Application by Port of Newcastle Operations Pty Ltd
[2019] ACompT 1
•30 October 2019
AUSTRALIAN COMPETITION TRIBUNAL
Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1
Review from: The arbitration determination by the Australian Competition and Consumer Commission under section 44ZP of the Competition and Consumer Act 2010 (Cth) in relation to an access dispute between Glencore Coal Assets Australia Pty Ltd and Port of Newcastle Operations Pty Ltd File numbers: ACT 2 of 2018
ACT 3 of 2018Tribunal: MIDDLETON J (PRESIDENT)
MR r F SHOGREN (MEMBER)
DR D R ABRAHAM (MEMBER)Date of Determination: 30 October 2019 Catchwords: COMPETITION – applications for review of the arbitration determination made by the Australian Competition and Consumer Commission in respect of access dispute between provider and user of a declared service – review to be conducted by way of ‘re-arbitration’ pursuant to s 44ZP of the Competition and Consumer Act 2010 (Cth) – where declared service is the right to access and use monopoly infrastructure assets at Port of Newcastle – where access dispute concerns quantum of charges levied for access and use of declared service and proper scope of application of such charges – how declared service to be interpreted and appropriate scope of application of arbitration determination – whether and how to account for contributions of service users in calculating regulated asset base – determination of projects that were the subject of contributions of service users – whether such projects would be undertaken by a hypothetical new entrant – determination of appropriate costs of such projects – determination of appropriate timeframe for such projects – consideration of impact of timeframe on interest – whether service provider able to recover costs of non-coal assets through arbitrated charges – whether to apply true-up for return on actual capital expenditure compared to return on forecast capital expenditure Legislation: Competition and Consumer Act 2010 (Cth)
Competition Policy Reform Act1995 (Cth)
Ports and Maritime Administration Act 1995 (NSW)
Trade Practices Act 1976 (Cth)
Cases cited: BHP v National Competition Council (2008) 236 CLR 145
East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 233 CLR 229
Port of Newcastle Operations Pty Ltd v Australian Competition and Consumer Commission [2017] FCA 1330; (2017) 350 ALR 552
Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124; (2017) 253 FCR 115
Date of hearing: 6-13 May 2019 Registry: Victoria (Heard in Sydney) Category: Catchwords Number of paragraphs: 610 Counsel for Port of Newcastle Operations Pty Ltd: Mr CA Moore SC with Dr DJ Roche Solicitor for Port of Newcastle Operations Pty Ltd: Webb Henderson Counsel for Glencore Coal Assets Australia Pty Ltd: Mr NJ Young QC with Mr N De Young SC and Mr C Henderson Solicitor for Glencore Coal Assets Australia Pty Ltd: Clifford Chance Counsel for Australian Competition and Consumer Commission: Mr S Lloyd SC with Ms C Dermody Solicitor for Australian Competition and Consumer Commission: DLA Piper Australia IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 2 of 2018 RE: APPLICATION FOR REVIEW OF THE ARBITRATION DETERMINATION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION UNDER SECTION 44ZP OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) IN RELATION TO AN ACCESS DISPUTE BETWEEN GLENCORE COAL ASSETS AUSTRALIA PTY LTD AND PORT OF NEWCASTLE OPERATIONS PTY LTD
by: PORT OF NEWCASTLE OPERATIONS PTY LTD
Applicant
tribunal:
MIDDLETON J (PRESIDENT)
MR R F SHOGREN (MEMBER)
DR D R ABRAHAM (MEMBER)DATE OF DETERMINATION:
30 October 2019
THE TRIBUNAL DETERMINES THAT:
The ACCC’s Final Determination made under s 44V of the Competition and Consumer Act 2010 (Cth) dated 18 September 2018, be varied by deleting Clauses 2.1, 2.2 and 6.1 and replacing them as follows:
2.1The scope of the determination is confined to the terms and conditions of access where Glencore owns or, either directly or by agent, charters a vessel that enters the Port precinct and loads Glencore coal.
2.2For the avoidance of doubt, the determination does not apply to:
(a)the terms and conditions of access to apply in respect of vessels carrying coal that are not owned, or have not been chartered, by Glencore;
(b)the terms and conditions of access for vessels other than those calling at the coal terminals at the Port; and
(c)any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.
6.1The Navigation Service Charge payable by Glencore to PNO in accordance with this determination will be $1.0058 as at 1 January 2018.
IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 3 of 2018 RE: APPLICATION FOR REVIEW OF THE ARBITRATION DETERMINATION BY THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION UNDER SECTION 44ZP OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) IN RELATION TO AN ACCESS DISPUTE BETWEEN GLENCORE COAL ASSETS AUSTRALIA PTY LTD AND PORT OF NEWCASTLE OPERATIONS PTY LTD
BY: GLENCORE COAL ASSETS AUSTRALIA PTY LTD
Applicant
TRIBUNAL:
MIDDLETON J (PRESIDENT)
MR R F SHOGREN (MEMBER)
DR D R ABRAHAM (MEMBER)DATE OF DETERMINATION:
30 october 2019
THE TRIBUNAL DETERMINES THAT:
The ACCC’s Final Determination made under s 44V of the Competition and Consumer Act 2010 (Cth) dated 18 September 2018, be varied by deleting Clauses 2.1, 2.2 and 6.1 and replacing them as follows:
2.1The scope of the determination is confined to the terms and conditions of access where Glencore owns or, either directly or by agent, charters a vessel that enters the Port precinct and loads Glencore coal.
2.2For the avoidance of doubt, the determination does not apply to:
(a)the terms and conditions of access to apply in respect of vessels carrying coal that are not owned, or have not been chartered, by Glencore;
(b)the terms and conditions of access for vessels other than those calling at the coal terminals at the Port; and
(c)any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.
6.1The Navigation Service Charge payable by Glencore to PNO in accordance with this determination will be $1.0058 as at 1 January 2018.
REASONS FOR DETERMINATION
INTRODUCTION
[1]
BACKGROUND
[8]
Declaration of services at the Port
[12]
Notification and arbitration of the dispute
[15]
Judicial review of the notification of the dispute
[19]
The ACCC’s Draft Determination
[22]
The ACCC’s Final Determination
[23]
LEGISLATIVE CONTEXT
[28]
Competition and Consumer Act 2010 (Cth)
[28]
Ports and Maritime Administration Act 1995 (NSW)
[56]
PRELIMINARY ISSUES
[65]
Extension of the statutory timeframe for the Tribunal’s determination
[66]
Glencore’s application for the Tribunal to request further information
[71]
TOPICS OF CONTENTION
[117]
SCOPE OF THE FINAL DETERMINATION
[120]
PNO’s submissions
[125]
Glencore’s submissions
[131]
ACCC’s submissions
[141]
Consideration
[148]
USER CONTRIBUTIONS
[159]
Overview of the calculation of the DORC
[160]
What the ACCC decided and its approach
[168]
Submissions to the Tribunal
[183]
PNO
[183]
Glencore
[221]
ACCC
[234]
The Tribunal’s analysis
[263]
USER FUNDING OF RECLAMATION BUNDING
[366]
Submissions to the Tribunal
[368]
Glencore
[368]
PNO
[373]
ACCC
[377]
The Tribunal’s analysis
[379]
COSTS OF CHANNEL DREDGING
[381]
IMPORTATION OF RECLAMATION BUNDING MATERIAL
[439]
LENGTH OF CONSTRUCTION PERIOD AND INTEREST COSTS
[460]
Consideration
[471]
NON-COAL ASSETS
[500]
What the ACCC decided
[503]
Submissions to the Tribunal
[507]
Glencore
[507]
PNO
[521]
ACCC
[530]
The Tribunal’s analysis
[537]
CAPEX TRUE-UP
[577]
What the ACCC decided
[577]
Submissions by the parties to the ACCC
[579]
The ACCC’s reasoning
[581]
Submissions by the parties to the Tribunal
[582]
Glencore
[582]
PNO
[585]
ACCC
[590]
The Tribunal’s analysis
[598]
CONCLUSION
[606]
ANNEXURE ‘A’
ANNEXURE ‘B’
INTRODUCTION
The two applications before the Tribunal concern a dispute between Port of Newcastle Operations Pty Ltd (‘PNO’) and Glencore Coal Assets Australia Pty Ltd (‘Glencore’) regarding the terms and conditions of access to the Port of Newcastle (the ‘Port’).
PNO is the operator of the Port and Glencore is a user of the Port. PNO filed its application on 8 October 2018 (ACT 2 of 2018) and Glencore filed its application a day later on 9 October 2018 (ACT 3 of 2018).
The Port is subject to the access regime contained in Part IIIA of the Competition and Consumer Act 2010 (Cth) (the ‘CCA’). Pursuant to that regime, and by Glencore’s notification dated 4 November 2016, the dispute between it and PNO was referred to the Australian Competition and Consumer Commission (the ‘ACCC’) for arbitration. As a result of that arbitration the ACCC determined the value of certain charges that PNO could levy on Glencore for access to the Port and the circumstances in which such arbitrated charges could be levied. The ACCC’s determination as to these matters was published in its Final Determination on 18 September 2018.
Each application calls on the Tribunal to review the Final Determination by conducting a ‘re-arbitration’ pursuant to s 44ZP. The Tribunal’s function in applications of this kind is not to identify error in the relevant arbitration determination but to re-arbitrate the dispute between access seeker and access provider based on the information, reports and things referred to in s 44ZZOAAA.
Whilst there was some disputation as to the material the Tribunal should consider in this re-arbitration, nothing turned upon this disputation in the Tribunal’s deliberations and its ultimate determination. Putting aside the report which Glencore asked the Tribunal to consider (to which we will return) there were a number of documents that were not taken into account by the ACCC, which are set out in an annexure to the ACCC’s submissions in each application, dated 5 April 2019. The Tribunal has not taken these documents into account, but as mentioned nothing turns on this for the purposes of the Tribunal’s deliberations and determination.
