situation, the Western Australian Government has said it plans to implement a haulage regime, requiring larger iron ore exporters to haul iron, produced by smaller miners, on the railway.
The Pilbara Rail Access Interdepartmental Committee (PRAIC) invited submissions on the haulage regime from stakeholders and other interested parties (aspiring iron ore producers, incumbents BHP Billiton, Rio Tinto, Fortescue and industry representatives) as part of the consultation process, which was launched on 10 June. Public consultation on the State Government’s proposal closed 25 July.
The Sate’s treasury department is due to provide a final report to Cabinet by October.
Assistant director for structural policy with the Western Australia Department of Treasury and Finance John Murphy told the ‘Mining the Pilbara’ Conference in Karratha that a Pilbara railways haulage regime was necessary to resolve current uncertainty over third party access.
He said the regime would be developed so it was capable of certification under Part IIIA of the Trade Practices Act 1974.
“This sets a benchmark for the regime to be effective, balancing the interests of infrastructure providers and access seekers,” Murphy said.
“Pilbara railways are covered by a variety of State agreements intended to facilitate access arrangements.”
“BHP Billiton’s and Rio Tinto’s current State agreements include provisions for haulage services, while Fortescue’s current State agreement includes provisions for track access.”
Track access means third parties provide their own rolling stock and operate to separate standards.
The haulage regime provides third parties with access to existing operating haulage services provided by the infrastructure owner.
“The regime’s principles include the promotion of optimal and efficient use and investment in Pilbara rail infrastructure, the recovery of efficient costs by the provider, preservation of haulage provider safety and operational standards, maintenance of system flexibility, and simplicity and transparency,” Murphy said. Feedback was sought on a number of issues including whether a tonnage threshold should be implemented — how many million tonnes per annum should haulage services be limited to — capacity, haulage charges, the term of access arrangements and dispute resolution.
Implementation of the regime will require legislation, while the regime will also be submitted to the NCC for certification.
08 9327 2000
Department Treasury and Finance
08 9222 9222