Dickensian level of farce as track dispute rolls on

Julian Tapp, head of external affairs at Fortescue Metals Group gives his take on the miner's ongoing campaign for third party access to railways in the Pilbara region of Western Australia.

Fortescue Metals Group has been running a campaign to make the railways of the Pilbara available to third parties since June 2004, which means that it is now in its eighth year.

It is therefore perhaps appropriate to take stock of what the real issues are and why Fortescue has continued to prosecute a case that has started to resemble the fictional Jarndyce and Jarndyce from Bleak House.

When BHP and Rio Tinto were granted the permission to develop their railways, it was done through formal agreements, State Agreements with Western Australia, containing obligations which required them to haul ore for third parties.

It was always the state's intention that the railways it was allowing to be built would be used to assist in the development of more than just deposits owned by the entities that it was allowing to build railways. However, the obligation to haul ore was qualified by the proviso that it wouldn't interfere with existing activities.

This obligation was honoured only in its breach, the incumbents have argued that any access will inevitably interfere with their activities, so despite numerous attempts, nobody has ever succeeded in getting access.

Fortescue's view back in 2004 was that attempting to gain access using the State Agreement obligations was a hopeless task and that the only way miners trying to develop new projects in the Pilbara were ever likely to get a haulage service from the existing railway owners would be if they were forced to offer such a service in order to avoid something worse – and that fate would be another haulage provider running its rolling stock on their railway lines and providing the very service that they were refusing to provide.

In other words declaration of their railways (under Part IIIA of the Trade Practice Act) – which would enable Fortescue to be able to offer a haulage service – would force the existing incumbents to actually honour the obligations they signed up to when they agreed to their State Agreements.

Far from declaration being an unwarranted infringement on the incumbents' property rights, declaration would actually make them honour obligations that they freely entered into and then used every available method open to them to avoid having to deliver on.

Space, and perhaps reader interest, does not allow a detailed description of the legal shenanigans that followed, but the first four years were mainly taken up arguing about whether use of a railway track could be considered the use of a production process.

The High Court eventually decided unanimously that it couldn't.

Only then did the process of establishing whether the owners of the railways should be compelled to discuss potential terms of access with access seekers get properly underway.

No that is not a misprint – what is being legally argued about at the moment is not whether access seekers have a right to access the railways of the Pilbara, merely whether the owners can be compelled to have discussions about the matter.

In an irony, that goes beyond a Dickensian farce, the current state of play is that the Full Federal Court decided, contrary to all previous decisions made on this matter, that if there was even a possibility that building a competing railway could be privately profitable, regardless of the socially wasteful nature of any such investment, then the existing owner shouldn't be compelled to have such discussions.

Both Fortescue and the National Competition Council have appealed to the High Court against this ruling. If allowed to stand, it would effectively render Part IIIA otiose, because nobody in their right minds would even attempt to declare any service if one of the hurdles that needed to be met was to prove that it would be impossible to profitably duplicate the existing infrastructure.

Assuming that the service is eventually declared, the process then requires negotiations about access and, if agreement can't be reached, a process of arbitration about the areas where agreement could not be reached – and then a right to appeal against the outcome of that arbitration. So don't expect an end to this process any time soon.

However, Fortescue remains confident that common sense will eventually prevail, our perseverance will be rewarded, and that the eventual outcome will be that the railways will be declared.

The result of that is likely to be that BHP Billiton and Rio Tinto will offer a haulage service that they originally signed up to under their State Agreements.

Competition in the rail haulage market will have been significantly increased (some service is a lot better than none) and Fortescue and others will be able to exploit small deposits that could be developed on the back of utilising existing railways but would otherwise remain stranded because they are not large enough to justify building dedicated facilities.

Pic: Andrew Forrest has long been flying the flag to make the Pilbara's railways accessible to third parties.