The Tribunal will be referring to the ACCC’s Draft and Final Determinations as a convenient way to address the issues raised in the re-arbitration. In doing so the Tribunal follows the approach of the parties, although the relevant materials and arguments were strictly set out in the Statements of Reasons provided with each Determination, not in the Determinations themselves. The Tribunal is still undertaking a re-arbitration and not a review or appeal of the ACCC’s Final Determination. However, just as the applications were presented to the Tribunal by the parties, the task of the Tribunal does not require it to ignore the reasoning of the ACCC. In fact a great deal of the reasoning and the Final Determination itself remained non-contentious.
For convenience’s sake, the ACCC’s Final Determination is annexed to these reasons as Annexure “A”. A document which identifies aspects of the Final Determination not in dispute, jointly prepared by the parties and the ACCC (at the request of the Tribunal), is annexed to these reasons in summary form as Annexure “B”.
BACKGROUND
The Port is a major commercial shipping port and one of the largest coal export ports in the world. It is considered to be the only port from which it is commercially viable to export coal from the Hunter Valley coal fields in New South Wales (‘NSW’). The Hunter Valley coal industry and its associated supply chain is responsible for around 90% of NSW’s coal production and 40% of Australia’s total black coal production.
Glencore is the largest exporter by volume of coal from the Port. Approximately 85% of the coal mined by Glencore is exported to global markets including Japan, South Korea, Taiwan, China and Europe. Thermal coal exported from the Port to these destinations competes with coal exported from other countries such as Indonesia.
PNO has operated the Port since May 2014. Prior to this, the Port was operated by the State of NSW. In May 2014, the joint venture parents of PNO (Hastings Fund Management and China Merchants Group) acquired a 98 year lease from the NSW Government effectively privatising the Port’s assets. PNO is now jointly owned by The Infrastructure Fund (a wholesale investment fund under the trusteeship of Gardior Pty Ltd) and China Merchants Group. Under the terms of the lease, PNO has the power and authority to, amongst other things, fix and collect port charges pursuant to Pt 5 of the Ports and Maritime Administration Act 1995 (NSW) (the ‘PMAA’). Two such charges are relevant to this access dispute: the Navigation Service Charge (the ‘NSC’) (which is payable in respect of general use by a vessel of the Port and its infrastructure) and the Wharfage Charge (which is payable in respect of the availability of a site at which stevedoring operations may be carried out). After it assumed the role of Port operator, PNO implemented a restructure of its charges with the effect that the price for coal ships using the Port increased by between 40% and 60% for some vessel types. The charges applied by PNO to Glencore (and other users of the Port) were as follows:
·Navigation Service Charge: $0.7286 per gross tonne in its 2015 port pricing schedule, and increased to $0.7553 per gross tonne in its 2018 port pricing schedule; and
·Wharfage Charge: $0.0746 per revenue tonne.
We observe that the NSC is applied by PNO at different rates to coal vessels, cruise vessels, and non-coal vessels (other than cruise vessels).
Declaration of services at the Port
In the wake of PNO’s restructure of Port charges, Glencore made an application to the National Competition Council (‘NCC’) on 13 May 2015 for certain services at the Port to be ‘declared’ for the purposes of Part IIIA. The NCC issued its recommendation to the relevant Minister on 2 November 2015 which recommended the service not be declared on the grounds that it did not meet the requirement that declaration would promote a material increase in competition in at least one market other than the market for the service. The NCC was otherwise satisfied that all other criteria were met. On 8 January 2016, the Minister published his decision under s 44H(1) in which he decided not to declare the nominated service on the same basis as that recommended by the NCC.
On 29 January 2016, Glencore applied to the Tribunal under s 44K for review of the Minister’s decision. The Tribunal set aside the Minister’s decision in Re Application by Glencore Coal Pty Ltd [2016] ACompT 6, and on 16 June 2016 declared the following service:
the provision of the right to access and use the shipping channels (including berths next to the wharves as part of the channels) at the Port of Newcastle (Port), by virtue of which vessels may enter the Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.
(the ‘Service’)
The precise drafting of the description of the Service is important. It is a matter to which we will return later in these reasons.
Notification and arbitration of the dispute
Following the declaration of the Service, Glencore made a series of attempts to negotiate with PNO in respect of the terms and conditions upon which Glencore could access the Port. No agreement was reached and on 4 November 2016, Glencore notified the ACCC under s 44S(1) of the existence of an access dispute in relation to the Service. In its notification to the ACCC, Glencore described the dispute as follows:
Although PNO is currently providing access (and maintaining that it will always do so) the terms of access, in particular the navigation service charges for coal vessels, are unreasonable and Glencore is seeking to negotiate with PNO on reducing these charges to approximately their pre-privatisation levels (or pre-2015 levels as 2015 was the point at which PNO increased the charges, shortly after the Service was privatised and assets re-valued from $1.75 billion to $2.4 billion). Glencore submits that, at the very least, an economically efficient charge is likely to be significantly lower than the rates which are currently being applied by PNO.
On 22 December 2016, the ACCC advised Glencore and PNO that:
(1)the pre-conditions for notification of an access dispute under s 44S had been met;
(2)an access dispute relating to the Service existed between Glencore and PNO; and
(3)the access dispute had been validly notified by Glencore.
The ACCC also established a ‘Commission’ for the purposes of the access dispute arbitration pursuant to ss 44U to 44ZNA of the CCA.
Between 22 December 2016 and 20 July 2018, the parties provided the ACCC with a considerable volume of information pertaining to the arbitration, and more specifically information to be used to determine appropriate regulated access prices for the Service.
Judicial review of the notification of the dispute
On 9 October 2017, during the course of the arbitration, PNO filed proceedings against the ACCC and others in the Federal Court of Australia seeking judicial review in relation to the conduct of the ACCC’s arbitration. PNO and Glencore agreed to stay the arbitration while PNO’s challenge to the conduct of the arbitration was reviewed by the Court.
PNO claimed that the arbitration had not been validly commenced by the ACCC and that pre-conditions for notification of the access dispute had not been satisfied. On 9 November 2017, the Federal Court dismissed PNO’s application and found that the ACCC should be permitted to complete the arbitration process without interference from the Court: Port of Newcastle Operations Pty Ltd v Australian Competition and Consumer Commission [2017] FCA 1330; (2017) 350 ALR 552.
The arbitration resumed shortly after the Court’s judgment was handed down.
The ACCC’s Draft Determination
On 20 July 2018, the ACCC published its draft determination (‘Draft Determination’) as required by s 44V(4), accompanied by a draft statement of reasons. PNO and Glencore were invited to make further submissions in light of the Draft Determination and did so. In its Draft Determination, the charges payable by Glencore as at 1 January 2018 on access to the Service within the scope of the determination were as follows:
·Navigation Service Charge: $0.4685 per gross tonne; and
·Wharfage Charge: $0.0746 per revenue tonne.
The ACCC’s Final Determination
On 18 September 2018, the ACCC issued its Final Determination of the access dispute pursuant to s 44V(1)(b) along with a statement of reasons as required by s 44V(5), and an arbitration report. In its Final Determination, the charges payable by Glencore as at 1 January 2018 on access to the Service within the scope of the determination were as follows:
·Navigation Service Charge: $0.6075 per gross tonne (ie an increase of $0.1390 as compared to the Draft Determination); and
·Wharfage Charge: $0.0746 per revenue tonne (unchanged from the Draft Determination).
Relevantly, the scope of the Final Determination was limited to access to the Service:
(1)where Glencore, either directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal; and
(2)where Glencore makes a representation to PNO of the kind referred to in s 48(4)(b) of the PMAA that it has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order to enter the Port precinct and load Glencore coal.
The ACCC determined that the Final Determination did not apply to:
(1)the terms and conditions of access in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA;
(2)the terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and
(3)any charges imposed by PNO other than the NSC and the Wharfage Charge.
We will return to this defined scope and to the meaning of a representation of the kind referred to in s 48(4)(b) of the PMAA later in these reasons.
The Final Determination also provided for:
(1)‘backdating’ provisions to the effect that the charges apply from the period starting 8 July 2016, being the date of declaration of the Service by the Tribunal as contemplated by s 44ZO(4)(b); and
(2)‘five-year review’ provisions which contemplate a five-year review of the NSC involving a roll forward of the regulated asset base (the ‘RAB’) including actual capital expenditure which is incurred in the five-year period not funded by users (‘Five-Year Review’).
LEGISLATIVE CONTEXT
Competition and Consumer Act 2010 (Cth)
Part IIIA of the CCA is concerned with third party access to certain ‘declared’ services such as the Port. In circumstances where the provider of a service and a user of a service cannot reach a commercial agreement on the terms and conditions upon which the user can access the service, either the user or the provider may notify the ACCC of an access dispute and request that the ACCC arbitrate. To this end, s 44S relevantly provides as follows:
(1)If a third party is unable to agree with the provider on one or more aspects of access to a declared service, either the provider or the third party may notify the Commission in writing that an access dispute exists, but only to the extent that those aspects of access are not the subject of an access undertaking that is in operation in relation to the service.
(2)On receiving the notification, the Commission must give notice in writing of the access dispute to:
(a)the provider, if the third party notified the access dispute;
(b)the third party, if the provider notified the access dispute;
(c)any other person whom the Commission thinks might want to become a party to the arbitration.
Section 44B contains the definition of ‘third party’ among other terms:
“third party”, in relation to a service, means a person who wants access to the service or wants a change to some aspect of the person’s existing access to the service.
Once a dispute has been notified to the ACCC, an arbitration is commenced. Relevantly, s 44U provides:
The parties to the arbitration of an access dispute are:
(a) the provider;
(b) the third party;
(c)any other person who applies in writing to be made a party and is accepted by the Commission as having a sufficient interest.
And further, s 44V relevantly provides:
(1)Unless it terminates the arbitration under section 44Y, 44YA, 44ZZCB or 44ZZCBA, the Commission:
(a)must make a written final determination; …
on access by the third party to the service.
