RE:APPLICATION FOR REVIEW LODGED BY NEW SOUTH WALES MINERALS COUNCIL UNDER SUBSECTION 44K(2) OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) OF THE DECISION OF THE DESIGNATED MINISTER UNDER SUBSECTION 44H(1) OF THE...

[2021] ACompT 4

AUSTRALIAN COMPETITION TRIBUNAL

Application by New South Wales Minerals Council (No 3) [2021]

ACompT 4  

Review of:

Decision of the Commonwealth Treasurer under s 44H of the Competition and Consumer Act2010 (Cth) not to declare services at the Port of Newcastle made on 16 February 2021

File number:

ACT 1 of 2021

Tribunal:

JUSTICE O'BRYAN (Deputy President)
DR D ABRAHAM (Member)
PROF K DAVIS (Member)

Date of determination:

4 August 2021

Catchwords:

TRADE PRACTICES – application under s 44K(2) of the Competition and Consumer Act2010 (Cth) for review of the decision of the Commonwealth Treasurer under s 44H not to declare the shipping channel service at the Port of Newcastle – consideration of statutory framework for review – consideration of declaration criteria in s 44ZZCA – whether declaration criterion (a) satisfied – whether access on reasonable terms and conditions as a result of declaration would promote a material increase in competition in the coal tenements market in the Hunter Valley – consideration of commercial, regulatory and economic constraints facing the Port – consideration of prices likely to be charged by the Port for the shipping channel service in the future with and without declaration – whether declaration criterion (d) satisfied – decision of the Commonwealth Treasurer affirmed

STATUTORY INTERPRETATION – meaning of paragraph 44ZZCA(1)(a) – meaning of the phrase “access on reasonable terms and conditions” – meaning of the word “would” – meaning of the phrase “promote a material increase in competition” – time horizon over which criterion to be considered

COSTS – whether Tribunal is empowered by s 44KB to award costs in a review under s 44K(2) of a decision under s 44H not to declare a service

Legislation:

Competition and Consumer Act 2010 (Cth) ss 44CA, 44F, 44GC, 44H, 44HA, 44J, 44K, 44KB, 44ZZOAAA, 44ZZOAA, 44ZZOA

Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth)

Competition Policy Reform Act 1995 (Cth)

Trade Practices Amendment (Infrastructure Access) Act 2010 (Cth)

Trade Practices Amendment (National Access Regime) Act 2006 (Cth)

Ports and Maritime Administration Act 1995 (NSW) ss 48, 50, 51, 60, 61, 67, 77, 79, 80

Ports and Maritime Administration Regulations 2012 (NSW)

Cases cited:

ACCC v Pacific National (2020) 277 FCR 49

Application by Medicines Australia Inc [2007] ACompT 4; ATPR 42-164

Application by New South Wales Minerals Council (No 2) [2021] ACompT 3

Application by New South Wales Minerals Council [2021] ACompT 2

Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1

Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245

Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194

Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 233 CLR 229

Glencore Coal Assets Australia Pty Ltd v Australian Competition Tribunal (2020) 280 FCR 194

O’Sullivan v Australian Securities and Investments Commission (2018) 160 ALD 233

Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379

Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal (2017) 253 FCR 115

Re Australian Consumers’ Association’s Application (1987) 82 ALR 115

Re Duke Eastern Gas Pipeline Pty Ltd [2001] ACompT 2; 162 FLR 1

Re Fortescue Metals Group Ltd [2010] ACompT 2; 271 ALR 256

Re Glencore Coal Pty Ltd (No 2) [2016] ACompT 7; 309 FLR 358

Re Glencore Coal Pty Ltd [2016] ACompT 6

Re Herald & Weekly Times Ltd (1978) 17 ALR 281

Re Queensland Co‑operative Milling Association Ltd (1976) 8 ALR 481

Re Services Sydney Pty Ltd [2005] ACompT 7; 227 ALR 140

Re Sydney International Airport [2000] ACompT 1; 156 FLR 10

Re Virgin Blue Airlines Pty Ltd [2005] ACompT 5; 195 FLR 242

Shi v Migration Agents Registration Authority (2008) 235 CLR 286

Sydney Airport Corporation Ltd v Australian Competition Tribunal (2006) 155 FCR 124

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (NSW) (2011) 245 CLR 446

Telstra Corporation Ltd v Australian Competition Tribunal (2009) 175 FCR 201

Date of hearing:

22-24 June 2021

Registry:

Victoria

Number of paragraphs:

278

Counsel for New South Wales Minerals Council:

N De Young QC with D Tynan

Solicitor for New South Wales Minerals Council:

Clifford Chance LLP

Counsel for Port of Newcastle Operations Pty Ltd:

D Roche with P Strickland

Solicitor for Port of Newcastle Operations Pty Ltd:

Clayton Utz

Counsel for National Competition Council:

P Crutchfield QC with C Van Proctor

Solicitor for National Competition Council:

Johnson Winter & Slattery

IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 1 OF 2021
RE:	APPLICATION FOR REVIEW LODGED BY NEW SOUTH WALES MINERALS COUNCIL UNDER SUBSECTION 44K(2) OF THE COMPETITION AND CONSUMER ACT 2010 (CTH) OF THE DECISION OF THE DESIGNATED MINISTER UNDER SUBSECTION 44H(1) OF THE COMPETITION AND CONSUMER ACT 2010 (CTH)
APPLICANT:	NEW SOUTH WALES MINERALS COUNCIL

DETERMINATION

TRIBUNAL:	JUSTICE O’BRYAN (Deputy President) DR D ABRAHAM (Member) PROF K DAVIS (Member)
DATE:	4 AUGUST 2021

THE TRIBUNAL DETERMINES AND DIRECTS THAT:

1.The decision dated 16 February 2021 by the designated Minister, the Hon Joshua Frydenberg MP, Treasurer of the Commonwealth of Australia, under s 44H(1) of the Competition and Consumer Act 2010 (Cth) (Act), not to declare the service provided at the Port of Newcastle comprising the provision of the right to access and use all the shipping channels and berthing facilities required for the export of coal from the port, by virtue of which vessels may enter a port precinct and load and unload at relevant terminals located within the port precinct, and then depart the port precinct, currently being provided by Port of Newcastle Operations Pty Ltd, be affirmed.

2.Within 14 days after the date of this determination, Port of Newcastle Operations Pty Ltd (PNO) is to notify the Tribunal, the New South Wales Minerals Council (NSWMC) and the National Competition Council (NCC) whether it seeks an opportunity to make further written submissions on the question of the Tribunal’s power under s 44KB(1) of the Act to make an order for costs in this proceeding.

3.If PNO gives notice under direction 2 that it seeks an opportunity to make further written submissions on the question of the Tribunal’s power under s 44KB(1) of the Act:

(a)PNO must file such submissions, and any supplementary submissions on the exercise of the Tribunal’s discretion to make an order for costs (should the Tribunal reach the view that it has power to make an order for costs), limited to 10 pages, within 28 days after the date of this determination;

(b)NSWMC must file any submissions in reply, limited to 10 pages, within 42 days after the date of this determination;

(c)the Tribunal will determine the application for costs on the papers unless PNO or NSWMC indicate in their written submissions that they seek an opportunity to advance oral submissions on the application.

1.  

A. INTRODUCTION	[1]
B. STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW	[13]
Nature of the Tribunal’s review	[13]
The applicable statutory criteria	[32]
C. BACKGROUND	[61]
The Port and the Hunter Valley coal industry	[62]
Port charges	[67]
The declaration of Port services	[74]
Arbitration of Port charges	[77]
The revocation of the declaration	[84]
PNO’s current charges	[87]
Authorisation of collective bargaining	[91]
D. TREASURER’S DECISION	[93]
E. NSWMC SUBMISSIONS	[107]
Overview	[107]
The test to be applied	[111]
“Hold-up” risk of investment	[112]
Competitiveness of the tenements market	[115]
Port charges relative to coal mining costs	[116]
PNO’s ability and incentive to exercise market power	[117]
Period of declaration	[125]
Decisions of the Queensland Competition Authority	[126]
F. CONSIDERATION OF CRITERION (A)	[128]
Meaning of criterion (a)	[128]
How access may affect the conditions and environment for competition in dependent markets	[153]
Framework for the evaluation	[163]
The shipping channel service	[166]
The coal tenements market	[170]
Access without declaration	[177]
Comparing the effect of access with declaration to access without declaration	[241]
Conclusion on criterion (a)	[263]
G. CONSIDERATION OF CRITERION (D)	[265]
H. CONCLUSION AND COSTS	[267]

REASONS FOR DETERMINATION

TRIBUNAL:

A.       INTRODUCTION

1. The Port of Newcastle (Port) is one of the larger coal export ports in the world, with coal extracted from the Hunter Valley being shipped through the Port. The Port can be described as a bottleneck facility as coal producers in the Hunter Valley have no practicable alternative to the Port for the export of their coal.

2. In May 2014, the Port was privatised by the grant of a 98 year lease to The Infrastructure Fund (managed by Hastings Funds Management) and China Merchants Group as joint venturers. The Port is now operated by Port of Newcastle Operations Pty Ltd (PNO), a company owned by the joint venturers. As the operator of the Port, PNO controls the terms and conditions of access to the Port including, relevantly, the shipping channels and berthing facilities required for the export of coal from the Port.

3. On 23 July 2020, the New South Wales Minerals Council (NSWMC) applied to the National Competition Council (NCC) under s 44F(1) of the Competition and Consumer Act 2010 (Cth) (Act) asking the NCC to recommend that a service at the Port provided by PNO be declared. The service comprises the provision of the right to access and use all the shipping channels and berthing facilities required for the export of coal from the Port, by virtue of which vessels may enter a Port precinct and load and unload at relevant terminals located within the Port precinct, and then depart the Port precinct (which we will refer to as the shipping channel service for convenience).

4. On 18 December 2020, the NCC provided its final recommendation (NCC Recommendation) to the designated Minister, the Hon Josh Frydenberg MP, Treasurer of the Commonwealth of Australia (Treasurer). The NCC recommended that the shipping channel service not be declared on the basis that the criteria in paragraphs 44CA(1)(a) and (d) of the Act had not been satisfied. Those criteria are as follows:

   (a) that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service;

   (d) that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote the public interest.

