Re:3RD PARTY ACCESS WITH TONNAGE RESTRICTONS
For all those holding out hope for a free for all on bhp/rio's io railways the draft proposal is for tonnage restrictions,fair enough as it will turn their lines into a car park,juniors will be disappointed in this proposal...tb
SHIPPING STEEL
THE Western Australian State Government has opened the door for iron ore juniors to access Rio Tinto and BHP Billiton’s railway network in the Pilbara with the release of a draft proposal into the contentious issue.
The draft third party access regime, released today by State Treasurer Eric Ripper, outlines what he said was a major step towards a “fair and reasonable” third party access system.
Under the regime, third parties – smaller iron ore miners in the region – could be awarded access to Rio and BHP’s existing network of railways in the Pilbara.
“Rail access is about reducing unnecessary duplications in infrastructure, it is about reducing inefficiencies in the iron ore industry, and is about providing facilities for junior iron ore miners to bring their projects into production,” Ripper said at a press conference in Perth this afternoon.
The rail access regime would only add to the value, efficiency and competition of the iron ore industry in the Pilbara, he said.
Ripper said the details of the regime were subject to consultation and still to be settled, and could only be implemented with the agreement of BHP and Rio.
“The object of the exercise is to get a haulage regime which is agreed to by Rio and BHP and other owners of the infrastructure and is effective from the point of view of the junior miners,” he said.
However, Ripper warned the majors that if they did not agree to the Government’s third party access regime they could face federal legislation in the future forcing such access, which could be less flexible and convenient.
While the draft regime firmly opens the door for third party access to the railways for juniors, the Government said there could be a tonnage limit on the level of access given to those third parties.
This point, which will no doubt be seized upon by Rio and BHP as the draft regime goes into its public consultation phase, could mean iron ore developments over a certain size - either on a cumulative or tonnage basis - could be prevented from accessing Rio and BHP’s railways.
If this is the case, the haulage regime would exclude larger players in the region, including Fortescue Metals Group, which last year signaled its hopes for third party access for future development of the Solomon deposit.
In its report, the WA Government also said third party access was a key part of the original state agreements signed with both Rio Tinto and BHP Billiton during the 1960s when their massive iron ore mines were first established.
The important proviso of these state agreements was that third party access did not “unduly prejudice or interfere with” the operations of the mining majors, which will be another area where the majors may find wriggle room within the spirit of the law.
BHP and Rio have staunchly opposed any third party access to their Pilbara railways and BHP is currently in legal proceedings at the Federal Court level with the Pilbara’s newest miner, Fortescue Metals Group, over potential access to its rail system.
Earlier this year the emerging iron ore producer lodged applications with the National Competition Council to declare sections of Rio’s Hamersley and Robe River railways and BHP’s Goldsworthy railway networks open to third parties under part 111A of the Trade Practices Act.
Both Rio and BHP have argued any opening of the railways to third parties such as FMG or the host of smaller juniors seeking to establish mines in the Pilbara would impact their ability to grow their own iron ore businesses.
Ripper said the Government could face difficulties in bringing the regime to fruition but would not force third party access upon the majors without their agreement. He suggested there would be some negotiation between the Government and the majors.
Other key details of the regime include provisions to govern which party will pay for what, with the State Government saying in the draft document it expected “the haulage provider will construct spurs to connect the third party's loading facilities to the provider's railway”.
However, the third party would be required to pay up front for the cost of construction and for any additional facilities and equipment needed, including any expansions to “fully utilised” railways.
At today’s briefing Ripper agreed this could be cost prohibitive for some juniors but noted it would still be cheaper than building an entire railway.
Additionally, Rio and BHP have long argued their railways are in fact fully used.
Other terms of the draft regime include provisions for dispute resolution where third parties and the railway owner cannot agree on commercial terms over haulage.
The third party access would be for rail haulage services only, excluding track access, loading, unloading, port facilities or any non-iron ore haulage.
Additionally, Rio and BHP would also need to provide certainty of service on a non-discriminatory basis, but without resorting to fixed schedules.
Public consultation on the proposal will run until July 25, with State Cabinet to receive the final report by the end of the year.