(2)A determination may deal with any matter relating to access by the third party to the service, including matters that were not the basis for notification of the dispute. By way of example, the determination may:
(a) require the provider to provide access to the service by the third party;
(b) require the third party to accept, and pay for, access to the service;
(c)specify the terms and conditions of the third party’s access to the service;
(d) require the provider to extend the facility;
…
(2A)Without limiting paragraph (2)(d), a requirement referred to in that paragraph may do either or both of the following:
(a) require the provider to expand the capacity of the facility;
(b) require the provider to expand the geographical reach of the facility.
(3)A determination does not have to require the provider to provide access to the service by the third party.
We should at this juncture comment on the operation of s 44V(2), which was relied upon by Glencore in support of its contention on the scope of the arbitration. In short, Glencore contended that the terms of s 44V(2) were such to permit a determination making Glencore’s terms of access available to persons who access facilities at a berth to load coal onto a vessel, regardless of whether that person is the owner or charterer of the vessel. The Tribunal does not accept the expansive operation of s 44V(2) as contended for by Glencore.
Access disputes within the context of Part IIIA are bilateral in nature. The consequence of the declaration of the Service was that a party (ie the person seeking access to the Service) had a right to negotiate with the provider of the Service. If they were unable to agree, then the party seeking access could notify the dispute to the ACCC. Access disputes are not intended to address rights of access by all users of a declared service. Further, the Final Determination under scrutiny in these applications does not deal with the general right of access by Glencore to the Port, but with the terms of access pertaining to that right of access already available. Glencore here is wanting a change to aspects of the existing access to the Service. The contest is thus as to the terms of the access already made available to Glencore, and relating to Glencore’s access as defined in the Service. Subsection 44V(2) allows the ACCC, in making a determination, some flexibility to deal with related matters to the access sought in Glencore’s notification. The inclusory matter mentioned in s 44V(2) suggests this by indicating matters, that were not the basis of notification of the dispute, which must nevertheless be related to the actual dispute between the parties as notified to the ACCC.
The provision in s 44V(2)(d), which deals with the provider extending the facility (including expanding its capacity), is within the scope of determining ‘access by a third party’. This is because it deals with the provider needing to act in connection with the circumstances relating to the particular third party, who notifies or who has been notified of the access dispute, which currently existed and which gave rise to the request for the ACCC to arbitrate.
In the present case, the Service consists of the provision of the right to access and use the shipping channel at the Port, by virtue of which vessels may enter the Port precinct, and load and unload at terminals within the Port precinct. The only circumstance in which Glencore could be said to be using the Service so defined is where it owns or, whether directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal. We will return to this issue later in these reasons. However, it is important to appreciate that s 44V(2), whilst allowing for certain related matters to be dealt with by the ACCC that were not the basis for notification of the dispute, would not permit a change to the Service as defined and declared by the Tribunal on 16 June 2016.
As we have already observed, the applications before us call on the Tribunal to conduct a ‘re-arbitration’ of the access dispute. In this sense, the Tribunal is not required to identify any form of error in the Final Determination having regard to, for instance, the mandatory considerations the ACCC is required to take into account. That said, it is nevertheless helpful to outline the ACCC’s obligations when arbitrating disputes under Division 3 of Part IIIA, particularly as these are also relevant to our determination.
Section 44X sets out the matters that the ACCC must take into account in making final determinations in notified access disputes. At the time of the dispute being notified to the ACCC, it provided:
(1)The Commission must take the following matters into account in making a final determination:
(aa)the objects of this Part;
(a)the legitimate business interests of the provider, and the provider’s investment in the facility;
(b)the public interest, including the public interest in having competition in markets (whether or not in Australia);
(c)the interests of all persons who have rights to use the service;
(d)the direct costs of providing access to the service;
(e)the value to the provider of extensions whose cost is borne by someone else;
(ea)the value to the provider of interconnections to the facility whose cost is borne by someone else;
(f)the operational and technical requirements necessary for the safe and reliable operation of the facility;
(g)the economically efficient operation of the facility;
(h)the pricing principles specified in section 44ZZCA.
(2)The Commission may take into account any other matters that it thinks are relevant.
We should observe that amendments have been made to the CCA since the time of notification to the ACCC, but the parties agreed that the amendments were of no significance to the dispute before the Tribunal.
Relevant to subsection (aa), the objects of Part IIIA are set out in s 44AA:
(a)promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and
(b)provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.
Relevant to subsection (h), s 44ZZCA sets out three pricing principles:
The pricing principles relating to the price of access to a service are:
(a)that regulated access prices should:
(i)be set so as to generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to the regulated service or services; and
(ii)include a return on investment commensurate with the regulatory and commercial risks involved; and
(b)that the access price structures should:
(i)allow multi-part pricing and price discrimination when it aids efficiency; and
(ii)not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and
(c)that access pricing regimes should provide incentives to reduce costs or otherwise improve productivity.
Also relevant to the ACCC’s role in arbitrations of access disputes are the statutory restrictions on final determinations. Section 44W provides that a determination of the ACCC has no effect if it would have any of the following effects:
(a)preventing an existing user obtaining a sufficient amount of the service to be able to meet the user’s reasonably anticipated requirements, measured at the time when the dispute was notified;
(b)preventing a person from obtaining, by the exercise of a pre-notification right, a sufficient amount of the service to be able to meet the person’s actual requirements;
(c)depriving any person of a protected contractual right;
(d)resulting in the third party becoming the owner (or one of the owners) of any part of the facility, or of extensions of the facility (including expansions of the capacity of the facility and expansions of the geographical reach of the facility), without the consent of the provider;
(e)requiring the provider to bear some or all of the costs of extending the facility (including expanding the capacity of the facility and expanding the geographical reach of the facility);
(ea)requiring the provider to bear some or all of the costs of maintaining extensions of the facility (including expansions of the capacity of the facility and expansions of the geographical reach of the facility);
(f)requiring the provider to bear some or all of the costs of interconnections to the facility or maintaining interconnections to the facility.
Separately, the Tribunal’s role in re-arbitrations of access disputes is set out in s 44ZP. Relevantly, that section provides:
(3)A review by the Tribunal is a re-arbitration of the access dispute based on the information, reports and things referred to in section 44ZZOAA.
(4)For the purposes of the review, the Tribunal has the same powers as the Commission.
(5)The member of the Tribunal presiding at the review may require the Commission to give assistance for the purposes of the review.
…
(6)The Tribunal may either affirm or vary the Commission’s determination.
Pursuant to s 44ZZOA, the Tribunal is required to make a decision within the ‘consideration period’. The consideration period is ordinarily a period of 180 days from the date of the application for review, but may be extended by written notice to the relevant Minister (see s 44ZZOA(7)), or extended in effect by agreement between the relevant parties (see s 44ZZOA(5)). The consideration period for the Tribunal’s determination of these applications is further addressed below.
Pursuant to s 44ZZOAA, the Tribunal must have regard to all of the information that the ACCC took into account in connection with the making of its Final Determination, as well as any information that the Tribunal has requested under the powers set out in s 44ZZOAAA(4) or anything done as mentioned in s 44ZP(5) or any information or report given to the Tribunal under s 44ZP(5A). We address s 44ZZOAAA(4) below in the context of an application made by Glencore for the Tribunal to request and consider additional information that was not taken into account by the ACCC in connection with the making of its Final Determination.
At the outset the Tribunal makes the following observations relating to these statutory provisions and their operation in these proceedings, particularly in relation to the important issue of ‘user contributions’ (to which we will return in more detail).
It is clear from the mandatory considerations that the Tribunal can and must have regard to a range of matters in a determination. The weight to be given to each matter is a question for the Tribunal depending on the circumstances before the Tribunal. To the extent mandatory considerations pull in different directions, again this is a matter the Tribunal needs to consider and undertake a balancing exercise. It is essentially an evaluative exercise.
Legitimate business interests of the provider are a factor to consider, and these need to be carefully considered and evaluated. This consideration is referred to expressly in s 44X(1)(a), the objects of Part IIIA (s 44AA) and the pricing principles (s 44ZZCA).
It is important (as one aspect to consider) that the price and terms of access should provide an incentive to a service provider to efficiently (and in a timely fashion) invest in maintaining and improving infrastructure necessary to provide facilities at the Port. Prices that are too low can lead to non-investment or delayed investment, or the non-provision of some infrastructure services.
The significance of this consideration is confirmed by the extrinsic materials to the Trade Practices Amendment (National Access Regime) Bill 2005 (Cth), which introduced the pricing principles. The Revised Explanatory Memorandum to that Bill notes (at [22.2]) that the pricing principles were introduced to address concerns that the potential for access regulation would deter investment in essential infrastructure, and that the pricing principles are intended to ensure that ‘the objects clause has more than just symbolic value, by providing effective market signals for the efficient use of existing resources and for future investment in infrastructure’. The Explanatory Memorandum goes on to explain (at [22.7]) that the pricing principle in s 44ZZCA(a)(ii) requires the ACCC to specifically factor in regulatory and commercial risks faced by service providers, to counter the perception that regulation favours service users:
The reference to regulatory risk in Pricing Principle (a)(ii) is intended to refer to the perception that the exercise of regulatory discretion will be undertaken in a heavy-handed, arbitrary or uneven fashion. While such perceptions may deter investment in any dysfunctional market subject to regulation, regulatory risk takes on greater importance for infrastructure investors, due to the length of time and expense required for service providers to respond to changes in a market, perceptions that regulatory decisions tend to be biased in favour of service users rather than service providers/investors, the scale of investment in infrastructure and the sunk nature of the assets. Pricing Principle (a)(ii) requires regulators specifically to factor in regulatory and commercial risks in setting access prices. This may assist to address perceptions that regulatory bias favours service users.
The other matter to recall is that regulation under Part IIIA is not an end in itself, but rather, the means of promoting effective competition in upstream and downstream markets. In BHP v National Competition Council (2008) 236 CLR 145, the High Court reviewed the background against which the Competition Policy Reform Act1995 (Cth) (the ‘1995 Act’) introduced Part IIIA to the Trade Practices Act 1976 (Cth) (the ‘TPA’). The Court quoted (at [13]) from the Second Reading Speech in the Senate on the Bill for the 1995 Act, where the Minister said:
The bill inserts a new Part into the [TPA], to establish a legal regime to facilitate third parties obtaining access to the services of certain essential facilities of national significance. The notion underlying the regime is that access to certain facilities with natural monopoly characteristics, such as electricity grids or gas pipelines, is needed to encourage competition in related markets, such as electricity generation or gas production. Access to such facilities can be achieved if a person seeking access is successful in having the service ‘declared’ and then negotiates access with the service provider.
