Life in the fast track

A third party access scheme for the Pilbara rail is making Australia’s mining giants hot under the collar.

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.

All aboard?

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.

Sam Walsh

Chief Executive

Rio Tinto

08 9327 2000

John Murphy

Assistant Director

Department Treasury and Finance

Western Australia

08 9222 9222

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