Fortescue Metals Group Ltd ncc gov au

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Commonwealth of Australia 2006, This work is subject to copyright Apart from any use as permitted under the Copyright Act. 1968 the work may be reproduced in whole or in part for study or training purposes. subject to the inclusion of an acknowledgement of the source Reproduction for commercial. use or sale requires prior written permission from the Attorney General s Department. Requests and inquiries concerning reproduction and rights should be addressed to the. Commonwealth Copyright Administration Attorney General s Department Robert Garran. Office National Circuit Barton ACT 2600, Inquiries or comments on this recommendation should be directed to. Media and Communications Manager,National Competition Council. Level 9 128 Exhibition Street,Melbourne Victoria 3000. Tel 03 9285 7474,Fax 03 9285 7477,Email info ncc gov au.
An appropriate citation for this paper is, National Competition Council 2006 Final recommendation Fortescue Metals Group Ltd. application for declaration of a service provided by the Mt Newman railway line under. section 44F 1 of the Trade Practices Act 1974 Melbourne. The National Competition Council, The National Competition Council was established on 6 November 1995 by the Competition. Policy Reform Act 1995 following agreement by the Australian Government and state and. territory governments, It is a federal statutory authority which functions as an independent advisory body for all. governments on the implementation of the National Competition Policy reforms The. Council s aim is to improve the well being of all Australians through growth innovation and. rising productivity and by promoting competition that is in the public interest. Information on the National Competition Council its publications and its current work. program can be found on the internet at www ncc gov au or by contacting NCC. Communications on 03 9285 7474, FMG application for declaration of a Mount Newman Railway service. Abbreviations and glossary of terms 4,1 Final recommendation 6.
2 The declaration criteria 9,3 The service the facility and the provider 10. 4 Iron ore production and railways in the Pilbara background 15. 5 Summary of key points raised by stakeholders 21, 6 Criterion b Uneconomical to develop another facility 30. 7 Criterion a Promotion of competition 105,8 Criterion c National significance 170. 9 Criterion d Health and safety 173,10 Criterion e Effective access regime 180. 11 Criterion f The public interest 196,12 Exercise of residual discretion 213.
13 Duration of declaration 219,Submissions and references 222. Attachment 1 Mt Newman line map 230,Attachment 2 Proposed FMG Chichester line map 231. Attachment 3 Trade Practices Act 1974 extract 232, Attachment 4 Competition Principles Agreement extract 234. Abbreviations and glossary of terms, above rail Assets such as locomotives and ore cars that operate on a. ACCC Australian Competition and Consumer Commission. Application The application by FMG for declaration of the Mt Newman. Service in accordance with Part IIIA of the TPA,APR Asia Pacific Rail Pty Ltd.
below rail Fixed railway assets such as tracks sleepers signalling and. monitoring equipment, BHPBIO BHP Billiton Iron Ore Pty Ltd a subsidiary of BHP Billiton. Limited responsible for that company s iron ore operations. Council National Competition Council, CRA Report The report identified in paragraph 6 53 a i and identified. as BHPBIO 2005b, CVRD Companhia Vale do Rio Doce a Brazilian iron ore producer. that is a significant player in the global iron ore market. draft recommendation The Council s draft recommendation published November. Duke EGP decision Re Duke Eastern Gas Pipeline Pty Ltd 2001 ACompT 2 4. End effects The reduction in the efficiency of a rail system due to. random delays arising from the loading and unloading. operations BHPBIO2006c para 3 1 2,FMG Fortescue Metals Group Ltd ACN 002 594 872. FMG Chichester line The railway line that FMG proposes to build from Port. Hedland to Cloud Break in the Chichester Ranges, FMG Mindy Mindy spur line A railway spur that FMG once contemplated to connect the.