Glencore already has access to the Port, and this Tribunal has previously reached the view that it was not satisfied that increased access would promote a material increase in competition in the coal export market, or any other dependent market (see Application by Glencore Coal Pty Ltd [2016] ACompT 6 at [157]). These findings were made in the context of whether the service should be declared but are relevant to pricing and terms of access. For instance, there can be no competition-related justification to deduct $912.0 million from the optimised replacement cost (‘ORC’) for “user contributions” on the basis that the deduction will promote competition in related markets.
A number of other matters should be mentioned relating to the statutory provisions under consideration, particularly in respect of ‘user contributions’. As initial observations we make the following comments.
We do not see a deduction being made to the RAB for user contributions as consistent with allowing the Port to recover its efficient costs. Undoubtedly, the concepts of efficient costs and efficient operation appear in several provisions: ss 44X(1)(g), 44AA(a) and 44ZZCA(a)(i). However the efficient costs, pursuant to the methodology adopted by the ACCC, are those which a new entrant would incur, the depreciated ORC (‘DORC’) value. The concept of “efficiency” does not explain or justify any deduction of particular assets for historical reasons.
Subsection 44X(1)(e) provides that in making a determination the ACCC must take into account the value to the service provider of extensions whose cost is borne by someone else. The Tribunal takes the view this factor is directed at situations where the determination requires the provider to extend the facility (for example by extending a train line to a third party’s mine) and is not applicable here.
Then the question arises whether the deduction is justified as being in the interests of those who have a right to use the Service (s 44X(1)(c)) because it will ensure that users do not pay for the same assets twice: once through their initial investment and again through PNO’s charges. This presupposes, however, that the user has made an initial contribution with the expectation of receiving a future price benefit. In the present case, that assumption is not valid. However, we will return later to this issue in more detail.
Ports and Maritime Administration Act 1995 (NSW)
Part 5 of the PMAA governs the imposition of various port charges on either the owner of the vessel in which cargo is loaded or the owner of the cargo being loaded. Ordinarily, such charges are payable to the relevant port authority (see s 68), but by virtue of the 98 year lease arrangement, these charges are payable to PNO in the case of the Port.
As noted above, two charges are relevant to this access dispute: the NSC and the Wharfage Charge.
Section 50 of the PMAA relevantly provides for the imposition of the NSC in respect of the general use by a vessel of the Port and its infrastructure as follows:
(1)A navigation service charge is payable in respect of the general use by a vessel of a designated port and its infrastructure…
(2)Unless the regulations otherwise provide, the charge:
(a)is payable on each entry by the vessel into any designated port, and
(b)is to be calculated by reference to the gross tonnage of the vessel
…
(4)A navigation service charge is payable by the owner of the vessel concerned.
Section 61 of the PMAA also relevantly provides for the imposition of the Wharfage Charge in respect of the loading and unloading of cargo at the Port as follows:
(1)A wharfage charge is payable in respect of the availability of a site at which stevedoring operations may be carried out.
…
(3)The charge is payable:
(a)in the case of cargo that is unloaded at the site—by the person who, immediately after it is unloaded, is the owner of the cargo, and
(b)in the case of cargo that is loaded at the site—by the person who, immediately before it is loaded, is the owner of the cargo.
(4)To the extent, however, that the charge is not paid by the person indicated in subsection (3) as liable for its payment, the charge is payable by the person who, at the time payment is demanded by the relevant port authority, is the owner of the cargo.
Relevantly, s 67 of the PMAA provides as follows:
(1)The relevant port authority may enter into an agreement with a person liable to pay any kind of charge under this Part.
(2)Such an agreement may make provision for or with respect to:
(a)fixing the amount of any charge payable by the person to the relevant port authority, and
(b)any other matter which the relevant port authority is permitted by or under this Part to determine in respect of the charge, and
(c)any right or privilege which by or under this Part accrues to the person liable to pay the charge, or which the relevant port authority may confer on the person.
(3)To the extent that provision is so made, the agreement displaces any determinations of the relevant port authority in relation to the charge or to the matter, right or privilege concerned.
Importantly, the PMAA defines for the purposes of that Act the term ‘owner’ when used in the context of a vessel or cargo. In this respect, s 48 of the PMAA relevantly provides:
(1)In this Act, owner of a vessel or cargo means (subject to this section) the person who owns the vessel or cargo.
(2)A reference in this Act to the owner of a vessel includes a reference to:
(a)a person registered as the vessel’s owner in the relevant authority under the marine legislation or the National law or other certificate of registry for the vessel, or
(b) a person who has chartered the vessel.
…
(4)A reference in this Act to the owner of a vessel or cargo includes a reference to any person who, whether on the person’s own behalf or on behalf of another:
(a) exercises any of the functions of the owner of the vessel or cargo, or
(b)represents to the relevant port authority that the person has those functions or accepts the obligation to exercise those functions.
…
This section, and more specifically s 48(4)(b), formed part of the basis for the scope of the determination defined by the ACCC in its Final Determination, and is a topic of contention between PNO and Glencore in this access dispute.
Separately, Division 6A of the PMAA was introduced by amendments made on 26 November 2012. It allows the relevant port authority (PNO in the case of the Port) to levy on port users ‘infrastructure charges’ to fund investment in infrastructure projects such as the acquisition or development of land to be used as part of the port precinct, or the provision of services and facilities by the operator of the Port. As will be seen, this Division is relevant to one of the topics of contention raised in Glencore’s application regarding user contributions.
Finally, we mention cl 11 of the Ports and Maritime Administration Regulation 2012 (NSW), which provides as follows relating to the responsibility of an ‘owner’ of a vessel to provide certain particulars to PNO relevant to the NSC:
The owner of a vessel in respect of which a navigation service charge is payable must, at such time as the relevant port authority requires, furnish the relevant port authority with the following particulars:
(a)the owner’s name and address,
(b)the name, identifying particulars and relevant voyage number of the vessel,
(c)the gross tonnage of the vessel,
(d)the port in respect of which the navigation service charge is payable,
(e)the date on which, the time at which, and the purpose for which, the vessel entered the port,
(f)such other information with respect to payment of the navigation service charge as the relevant port authority reasonably requests.
Maximum penalty: 20 penalty units.
PRELIMINARY ISSUES
Before embarking on the parties’ submissions regarding the substantive aspects of the access dispute, it is appropriate to briefly address the two preliminary issues that arose as part of the case management of the applications before the Tribunal.
Extension of the statutory timeframe for the Tribunal’s determination
As noted above, the Tribunal is statutorily required to make its determination on applications brought before it under Part IIIA within the ‘consideration period’, ordinarily a period of 180 days from the date of the applications save for the effect of any extensions of time or an agreement to disregard certain periods of time (see s 44ZZOA).
PNO’s application was made on 8 October 2018 and Glencore’s application was made a day later on 9 October 2018. In the absence of any extension of time or an agreement to disregard certain periods of time, the ordinary application of the consideration period would require the Tribunal to make its determination as early as 6 April 2019.
At the initial case management hearing of the applications, it became apparent that the hearing timetable agreed between the parties and the ACCC was such the applications would not – or rather could not, for a want of sufficient time for the parties and the ACCC to prepare – be heard by the Tribunal, much less decided by the Tribunal, prior to the date on which the Tribunal would be required to make and publish its determination. The parties and the ACCC subsequently gave further consideration to the most appropriate means by which to effectively extend the timeframe for the Tribunal’s determination on the applications to a date that afforded time for the applications to be heard and for the Tribunal to make its determination. Ultimately, it was considered that an agreement to ‘stop the clock’ pursuant to s 44ZZOA(5) was the most appropriate means.
On 2 April 2019, the Tribunal issued a direction to memorialise its agreement pursuant to that subsection with each of the parties and the ACCC. By that direction, it was agreed that the period between 2 April 2019 and 15 July 2019 would be disregarded for the purposes of calculating the consideration period. The effect of this agreement was that the Tribunal would be required to make its determination on the applications before it by as early as 20 July 2019.
Due to a number of factors, including the nature of the disputation between the parties and the complex issues that arose for determination, the Tribunal concluded that it would not be in a position to make its determination on the applications before it by that date. Accordingly, by notice dated 13 June 2019, the Tribunal advised the Treasurer, pursuant to s 44ZZOA(8) of the Act, that it would make its decision by 29 November 2019. In keeping with the requirements of that section, the Tribunal provided a copy of the notice to each of the parties and the ACCC and published a short form notice in The Australian newspaper. A copy of the notice to the Treasurer was also uploaded to the Tribunal’s website.
Glencore’s application for the Tribunal to request further information
On 12 February 2019, Glencore made an application seeking that the Tribunal request additional information in the form of an expert report from Baggerman Associates, Marine Dredging Consultants, dated 12 February 2019 (the ‘Baggerman Report’).
Pursuant to s 44ZZOAAA(4) the Tribunal may request such information that the Tribunal considers reasonable and appropriate for the purposes of making its decision on a review under Part IIIA.
If so requested, that information must be considered by the Tribunal in addition to the information that the ACCC took into account (see s 44ZZOAA(a)(ii)), as noted above.
Glencore contended that the Baggerman Report should be requested (and included in the materials considered by the Tribunal) because it would assist the Tribunal to make a fully informed determination in relation to the costs of dredging. Specifically, it was claimed that the Baggerman Report would shed light on whether, as contended by Glencore, dredging of the entrance channel to the Port could be undertaken with modern dredging equipment alone, or whether, as contended by PNO, additional and expensive steps (specifically drilling and blasting pre-treatment) would need to be undertaken before dredging could occur.