5. On 16 February 2021, the Treasurer decided under s 44H(1) of the Act not to declare the shipping channel service on the same basis, namely that the criteria in paragraphs 44CA(1)(a) and (d) had not been satisfied. The Treasurer’s decision and reasons for the decision were published the same day in accordance with s 44HA (Treasurer’s Reasons).

6. In this proceeding, NSWMC has applied to the Tribunal under s 44K(2) of the Act for a review of the Treasurer’s decision.

7. The principal contention advanced by NSWMC to the NCC and maintained in this review is that, without declaration of the shipping channel service, companies considering investments in the coal tenements market in the Hunter Valley region will face uncertainty with respect to future prices to be charged by PNO for the shipping channel service. The uncertainty will increase the risk associated with making investments in tenements, as compared to access on reasonable terms and conditions as a result of declaration. The elevated risk increases the likelihood that investors will delay their investments until the uncertainty is resolved. The uncertainty will therefore harm the conditions for competition in the coal tenements market. In contrast, access to the shipping channel service on reasonable terms and conditions as a result of declaration will remove or reduce that uncertainty and thereby promote a material increase in competition.

8. NSWMC’s principal contention to the NCC was not supported by any empirical evidence concerning the coal tenements market. NSWMC failed to present to the NCC any financial or quantitative evidence concerning the coal tenements market conditions, structure, prices or expected returns. No financial evidence was presented as to how investment decisions are made in the coal tenements market and how Port charges figure in investment decisions. Instead, NSWMC relied on assertions by a limited number of existing coal mining companies to the effect that investment decisions would be affected if the shipping channel service were not declared, supported by a theoretical economic report from Synergy Consulting.

9. Neither the NCC nor the Treasurer were persuaded by NSWMC’s principal contention. The NCC concluded (at [7.125], [7.126], [7.154] and [7.155]) that:

   (a)It is not in PNO’s long-term interests for Port users to experience such uncertainty around access charges at the Port if this risks significantly less investment in coal mining activity in the Newcastle catchment.

   (b)PNO has published open access arrangements that set out terms and conditions of access for coal exports and also offered access prices for coal exports under a long term (10 year) deed. Both the open access arrangements and the deed make provision for dispute resolution. These arrangements assist coal producers in mitigating the risks that may otherwise arise from pricing and other uncertainties at the Port.

   (c)Coal producers and exporters seeking access to the Port face significant uncertainty from other factors that are more likely to influence their ability to compete in export coal markets, particularly future changes in coal prices, labour costs and taxes. Relative to these factors, charges for the shipping channel service are likely to remain a small proportion of the cost of production and sale of coal for export. The risks associated with uncertainty over access charges for the shipping channel service would not contribute significantly to an investor’s expected valuation of future mining projects in the Newcastle catchment.

10. The Treasurer accepted the conclusions reached by the NCC in the Recommendation.

11. The Tribunal has also reached the conclusion that the criteria in paragraphs 44CA(1)(a) and (d) of the Act have not been satisfied, for largely the same reasons as explained in the NCC Recommendation. The Tribunal therefore affirms the Treasurer’s decision not to declare the shipping channel service.

12. On the assumption that NSWMC would not be successful in its application for review, PNO applied for an order under s 44KB(1) of the Act that NSWMC pay its costs of the proceeding. For the reasons set out below, the Tribunal doubts that it has power under s 44KB(1) to make an order for costs in this proceeding, which is a proceeding for review of the Treasurer’s decision not to declare the shipping channel service under s 44K(2) (and not a proceeding for a review of a declaration under section 44K(1)). However, as neither party addressed the question of power during the hearing, the Tribunal will afford PNO and NSWMC the opportunity to make further written submissions on the question of power (if they so choose) and any supplementary submissions on the exercise of the Tribunal’s discretion (should the Tribunal reach the view that it has power to make an order for costs).

    B.       STATUTORY FRAMEWORK FOR THE TRIBUNAL’S REVIEW

    Nature of the Tribunal’s review

13. In the course of two interlocutory applications made in this proceeding, the Tribunal has summarised the statutory framework that is applicable to the Tribunal’s power to review the Treasurer’s decision under s 44K(2) of the Act: see Application by New South Wales Minerals Council [2021] ACompT 2 and Application by New South Wales Minerals Council (No 2) [2021] ACompT 3. It is nevertheless appropriate to restate the principal features of the statutory framework which govern the Tribunal’s task in this proceeding.

14. Since it was first enacted, the relevant provisions of Part IIIA have been subject to significant amendment on three occasions: by the Trade Practices Amendment (National Access Regime) Act 2006 (Cth) (2006 Amendment Act); by the Trade Practices Amendment (Infrastructure Access) Act 2010 (Cth) (2010 Amendment Act); and by the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) (2017 Amendment Act). It is necessary to keep the amendments in mind when considering earlier Tribunal and Court decisions.

15. Under s 44F(1), a person may apply in writing to the NCC asking the NCC to recommend that a particular service be declared. Section 44F(2)(b) stipulates that the NCC must, after having regard to the objects of Part IIIA of the Act, recommend to the designated Minister that the service be declared (with the expiry date specified in the recommendation) or that the service not be declared. Section 44G provides that the NCC cannot recommend that a service be declared unless it is satisfied of all of the declaration criteria for the service. The declaration criteria are set out below. Section 44GA requires the NCC to make a recommendation within a period of 180 days, although the NCC may extend that period in certain circumstances. Section 44GC provides that the NCC must publish its recommendation under section 44F and its reasons for the recommendation.

16. By s 44D, the designated Minister is defined as the Commonwealth Minister unless the provider of the service is a State or Territory body. At the time of the decision the subject of this proceeding, the relevant Commonwealth Minister was the Commonwealth Treasurer.

17. Under s 44H(1), on receiving a declaration recommendation, the designated Minister must either declare the service or decide not to declare it. Section 44H(1A) stipulates that the designated Minister must have regard to the objects of Part IIIA in making his or her decision and s 44H(4) stipulates that the designated Minister cannot declare a service unless he or she is satisfied of all of the declaration criteria for the service. Section 44H(9) provides that if the designated Minister does not publish his or her decision on the declaration recommendation within 60 days, the designated Minister is taken, at the end of that 60-day period, to have made a decision in accordance with the declaration recommendation.

18. In the present case, the Treasurer published his decision not to declare the shipping channel service, and the reasons for the decision, within the 60-day period specified by s 44H(9).

19. The Tribunal is empowered by s 44K(2) to review the Treasurer’s decision not to declare the service. Section 44K provides as follows:

    44K Review of declaration

    (1) If the designated Minister declares a service, the provider may apply in writing to the Tribunal for review of the declaration.

    (2) If the designated Minister decides not to declare a service, an application in writing for review of the designated Minister’s decision may be made by the person who applied for the declaration recommendation.

    (3) An application for review must be made within 21 days after publication of the designated Minister’s decision.

    (4) The review by the Tribunal is a re‑consideration of the matter based on the information, reports and things referred to in section 44ZZOAA.

    Note: There are limits on the information to which the Tribunal may have regard (see section 44ZZOAA) and time limits that apply to the Tribunal’s decision on the review (see section 44ZZOA).

    (5) For the purposes of the review, the Tribunal has the same powers as the designated Minister.

    (6) The member of the Tribunal presiding at the review may require the Council to give assistance for the purposes of the review (including for the purposes of deciding whether to make an order under section 44KA).

    (6A) Without limiting subsection (6), the member may, by written notice, require the Council to give information, and to make reports, of a kind specified in the notice, within the period specified in the notice, for the purposes of the review.

    (6B) The Tribunal must:

    (a)       give a copy of the notice to:

    (i)        the person who applied for review; and

    (ii)       the provider of the service; and

    (iii) the person who applied for the declaration recommendation; and

    (iv) any other person who has been made a party to the proceedings for review by the Tribunal; and

    (b)       publish, by electronic or other means, the notice.

    (7) If the designated Minister declared the service, the Tribunal may affirm, vary or set aside the declaration.

    (8) If the designated Minister decided not to declare the service, the Tribunal may either:

    (a)       affirm the designated Minister’s decision; or

    (b) set aside the designated Minister’s decision and declare the service in question.

    (9) A declaration, or varied declaration, made by the Tribunal is to be taken to be a declaration by the designated Minister for all purposes of this Part (except this section).

1. The Tribunal’s review power under s 44K was the subject of detailed consideration by the High Court in Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379 (the Pilbara case), while recognising that that case considered s 44K in its form prior to the amendments made by the 2010 Amendment Act.

2. By s 44K(4), the review by the Tribunal is defined as, and limited to, a “re‑consideration of the matter based on the information, reports and things referred to in section 44ZZOAA”. Four aspects of s 44K(4) should be noted.

3. First, the “matter” to be reviewed by the Tribunal is the Treasurer’s decision not to declare the relevant service, not the NCC Recommendation. In the Pilbara case, the plurality stated (at [37]):

   The “matter” referred to in s 44K(4) was identified in s 44K(1) and (2). In a case where the Minister has declared a service, the “matter” is “the declaration” made by the Minister. In a case where the Minister decided not to declare a service, the matter is “the designated Minister’s decision” not to make a declaration. In both cases, the hinge about which the identification of the “matter” turns is what the Minister has done, not what the NCC did when it made its declaration recommendation. The requirement of s 44K(4) – that the Tribunal review the matter and that the review be “a re-consideration of the matter” – necessitates identification of the Minister’s task. It is that task, and the result of its performance, which is to be subject to “re-consideration” by the Tribunal.

