The dispute over access to Fortescue Metals Group’s Pilbara rail line appears destined for arbitration after Economic Regulation Authority chairman Lyndon Rowe said there was little his agency could do to achieve an outcome.
“The code is relatively light-handed regulation that relies on negotiations between the parties, with an ultimate resort to arbitration,” Mr Rowe told a business lunch today.
He said there had been some misunderstanding about the agency’s role, saying “the ERA does not determine access prices”.
The utility of the state government's Railways Access Code is being tested by aspiring iron ore miner Brockman Resources, which has applied for access to a section of railway owned by FMG subsidiary The Pilbara Infrastructure.
The ERA said last month it has approved the commencement of negotiations between Brockman and TPI.
In doing so it rejected multiple objections put forward by FMG and TPI.
The next step in the process, due to occur this week, is for the ERA to set a floor and ceiling price.
Mr Rowe said that was as far as the ERA could take the matter.
“The ERA’s involvement in negotiations is really setting the parameters around which negotiations take place,” he told the American Chamber of Commerce lunch.
“That’s what we do when we set the floor and ceiling costs.
“There is a very wide margin; the parties are then free to negotiate within those.
“Apart from that, the parties have to be grown up enough to come to their own conclusions.”
Mr Rowe said the Institute of Arbitrators has already supplied a panel of names, from which the ERA would be able to select an independent arbitrator.
Any ruling by the arbitrator would be legally enforceable.
In its ruling last month, the ERA acknowledged that third-party access was likely to impose "real disadvantages" on TPI but said the company knew of this possibility when it started building its railway.
"TPI's business interests must be considered in a context where TPI knew, at the time it decided to proceed with its investment in the railway infrastructure, that it would be subject to third party access proposals," the ERA said.
"In particular, in order to obtain the state's assistance with development of multi-use rail and port infrastructure, TPI made commitments to the state government ... to use all reasonable endeavours to promote access to, and attract above-rail customers for (its) railway."
Under the provisions of the access code, TPI will require Brockman to show that it has the necessary financial resources to carry on the proposed rail operations, and show how its access proposal can be accommodated on the route.
Brockman said last month it was preparing submissions to satisfy these requests, including its belief there is spare capacity on TPI's railway.
If TPI is not satisfied with Brockman's submissions, it can utilise procedures "to give notice of its dissatisfaction and seek further information from Brockman".
FMG will certainly dispute Brockman's claim there is spare capacity on its railway, which will reach a capacity of 155 million tonnes per annum by the end of the calendar year.
Brockman wants to use the railway to haul 20mt of ore from its proposed Marillana mine to Port Hedland, with spur lines to be built at each end.
It has separately been working with rail operator Aurizon on the possible development of a new railway.