On 27 February 2019, the Tribunal issued a memorandum to the parties and the ACCC which stated that it would refuse Glencore’s application, but that its reasons for doing so would be provided upon the publication of these reasons.
Before proceeding further on this topic, we should mention the way in which Glencore put its request, recalling this is a request for Glencore effectively to rely upon another expert report commissioned by it in respect of issues that were before the ACCC.
In support of its application, Glencore submitted:
Access disputes under Part IIIA are difficult matters for access seekers as they face an asymmetry in obtaining data as to the relevant cost structures that the access provider enjoys. The Baggerman Report addresses a critical gap in the material before the ACCC. In Glencore’s submission, its consideration is essential to permit the Tribunal to make a fully informed determination of an important issue in this proceeding, namely whether, as contended by Glencore, dredging of the Entrance Channel to the Port could be undertaken with modern dredging equipment alone (as was done, for example, at Walker Shoal near Darwin) or, as argued by PNO, whether substantial additional costs for pre-treating hard rock with drilling and blasting should be included.
At the outset, we do not accept that the Baggerman Report “addresses a critical gap” in the material before the ACCC. It supplements that material, but there is no critical gap. Further, the consideration of the Baggerman Report is not “essential” to permit the Tribunal to make the informed decision of the issue identified by Glencore. The Tribunal already has material on this topic on which it can make an informed decision.
In addition, the context in which it is sought to introduce the Baggerman Report is a factor to take into account.
In the lead up to the Draft Determination, Glencore, through its consultant engineers, Arup, contended that modern ‘Cutter Suction Dredgers’ (‘CSDs’) are capable of dredging of the entire Port, including the hardest rock located at the Entrance Channel (referred to as ‘dredging direct’). To support its opinion, Arup referred to the dredging of Walker Shoal in Darwin in 2014 where ‘rock with a greater strength to the Entrance of Newcastle was dredged direct by the CSD, Athena’.
PNO rejected this approach and, via its experts, AECOM, argued that the very hard rock at the Entrance Channel could not be dredged by CSDs and ‘would require the mobilisation of additional plant at significant cost’. AECOM also proffered the view that ‘[d]rilling and blasting then double handling with a TSHD [Trailer Suction Hopper Dredger] is also a much slower process than using a CSD’.
Glencore and PNO were also unable to agree on the volumes and types of material that were required to be dredged, particularly from the Entrance Channel.
In its Draft Determination, the ACCC accepted the position proposed by Arup:
… [B]ased on the evidence before it, the Commission has concluded that Arup’s modelling provides a more robust approach to estimating the volume and type of material to be dredged. This extends to the UCS and RQD figures. The Commission also notes that Arup’s proposed methodology to dredging is based on what it submits has occurred in practice on at least one occasion such that it goes beyond a theoretical exercise. The Commission considers that these two factors suggest that the use of more advanced technology as proposed in Arup’s report is an appropriate assumption for the purposes of a DORC valuation for this arbitration. This also informs the Commission’s consideration of dredging costs below.
In response to this finding, on 17 August 2018, PNO provided the ACCC with new expert material to explain why Arup’s proposed dredging methodology was impractical. This included material claiming that the sea conditions at the Port restricted the use of a CSD for much of the year and that the rock type and strengths at the Port were incomparable with those at Walker Shoal. The ACCC was critical of PNO, noting that it could have provided this information earlier in the arbitration as it was aware of Glencore’s position well before the Draft Determination. Nevertheless, the ACCC had regard to the further material.
Having received PNO’s additional material, on 17 August 2018, Glencore was required to provide any reply to the additional material from PNO within 10 days.
On 3 September 2018, Glencore provided the ACCC with a further report by Arup, responding to PNO’s additional material with as much information as it could obtain in the time available to it. That report included revised geological modelling for the Port but noted that the geotechnical data for Walker Shoal was the subject of confidentiality to a third party and thus could not be disclosed at that time. Arup also sought to address the claim that sea conditions at the Port were not suitable for the economic use of a CSD. Arup pointed out that smaller dredgers had been employed at the Port throughout its history and assessed the ‘operating envelope’ of newer, significantly larger CSDs.
In its Final Determination, the ACCC departed from the view it had expressed in its Draft Reasons and instead adopted the position argued by PNO: that pre-treatment of the rock with drilling and blasting was necessary. The ACCC took this view “specifically having had regard to the additional material submitted by the parties following the Draft Determination.”
In our determination of whether to receive and consider the Baggerman Report, a number of matters needed to be considered.
It is significant that the issues the Baggerman Report addressed were before the ACCC and well-known by the parties at least upon the delivery of the Draft Determination.
The Baggerman Report addressed the following questions:
(1)the extent to which the Entrance Channel at the Port could, as a practical matter and had it not already been dredged, be dredged today using a modern CSD, without a requirement for drilling and blasting pre-treatment; and
(2)to the extent that a significant portion of the Entrance Channel could be dredged by use of a CSD, the approximate total cost of dredging (including any necessary drilling and blasting pre-treatment).
In addressing these questions, Baggerman Associates:
(1)introduced background information regarding dredging technology, including CSDs and other methods such as drilling and blasting;
(2)considered the sea (wave) conditions in which modern CSDs can operate and considered independently collected data relating to the actual conditions experienced at the Entrance Channel over many years;
(3)considered the rock types and strengths that can be dredged by modern CSDs, analysed the geotechnical aspects of the rock at the Entrance Channel by reference to bore hole data, and compared them with rock conditions found at Walker Shoal – a project in which Baggerman Associates was intimately involved; and
(4)determined an economically appropriate work method for dredging the Entrance Channel and calculated the estimated costs of doing so. Reference was made to the volumes and geotechnical characteristics of the various materials to be removed, along with the specific production rates expected of modern dredging equipment operating at the Entrance Channel; and the real costs likely to be incurred in a commercial project.
It cannot be said that any of these questions or issues were only raised by the Draft Determination.
When on 17 August 2018, PNO lodged material in response to the Draft Determination, it included reports from Evers Consult on dredging and Akuna Dredging Solutions on dredging methodology and the assessment of hard rock at the Entrance Channel to the Port.
Then on 3 September 2018, when Glencore lodged its submissions in reply to PNO’s submission on 17 August 2018, that submission noted as follows:
2.The PNO Submission repeats a number of arguments already addressed by Glencore in previous submissions made to the ACCC in this arbitration and, in particular, many of these arguments have been addressed in Glencore’s submission dated 17 August 2018. As such, Glencore does not seek to address each argument in the PNO Submission and instead maintains and refers to Glencore’s previous submissions in this matter, and in particular, its submissions to the ACCC dated 17 August 2018…
3.Enclosed with this submission is a report from Synergies Economic Consulting (Synergies Report) and a confidential report from Arup (Arup Report) which also respond to Direction 2 of the ACCC’s Direction.
The Synergies report dated 3 September 2018 (referred to by Glencore) noted:
After considering the suite of reports that PNO has submitted, they, while lengthy, introduce only limited new information. In many instances, PNO’s submission restates material from previous submissions, to which we have previously responded.
We accept that it may have been difficult for Glencore to respond to the Draft Determination and material put forward by PNO on 17 August 2018. However, Glencore acted by 3 September 2018 in providing the ACCC with a further report from Arup on the material then obtained and available, and significantly did not request an extension of time to put further material before the ACCC. Presumably, Glencore considered it did not need to put further material before ACCC: after all, the Draft Determination on this issue was in its favour.
It was only upon its review of the Final Determination that Glencore wanted to rely on further material, as attested to in the affidavit of its solicitor (Mr Poddar) sworn 12 February 2019:
15.Upon review of the Final Determination, I formed a view that the ACCC had relied on the Further PNO Material lodged on 17 August 2018 in response to the Draft Determination, and that Glencore had not had an adequate opportunity to address the matters which had impacted on the decisions reached by the ACCC in the Final Determination.
16.As such, the need for Glencore to seek to engage an expert to provide an expert report in response to the Evers Report and Akuna Report did not become apparent until after publication of the Final Determination on 15 September 2018.
As Mr Poddar also attested, to address the PNO material (once the decision had been made to obtain more information after the Final Determination was published) would require time and resources to access information and obtain inputs from wave specialists.
Even accepting that Glencore could not reasonably have made available to the ACCC the Baggerman Report in the time limit it proposed, Glencore did not request an extension of time (presumably because it did not think it necessary) and, as we have indicated, the Baggerman Report covered issues well identified during the course of the arbitration before the Draft Determination was published.
Then it is important to recall the statutory context.
In a review of a final determination under s 44ZP, the Tribunal must only consider specified information. This primarily comprises the information the ACCC took into account in connection with the making of the determination to which the review relates, subject to the application of s 44ZZOAA.
There are a limited number of other categories of information or material that the Tribunal must have regard to that provide a potential avenue for “new” material (that is, material the ACCC did not take into account in making the Final Determination) to be considered as part of the review process. Each of these exceptions is only enlivened essentially by the request of the Tribunal.
In light of the above, the text and context make clear that s 44ZZOAA operates to limit the material that the Tribunal may consider in a review under s 44ZP. As such, to the extent “new” information is allowed into the review process it may only come via:
(1)a request from the presiding member of the Tribunal for the ACCC to give assistance to the Tribunal pursuant to s 44ZP(5);
(2)a request from the presiding member of the Tribunal by written notice requiring the ACCC to give information and to make reports for the purposes of the review pursuant to s 44ZP(5A);
(3)a request from the Tribunal for ‘such information that the Tribunal considers reasonable and appropriate for the purposes of making its decision on a review’ pursuant to s 44ZZOAAA(4).
In connection with s 44ZZOAAA(4), the Tribunal must positively form a view that any information it requests is ‘reasonable and appropriate’ for the purposes of making its decision.
As a starting proposition, where a party before the Tribunal urges it to request information that could reasonably have been made available to the ACCC before it made a final determination, it would not be reasonable for the Tribunal to request such information. This is because in order for the arbitration before the ACCC to have meaning, it is critical that the parties place before the ACCC all of the material that they consider to be relevant to the determination of the access dispute.
