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HE increasingly painful rail track access stand-off between QR National and Asciano has been reignited.
The state rail operator revealed that its emerging Queensland coal freight competitor walked away from infrastructure sharing discussions in December last year.
In its formal response to Asciano's attempt to have Queensland's coal freight rail track and some supporting facilities declared by the National Competition Council, QR National says the companies have twice held detailed discussions over "reciprocal infrastructure sharing", first in 2008 and then through 2009.
QR's submission, which was lodged on Monday, tackles the Asciano application on two fronts.
First, it insists the NCC should reject the application because Asciano has provided no evidence of discrimination in its attempts to secure access to the QR-operated rail network.
Second, the commission should endorse the Queensland government's application for the formal certification of the state access regime overseen by the Queensland Competition Authority.
But, failing that, QR argues that even if the NCC wants to pursue the declaration case, it should whittle back Asciano's ambitions by excising claims it says have been made over access to supporting refuelling and maintenance infrastructure. Asciano yesterday confirmed the discussion over giving QR access to its service assets in NSW in return for securing similar access to QR's Queensland facilities.
"But the declaration application we have made is only about track and not about provisioning," a spokesman said yesterday. "We don't want access to the service assets that were talked about in 2008 and last year. We want access to the track. They say that might reduce the capacity of those service assets. We disagree."
The first attempt involved a broad sharing of rail and support functions in NSW and Queensland and it floundered when QR National Coal walked "after due diligence on the proposal".
But, according to the QR submission, it was Asciano that walked away from a second, more enduring, round of negotiations on a "one-way agreement to provide services" to Asciano in Queensland.
Those negotiations focused on providing access to a collection of support infrastructure that QR infers has been included in its declaration application. Asciano denies this.
"The short-term arrangement was extended several times," QR reported to the NCC. But negotiations ended in December when, according to QR, Asciano said it would make "independent arrangements" to support its Queensland operations.
"QR National Coal confirmed a willingness to provide short-term support and recommend negotiations for long-term support if ever required," the submission says. "However, Pacific National (Asciano's rail operator) did not wish to take the services and they expired on June 30, 2010. On that basis, QR National is unable to understand how Pacific National has been refused access or now insists that it requires access when it had previously indicated a preference and an intention to make independent arrangements for its Queensland operations."
Monday also saw the Queensland government lodge its response to Asciano's attempt to install a federal competition regime on the state rail network.
The important thing to appreciate here is that concurrent with Asciano's tilt at declaration, the Bligh government is attempting to secure NCC certification of the existing state access regime. The delicacy here is that certification would automatically render the Asciano application moot, as the TPA cannot override a certified state regime.
So, it is not that surprising that the government submission essentially accuses Asciano of "forum shopping" in search of competitive leverage over its incumbent competitor in the state's coal industry, QR National.
"It was never intended that the generic third party-access regime in the TPA would provide a mechanism for forum shopping or gaming by facility owners, access seekers and/or users. The process of certification under Part IIIA provides a method of dealing with this issue. In this regard, the state access regime has been in place for more than a decade and is the most comprehensive and developed rail access regime in Australia."
This claim is plainly disputed by Asciano, which embarked on the NCC declaration process in the belief that plans to privatise QR National as an integrated rail owner and operator will change the incentives to either foster competition or grow the network capacity to match demand.
This concern has been endorsed by the coalminers, who have made a $4.85 billion bid for the rail network in an attempt to defuse the risks they insist are implicit in the government's IPO model.
Like QR National (surprise, surprise) the government maintains first and foremost that Asciano has failed to provide evidence of discrimination. Crucially, neither party makes meaningful reference to claims that the competitive outlook will be changed essentially by the IPO nor ponders whether the state regime will be effective in managing the new risk.
But the government does say that its regime provides a more efficient and effective process generally than that enforced by Part IIIA of the TPA.
The issue here, as defined by the Bligh government, is that the "negotiate/arbitrate model" enforced by Part IIIA is essentially flawed, if only because it is such an unwieldy, time consuming process. What's more, argues Queensland Treasury, the TPA does not provide its ultimate enforcer, the ACCC, with the weapons necessary to "effectively constrain market power" as well as the state access regime.
"It should be noted that, unlike the QCA (Queensland Competition Authority), the ACCC does not have the power to require the owner or operator of a facility to give an access undertaking. Therefore, the comparison to be made is between the negotiate/arbitrate model in Part IIIA of the TPA and the current access undertaking model under the QCA Act."
The submission goes on to note that the only arbitration ever conducted under the Part IIIA rules (the Sydney Water access dispute) took more than seven months and that such a process "would be unworkable in a scenario where there are numerous users of the network having to raise an access dispute and go through arbitration every time an issue arises.
The unworkability of the negotiate-arbitrate model arises because any arbitration will only bind the access seeker who raises the dispute and no other access seekers (unless they join the arbitration) . . . while the ACCC is likely to adopt a consistent approach to issues, this will not preclude gaming behaviour and may result in complex issues remaining tied up in arbitration for years."
What Graeme Samuel will make of this touch-up, heaven only knows. Suffice it to say that the ACCC is a master of fairly rapidly creating and enforcing undertakings, so I am not too sure what the Queenslanders are on about there. And, as one ACCC insider suggested yesterday:"If the QCA access regime was so wonderful why has the government waited 14 years to get it certified by the NCC?"
Both QR and the government devote considerable space to contemplating how little the declaration would productively improve the competitive environment in the increasingly contested coal freight business. This, no doubt, is an issue for Asciano to explain. It has, after all, been stunningly successful in poaching QR business over the past 18 months.
Wall Street Journal
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