4. Second, the Treasurer’s decision, which is the subject of review by the Tribunal, is defined by s 44H(1). The plurality in the Pilbara case described the Minister’s decision-making task as follows (at [45]-[47]):

   45The Minister had only a short time to decide how to respond to a declaration recommendation. While the NCC could extend (s 44GA) the time for making its recommendation about an application for a declaration, the Minister was given sixty days after receiving the NCC’s declaration recommendation to decide whether to declare the service. Section 44H(9) provided that, if the Minister did not publish his or her decision on the declaration recommendation within sixty days after receiving it, the Minister was taken, at the end of that period, to have decided not to declare the service and to have published that decision. In such a case, the Minister would publish no reasons for decision but the NCC’s reasons for recommending a declaration would be published pursuant to s 44GC. If the Minister made a decision, the Act obliged (s 44HA(1)) the Minister to publish that decision and the reasons for it.

   46There is one other aspect of the Act’s treatment of the Minister’s task to which attention should be drawn. The Minister, unlike the Tribunal (s 44K(6)), was given no express power to request any further information, assistance or report from the NCC. The statutory supposition appears to have been that the Minister could and would make a decision on the NCC’s recommendation without any need for further information from the NCC.

   47The content of those provisions of Pt IIIA to which reference has been made suggests that it was expected that, armed with a recommendation from an expert and non-partisan body (the NCC), the Minister would make a decision quickly and would do so according to not only the Minister’s view of the public interest but also the expert advice given by the NCC about the more technical criteria of which the Minister had to be satisfied before a declaration could be made. And it is the Minister’s decision, not the NCC’s recommendation, that was the matter that was to be reviewed by the Tribunal.

5. Third, a review which is a “re-consideration” is a more limited form of review than a “re‑hearing” (as might be conducted by the Tribunal under Part IX of the Act). The plurality in the Pilbara case contrasted the two forms of review as follows (at [60] and [65]):

   60When s 101(2) of the Act used “re-hearing” to describe the task of the Tribunal reviewing a determination of the Commission, it was using “re-hearing” in a context wholly divorced from the exercise of judicial power. And when s 44K(4) referred to “re-consideration”, it too used that word in a context divorced from the exercise of judicial power. Nonetheless, some different meaning must presumably be intended by the use of the different words in identifying the review to be undertaken by the Tribunal. The contrast is best understood as being between a “re-hearing” which requires deciding an issue afresh on whatever material is placed before the new decision maker and a “re-consideration” which requires reviewing what the original decision maker decided and doing that by reference to the material that was placed before the original decision maker (supplemented, in this kind of case, only by whatever material the NCC provides in answer to requests made by the Tribunal pursuant to s 44K(6)).

   …

   65As has already been noted, the Tribunal treated its task as being to decide afresh on the new body of evidence and material placed before it whether the services should be declared. That was not its task. Its task was to review the Minister’s decisions by reconsidering those decisions on the material before the Minister supplemented, if necessary, by any information, assistance or report given to the Tribunal by the NCC in response to a request made under s 44K(6)…

6. The fourth aspect of s 44K(4) to be noted is the requirement, introduced by the 2010 Amendment Act, that the re-consideration of the Treasurer’s decision is to be based on the information, reports and things referred to in s 44ZZOAA. That section (which was also introduced by the 2010 Amendment Act) relevantly provides as follows:

   44ZZOAA Tribunal only to consider particular material

   For the purposes of a review under this Part, the Tribunal:

   (a)subject to paragraph (b), must have regard to:

   (i) information that was given to the Tribunal under subsection 44ZZOAAA(3); and

   (ii) any information given to the Tribunal in accordance with a notice given under subsection 44ZZOAAA(5); and

   (iii) any thing done as mentioned in subsection 44K(6) …; and

   (iv) any information or report given to the Tribunal in relation to the review under subsection 44K(6A) … within the specified period; and

   (b) may disregard:

   (i) any information given to the Tribunal in response to a notice given under subsection 44ZZOAAA(5) after the period specified in the notice has ended; and

   (ii) any information or report of the kind specified in a notice under subsection 44K(6A) … that is given to the Tribunal after the specified period has ended.

7. In the present case, the “information, reports and things referred to in s 44ZZOAA” comprise the following:

   (a)first, the material that was given to the Tribunal by the Treasurer under s 44ZZOAAA(3) on 21 April 2021, which consisted of a Treasury Ministerial Submission dated 18 December 2020, attaching the NCC Recommendation, and a further Treasury Ministerial Submission dated 12 February 2021, attaching a proposed decision and statement of reasons, together with correspondence to the NCC, NSWMC and PNO notifying them of the Treasurer’s decision;

   (b)second, the material given to the Tribunal by the NCC pursuant to a notice issued by the Tribunal under s 44K(6A) on 16 June 2021, which consisted of three pro forma deeds offered by PNO to Port users being:

   (i)the Port User Pro Forma Long Term Pricing Deed (Port User Pricing Deed), which was offered from December 2019; and

   (ii)the Producer Pro Forma Long Term Pricing Deed (Producer Pricing Deed) and the Vessel Agent Pro Forma Long Term Pricing Deed (Vessel Agent Pricing Deed), which were offered from March 2020 in replacement of the Port User Pricing Deed,

   (collectively, the Pro Forma Pricing Deeds), and which were annexed to NSWMC’s original application to the NCC; and

   (c)third, the material given to the Tribunal by PNO pursuant to a notice issued by the Tribunal under s 44ZZOAAA(5) on 16 June 2021, which consisted of paragraphs 41 to 45 and 50 of PNO’s confidential submission to the NCC dated 26 August 2020 and which related to the Pro Forma Pricing Deeds.

8. It is necessary to say something more about the nature of the Tribunal’s statutory task of reviewing the Treasurer’s decision. As already noted, in the Pilbara case the High Court concluded that the statutory task of “re-considering” the decision of the designated Minister is not to decide the issue (whether to declare or not to declare) afresh on whatever material is placed before the Tribunal, but to review the original decision by reference to the material that was placed before the designated Minister. Following the 2010 Amendment Act, the review is to be based on the “information, reports and things referred to in s 44ZZOAA”. The High Court did not elaborate further on the Tribunal’s statutory task of “reviewing” or “re-considering” the decision of the designated Minister.

9. The nature of review or appeal rights depends upon the terms of the statute conferring the rights (see Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (NSW) (2011) 245 CLR 446 at [5] per French CJ, Gummow, Crennan, Kiefel and Bell JJ; Shi v Migration Agents Registration Authority (2008) 235 CLR 286 (Shi) at [25] per Kirby J, at [92] per Hayne and Heydon JJ and at [132] per Kiefel J; East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 233 CLR 229 at [62] per Gummow and Hayne JJ; Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at [11] per Gleeson CJ, Gaudron and Hayne JJ and at [118] per Callinan J citing Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 621-622 per Mason J, with whose judgment Barwick CJ and Stephen J agreed). In Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245, Mason CJ, Brennan and Toohey JJ observed (at 261):

   In considering the nature of the 'review' contemplated by s25ZAC, it is relevant to note that the expression 'review' is commonly used in the context of judicial control of administrative action and in the context of comprehensive administrative review by an administrative tribunal of administrative decisions. But what emerges from the judicial decisions and, for that matter, from statutes is that 'review' has no settled pre-determined meaning; it takes its meaning from the context in which it appears.

10. As already noted, s 44K(4) describes the Tribunal’s task as a “re-consideration” of the decision of the designated Minister. The ordinary meaning of the word “re-consider” is to consider again. Together, ss 44K(5), (7), (8) and (9) provide that:

    (a)the Tribunal has the same powers as the designated Minister;

    (b)the Tribunal may affirm, vary or set aside the decision of the designated Minister and, if the Minister decided not to declare the service, the Tribunal may declare the service; and

    (c)the Tribunal’s declaration of the service is taken to be a declaration by the designated Minister for all purposes of Part IIIA.

11. The language of those subsections is similar to that found in many statutes that provide for review by an administrative tribunal of administrative decisions including, for example, ss 43(1) and (6) of the Administrative Appeals Tribunal Act 1975 (Cth). The combined effect of ss 44K(4), (5), (7), (8) and (9) indicate that the Tribunal’s review task is to determine whether the decision made by the designated Minister was objectively the correct or preferable decision to be made: cf Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 78 (Smithers J). In that sense, the Tribunal “stands in the shoes” of the designated Minister: O’Sullivan v Australian Securities and Investments Commission (2018) 160 ALD 233 at [36], citing Shi at [40], [100] and [134]. However, the Tribunal is to conduct the review and make that determination based on the information, reports and things referred to in s 44ZZOAA, not on whatever material the participants seek to place before the Tribunal.

12. It follows that the Tribunal’s power of review is not limited to the identification and correction of error in the Treasurer’s Reasons. The Tribunal is required to review the Treasurer’s decision not to declare the relevant service, not the reasons for decision. In that respect, the review task is analogous to that required under Part IX of the Act: see for example Re Queensland Co‑operative Milling Association Ltd (1976) 8 ALR 481 (QCMA) at 486 (Woodward J, Mr J Shipton and Prof M Brunt); Re Herald & Weekly Times Ltd (1978) 17 ALR 281 (Re Herald & Weekly Times) at 295-296 (Deane J, Mr J Shipton and Mr J Walker); Australian Consumers’ Association’s Application (Re Media Council of Australia (No 2)) (1987) 82 ALR 115 at 126 (Lockhart J, Prof M Brunt and Dr B Aldrich); Application by Medicines Australia Inc [2007] ACompT 4; ATPR 42-164 (Medicines Australia) at [135] and [138] (French J, Mr G Latta and Prof C Walsh). As those decisions of the Tribunal make clear, the task of the Tribunal is not to review the reasons of the decision-maker, but the reasons may “prove a convenient reference point for defining the matters which are truly in dispute” (Re Herald & Weekly Times at 296). Ultimately, the Tribunal must make its own decision with respect to the application of the statutory criteria, based on the material taken into account by the Treasurer supplemented by any additional material obtained by the Tribunal in exercise of its powers under ss 44K(6), 44K(6A) and 44ZZOAAA(4).

    The applicable statutory criteria

13. The decision of the Treasurer, which the Tribunal is required to reconsider, was made under s 44H which relevantly provides as follows:

    44H Designated Minister may declare a service

    (1) On receiving a declaration recommendation, the designated Minister must either declare the service or decide not to declare it.

    Note: The designated Minister must publish his or her decision: see section 44HA.