In considering making any request for information, the Tribunal should also keep firmly in mind that the CCA provides for the Tribunal to make a decision within 180 days from when the application for review is made: s 44ZZOA. Although this period can be lengthened, either by agreement of relevant persons or by the Tribunal extending the time in which it has to make a decision, it is an indication that the Tribunal should be able, and should endeavour, to make decisions within that period unless there are exceptional circumstances. In this way, the time period in which it is intended that a decision will be made (referred to as the ‘expected period’ or the ‘consideration period’) should inform whether any request for ‘new’ information is reasonable and appropriate.
Therefore, whether it is ‘reasonable and appropriate’ to request information will be necessarily informed by a consideration of the text and context of the ss 44ZZOAAA(4) and 44ZZOAA, including:
·that the primary material on which the review is to be based is that which was before the ACCC when it made the determination, which indicates that the review process before the ACCC is to be a meaningful one, and one in which the parties have every incentive to place the material that they consider to be relevant to the resolution of the dispute before the ACCC; and
·the limited timeframes in which the Tribunal has to make a decision, which indicates that it is not intended that there be any material broadening of the information that was before the ACCC when it made its final determination.
Finally, we observe that Glencore submitted that it is in the public interest for the Baggerman Report to be received and considered by the Tribunal because of its ‘broader relevance to future access issues’. Undoubtedly this may be so in that any determination by the Tribunal with the Baggerman Report before it will be made public and so will have some ‘precedent’ value in that regard; but this is but one consideration to be taken into account.
We accept that the Baggerman Report does contain information that is of general relevance to the declared services the subject of the arbitration.
At a high level, it goes to the optimised replacement cost of the assets required to provide the Service, which as will be seen, represents a significant battleground in this access dispute. However, relevance is not the only focus of the inquiry invited by s 44ZZOAAA(4). Indeed, we consider that requesting the Baggerman Report pursuant to that subsection, and at the behest of Glencore, would not be in keeping with the purpose of the statutory power, keeping in mind the Tribunal’s role as re-arbitrator in applications of this kind is constrained in the material it may consider in this role.
In respect of the specific subsection, the purpose of s 44ZZOAAA(4) is for the Tribunal to request information which it has identified as a means to fill a gap in its knowledge. It is not to be used to introduce new information – much less information which is the product of a commission of the party seeking to have it requested – that was not available at the time of the Final Determination. In this respect, the absence of any mechanism designed to be used by a party seeking to adduce new information for the Tribunal’s consideration is telling.
The ACCC recognised in its Final Determination that although the arbitration was between Glencore and PNO and conducted on the basis of the issues and materials put forward by the parties, the Final Determination and the supporting statement of reasons may be relevant to other users in their future negotiations with PNO. Similar observations could be made about this review process undertaken by the Tribunal. Nonetheless, the benefit of the Tribunal’s consideration of the information for any future negotiations or arbitrations needs to be balanced against the intent of the regime: that the parties to an arbitration put all relevant information before the ACCC as the original decision-maker.
Nevertheless, as we have already mentioned, this access dispute is bilateral in nature. It is open to the ACCC (and the Tribunal) to determine different terms and conditions of access to the Service for different users of the Service. We also mention that the Tribunal is not aware that any other user of the Service has notified any access dispute to the ACCC in relation to the Service.
Further, any pricing methodology adopted in one arbitration may change in a later arbitration, particularly if changes in future events suggest different assumptions may be appropriate to adopt in any pricing approach.
Therefore, whilst many considerations needed to be evaluated in determining whether it was reasonable and appropriate to request the Baggerman Report, in the end the proper approach was not to make any such request.
Finally, it bears noting that the Tribunal was aware of the contents of the Baggerman Report and its relevance to the issues between the parties in this re-arbitration at the time it made its decision on the issue. The Tribunal did not consider it was reasonable and appropriate to request the Baggerman Report in view of the ACCC process, the information already before the Tribunal and the statutory context of the Tribunal’s task. We also observe that assuming the Tribunal has the power to request the Baggerman Report now it has had a hearing and considered the submissions of the parties, the Tribunal would still not consider it reasonable and appropriate to request (on its own motion) the Baggerman Report for the same reasons. The Tribunal still considers that it does not require the Baggerman Report to assist it in the re-arbitration and does not consider that any request for such information is reasonable and appropriate for the purpose of making its determination in this re-arbitration.
TOPICS OF CONTENTION
PNO and Glencore identified seven topics of contention for the Tribunal’s consideration. In support of their positions, each made a series of written submissions (received between 1 March 2019 and 15 April 2019), presented oral argument before the Tribunal over six days between 6 and 13 May 2019, and provided subsequent documentation to the Tribunal.
The ACCC also made submissions regarding each of the applications in accordance with the Tribunal’s directions dated 6 December 2018 and subsequent requests, which in effect required the ACCC to give assistance for the purposes of the Tribunal’s review pursuant to s 44ZP(5).
The seven topics of contention are summarised below:
(1)the scope of the Final Determination;
(2)the ACCC’s deduction of user contributions from the RAB;
(3)the costs of channel dredging;
(4)the inclusion in the RAB of $145 million for the importation of reclamation bunding material, and the associated issue of user-funded reclamation bunding works;
(5)the length of the construction period and the associated issue of the amount of interest during that construction period;
(6)whether prices should be permitted to be set at a higher level than what represents an appropriate return on coal-related assets; and
(7)the true-up in respect of forecasted capital expenditure, and any difference between forecast capex and actual capex within each five-year period.
SCOPE OF THE FINAL DETERMINATION
As noted above, the ACCC concluded that the regulated prices set out in its Final Determination would only cover access to the Service:
(1)where Glencore, either directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal; and
(2)where Glencore makes a representation to PNO of the kind referred to in s 48(4)(b) of the PMAA that it has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order to enter the Port precinct and load Glencore coal.
For ease of reference, we will refer to the above as the first and second inclusive limbs, as appropriate, of the determination scope adopted by the ACCC.
The ACCC also expressly excluded certain matters from the scope of its Final Determination. As noted above, these matters were:
(1)the terms and conditions of access in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA;
(2)the terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and
(3)any charges imposed by PNO other than the NSC and the Wharfage Charge.
Again, for ease of reference, we will refer to the above as the first, second and third exclusive limbs, as appropriate, of the scope adopted by the ACCC.
PNO and Glencore both challenged this scope of the Final Determination. PNO contended it was too broad, while Glencore contended it was too narrow. Further, and as we will indicate later, the ACCC suggested a revised scope different from that in the Final Determination.
PNO’s submissions
PNO’s primary contention was that, having regard to the provisions of Part IIIA, the ACCC had no statutory power to extend the scope of its Final Determination to the circumstances described in the second inclusive limb. In the alternative, PNO contended that even if it was within the ACCC’s statutory power (which PNO denied), the inclusion of the second inclusive limb would reveal a failure by the ACCC to have had proper regard to the mandatory considerations set out in Part IIIA.
PNO first turned to the description of the Service. It argued the focus of that description was access to and use of the Port’s shipping channels, including its berths. On PNO’s submission, that meant from both a practical perspective, and from the perspective of a proper construction of the description of the Service, that the only persons who could conceivably access or use the Service are persons that control a vessel (whether through direct ownership or a charter arrangement) for the purposes of loading or unloading at a terminal. This formed the foundation of PNO’s arguments against the ACCC’s adoption of the second inclusive limb in its determination scope.
PNO then referred to a number of provisions of Part IIIA including ss 44S, 44U, 44V, 44W, 44ZO(4), 44ZV, 44ZY and the definition of ‘third party’ in s 44B. PNO also referred the Tribunal to a decision of the Full Court of the Federal Court of Australia, which held that in the context of Part IIIA the word ‘access’ should be given its ordinary meaning, being ‘a right or ability to use a service’: Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124; (2017) 253 FCR 115. The net effect of the provisions and the authority referred to was said to be that the ACCC (and indeed the Tribunal) has statutory authority to make access dispute determinations only in respect of the ‘third party’ who sought to access the Service and who had notified the access dispute to the ACCC in accordance with the provisions of the CCA. In other words, the ACCC and the Tribunal only have the power to arbitrate a bilateral dispute between the relevant access provider and a (single) access seeker, not the power to arbitrate general terms of access between an access provider and all other persons.
PNO then referred to s 48 of the PMAA which among other things, deems for the purposes of that Act a person to be an ‘owner’ of a vessel, where that person makes a representation that it has the functions of the owner or accepts the obligations of the owner through its conduct. On PNO’s submission, the purpose of this deeming provision was to assist the relevant port authority in recovering charges for use of port infrastructure.
PNO submitted that the provisions of the PMAA (a State Act) were not intended to, and in any event could not for constitutional reasons, broaden the powers of the ACCC or the Tribunal to make access dispute determinations under the CCA (a Commonwealth Act). In other words, representations made pursuant to a section of the PMAA could not change who is in fact the owner of a vessel (when the word ‘owner’ is used in its ordinary sense) or alter the identity of the person who is in fact accessing or using the Service. It was on this basis that PNO contended that the second inclusive limb exceeded the ACCC’s power under Part IIIA to make a determination dealing only with the terms and conditions of access by the ‘third party’ that originally notified the dispute to the ACCC.
PNO also identified certain unintended and undesirable consequences of the second inclusive limb. First, by allowing Glencore to take advantage of the ACCC’s arbitrated prices whenever a s 48(4)(b) declaration was made, Glencore could engage in a form of arbitrage. For example, Glencore could represent to PNO that it had undertaken to pay another user’s fee for accessing the Service thereby permitting that user, who was not a party to the ACCC’s arbitration, to take advantage of the regulated prices PNO must provide to Glencore. Second, and relatedly, if the second inclusive limb of the ACCC’s determination scope were allowed to stand without intervention from the Tribunal, PNO would have no certainty as to whom it is required to provide Glencore’s arbitrated terms of access which, on PNO’s submissions, would, contrary to s 44X(1)(a) of Part IIIA, fail to take account of the service provider’s legitimate business interests. This consequence, as it was described by PNO, was also argued as illustrative that – in the alternative world where the ACCC had statutory power to extend the scope of its determination in the manner identified in the second inclusive limb (which PNO denies) – the ACCC had, in any case, made its determination beyond power because it had plainly not taken into account PNO’s legitimate business interests by extending the scope to the second inclusive limb.
