05/12/2007 - 22:00

Pilbara's potential thwarted

05/12/2007 - 22:00


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November 13 2007 was certainly a very unlucky day for former state upper house MPs, Shelley Archer and Anthony Fels.

Pilbara's potential thwarted

November 13 2007 was certainly a very unlucky day for former state upper house MPs, Shelley Archer and Anthony Fels.

The same applies to banned lobbyists Brian Burke, Julian Grill and Noel Crichton-Browne.

The reason? Each was the subject of unfavourable remarks carried in a powerful three-member upper house committee’s 500-page report titled Select Committee of Privilege on a matter arising in the Standing Committee on Estimates and Financial Operations.

Although this huge document is essentially derived from closed hearings conducted by MLCs Murray Criddle (National), Adele Farina (Labor), and Barry House (Liberal), its crucial ingredients were transcripts of telephone and other taps from Corruption and Crimes Commission technical operatives.

That meant in-camera evidence provided to the select committee by all five, plus several others, was able to be cross checked against comments they’d made during recorded confidential conversations.

Although much more may arise from those conversations – including perhaps charges being laid against at least Ms Archer and Mr Fels – there’s a real danger another issue indirectly encountered during the investigation could yet again slip into the too-hard basket.

State Scene refers here to the way Western Australia’s crucially important iron ore industry has developed since the mid-1960s, an issue that underlies the work undertaken by the three lobbyists.

When former premier Sir Charles Court emerged as industrial development and north-west minister in 1959, the vision drawn-up for the Pilbara was for it to become the world’s leading iron ore province, which meant its development by many mining companies.

The first of these aims has been realised, while some mining companies have managed to thwart the second.

To understand why the Pilbara is dominated by two of the world’s biggest international mining conglomerates – Rio Tinto and BHP Billiton – it’s important to appreciate their grip on this region hinges around the fact that they fully control the two private rail networks used to get ore to the coast.

A key element of Sir Charles’ developmental approach was the negotia-ted State Agreement Acts with miners who sought to exploit the Pilbara.

Most state agreements, therefore, carried clauses specifying that privately established railways would be accessible to others, with haulage paid, as any new nearby deposits were found and came on stream.

This was done to avoid costly rail duplication and to diversify and maximise the Pilbara’s development.

In theory, this could happen. BHP and Rio say they would be willing to negotiate third party haulage arrangements, using their own rail stock to carry ore for other mining companies.

At the same time, they have vigorously opposed the third party access proposed by Fortescue Metals Group, which would have involved FMG putting its rail cars on BHP’s tracks.

Unfortunately, in practice, third party haulage has never happened.

State Scene highlights this issue of access to the Rio and BHP Pilbara rail networks by potential miners because it is a sad story of restrictive practices involving lobbyists, costly Federal and Supreme Court actions, and thus batteries of overpaid lawyers.

It’s all wasteful, costly, and disgracefully anti-competitive stuff.

Even the late Lang Hancock failed to gain access to established rail lines to help develop his reserves.

His daughter, Gina, did likewise by seeking to access to Rio’s and BHP’s networks. She also failed.

In the end her only way ahead was to enter a joint venture with Rio.

If she’d not done that she faced the prospect of never seeing her father’s dreams of exporting ore being realised.

The Hancocks together spent millions on lawyers, to no avail.

Another company, North Mining, with working deposits, was eventually sold to Rio after it failed in a costly legal action against that giant.

So far, Andrew Forrest’s FMG has failed to break the cosy Pilbara rail cartel, but that is set to change next year when it completes its own rail line and port.

Well before Mr Burke’s phones began being tapped by the CCC, State Scene telephoned him to discuss Rio’s and BHP’s effective locking-up of the Pilbara.

At the time, I’d established that there were about a dozen tenements that owners may well have developed into sizeable mining operations if they could gain access to an established rail network.

These were: Aquila/API Group (four tenements); Iron Ore Holdings (three tenements); Consolidated Iron Ltd (three tenements); Ausi Iron Pty NL (one tenement); and Yilgarn Mining WA Pty Ltd, (one tenement).

Mr Burke, clearly no friend of mining conglomerates, pointed out that Sir Charles Court’s State Agreement Acts were drafted to ensure rail access was open to all so more mines came on-stream without the intending miners having to duplicate expensive railways.

Furthermore, in 1987, Mr Burke’s government and BHP had hammered out The Rail Transport Agreement, which contained terms and conditions designed to pry open the door for others wanting to exploit Pilbara deposits.

It’s important to remember that the price tag of a railway line from inland Pilbara to the coast begins at about $1.5 billion. That means a huge up-front outlay must be made before a miner gets the business running and then builds port facilities in a remote and costly region of the world.

Little wonder Rio and BHP have moved to keep access to their rail networks locked up by a range of legalistic actions.

And they’ve done this despite a range of governments having indicated they intended to see an open door in the Pilbara, which is also what the National Competition Council ostensibly desires.

Little wonder, too, that Rio and BHP control 80 per cent of the inter-national iron ore trade with Brazil’s Companhia Vale do Rio Doce.

Unfortunately this locking up of the Pilbara has been with us for many years.

And it’s time WA’s two major parties sat down together and firstly undertook a detailed inquiry into the way the initial developmental intentions for the region have been thwarted, and secondly what this is costing WA and how it can be legislatively remedied. Only then can the Pilbara be put back on to the path that was devised in the 1960s to ensure it reached full potential.

Readers are strongly urged to log on to the WA state parliament site to read the 500-page Select Committee of Privilege on a matter arising in the Standing Committee on Estimates and Financial Operations report.

There are many fascinating comments, remarks, findings and reco-mmen-dation in this truly unique document.

But what seemed to be most pertinent in relation to the locking-up of the Pilbara is carried at page 144, where Mr Burke is quoted during a taped meeting at Mr Grill’s West Perth home on October 18 2006

“…those big corporations all work, mostly, on being absolutely bloody immoral robbers,” he said. “But, publicly having this corporate citizenship image.”

State Scene believes use of the words “immoral” and “robbers” make this a rather harsh assessment.

Economists describe Rio’s and BHP’s behaviour differently. They call it “barriers to entry”. In other words, companies tend to do everything possible to ensure competitors are blocked from getting into business to compete against them.

In this case, Rio and BHP are doing it by legalistically denying access to their railway lines.

Tactically using “barrier to entry” is simply a fact of life under big, freewheeling capitalism. But it’s something elected governments don’t need to, and shouldn’t, tolerate.

They have the power of equitable law-making, which has legality and standing.

It’s time WA’s political leaders took it up as Mr Burke did, although unsuccessfully, in 1987.

If that were to happen, the select committee report that has so embarrassed Messrs Burke and Crichton-Browne and several of their contacts would most definitely not have been a waste of time and taxpayers’ money.


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