    (1A) The designated Minister must have regard to the objects of this Part in making his or her decision.

    (4) The designated Minister cannot declare a service unless he or she is satisfied of all of the declaration criteria for the service.

14. The objects of Part IIIA are stated in s 44AA as follows:

    44AA Objects of Part

    The objects of this Part are to:

    (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.

15. The declaration criteria are defined by s 44CA as follows:

    44CA Meaning of declaration criteria

    (1) The declaration criteria for a service are:

    (a) that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service; and

    Note: Market is defined in section 4E.

    (b) that the facility that is used (or will be used) to provide the service could meet the total foreseeable demand in the market:

    (i) over the period for which the service would be declared; and

    (ii) at the least cost compared to any 2 or more facilities (which could include the first-mentioned facility); and

    (c)       that the facility is of national significance, having regard to:

    (i) the size of the facility; or

    (ii) the importance of the facility to constitutional trade or commerce; or

    (iii) the importance of the facility to the national economy; and

    (d) that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote the public interest.

    (2) For the purposes of paragraph (1)(b):

    (a) if the facility is currently at capacity, and it is reasonably possible to expand that capacity, have regard to the facility as if it had that expanded capacity; and

    (b) without limiting paragraph (1)(b), the cost referred to in that paragraph includes all costs associated with having multiple users of the facility (including such costs that would be incurred if the service is declared).

    (3) Without limiting the matters to which the Council may have regard for the purposes of section 44G, or the designated Minister may have regard for the purposes of section 44H, in considering whether paragraph (1)(d) of this section applies the Council or designated Minister must have regard to:

    (a)       the effect that declaring the service would have on investment in:

    (i)        infrastructure services; and

    (ii)       markets that depend on access to the service; and

    (b) the administrative and compliance costs that would be incurred by the provider of the service if the service is declared.

16. As noted earlier, the Treasurer decided not to declare the shipping channel service on the basis that the criteria in paragraphs 44CA(1)(a) and (d) had not been satisfied. In this proceeding, all participants accepted that the criteria in paragraphs 44CA(1)(b) and (c) were satisfied. Accordingly, it is only necessary for the Tribunal to consider criteria (a) and (d).

17. The declaration criteria in Part IIIA of the Act were amended by the 2017 Amendment Act with effect from 6 November 2017. Prior to the amendment, the declaration criteria were located in s 44H(4). After the amendment, the declaration criteria were relocated to a new s 44CA(1). Each of criterion (a) and (d) were the subject of material revision.

    Criterion (a)

18. When Part IIIA was first enacted by the Competition Policy Reform Act 1995 (Cth), criterion (a) was expressed as follows: “that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service”.

19. As first enacted, the criterion focussed on the question whether access would “promote competition”. In Re Sydney International Airport [2000] ACompT 1; 156 FLR 10 (Re Sydney International Airport), the Tribunal construed that expression as follows (at [106]-[107]):

    The Tribunal does not consider that the notion of "promoting" competition in s 44H(4)(a) requires it to be satisfied that there would be an advance in competition in the sense that competition would be increased. Rather, the Tribunal considers that the notion of "promoting" competition in s 44H(4)(a) involves the idea of creating the conditions or environment for improving competition from what it would be otherwise. That is to say, the opportunities and environment for competition given declaration, will be better than they would be without declaration.

    We have reached this conclusion having had regard, in particular, to the two stage process of the Pt IIIA access regime. The purpose of an access declaration is to unlock a bottleneck so that competition can be promoted in a market other than the market for the service. The emphasis is on "access", which leads us to the view that s 44H(4)(a) is concerned with the fostering of competition, that is to say it is concerned with the removal of barriers to entry which inhibit the opportunity for competition in the relevant downstream market. It is in this sense that the Tribunal considers that the promotion of competition involves a consideration that if the conditions or environment for improving competition are enhanced, then there is a likelihood of increased competition that is not trivial.

20. The Tribunal’s explanation of the meaning of the phrase “promote competition” has been consistently followed in subsequent Tribunal decisions: see Re Duke Eastern Gas Pipeline Pty Ltd [2001] ACompT 2; 162 FLR 1 (Re Duke) at [75]; Re Virgin Blue Airlines Pty Ltd [2005] ACompT 5; 195 FLR 242 (Re Virgin Blue) at [146]; Re Services Sydney Pty Ltd [2005] ACompT 7; 227 ALR 140 at [132]; Re Fortescue Metals Group Ltd [2010] ACompT 2; 271 ALR 256 (Re Fortescue Metals) at [1060]. In Telstra Corporation Ltd v Australian Competition Tribunal (2009) 175 FCR 201 (Telstra Corporation), the Full Court approved that understanding of the phrase when used in an analogous context in the telecommunications access regime in Part XIC of the Act (at [224]-[225]). So too in Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal (2017) 253 FCR 115 (Port of Newcastle), the Full Court used the same explanation of the meaning of the phrase “promote competition” (at [86]). The Tribunal discusses further the phrase “promote competition”, and particularly the meaning of the word “competition”, below.

1. In Re Sydney International Airport and the Tribunal decisions that followed, criterion (a) was understood to require an assessment of the effect of declaration on the promotion of competition. In Re Virgin Blue, the Tribunal expressed the relevant enquiry as follows (at [148]):

   In order to determine whether access or increased access “would promote competition” in a dependent market, it is necessary to undertake an analysis of the future with declaration (which is referred to as the “factual”) as against the future without declaration (which is referred to as the “counterfactual”). As the Tribunal in Re Sydney Airports Corp observed at [108], a comparison of the factual and the counterfactual requires a forward-looking analysis which involves a comparison of the competitive conditions and environment likely to arise in the future with and without declaration.

2. However, on application for review of the decision in Re Virgin Blue, the Full Court of the Federal Court in Sydney Airport Corporation Ltd v Australian Competition Tribunal (2006) 155 FCR 124 (Sydney Airport) concluded that criterion (a) required a comparison between access and no access, and limited access and increased access, to the service (at [81]). In other words, the criterion required a comparison of the future state of competition in the dependent market with a right or ability to use the service and the future state of competition in the dependent market without any right or ability or with a restricted right or ability to use the service (at [83]). The criterion did not involve an enquiry about the effect of declaration under Part IIIA. As discussed below, criterion (a) was amended by the 2017 Amendment Act to overcome the interpretation in Sydney Airport and, to a considerable extent, revert to the interpretation in Re Virgin Blue.

3. Criterion (a) was amended by the 2006 Amendment Act, which inserted the phrase “a material increase in” before the word “competition”. Thus, criterion (a) became “that access (or increased access) to the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service”. In relation to the meaning of the phrase “material increase”, the Explanatory Memorandum to the Trade Practices Amendment (National Access Regime) Bill 2005 (Cth) stated (at [1.9]):

   The Government has agreed to amend the ‘promote competition’ declaration criteria contained in paragraph 44G(2)(a), to ensure that access declarations are only granted where the expected increase in competition in an upstream or downstream market is not trivial.

4. In Re Fortescue Metals, the Tribunal concluded (at [584]) that the inclusion of the phrase “material increase” brought no change to the existing law as the Tribunal had always taken the position that criterion (a) required a non-trivial increase in competition (referring to Re Duke and Re Sydney International Airport).

5. In Port of Newcastle, the Full Court approved the interpretation of criterion (a) adopted in Sydney Airport (at [136]), and concluded that the proper construction of criterion (a) was not affected by the amendment made by the 2006 Amendment Act (at [144]). In respect of the phrase “material increase”, the Full Court also noted (at [144]) the statement in the Explanatory Memorandum (reproduced above) to the effect that the criterion only applies where the expected increase in competition in an upstream or downstream market is not trivial.

6. Criterion (a) was amended in a more significant way by the 2017 Amendment Act. Since 6 November 2017, criterion (a) has become “that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in at least one market (whether or not in Australia), other than the market for the service”. It can be seen that the phrase “access (or increased access) to the service” has now been qualified by the phrase “on reasonable terms and conditions, as a result of a declaration of the service”. This is the first decision of the Tribunal to consider criterion (a) as so amended.

7. On its plain terms, the amended criterion no longer requires a comparison of access and no access. The relevant enquiry has become: what effect would access to the service on reasonable terms and conditions as a result of a declaration of the service have on the promotion of competition in a dependent market? That enquiry invites a comparison of (i) access on reasonable terms and conditions as a result of a declaration of the service and (ii) the circumstances that would be likely to prevail with respect to access in the absence of declaration. While the enquiry is forward looking, the prevailing circumstances relating to access (in particular, whether access is presently given and on what terms) will be relevant to the required forward looking comparison.

8. The foregoing understanding of the amended criterion (a) is confirmed by the relevant extrinsic materials. The Explanatory Memorandum to the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 (Cth) (Competition Policy Review Explanatory Memorandum) explained the background to the amendments as follows:

   12.9 The declaration criteria have been examined in a number of cases heard by both the Federal and High Courts. The declaration criteria have been subject to several different interpretations in these cases, with particular implications for how competition in dependent markets should be assessed. For investment to continue to be made in nationally significant infrastructure, it is important that the Regime is easily understood, creates outcomes that are predictable and addresses the economic problem of natural monopoly in markets for infrastructure services.

   12.10 The Regime has been reviewed three times, by the Productivity Commission in 2001 and 2013, and then by the Harper Review in 2015. Both the 2013 and 2015 reviews examined the application of the declaration criteria and whether they were achieving the objectives of the Regime. These two reviews involved extensive consultation with the public and the States and Territories.

   12.11 The Government decided in 2014 that it would respond to both reviews following the conclusion of the Harper Review.

   12.12 The Government decided to implement all of the recommendations of the Productivity Commission as part of its response to the Harper Review. These amendments seek to refocus and clarify the intent of the Regime. In particular, they seek to clarify the declaration criteria that the Council and Minister must be satisfied of in order to recommend that a service be declared, or declare the service, respectively. This then determines when arbitration by the Commission will be available to access seekers or access providers.

