In brief

  • On 29 June 2011 the ACCC finally approved the Australian Rail Track Corporation’s (ARTC) access undertaking for ‘below rail’ access to the Hunter Valley Coal Network in New South Wales. 
  • The formal approval brings an end to over three years of negotiation with Hunter Valley coal producers over its proposed terms.
  • The new access undertaking takes effect from 1 July 2011 and has a term of five years and will require Hunter Valley coal producers to negotiate new access contracts.

Key features

The access undertaking will regulate the terms on which coal producers will be granted access to ARTC’s Hunter Valley coal rail network, which is essential for the delivery of coal from Hunter Valley coal mines to the Port of Newcastle for export.

The access undertaking is intended to form another step toward implementing the ‘long-term solution’ to capacity constraints which have plagued the Hunter Valley coal export supply chain, which involves managing rail and port infrastructure on a system-wide basis to optimise efficiency.

The access undertaking covers:

  • the application and negotiation process for access to the rail network, including the entry into 10 year evergreen access contracts between coal producers and ARTC 
  • access pricing principles to be applied in setting access charges
  • process for investment and expansion of the network by ARTC and industry consultation, including principles for producers to ‘user fund’ network investments required to deliver access rights
  • contracting principles intended to align below rail access rights with other contractual arrangements of the Hunter Valley coal chain, such as port access entitlements. An important component of this is that access rights will be conditional on coal producers demonstrating that they have sufficient port access and the Hunter Valley Coal Chain Coordinator confirming that there is sufficient system-wide coal chain capacity to accommodate the access rights sought.

Transitional arrangements

The access undertaking adopts a new contracting model whereby coal producers are required to contract directly with ARTC for rail access rights. These rights are then utilised by the coal producer’s nominated rail haulage provider under separate agreements. Previously, access rights were contracted between the rail haulage providers and ARTC and not held by the coal producers.

A transition period extending to December 2011 will apply for existing producers to negotiate new access agreements with ARTC, which will involve a requirement to demonstrate that sufficient port access entitlements are held.

What are the implications?

The new access undertaking emphasises the contractual alignment principles which now underpin the Hunter Valley coal supply chain and the need for coal producers to be able to align both rail and port access entitlements.

Access to adequate rail and port capacity is highly critical to the value of existing and future mining operations. Given the potentially long lead times associated with infrastructure investments, it will be vitally important that port and rail access issues, including the new access undertaking, are assessed in the context of mine and tenement acquisitions and development proposals.