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The new head of Anglo American’s coal division has attacked the conduct of rail group Aurizon, warning that the monopoly provider’s threat to curb capacity on its crucial Queensland coal rail network would hurt not just the industry but the nation.
In his first media interview since starting in the role earlier this year, Tyler Mitchelson said Aurizon’s conduct was “completely unacceptable” and was damaging the sector.
Aurizon has warned that a draft determination by the Queensland Competition Authority would force it to cut the capacity of its rail network by about 20 million tonnes a year, worth about $4 billion at current coal prices. The company, headed by former Rio Tinto iron ore chief Andrew Harding, has argued that the QCA’s determination effectively forced Aurizon to employ cheaper maintenance practices that led to a much greater disruption of the rail network.
Mr Mitchelson told The Australian that Anglo American was managing through the disruption due to its own maintenance efforts but added that the company had no idea when the restrictions would start to bite.
“The uncertainty is a huge, huge concern for us right now,” Mr Mitchelson said.
“They have introduced complete and utter uncertainty so you don’t know which rail line and which capacity is going to be affected and when.”
Mr Mitchelson said it was “completely unacceptable” that Aurizon had taken the action on the strength of only a draft determination, with Aurizon and the mining sector still waiting on the QCA’s final decision.
“There’s a regulatory process, so follow the process,” he said.
“At some point when this is all resolved we have to go back and understand how do we prevent this type of thing from happening again and prevent these behaviours. To have a monopoly network and react the way they have hurts the industry, it hurts the state and it hurts the country,” Mr Mitchelson added.
The stoush has been brewing since December last year, when the QCA handed down its draft ruling. That decision found that Aurizon was entitled to maximum allowable revenue over four years of just under $3.9bn, well short of the more than $4.8bn Aurizon had sought.
The ruling is retrospective to July 1 last year, meaning that if the decision is upheld Aurizon will have to offer refunds to its customers.
Aurizon is also arguing that QCA chairman Roy Green has a conflict of interest, given he was named as chairman of the Port of Newcastle — the same port that services the coalminers of the Hunter Valley — just one day after the draft determination was announced.
A spokesman for Aurizon said the company remained committed to “working with our customers and the QCA on a fair and equitable outcome”.
“We have had to take action now because of the retrospective nature of the process and the very real prospect that it could cost Aurizon jobs and hundreds of millions of dollars if we don’t,” the spokesman said.
“The QCA draft decision makes no commercial sense. If the draft decision was to stand, it would drive our operational practices to the lowest possible cost regardless of the impact on our customers and also be one of the lowest rates of return on any regulated asset in Australia.”
This article first appeared on www.theaustralian.com.au
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