Glencore’s submissions
Glencore contended that the scope for the ACCC’s determination was unduly restrictive on account of the first exclusive limb which expressly excluded the arbitrated NSC from applying in respect of vessels carrying coal which have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA. Glencore sought for the first exclusive limb to be excised from the scope.
Glencore advanced this contention from two fronts. On one front, Glencore argued that in order to fulfil the purpose of declared services regime in Part IIIA, the Tribunal needed to approach the matter from a practical and commercial point of view. This meant taking a ‘substance over form’ approach by ensuring that no matter the precise manner in which Glencore and its customers choose to contract with one another, the arbitrated terms and conditions of access to the Port should apply when Glencore is exporting its coal from the Port. On the other front, Glencore urged the Tribunal not to take an overly restrictive view of what the Service actually is. It argued that whenever Glencore uses the Port and its associated facilities and infrastructure to load coal onto a vessel for export, it was ‘using’ or ‘accessing’ part of the Service within the meaning of Part IIIA, and therefore should be able to enjoy its arbitrated prices.
Taking each of the fronts advanced by Glencore in turn, its primary submission in respect of the first was that because Glencore bears the ultimate economic cost of port charges in circumstances where vessels that are using the Service are chartered by Glencore’s customers and carrying Glencore’s coal, in order to effect the Final Determination, this practical and commercial reality should be recognised by excising the first exclusive limb, thereby extending the scope accordingly.
In support of this, Glencore submitted that its coal is sold to export customers under a number of different contract types, but that no matter the type, Glencore seeks to sell coal at the most competitive price on a delivered basis. In some cases, Glencore will arrange for the transporting vessel, and in other cases, the customer will make those arrangements. Glencore submitted that in either case, market structure and dynamics are such that Glencore bears the ultimate economic burden of the NSC imposed by PNO for use of the Service in the form of lower delivered coal prices. It claimed that for the Final Determination to only to apply to circumstances where Glencore arranges for the delivery of coal to its customers – and to ignore instances where Glencore’s customers make such arrangements – risks undermining the utility of the application of the Part IIIA regime to the Port.
The Final Determination does not provide for the ACCC to review forecast capital expenditure for the forthcoming five-year period (or perform any other function) in the five-yearly review. This reflects the ACCC’s view that the five-yearly review should be self-executing and capable of mechanistic implementation, and that the ACCC should not be conferred with any function in the review or by the Final Determination more generally. In the event there is a dispute between Glencore and PNO as to forecast capital expenditure, this would be dealt with pursuant to cl 14 of the Final Determination, which provides for:
(1)first, negotiation in good faith between senior executives of the parties in an attempt to resolve the dispute;
(2)secondly, if the dispute is not resolved within 15 days after notice was given of the dispute or within a period otherwise agreed by the parties, the dispute is submitted to a mediator;
(3)finally, if the dispute is not resolved within 45 days after notice was given of the dispute or within a period otherwise agreed by the parties, the dispute may be submitted to arbitration by the ACCC pursuant to s 44S.
In his oral submissions on behalf of the ACCC, Mr Lloyd SC pointed out that forecast capex for the initial period of the Final Determination is very small. If PNO were to spend a great deal more on capex in the period, then with no true-up they would not get a return on that additional capex during the period.
Putting that possibility aside, the only time the issue bites is in the second period. If PNO asked for an outrageously high level of capex, then Glencore would benefit from a true-up by PNO only receiving a return on its actual capex, if that were less than the forecast.
The Tribunal’s analysis
The Tribunal notes that, in the end, PNO indicated that it did not care whether there was a true-up or not. Even if PNO embraced having a true-up – thus agreeing with Glencore’s position – the matter would require consideration against the relevant provisions of Part IIIA.
There was some confusion in the submissions as to what incentives are brought into play by having, or not having, a true-up mechanism. Is spending more on capex than is efficient the issue, ie more than is required to provide services efficiently into the future? Or is the issue making an overstated forecast of the efficient level of capex?
In the Tribunal’s view, the more important issue is the actual level of capex. Under this form of price regulation, the intention is that $1 million of capex will generate a return of $1 million over the life of the asset. That would accord with the NPV=0 principle. Of course, such an expected outcome – the actual outcome can never be assured – is subject to assumptions about the how the regulatory framework operates, eg that the WACC accurately reflects the firm’s cost of capital. It also depends on the regulatory framework – and indeed the specific pricing methodology – applying over the life of the asset, which may not be the case here.
Even with those qualifications there is a largely unavoidable incentive for “gold-plating”, ie spending more than the efficient level of capex, because once the capex is rolled into the asset base, a return is guaranteed. One method of dealing with that incentive is to subject the proposed capex to prior scrutiny. No such process was provided for during the course of the Final Determination, and there was apparently no call for one.
Whether there is a true-up or not has little bearing on this incentive to overspend on capex. The true-up – if there is one – comes into play only in relation to the difference between forecast and actual capex. It looks backward at the end of each five-year period to the return on capital during that period. Certainly, the absence of a true-up, as explained by the ACCC and PNO, does provide an incentive to underspend against the forecast. It seems to be assumed that any underspend is likely to be efficient. It might be achieved, for example, by postponing capex by extending the life of an asset and better maintenance. That would be a good thing. But it is hard to see why PNO would go out of its way to spend less than its forecast, given that this would reduce the return to it for the following period.
The incentive for efficiency said to be induced by not having a true-up mechanism depends, the Tribunal considers, on the capex forecast being accurate in the sense of being the best forecast, at the time it is made, of prudent, efficient capex. If the forecast is not the best possible, having no true-up still provides an incentive to underspend against the forecast.
On the other hand, with a true-up, PNO could more easily conceal intended overspending on capex by understating the intention in its forecast. It would pay no penalty for that understatement, as the true-up would provide it with a return, in the period in which it was made, of the full amount of capex.
In the light of these considerations, the Tribunal considers that the absence of a true-up mechanism better accords with the statutory provisions referred to by the ACCC in the Final Determination.
CONCLUSION
The final view of the Tribunal is that the Final Determination is only to be varied as a result of the Tribunal’s disagreement with the result of the ACCC on the scope of the Final Determination and the NSC (and here only because of the contention relating to user contributions).
The Tribunal provided to the parties a draft of the Tribunal’s Determinations and the reasons for the sole purpose of checking confidentiality and the exact wording of the Determinations so as to properly reflect these reasons. In this regard, of particular focus was the scope of the Tribunal’s Determinations and the appropriate NSC.
The Tribunal has decided that no allowance should be made for user contributions in the calculation of the RAB. This was implemented in the agreed access pricing building block model by changing the percentage allowances for user contributions to zero. No other changes to the model are required to implement the Tribunal’s reasons.
The new NPV=0 pricing solution in the model requires an initial 2018 Coal Vessel NSC of $1.0058 per GRT. This replaces the previous value ($0.6075) in paragraph 6.1 of the Final Determination.
In each Application, the Tribunal varies the Final Determination made under s 44V of the Competition and Consumer Act2010 (Cth) dated 18 September 2018, by deleting Clauses 2.1, 2.2 and 6.1 and replacing them as follows:
2.1The scope of the determination is confined to the terms and conditions of access where Glencore owns or, either directly or by agent, charters a vessel that enters the Port precinct and loads Glencore coal.
2.2For the avoidance of doubt, the determination does not apply to:
(a)the terms and conditions of access to apply in respect of vessels carrying coal that are not owned, or have not been chartered, by Glencore;
(b)the terms and conditions of access for vessels other than those calling at the coal terminals of the Port; and
(c)any charges imposed by PNO other than the Navigation Service Charge and the Wharfage Charge.
6.1The Navigation Service Charge payable by Glencore to PNO in accordance with this determination will be $1.0058 as at 1 January 2018.
I certify that the preceding six hundred and ten (610) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice Middleton, Mr RF Shogren and Dr D Abraham. Associate:
Dated: 30 October 2019
ANNEXURE ‘A’
ANNEXURE ‘B’
TERMS OF FINAL DETERMINATION CONTESTED AND NOT CONTESTED FACTS
The parties collated a document which identified the terms of the determination in dispute and not in dispute before the Tribunal.
Non-contested facts
Wholly stated, the non-contested terms are;
(1.1)Term: that the Final Determination should take effect 21 days after the date it is made and expires on 7 July 2031.
(1.2)Backdating: that the Navigation Service Charge (NSC) and Wharfage Charge apply from the period starting 8 July 2016, as per clause 1.3.
(1.3)Backdating: that the charges to apply during the period of backdating are to be determined through a deflation of the charges specified in 5.1 and 6.1 using the Sydney All Groups Consumer Price Index number published by the Australian Bureau of Statistics (CPI Sydney), calculated as the average of the latest four quarters over the average of the preceding four quarters.
(1.4)Interest on backdated payment: that the Interest is payable on any amount overpaid to PNO by Glencore within the relevant dates, being from 8 July 2016 until the date the Final Determination takes effect. The interest rate to be applied is 3.95%, which is the June 2016 rate specified in the Large Business Weighted Average Rate on Credit Outstanding Variable Rate published by the Reserve Bank of Australia. Interest is to be compounded daily.
(3.1)Notification by Glencore: Glencore must provide 48 hours’ prior written notice of its intention to use the Service under the terms of this determination. In the absence of notice the standard terms of access will apply. This term is waived for the period of backdating in clause 1.2.
(4.1)Building Block Model: The Building Block Model (BBM) is to be used to calculate the maximum allowable revenue that PNO may recover from the Wharfage Charge and NSC in each relevant period. The inputs to the BBM and the charges are reviewable as set out in clauses 5 to 9.
(5.1)Wharfage Charge: the Wharfage Charge payable by Glencore to PNO in accordance with this determination will be $0.0746 per revenue tonne as at 1 January 2018.