9. The Explanatory Memorandum stated, in respect of criterion (a) that:

   12.19 The amendments require the Council and the Minister to consider whether access (or increased access) on reasonable terms and conditions as a result of declaration would promote a material increase in competition in a market other than the market for the service. That is, the amendments focus the test on the effect of declaration, rather than merely assessing whether access (or increased access) would promote competition.

10. As stated in the Competition Policy Review Explanatory Memorandum, the Government decided to implement the recommendations of the Productivity Commission as part of its response to the 2015 Final Report of the Competition Policy Review chaired by Professor Ian Harper (and commonly referred to as the Harper Review). In its Inquiry Report No 66 titled “National Access Regime” (25 October 2013) (2013 Productivity Commission Report), the Productivity Commission recommended that criterion (a) be amended so that it “becomes a comparison of competition with and without access on reasonable terms and conditions through declaration” (recommendation 8.1). In summarising its proposed reform to criterion (a), the Productivity Commission said (at p 249):

    Criterion (a) should be amended so that it is only satisfied where access to an infrastructure service on reasonable terms and conditions through declaration (rather than access per se) would promote a material increase in competition in a dependent market. This amended criterion would require a comparison of the future state of competition under the status quo (including where access may already be available under the status quo) against the future state of competition where access is granted on reasonable terms and conditions through declaration.

    A declaration-focused competition test is the most effective way to target the economic problem that the Regime is intended to address. This competition test would not be satisfied where there is already effective competition in dependent markets. It would also not be satisfied where access is already granted to all third parties on reasonable terms and conditions, as declaration would not be expected to alter the terms and conditions of access.

    (Original emphasis.)

11. The Final Report of the Harper Review agreed with the Productivity Commission’s recommendation to re-focus criterion (a) on the effect of declaration, but expressed concern that criterion (a) set a low threshold for declaration (at p 433). The Harper Review recommended that criterion (a) should require that access on reasonable terms and conditions through declaration promote a substantial increase in competition in a dependent market that is nationally significant (at p 437). That recommendation was not adopted by Parliament when enacting the 2017 Amendment Act.

12. The foregoing review of the legislative history and text supports the following propositions:

    (a)Criterion (a) requires an assessment of the effect of access (or increased access) to the service on reasonable terms and conditions as a result of declaration.

    (b)The criterion requires that such access would promote a material increase in competition in at least one market other than the market for the service. A material increase in competition is promoted if the conditions, opportunities or environment for competition are improved in more than a trivial way.

    (c)The criterion necessitates a forward looking analysis focussed upon the effect of access as a result of declaration. The necessary comparator is the commercial environment without declaration. An important consideration in applying the criterion is whether access will be, or is likely to be, available without declaration and the commercial features of such access including the nature and scope of access, the terms and conditions of access and any capacity limitations to access. The existing availability of access will be relevant to assessing the likely future availability of access. However, due consideration must also be given to the prospect of future changes in the commercial, regulatory and economic circumstances that might alter the incentives, and likely behaviour, of the service provider.

13. In these reasons, we will use the descriptive phrase “the effects of declaration” as an abbreviation of the statutory criterion which concerns the effects of access (or increased access) to the service on reasonable terms and conditions as a result of declaration. A similar abbreviation is used in the 2013 Productivity Commission Report and the Competition Policy Review Explanatory Memorandum, as seen in the extracts reproduced above. We emphasise, though, that in using that abbreviation we do not lose sight of the statutory criterion.

14. During the hearing, the parties advanced arguments about the proper construction, and approach to the application, of criterion (a). Those arguments are considered below.

    Criterion (d)

15. When Part IIIA was first enacted, criterion (f) (in s 44H(4)) was expressed as follows: “that access (or increased access) to the service would not be contrary to the public interest”.

16. In the Pilbara case, the plurality confirmed the breadth of the phrase “public interest” in criterion (f) (at [42], citations omitted):

    Criterion (f) was “that access (or increased access) to the service would not be contrary to the public interest”. It is well established that, when used in a statute, the expression “public interest” imports a discretionary value judgment to be made by reference to undefined factual matters. As Dixon J pointed out in Water Conservation and Irrigation Commission (NSW) v Browning, when a discretionary power of this kind is given, the power is “neither arbitrary nor completely unlimited” but is “unconfined except in so far as the subject matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons to be definitely extraneous to any objects the legislature could have had in view”. It follows that the range of matters to which the NCC and, more particularly, the Minister may have regard when considering whether to be satisfied that access (or increased access) would not be contrary to the public interest is very wide indeed. And conferring the power to decide on the Minister (as distinct from giving to the NCC a power to recommend) is consistent with legislative recognition of the great breadth of matters that can be encompassed by an inquiry into what is or is not in the public interest and with legislative recognition that the inquiries are best suited to resolution by the holder of a political office.

    (Original emphasis.)

17. By reason of the breadth of the phrase, the plurality also observed that a Tribunal reviewing the Minister’s decision should be slow to reach a conclusion with respect to criterion (f) to the contrary of the Minister’s conclusion (at [112]):

    In neither case is it to be expected that the Tribunal, reconsidering the Minister’s decision, would lightly depart from a ministerial conclusion about whether access or increased access would not be in the public interest. In particular, if the Minister has not found that access would not be in the public interest, the Tribunal should ordinarily be slow to find to the contrary. And it is to be doubted that such a finding would be made, except in the clearest of cases, by reference to some overall balancing of costs and benefits.

18. As noted above, the declaration criteria in s 44H(4) were amended by the 2017 Amendment Act and relocated to s 44CA(1). Criterion (f) became criterion (d) in the new section and was rephrased as follows: “that access (or increased access) to the service, on reasonable terms and conditions, as a result of a declaration of the service would promote the public interest”. Thus, like criterion (a), criterion (d) is now focussed on the effect of access (or increased access) to the service on reasonable terms and conditions as a result of declaration. The new criterion necessitates a forward looking analysis focussed upon the effect of access as a result of declaration and requires that such access would promote the public interest. Consistently with the conclusion of the High Court in the Pilbara case, the criterion imports a discretionary value judgment to be made by reference to undefined factual matters confined only by the subject matter, scope and purpose of the Act.

19. As noted above, s 44CA(3) stipulates that, in considering whether criterion (d) applies, the designated Minister must have regard to the following (non-exhaustive) factors:

    (a)the effect that declaring the service would have on investment in infrastructure services; and markets that depend on access to the service; and

    (b)the administrative and compliance costs that would be incurred by the provider of the service if the service is declared.

20. The Competition Policy Review Explanatory Memorandum stated, in respect of criterion (d), that:

    12.37 Subsection 44CA(1)(d) asks if access or increased access to the service as a result of declaration of the service, on reasonable terms and conditions, would promote the public interest. This means that a decision maker must be satisfied that declaration is likely to generate overall gains to the community.

21. That statement reflected the recommendation in the 2013 Productivity Commission Report that “Criterion (f) should be a rigorous test, which only enables the declaration of infrastructure services where the decision maker is satisfied that declaration is likely to generate overall gains to the community” (at pp 181, 251).

    C.       BACKGROUND

22. The Port has been the subject of a number of contested declaration decisions since its privatisation in May 2014, which have resulted in previous decisions of the Tribunal and the Full Federal Court. This section briefly summarises that history to contextualise the present application. The background information has largely been drawn from the NCC Recommendation, but includes certain uncontroversial facts that have been drawn from the previous declaration decision of the Tribunal in Re Glencore Coal Pty Ltd [2016] ACompT 6 (Re Glencore Coal) which were reproduced in the Full Court’s decision in Port of Newcastle.

    The Port and the Hunter Valley coal industry

23. Until May 2014, the Port was operated by the State of NSW. It is one of the larger coal export ports in the world, with coal extracted from the Hunter Valley being shipped through the Port. In 2018, the Port handled 158.6 million tonnes of coal with a value of approximately $23.6 billion.

24. In Re Glencore Coal, the Tribunal noted that the Hunter Valley coal industry and associated supply chain are the largest coal export operations in the world. The Hunter Valley/Newcastle coalfields produce over 170 million tonnes of saleable coal per year. There are more than 30 operating coal mines in the Hunter Valley operated by 11 coal producers as well as other coal projects in various stages of exploration and development. There are three main rail haulage providers who transport coal from the mines to export terminals at the Port. Coal is then loaded onto vessels at one of the loading terminals.

25. In the 2019 financial year, the Hunter Valley mining sector directly supported 3,282 businesses, directly employed 13,347 people, paid $1.4 billion in wages and salaries and directly spent $4.0 billion on goods and services. In total, about 19.1% of the Hunter Region’s workforce was supported by mining.

26. The NCC described the Port as a bottleneck facility. That description is uncontroversial. In practical terms, the Port facilities, including particularly the shipping channel service, is necessary for the export of coal from the Hunter Valley. Coal producers in the Hunter Valley have no practicable alternative to the Port for the export of their coal.

27. The Port was privatised in May 2014 by the grant of a 98 year lease to the joint venture parents of PNO, The Infrastructure Fund managed by Hastings Funds Management and China Merchants Group. The transaction generated gross proceeds of some $1.75 billion to the State of NSW. PNO operates the Port under a 98-year sublease. As the operator of the Port, PNO controls the terms and conditions of access to the Port including, relevantly, the shipping channels and berthing facilities required for the export of coal from the Port.

    Port charges

28. As the port operator in respect of the Port, PNO is empowered under Part 5 of the Ports and Maritime Administration Act1995 (NSW) (PAMA Act) to fix and levy three types of charges on the users of Port services:

    (a)the navigation service charge, which is payable in respect of general use by a vessel of the Port and its infrastructure, and is paid by the owner of the vessel (as defined in s 48 of the PAMA Act) on each entry by the vessel into the Port calculated by reference to the gross tonnage of the vessel (ss 50 and 51 of the PAMA Act);

    (b)the wharfage charge, which is payable in respect of the availability of a site at which stevedoring operations may be carried out, and is paid by the owner of the cargo at the time immediately before it is loaded or immediately after it is unloaded at the site by reference to the quantity of cargo loaded or unloaded (s 61 of the PAMA Act); and

    (c)the site occupation charge, which is payable by occupiers of land-side facilities such as stevedoring at terminals (s 60 of the PAMA Act).