Mindy Mindy project to the FMG Chichester line, FMG State Agreement The agreement between FMG and the State of Western. Australia dated 1 December 2005 providing for the,development by FMG of its tenements. G13 G13 Associates Pty Ltd, Hope Downs An emerging iron ore project in the Pilbara. Hope Downs line The railway line which Hope Downs proposed to build from. its mining tenements in the Pilbara to proposed port facilities. near Karratha Plans for the railway and the port facilities. were shelved in 2005 following RTIO s acquisition of a. controlling interest in Hope Downs, JORC The Australasian Joint Ore Reserves Committee a mining. industry body which sets standards for reporting mineral ore. reserves and resources, junior explorer A company that is exploring for mineral resources but is not.
yet producing mineral commodities, Mt Newman Facility The facility described at paragraph 3 11 of this. recommendation, FMG application for declaration of the Mt Newman Service. Mt Newman Joint Venture Joint venture comprising BHP Billiton Minerals Pty Limited. 85 per cent Mitsui Itouchu Iron Pty Limited 10 per cent. and Itouchu Minerals and Energy of Australia Pty Limited. 5 per cent which owns the Mount Newman line, Mt Newman Participants The above mentioned participants in the Mount Newman. Joint Venture, Mt Newman State Agreement The Mount Newman Iron Ore State Agreement between. the State of Western Australia and the Mt Newman, Participants enacted as the Mount Newman Iron Ore State.
Agreement Act 1964, Mt Newman Service The service the subject of FMG s Application and which is. described at paragraph 3 1 of this recommendation,mtpa million tonnes per annum. natural monopoly Where a single facility can serve the entire range of. reasonably foreseeable demand for a service at a lower cost. than two or more facilities, Part IIIA Part IIIA of the Trade Practices Act 1974. rake A set of ore cars usually numbering around 100 cars The. size of a train is usually described in terms of rakes rather. than ore cars, RTA The Rail Transport Agreement between the State of Western. Australia and the Mt Newman Participants signed 27 January. RTIO Rio Tinto Iron Ore a division of Rio Tinto Limited. responsible for iron ore operations, Services Sydney decision Application by Services Sydney Pty Limited 2005 ACompT.
7 21 December 2005, State Agreement s The agreements between the respective mining companies. and the State of Western Australia referred to in paragraphs. 4 20 and 4 21 of this recommendation, Sydney Airport decision Re Review of Freight Handling Services at Sydney. International Airport 2000 ACompT 1 1 March 2000,TPA Trade Practices Act 1974 Cwlth. train set Also called a consist a given combination of locomotives. Tribunal The Australian Competition Tribunal,TSG TSG Consulting. Virgin Blue decision Virgin Blue Airlines Pty Limited 2005 ACompT 5 9. December 2005,Final recommendation,1 Final recommendation.
1 1 On 13 June 2004 Fortescue Metals Group Ltd FMG applied to the. National Competition Council the Council to have a service. provided through use of part of the Mt Newman railway line declared. under Part IIIA of the Trade Practices Act 1974 TPA A declaration. to this effect would provide FMG with an enforceable right to. negotiate access to the service, 1 2 The service to which FMG seeks access is the use of a 295 kilometre. segment of the Mt Newman railway line running from a rail siding to. be constructed near Mindy Mindy in the Pilbara to Port Hedland. Mt Newman Service The Mt Newman Service includes the use of. bridges passing loops train control systems sidings maintenance. protection systems and other associated infrastructure 1 The. Application provides a route map at Annexure 1 FMG 2004a. available at Attachment 1 of this recommendation, 1 3 The provider of the Mt Newman Service is the Mt Newman. Participants see paragraph 3 13 of this recommendation. 1 4 FMG s Application also sought declaration of a second service. provided by BHPBIO on part of the Goldsworthy line the. Goldsworthy Service Following submissions from relevant parties. the Council determined in November 2004 that the Goldsworthy line. constituted part of a production process within the meaning of s44B. of the TPA such that use of part of that facility was not a service to. which Part IIIA of the TPA applies NCC 2004 2 The Council did not. proceed further with the application for declaration of the. Goldsworthy Service, 1 5 The Council conducted two public consultation processes in the. development of its final recommendation on FMG s Application A. 1 A definition of the service as stated in FMG s application is provided at. paragraph 3 1 of this recommendation, 2 See National Competition Council Preliminary Matters Statement of Reasons. November 2004, FMG application for declaration of the Mt Newman Service.