(5.2)Wharfage Charge: the Wharfage Charge will be indexed on 1 January of each subsequent year by CPI Sydney determined by reference to the CPI published for the September quarter of that year.
(6.2)Navigation Service Charge: the NSC will be reviewed on an annual and five-yearly basis as set out in clauses 7 and 8.
(7.1)Annual price setting: the NSC is to be reviewed annually as set out in clause 7.2.
(7.2)Annual price setting: the inputs to the BBM to calculate the NSC that are reviewable under the annual price setting mechanism are limited to:
(a)forecast cargo volumes and gross tonnage coal vessels and non-coal vessels for the year, and
(b)in the event of a Material Change Event, forecast inputs relevant for determining the addition to the NSC as a result of the Material Change Event.
(7.3)Annual price setting: PNO will notify Glencore of the NSC at least 60 days prior to the start of the calendar year in which the charge is to apply. The notice will also outline and explain the assumptions on which the updated NSC has been determined.
(8.1)Five-yearly review: A five-yearly review of the NSC will occur during the following years:
(a)in 2021, with such reviewed price to take effect on and from 1 January 2022, and
(b)in 2026, with such reviewed price to take effect on and from 1 January 2027.
(9.1) True up: The NSC will be subject to an annual true up consisting of:
(a)a pass through of the impact on revenue of actual volumes compared to forecast volumes through a revenue unders and overs mechanism, and
(b)a pass through of costs from Force Majeure Events that have an incremental cost of in excess of $1 million.
(9.2)True up: Within 60 days of the end of each calendar year PNO shall provide Glencore a true up reconciliation account setting out:
(a)for the relevant year, forecast cargo volumes and gross tonnage of coal and non-coal vessels for the relevant year
(b)for the relevant year, the actual data for cargo volumes and gross tonnage of coal vessels and non-coal vessels for the year
(c)the variance of the actual data in 9.2.b against the forecast data identified in 9.2.a
(d)for the relevant year, calculation of the amount of the NSC determined by the BBM using the actual data in 9.2.b (the Notional NSC)
(e)for the relevant year, details of the NSC paid by Glencore under this determination including the total gross tonnage of vessels (Glencore Paid NSC)
(f)for the relevant year, calculation of the amount of the NSC liability for Glencore using the Notional NSC (from 9.2.d) and the Glencore total gross tonnage of vessels (from 9.2.e) (the Glencore NSC Liability)
(g)identification of the variance of the Glencore Paid NSC against the Glencore NSC Liability
(h)identification of either:
(i)an over-recovery by PNO of the NSC (where the Glencore Paid NSC is greater than the Glencore NSC Liability), or
(ii)an under-recovery by PNO of the NSC (where the Glencore Paid NSC is less than the Glencore NSC Liability).
(9.3)True up: within 7 days of PNO delivering to Glencore the true-up reconciliation account under clause 9.2, Glencore must, in the event that the previous years’ price setting regime resulted in an over-recovery by PNO of the NSC, issue PNO a valid tax invoice for any amounts to be adjusted, or
(9.4)True up: PNO must, in the event that the previous years’ price setting regime resulted in an under-recovery by PNO of the NSC, issue Glencore a valid tax invoice for any amounts to be adjusted at the same time as delivering the true-up reconciliation account.
Non-price terms
(10.1)Invoicing: PNO will issue a valid tax invoice in relation to any Wharfage Charge arising under the determination within 7 days of receipt from Glencore of the applicable cargo manifest prescribed by the PMAA.
(10.2)Invoicing: PNO will issue a valid tax invoice to Glencore in relation to any NSC arising under this determination within 7 days of the vessel entering the Port.
(11.1)Payment terms: All amounts due under this determination are payable within 7 days of delivery by email of a relevant tax invoice.
(12.1)Interest on late payment: Interest on late payment of monies due and payable under this determination will accrue and be payable pursuant to section 70 of the PMAA.
(13.1)Termination: The terms of the determination may be terminated in the following circumstances:
(a)by the parties’ mutual written agreement
(b)PNO may terminate the terms of the determination by written notice to Glencore where Glencore is in material breach of the terms, and that breach has not been remedied by Glencore within 28 days’ notice of the breach by PNO
(c)PNO may terminate the terms of the determination where PNO’s right to provide access to the Port is terminated or expires
(d)Glencore may terminate the terms of the determination by providing 28 days written notice to PNO.
(14.1)Dispute resolution: if an issue, dispute or difference between Glencore and PNO arises out of, or in relation to the terms of the determination, either party may give written notice to the other party specifying:
(a)The nature of the dispute
(b)The alleged basis of the dispute
(c)The position which the party issuing the notice considers correct
(14.2)Dispute resolution: if Glencore and PNO do not agree within 7 days about the procedure and timetable for dispute resolution, each party must appoint a senior executive as its representative to meet or negotiate in good faith in an attempt to resolve the dispute.
(14.3)Dispute resolution: If the dispute has not been resolved within 15 days after the date on which written notice was given, or within a period agreed in writing by the parties, the dispute must be submitted to a mediator in accordance and subject to the Resolution Institute Mediation Rules.
(14.4)Dispute resolution: If the dispute has not been resolved within 45 days after the date on which written notice was given, or within a period agreed in writing by the parties, the dispute may be submitted to arbitration by the ACCC pursuant to section 44S.
(14.5)Dispute resolution: The referral to, or undertaking of, a dispute resolution process does not (subject to any interlocutory order) suspend the parties’ obligations under the terms of the agreement.
(15.1)Assignment: Glencore cannot assign or otherwise transfer its rights under this determination without prior consent of PNO. Such consent must not be unreasonably withheld.
Contested Facts
Wholly stated, the contested terms are;
(2.1) Scope: The scope of the determination includes the terms and conditions of access:
(a)where Glencore, either directly or by agent, charters a vessel to enter the Port precinct and load Glencore coal, and
(b)where Glencore makes a representation to PNO of the kind referred to in s 48(4)(b) of the Ports and Maritime Administration Act 1995 (the PMAA) that it has the functions of the owner of a vessel, or accepts the obligation to exercise those functions, in order to enter the Port precinct and load Glencore Coal.
(2.2) Scope: For the avoidance of doubt, the determination does not apply to:
(a)the terms and conditions of access to apply in respect of vessels carrying coal that have not been chartered by Glencore or in respect of which Glencore has not made a representation of the kind referred to in s 48(4)(b) of the PMAA
(b)terms and conditions of access for vessels other than those calling at the coal terminals at the Port, and
(c)any charges imposed by PNO other than the NSC and the Wharfage Charge.
(6.1)Navigation Service Charge: The NSC payable by Glencore to PNO in accordance with this determination will be $0.6075 as at 1 January 2018.
(8.2)Five-yearly review: The inputs to the BBM to calculate the NSC that are reviewable under the five-yearly review are limited to:
(a)the regulated asset base being rolled forward, and the roll forward should:
(i)include, at the time of its commissioning, actual capital expenditure incurred in the current five-year period excluding any actual capital expenditure that is provided or funded by users and including an amount for interest incurred during construction of assets
(ii)include the forecast inflation used to set prices in the current period, and
(iii)be based on forecast depreciation used to set prices in the current period.
(b)the useful life of assets required to provide the Service and rates of depreciation (excluding perpetual assets)
(c)the weighted average cost of capital
(d)forecast capital expenditure for the following five-year period excluding any capital expenditure that is forecast to be provided or funded by users
(e)forecast operating expenditure for the following five-year period, and
(f)such other inputs that are subject to a Material Change Event.
In agreeing to the document outlining the contested and non-contested terms, the ACCC’s reserved the right to qualify its position.
The ACCC subsequently did so via email, providing these additional comments regarding the NSC contained in clause 6.1 of the ACCC’s final determination:
The navigation service charge is a function of many elements:
·Valuation date: This was not contested by the parties before the Tribunal.
·Construction cost estimates: Glencore sought review of the ACCC’s determination in respect of dredging costs and reclamation bunding.
·Interest during construction: This is a function of the construction period/program and WACC. Glencore sought review of the ACCC’s determination in respect of the construction period/program.
·Asset lives: This was not contested by the parties before the Tribunal.
·WACC: The ACCC submits that the Tribunal should consider whether the WACC should be adjusted (primarily, decreasing the asset beta) if it includes a true up for the return on actual capital expenditure compared to the return on forecast capital expenditure in the RAB roll forward in the five-yearly review (see cl 8.2 of the ACCC’s determination) as contended for by Glencore (T383 lines 6 to 11). The ACCC notes that Glencore disputes this submission on the basis that a WACC is to be determined through the CAPM pricing model in which only systematic (or non-diversifiable) risk is compensated through the CAPM and the absence of a true up has no meaningful bearing on systematic risk (T474 line 40 to T475 line 3).
·User funding: PNO sought review of the adjustment to the DORC for user contributions. Glencore contended that (in addition to dredging and revetments) the estimated costs of reclamation bunding should take into account user funding of the assets.
·Standalone cost test for coal vessels: Glencore sought review of the treatment of non-coal assets in determining efficient allocations of the maximum allowable revenue between coal and non-coal users.
PNO responded to the ACCC above comments with the following:
·First, the material does not respond to the Tribunal’s request for a document identifying the clauses of the ACCC’s determination not in dispute before the Tribunal. PNO considers the Tribunal should not have regard to these comments in determining the navigation service charge.
·Second, and alternatively to 1, PNO does not agree that the ACCC’s description of the matters relevant to the determination of the navigation service charge is either exhaustive or correct. For example, the ACCC’s list does not include a number of inputs including (without limitation) demand forecasts, operating expenditure, and regulatory tax allowance, and includes elements that PNO says should not be taken into account in determining the navigation service charge. PNO relies on its previous submissions, including in relation to the interrelationship between the model inputs.
In relation to WACC, PNO agrees with Glencore that whether or not there is a true- up for the return on actual capital expenditure compared to the return on forecast capital expenditure in the RAB roll forward in the five-yearly review does not bear on the appropriate WACC for the reasons Glencore identifies. Accordingly, no adjustments to WACC are required.
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