1. Section 67 of the PAMA Act empowers PNO, as the port operator in respect of the Port, to enter into an agreement with a person otherwise liable to pay a charge under Part 5 of the PAMA Act in respect of such charges. It provides as follows:

   67 Agreements in respect of charges

   (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.

2. Part 6 of the PAMA Act establishes a price monitoring scheme in respect of charges imposed at various ports in NSW including the Port. Section 77 states the objective of the scheme:

   The objective of the price monitoring scheme established by this Part (the scheme objective) is to promote the economically efficient operation of, use of and investment in major port facilities in the State by monitoring the prices port operators charge users of those facilities, so as to promote a competitive commercial environment in port operations.

3. By s 79, PNO is required to publish, on its website, a list of the Port charges charged by it (other than charges made pursuant to an agreement under s 67). Under s 80, PNO is required to give prior notice of any change in its charges to the Minister (responsible for the administration of the PAMA Act in NSW) and by publication on its website, and must state the reason for the change. Under s 81, PNO must provide an annual report to the Minister in respect of its charges and the revenue received from the charges.

4. PNO publishes a Schedule of Service Charges that apply to the use of the Port, pursuant to the PAMA Act, which includes the navigation service charge and the wharfage charge.

5. It should be noted that s 50 of the PAMA Act requires that the navigation service charge be calculated by reference to the gross tonnage of the vessel using the shipping channel, and not the quantity of coal shipped on the vessel. Further, the Ports and Maritime Administration Regulations 2012 (NSW) (PAMA Regulations) provide for the conversion of a vessel’s volume into a gross tonnage measurement. Accordingly, the cost of shipping one tonne of coal through the Port is not necessarily the prevailing rate of the navigation service charge. There was no evidence before the Tribunal concerning the average conversion ratio of the prevailing navigation service charge into a cost per tonne of coal shipped through the Port in any given period, and no party submitted that the conversion ratio would make any material difference to the issues arising on the review.

6. In Re Glencore Coal, the Tribunal noted that, after PNO assumed the role of Port operator, the price for coal ships using the shipping channels to enter and exit the Port was increased by between approximately 40% and 60% for some vessel types – particularly the larger more efficient vessels (at [16]).

   The declaration of Port services

7. In May 2015, Glencore Coal Pty Ltd (Glencore) made an application for the declaration of the shipping channel and berthing service at the Port. In January 2015, the NCC recommended against declaration, and in January 2016 the Treasurer decided not to declare the Port service. In concluding that criterion (a) (as it then was) was not satisfied, the Treasurer took account of the fact that PNO provided access to vessels shipping coal at published prices. Glencore applied to the Tribunal for review of that decision.

8. On 31 May 2016, the Tribunal published its reasons for deciding to set aside the Minister’s decision and make an order to declare the Port service for a period of 15 years, commencing July 2016 and expiring July 2031: Re Glencore Coal. That order was made on 10 June 2016: Re Glencore Coal Pty Ltd (No 2) [2016] ACompT 7; 309 FLR 358 (Re Glencore Coal No 2). In relation to criterion (a), the Tribunal in Re Glencore Coal concluded that it was bound to apply the test as stated by the Full Court in Sydney Airport (at [100]) and, on that basis, criterion (a) was satisfied (at [112]-[113], [121]). Although unnecessary to its decision, the Tribunal also considered whether criterion (a) would have been satisfied if it were relevant to consider the effect of declaration (with access being provided on reasonable terms and conditions by reason of the declaration) on the promotion of competition, taking into account the likely terms of access in the absence of declaration. The Tribunal concluded that criterion (a) would not have been satisfied on that approach (at [157]). That latter approach is now required to be taken following the amendments made by the 2017 Amendment Act.

9. The Tribunal’s decision in Re Glencore Coal was upheld by the Full Court in Port of Newcastle.

   Arbitration of Port charges

10. As recorded in the NCC Recommendation, Glencore notified the ACCC of an access dispute with respect to the navigation service and wharfage charges at the Port under Division 3 of Part IIIA of the Act. In its arbitral determination made on 18 September 2018, the ACCC set out the following information concerning PNO’s published rates for the two charges, the rates of the charges proposed by each of PNO and Glencore in the arbitration and the ACCC’s determination of the charges (all in 2018 dollars):

Navigation service charge ($ per gross tonne	Wharfage charge ($ per revenue tonne)
PNO 2015 port pricing schedule	0.7286	0.0720
PNO 2018 port pricing schedule	0.7553	0.0746
PNO proposed pricing	1.3643	0.0746
Glencore proposed pricing	0.4139	0.0746
ACCC determination	0.6075	0.0746

1. In determining the initial rates for the navigation service and wharfage charges, the ACCC used a building block model to calculate the maximum allowable revenue that PNO could recover from the two charges. The parties agreed to use the depreciated optimised replacement cost (DORC) methodology to value the Port assets and establish the regulated asset base upon which the capital components of the allowed revenue were to be calculated. As noted in the NCC Recommendation, the rate for the navigation service charge determined by the ACCC represented a significant decrease below the rate published by PNO as at 1 January 2018. The term of the determination made by the ACCC coincided with the term of declaration of the shipping channel service, expiring July 2031 (with the arbitral prices to apply from the commencement of declaration, July 2016). Under the determination, the initial prices were to be adjusted over the declaration period as follows:

   (a)The wharfage charge was to be indexed annually by reference to CPI.

   (b)The navigation service charge was to be reviewed on an annual and five yearly basis. In the annual review, the inputs to the building block model to be reviewed were limited to the forecast cargo volumes and gross tonnage coal vessels and non-coal vessels for the year. The five yearly review allowed review of the primary integers of the building block model including the roll forward of the regulated asset base, rates of depreciation and the useful life of assets, the weighted average cost of capital, forecast capital expenditure and forecast operating expenditure. In both categories of review, account could be taken of material change events, being a change in law that was expected to cause an increase in costs that would cause a change in the charges of more than 2.5%.

2. It is relevant to note that a material area of dispute between Glencore and PNO in the arbitration before the ACCC was the treatment in the regulated asset base of user funded capital contributions, being historic payments made by Port users to the Port owner which funded, amongst other things, channel dredging to allow larger ships to berth at the Port. Glencore argued that user funded contributions should be deducted from the Port's regulatory asset base, upon which the capital components of Port charges were calculated. The deduction of user funded contributions from the regulatory asset base would reduce the amount of capital costs PNO was able to recover through charges for the navigation service charge.

3. PNO applied to the Tribunal for review of the prices that had been determined by the ACCC. In its arbitral determination made on 30 October 2019, the Tribunal determined an initial arbitral price for the navigation service charge of $1.0058 per gross tonne (as at 1 January 2018) and the rate of wharfage charge agreed in the ACCC arbitration was maintained: Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1 (Re Port of Newcastle Operations). In its decision, the Tribunal disagreed with the ACCC’s deduction of historic user funded contributions from the regulatory asset base of the Port.

4. Glencore applied to the Full Federal Court for judicial review of the 2019 arbitral decision of the Tribunal. In August 2020, the Full Court determined that the Tribunal’s decision was affected by errors of law, in failing to take into account the value of expansions of capacity to the shipping channels the cost of which was historically borne by Port users, and remitted the arbitral determination to the Tribunal for re-determination: Glencore Coal Assets Australia Pty Ltd v Australian Competition Tribunal (2020) 280 FCR 194 (Glencore Coal). The Full Court rejected a submission of Glencore that the Full Court should order that the Tribunal’s determination be varied by substituting the navigation service charge as determined by the ACCC. The Full Court concluded that such an order was not one that could be made by the Court (at [317]). The Full Court further concluded that its findings did not mean that, on remittal, the Tribunal was bound to adopt the navigation service charge as determined by the ACCC, stating (at [320]-[321]):

   [320]…the statutory task to be undertaken by the Tribunal required it to have regard to the user contributions and not simply to bring them to account in the manner reasoned by the ACCC in its determination. It is not for this Court on review to undertake that task which involves regard to matters other than user contributions alone.

   [321]Therefore, the question of user contributions and any consequence for the access price arising from a determination of that issue is a matter for the Tribunal and that aspect must be referred back to the Tribunal.

5. PNO has subsequently applied for, and been granted, special leave to appeal the Full Court decision to the High Court.

6. As a consequence of the foregoing reviews and appeals, neither the navigation service charge nor the wharfage charge is the subject of an arbitral determination under Division 3 of Part IIIA of the Act, and the current level of those charges are as set by PNO under the PAMA Act.

   The revocation of the declaration

7. Under s 44J of the Act, the NCC may recommend to the designated Minister that the declaration of a service be revoked if it is satisfied that, at the time of the recommendation, the declaration criteria would prevent the service being declared.

8. Following the amendments made to the declaration criteria by the 2017 Amendment Act, in July 2019 the NCC recommended to the Treasurer that the 2016 declaration of Port services should be revoked. The Treasurer did not publish a decision on that recommendation within 60 days of receiving it. As a result, he was deemed by s 44J(7) of the Act to have made a decision that the declaration be revoked. A revocation decision under s 44J is not reviewable by the Tribunal.

9. We note for completeness that the revocation of the 2016 declaration of Port services does not affect accrued rights. Accordingly, Glencore is able to maintain its application, originally made to the ACCC, for an arbitral determination of the navigation service and wharfage charges at the Port.