list of submissions received by the Council is provided with this. recommendation 3, a The Council released an issues paper in March 2005 asking. for comment on issues arising from FMG s Application. b The Council considered all submissions in developing a draft. recommendation on FMG s Application The draft, recommendation published in November 2005 was that the. Mt Newman Service be declared for a period of 20 years. c The Council sought comment on its draft recommendation. and received six further submissions and related, correspondence which the Council considered in developing. its final recommendation, 1 6 The Council has taken into account the submissions received. information provided during meetings with specific parties and. organisations and other information obtained from publicly. available sources, 1 7 In addition the Council commissioned independent analysis by.
external consultants to assist it in formulating this recommendation. 1 8 The Council s final recommendation is that the Mt Newman. Service meets each of the declaration criteria set out at. s44G 2 of the TPA The Council recommends that the, Mt Newman Service be declared for a period of 20 years. Decision making, 1 9 The Council will forward its recommendation to the designated. Minister who decides whether or not to declare the Mt Newman. Service In this matter the designated Minister is the Hon Chris. Pearce MP Parliamentary Secretary to the Australian Government. Treasurer The Council s recommendation is made public when the. Minister releases a decision The Minister s decision is reviewable by. the Australian Competition Tribunal the Tribunal,3 See page 222 of this recommendation. Final recommendation, 1 10 The declaration of a service under Part IIIA of the TPA provides a. means of ensuring that competition in a dependent market is not. frustrated due to an inability to gain access to a bottleneck facility. 1 11 While generally owners of facilities are free to deal or not deal with. whom they choose Part IIIA modifies the property rights of facility. owners in specific limited circumstances, 1 12 Declaration seeks to balance the interests of asset owners with the.
public interest in the promotion of competition in dependent. markets The declaration criteria and other requirements of. Part IIIA provide a narrow basis for mandating access. 1 13 Declaration provides access seekers with an enforceable right to. negotiate access to a declared service on reasonable terms and if. necessary provides that access prices and other terms and conditions. may be arbitrated by the Australian Competition and Consumer. Commission ACCC, 1 14 Part IIIA does not provide for free or subsidised access Indeed if no. reasonable basis for the provision of access can be found access may. not be required notwithstanding declaration 4 However where the. declaration criteria and other requirements of Part IIIA are met and. where an asset owner can receive an appropriate commercial return. on its investment in the facility used to provide a declared service. and can be recompensed for costs incurred in providing the declared. service including where appropriate necessary expansion or. augmentation of the facility to meet its own and access seekers. needs then access must be provided on a negotiated or arbitrated. 1 15 Importantly also declaration does not preclude access occurring on. an alternative basis if this is more efficient As the Tribunal has. observed declaration may act as a circuit breaker encouraging a. commercially negotiated outcome that provides access on terms and. in ways that minimise costs to access providers,4 Sections 44V 3 44X TPA. FMG application for declaration of the Mt Newman Service. 2 The declaration criteria, 2 1 The Council cannot recommend that a service be declared unless it is. satisfied that all of the following criteria set out in s44G 2 of the. TPA are met, a that access or increased access to the service would. promote competition in at least one market whether or not. in Australia other than the market for the service. b that it would be uneconomical for anyone to develop another. facility to provide the service, c that the facility is of national significance having regard to.
1 1 On 13 June 2004 Fortescue Metals Group Ltd FMG applied to the National Competition Council the Council to have a service provided through use of part of the Mt Newman railway line declared under Part IIIA of the Trade Practices Act 1974 TPA A declaration to this effect would provide FMG with an enforceable right to negotiate access to the service 1 2 The service to which FMG seeks

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