Third-party access to infrastructure: the case of the Mt Newman rail line in the Pilbara

Economic Papers (Economic Society of Australia), Dec, 2007 by Paul Koshy, Peter Kenyon

In these cases, legislation will be put forward by the Commonwealth Government. However, as outlined in Clause 6(2) of the Competition Principles Agreement 1995, the Commonwealth regime is not intended to cover services provided by facilities covered by state-based access regimes unless the state-based regime is ineffective or substantial difficulties arise from the facility being situated in more than one jurisdiction. For state regimes to be effective, they must take account of the above criteria specified in Clauses 6(3) and 6(4) of the Competition Principles Agreement. Effectiveness is assessed by the National Competition Council (NCC).

In practice, infrastructure can be 'declared' by the Federal Treasurer, subject to advice from the Council on conformance with Part III of the TPA and the Competition Principles Agreement 1995.

3 The Approach Taken by the Council

As part of its deliberations, the Council makes distinct reference to the TPA in the sense that it reports back with specific regard to the criteria outlined in s.44G(2) (NCC 2002). In particular, the Council is usually called upon to make extensive inquiries into three key criteria set out in s44G(2): (a) "promotion of competition", (b) "uneconomic to develop another facility", and (f) "in the public benefit". Criteria (c) "national significance" and (d) "public health safety" are typically satisfied in the early stages of an application while (e) "an effective alternative access regime" is often the subject of the dispute between the two parties, but is really a technical legal argument.

In recommending declaration or otherwise, the Council draws on opinions from all parties submitting documentation as part of the case as well as recent decisions in the Federal Court of Australia and the Australian Competition Tribunal in determining and framing questions relating to a particular access case. Although it has no formal documentation on its procedures, the Council has made publicly available a document on the national access regime (NCC, 2002). In this it states that as part of its deliberations?and, ultimately, in the draft and final recommendations to the Federal Treasurer?the Council assesses the case for declaration on the basis of evidence and conclusions about each criterion.

For two reasons the recent case where FMG sought access to the BHPBIO Mt Newman Line provides a good introduction to the important economic issues upon which the Council must adjudicate when making a decision whether or not to declare a facility as essential infrastructure. First, it raises most, if not all, of the critical considerations in assessing the arguments for and against the granting of third-party access. Primarily these include the nature and definition of competition in a market and the relative costs and benefits of access compared to alternatives. Second, although the Council recommended that the rail line be 'declared' under Part IIIA, the Federal Treasurer allowed the recommendation to 'lapse' after the legislated sixty-day period set aside for his consideration. Although the Treasurer did not give any reasons for this decision, the decision itself indicates that the arguments for and against declaration remain unresolved. FMG will shortly commence an appeal of this outcome before the Australian Competition Tribunal (ACT).