   PNO’s current charges

10. The NCC Recommendation records that, in December 2019 (and subsequent to the revocation decision), PNO published on its website new “open access” rates for the navigation service and wharfage charges for vessels using the shipping channel service taking effect from 1 January 2020. The “open access” rates published by PNO, available to any coal vessel entering the Port, are a navigation service charge of $1.0424 per gross tonne and a wharfage charge of $0.0802 per revenue tonne. In addition to publishing “open access” rates on its website, PNO also published, and offered on a standing basis, the Pro Forma Pricing Deeds. As noted earlier, the Port User Pricing Deed was published in December 2019 but was replaced by the Producer Pricing Deed and Vessel Agent Pricing Deed in March 2020. The Pro Forma Pricing Deeds were offered as an agreement in respect of the navigation service charge and wharfage charge pursuant to s 67 of the PAMA Act which could be entered into by, relevantly, coal producers or vessel agents. The Pro Forma Pricing Deeds have a 10 year term. Under each of the three deeds, PNO offered a navigation service charge of $0.8121 per gross tonne and a wharfage charge of $0.0802 per revenue tonne, subject to an annual price adjustment (the greater of CPI increases and 4%) and other adjustment terms. It is convenient to reproduce the NCC’s summary of the terms offered by PNO under each set of arrangements (pp 25-26):

    Developments at the Port since the Revocation of the 2016 Glencore Declaration

    Vessel Open Access Regime

    5.23 In December 2019 PNO published a number of documents which collectively establish formal terms and conditions of open access arrangements at the Port for any vessel seeking to enter the Port and use its facilities. Relevant to the Council's consideration, the open access arrangements provide:

    (a)An initial NSC rate of $1.0424 per GT, with effect from 1 January 2020.

    (b)That PNO may vary its schedule of charges from time to time, including varying or introducing any new fees or charges. PNO will publish a notice of the proposed change on its website at least 10 Business Days before the variation is proposed to take effect.

    (c)As at 13 March 2020, it was PNO's intention to adjust the NSC and wharfage charge for coal vessels annually by an amount equal to the CPI. PNO intends that these charges may also be increased to reflect additional investment by PNO in port services, any increases in government charges or taxes or changes in law and any material change events.

    (d)Established a dispute resolution process (mediation and commercial arbitration).

    Port User Deed

    5.24 In December 2019, PNO published a long term pricing Deed which could be entered into by Vessel Agents, Vessel Operators, Coal Producers and free on board coal consignees involved in the shipment of coal from the Port (the Port User Deed). The Port User Deed has now been superseded and is no longer offered by PNO. Its terms included, in part:

    (a)An initial term of 10 years.

    (b)An initial NSC rate of $0.8121 per GT, with effect from 1 January 2020.

    (c)An 'annual adjustment', being the greater of CPI or 4%.

    (d)Provided for ad hoc variations to the NSC in response to changes in tax or other law which increased PNO's costs or decreased its revenues.

    (e)Provided for ad hoc variations to the NSC in response to material change events (to allow PNO to recover additional costs and to sustain its equity rate of return).

    (f)Established a dispute resolution process (mediation and commercial arbitration).

    (g)Established 'pricing principles' to be applied in mediation and arbitration. The pricing principles include elements consistent with those the ACCC must take into account when making an arbitration determination under Part IIIA of the CCA.

    (h)Established 'excluded disputes' which include disputes about the NSC when the NSC does not exceed the value of $0.8121 plus each subsequent annual adjustment.

    (i)Established an 'initial capital base' being the value established by reference to the depreciated optimised replacement cost as at 31 December 2014 of the assets used in the provision of all of the services at the Port and, unless otherwise agreed by PNO, without deduction for user contributions.

    (j)Established a number of information requirements.

    Producer Deed and Vessel Agent Deed

    5.25In March 2020, PNO published the Producer Pro Forma Long Term Pricing Deed and Vessel Agent Pro Forma Long Term Pricing Deed (collectively, the Deed). The Deed replaced the Port User Deed.

    5.26The Deed maintained the terms described at items 5.23 (a) - (c) and (f) - (j) but removed the specific provisions that permitted variation to the NSC in response to tax and law reform and amended the approach to material change events. The Deed also introduced capital expenditure transparency measures and non-discriminatory pricing provisions.

11. Copies of the Pro Forma Pricing Deeds were in evidence before the Tribunal, together with an extract of PNO’s submission to the NCC explaining those documents. It will be necessary to refer to the terms of the Producer and Vessel Agent Pricing Deeds (together, the Deeds) in more detail below. However, it should be noted that both the Producer and the Vessel Agent Pricing Deeds constitute an agreement under s 67 of the PAMA Act in respect of the navigation service charge, while only the Producer Pricing Deed governs the wharfage charge. The Producer Pricing Deed enables coal producers to agree the navigation service charge and wharfage charge with PNO in respect of “Covered Vessels” which are defined as a vessel that is loaded with and carries out of the Port (a) the producer’s coal (i.e. coal mined from one of the producer’s mines) and no other coal or (b) the producer’s coal and other coal in respect of which PNO has agreed that the navigation service charge and wharfage charge are the same for that other coal as for the producer, and no other coal. The Vessel Agent Pricing Deed enables vessel agents to agree the navigation service charge with PNO in respect of “Covered Vessels” which are defined as a vessel that is loaded with coal at the Port in respect of which the Vessel Agent is named as the vessel's inward agent in the vessel berthing application lodged with PNO in respect of that vessel's visit to the Port.

12. PNO’s submission to the NCC in respect of the Deeds states that PNO has (through their agents) entered into, with effect from 1 April 2020, deeds with all of the coal vessels calling at the Port. As the Deeds have a 10 year term, the Deeds will determine the charges in respect of navigation services supplied at the Port in respect of the covered vessels for the next ten years (in the absence of another declaration which results in lower charges). The terms of those Deeds are the same as the pro forma Vessel Agent Pricing Deed. As a result, PNO has been charging all coal vessels calling at the Port the navigation service charge as determined in accordance with that pro forma Deed. No charges have been levied on any coal vessel under s 50 of the PAMA Act since that date and PNO does not expect to levy any charges under s 50 of the PAMA Act in relation to any coal vessel for the ten year duration of those s 67 agreements. PNO stated that it has made it clear by way of open offer on its website that the same s 67 agreement is available to any other coal vessel that should choose to call at the Port to carry export coal. This would include operators of vessels that should choose to call at the Port in the future in respect of any new mine which is developed over the period of the term of the pricing arrangement offer.

1. First, at this time it is not certain that a pricing arbitration conducted under Division 3 of Part IIIA of the Act would exclude historic user funded contributions in the valuation of the capital base of the Port. As discussed earlier, the ACCC determined that such costs should be excluded, but another Tribunal determined that the costs should not be excluded. The Tribunal’s determination was set aside by the Full Court on the basis of errors of law, and the determination was remitted to the Tribunal for reconsideration. The Full Court’s decision is currently on appeal by PNO to the High Court. Even if the appeal is dismissed, the Full Court’s decision does not pre-determine the Tribunal’s reconsideration of the treatment of historic user funded contributions or its assessment of the value of such contributions.

2. Second, even if it be the case that a pricing arbitration conducted under Division 3 of Part IIIA of the Act would exclude historic user funded contributions in the valuation of the capital base of the Port whereas a pricing arbitration under the Deeds would not, that does not demonstrate that prices set under the Deeds are likely to have a negative impact on the conditions or environment for competition in the coal tenements market on a forward looking basis. Critically, and as NSWMC submitted, historic user funded contributions have been built into PNO’s current rate of the navigation service charge. The available evidence does not demonstrate that the current rate of the navigation service charge is having a negative impact on the competitive environment in the coal tenements market.

3. Third, looking forward, the pricing principle in paragraph (e) of cl 4.2 requires an arbitrator to take account of the economic value to PNO of investments that a person has agreed to undertake. The Tribunal expects that a Port user would not in the future agree to fund capital investments at the Port without first reaching an agreement with the Port about the financial return on the investment, whether by way of an adjustment to the Port charges or otherwise. Further, any future user funded capital investments at the Port would be required to be taken into account by the arbitrator in any dispute with respect to future price variations. In that respect, future user funded contributions can be expected to be treated in the same manner in an arbitration conducted under the Deeds and in an arbitration conducted under Division 3 of Part IIIA of the Act.

4. It follows, in the Tribunal’s view, that the differences identified by NSWMC between the pricing principles defined in cl 4.2 of Sch 3 to the Deeds and the equivalent principles that must be applied in an arbitration under Division 3 of Part IIIA will not have a negative impact on competition in the coal tenements market. While the inclusion or exclusion of historic user funder contributions in the capital base of the Port is the subject of significant dispute between PNO and coal producers who use the Port, it has not been demonstrated that the financial magnitude of the difference is likely to impact negatively on competition in the coal tenements market.

5. For completeness, the Tribunal notes another potential difference between the pricing principles defined in paragraph (b) of cl 4.2 of Sch 3 to the Deeds and the equivalent principles that must be applied in an arbitration under Division 3 of Part IIIA. The difference concerns the ability of the arbitrator to re-open the DORC valuation of the Port assets by, for example, re-assessing the optimised replacement cost of the Port assets at some future point in time. Under paragraph (b) of cl 4.2 of the Deeds, the capital base upon which PNO’s capital return is to be determined is described as “the value of all assets comprising its Initial Capital Base and any updates thereof, including efficient additional capital investments”. The meaning of that phrase may be open to debate. The Tribunal understands the phrase to indicate that the arbitrator may update the DORC valuation over time by reference to depreciation, efficient additional capital investments and asset disposals. It is less clear whether the word “update” allows the arbitrator to re-assess the optimised replacement cost of the Port assets, including by deducting the value of redundant assets. In contrast, the equivalent principles that must be applied in an arbitration under Division 3 of Part IIIA do not expressly restrict the ability of the ACCC to re-assess the value of the capital base upon which the capital return is to be determined. While the Tribunal has identified this point of possible difference between a price arbitration under the Deeds and a price arbitration under Division 3 of Part IIIA, the Tribunal places no weight upon that consideration in making its decision. That is for two reasons, which may be related. First, NSWMC made no submissions in respect of that point of possible difference. Second, the question whether and in what circumstances it would become appropriate, in the context of a price arbitration under Division 3 of Part IIIA, to re-open the DORC valuation of the Port assets by, for example, re-assessing the optimised replacement cost of the Port assets at some future point in time is a complex question. It raises a number of competing considerations having regard to the principles that must be applied under Division 3 of Part IIIA. To contemplate such a re-assessment occurring in the medium term would involve considerable speculation. In the Tribunal’s view, such speculation does not materially bear upon the Tribunal’s present assessment of criterion (a).

