BHP fights second front in rail dispute

MINING giant BHP Billiton has quietly opened a second front in its battle to prevent other miners from accessing its Pilbara iron ore railways, putting it in direct confrontation with the state government.

BHP and Rio Tinto won a rare victory defending their Pilbara rail monopoly last week, when the Australian Competition Tribunal upheld the exemption of their Newman and Hamersley rail lines from national competition laws.

Declaration would have entitled other miners, such as Fortescue Metals Group, to negotiate access to operate their own trains on the iron ore giants’ main railways.

The tribunal also upheld the declaration of Rio’s smaller Robe River railway and BHP’s Goldsworthy line, which would be accessible to fewer third-party users.

But while the rail access battle continues on the national stage, BHP has also launched a pre-emptive strike to stop a state-backed access regime being enacted in WA.

In mid-May, the state government lodged an application with National Competition Council seeking national certification of its own decade-old rail access regime.

The application followed the WA Economic Regulation Authority’s approval of a third-party access regime for FMG’s Pilbara railway, heralding the first time the regime has been extended to the Pilbara iron ore industry.

The government’s application was opened to third party comment for over a month, but BHP was the only respondent to oppose certification outright.

In its submission, BHP repeated its default argument that third party rail access would damage the operating efficiency of what was an “integrated iron ore supply chain”.

“Accordingly the NCC should recommend to the minister that the WA regime not be certified as an effective access regime,” BHP wrote.

In particular, BHP stated that the WA regime: “Prohibits rather than facilitates efficient co-ordination of mine, rail and port operations; ignores and does not compensate the owner for the full costs (in terms of lost production and reduced system efficiency) … and impedes the flexibility of the owner’s mine, rail and port system, by imposing a de facto timetable on the owner’s railway operations”.

BHP said it had extensively considered third-party access during its discussions with the then Labor state government’s Pilbara Rail Access Interdepartmental Committee between 2006 and 2008.

The Barnett government is still seeking to enact the committee’s recommendation to establish a state haulage regime that would require Pilbara railway owners to transport other miners’ ore on their existing rail fleet at commercial rates.