6. NSWMC also criticised the dispute mechanisms in the Deeds, submitting that they are not reasonable terms and conditions of access and are no substitute for arbitration under Part IIIA of the Act. In that respect, NSWMC observed that the previous arbitration conducted by the ACCC on the application of Glencore resulted in the adoption of a regulated asset base and building block methodology to determine allowed revenues and prices, with disclosure of relevant financial inputs to the model. NSWMC submitted that arbitration in accordance with the ACICA Arbitration Rules (as stipulated by cl 3.3 of Sch 3 to the Deeds) does not necessitate any particular methodology to determining prices or disclosure of financial information.

7. The Tribunal agrees that the dispute resolution provisions of the Deeds do not mandate the use of a building block methodology to determine allowed revenues and prices. However, nor does arbitration under Division 3 of Part IIIA. While a building block methodology is commonly used by regulatory authorities when seeking to determine efficient costs and prices, and was used by the ACCC in the Glencore initiated arbitration, such an approach is not the only methodology that can be applied. For the reasons explained above, the pricing principles required to be applied to resolve a pricing dispute under the Deeds follow closely the principles to be applied in an arbitration under Division 3 of Part IIIA. Further, the pricing principle in cl 4.2(b), which directs attention to Port’s capital base, a reasonable rate of return on capital and a return of capital over the term of the Port lease, lend themselves to a building block methodology for determining allowed revenue and prices.

8. As to the disclosure of information for the purposes of any arbitration, two matters can be noted. First, and as referred to earlier, under the Deeds PNO has undertaken to provide to the coal producer or vessel agent (as applicable) on an annual basis a forward looking 5 year forecast of its projected capital expenditure that may impact the navigation service charge and meet with the coal producer or vessel agent to discuss those forecasts and any potential associated variations to that charge. Further, when proposing any variation to the navigation service charge, PNO has undertaken to provide a report prepared by an independent appropriately qualified professional which sets out the opinion of that person, and the material facts (including all relevant cost, capital expenditure and revenue data) on which that opinion was based, as to whether the proposed variation is consistent with the pricing principles. Second, the ACICA Arbitration Rules afford an arbitrator broad powers in relation to the procedure to be applied in an arbitration, including the power to require the production of relevant documents and information.

9. For those reasons, the Tribunal considers that the dispute mechanisms in the Deeds are consistent with reasonable terms and conditions of access and are reasonable substitutes for arbitration under Part IIIA of the Act.

   Overall conclusions about PNO’s pricing behaviour

10. The Tribunal draws the following three conclusions from the above discussion of the evidence of PNO’s pricing behaviour to date. First, it can be inferred that PNO considers that its long run profits will be maximised by setting the rate of the navigation service charge in accordance with the Pro Forma Pricing Deeds (and the “open access” arrangements if a Port user is unwilling to agree to the terms of the Pro Forma Pricing Deeds). It can be assumed that the prices so charged cover PNO’s assessment of its long run costs. Second, the Pro Forma Pricing Deeds provide a reasonable degree of pricing certainty to coal producers. While the Deeds allow PNO to propose adjustments to the rate of the navigation service charge, any such adjustment is subject to arbitration applying pricing principles which are similar to those governing arbitrations under Division 3 of Part IIIA. Third, there was no substantive evidence before the NCC that the prices currently being charged by PNO under its open access arrangements or the Pro Forma Pricing Deeds are having any detrimental impact on investment and competition in the coal tenements market.

    Comparing the effect of access with declaration to access without declaration

11. As explained above, criterion (a) requires the Tribunal to assume that declaration of the shipping channel service will result in access on reasonable terms and conditions. The matter that must be assessed is whether that outcome will promote a material increase in competition in a dependent market (here, the coal tenements market). The enquiry necessarily focusses on the future market and commercial circumstances without declaration in order to assess whether the effect of declaration would promote a material increase in competition.

12. The Tribunal accepts that the rate of the navigation service charge across the medium term may differ depending on whether the shipping channel service is declared or not declared. However, as noted by the NCC (at [7.93], [7.122]), it is not certain whether the rate will be higher or lower without declaration or with declaration.

13. Without declaration, for at least the current term of the Vessel Agent Pricing Deeds, the navigation service charge will largely be determined in accordance with those Deeds (as all coal vessels presently using the Port are covered by those Deeds). Under those arrangements, the starting rate of the navigation service charge is the mid-point of the ACCC and Tribunal arbitrated rates. That rate implicitly includes a partial return on historic user funded contributions. The rate of the navigation service charge is subject to an annual increase of the greater of CPI and 4%. There is the possibility of other adjustments, but those adjustments are subject to arbitration. The rate to be charged after the expiry of the Deeds is not known, but the Deeds enable a period of negotiation over price during the third last year of the term, affording access seekers an opportunity to apply for declaration at that time if they consider that the price proposed by PNO is unreasonable.

14. With declaration, the precise level of the navigation service charge is uncertain. Criterion (a) requires the Tribunal to assume that the rate will be reasonable. The ACCC has previously determined that a reasonable rate of navigation service charge should be based on the DORC value of the Port assets excluding the value of historic user funded contributions (as assessed by the ACCC), while the Tribunal has previously determined that a reasonable rate of navigation service charge should be based on the DORC value of the Port assets without that deduction. The Tribunal considers that a reasonable rate of navigation service charge as a result of declaration lies within those bounds, but it is unnecessary to be more precise. The NCC formed the same conclusion (at [6.35]).

15. For the purposes of its evaluation, the Tribunal accepts that the rate of the navigation service charge in the future may be higher if the shipping channel service is not declared by reason of the inclusion of a return on historic user funded contributions. However, the inclusion or exclusion of a return on the value of historic user funded contributions is largely irrelevant to the assessment of criterion (a). It is not sufficient for NSWMC to demonstrate that reasonable terms and conditions of access to the shipping channel service as a result of declaration would be at a price lower than access without declaration. It is necessary to demonstrate that, in comparison to reasonable terms and conditions of access to the shipping channel service as a result of declaration, the terms of access without declaration would negatively impact the conditions or environment for competition on a forward looking basis. NSWMC did not submit that the current rate was such as to negatively impact the conditions or environment for competition in the coal tenements market, and there is no evidence to suggest that the current rate is having any such effect.

16. The principal argument advanced by NSWMC on this application is that declaration would remove, or materially reduce, the “hold-up” risk of investment in the coal tenements market in the Hunter Valley and thereby promote a material increase in competition in that market. NSWMC argued that, in the future without declaration, participants in the coal tenements market will face higher levels of uncertainty with respect to the navigation service charge which will increase the risk associated with making investments, as compared to the future with declaration. NSWMC argued that the elevated risk increases the likelihood that investors will delay their investments until the uncertainty is resolved and that delay reduces allocative efficiency and the productivity of the Australian economy.

17. The Tribunal accepts that the asserted “hold-up” risk of investment will not be present in circumstances where access to the shipping channel service is given on reasonable terms and conditions as a result of declaration. Having considered the available evidence concerning the Port, the coal export market and the coal tenements market as set out above, however, the Tribunal is not persuaded that the “hold-up” risk of investment will arise in the absence of declaration. That is for five reasons.

    Absence of financial analysis

18. First, NSWMC’s hold-up risk contention was not supported by any empirical evidence concerning the coal tenements market. NSWMC failed to present to the NCC any financial or quantitative evidence concerning the coal tenements market conditions, structure, prices or expected returns. No financial evidence was presented as to how investment decisions are made in the coal tenements market and how Port charges figure in investment decisions.

19. The only evidence relied on by NSWMC in support of its hold-up risk contention consists of generalised assertions by various coal producers which were summarised in the NCC Recommendation as follows:

    (a)Yancoal submitted that PNO’s prices were “inefficiently high” because they include a return on user funded contributions (at [6.17](a)). Yancoal acknowledged that PNO’s prices will not cause coal volumes to decrease (at [6.18]), but submitted that the ability to increase prices in the future gives rise to a significant hold-up problem for investment in the coal tenements market (at [6.20]).

    (b)Malabar Resources and Bloomfield Group both submitted that PNO should not be entitled to charge a price that includes a return on user funded contribution (at [6.21] and [6.22]. They also submitted that the risk of PNO levying higher navigation service charges makes the Hunter Valley an increasingly unattractive market for coal mining investment (at [7.106]) and [7.142]).

    (c)Glencore submitted that the differential between the navigation service charge determined by the ACCC (being $0.61 per gross tonne) compared to the current navigation service charge being offered by PNO is likely to give rise to a risk of hold-up of investment in development stage coal tenements in the Hunter Valley region (at [7.141]).

    (d)Port Waratah Coal Services submitted that the inability to forecast shipping channel access charges and future returns with any degree of certainty increases the potential for hold-up of new investments or cancellation of proposed investments (at [7.143]).

20. A central aspect of the complaints made by the coal producers was that PNO’s current prices (particularly the navigation service charge) include a return on historic user funded contributions, which coal producers consider is unjustified and involves a transfer of economic surplus in favour of PNO. The Tribunal infers that coal producers wish to prevent such a transfer and perceive that declaration of the shipping channel service under Part IIIA is a means to that end. However, a transfer of economic rents between participants in a supply chain does not necessarily involve any allocative efficiency effects in dependent markets, and does not necessarily involve negative impacts on competition in dependent markets. For the reasons discussed above, the inclusion or exclusion of a return on the value of historic user funded contributions is largely irrelevant to the assessment of criterion (a).

21. Absent from the evidence presented to the NCC by NSWMC and the coal companies referred to above is any financial analysis of the impact of the rates of the navigation service and wharfage charges on returns in the coal mining sector in the Hunter Valley. The Tribunal expects that coal exploration and mining companies regularly undertake detailed financial analysis and forecasting in respect of all significant investments, whether in respect of minerals exploration, mine development or production. The Tribunal also expects that, as the peak industry body for the NSW mineral’s industry, NSWMC would regularly collate financial and economic analysis of that kind to assist in policy development and industry advocacy. Despite that, no such evidence was presented to the NCC. The Tribunal considers that generalised assertions are no substitute for proper financial and economic analysis. For that reason, the Tribunal places little weight on the assertions made.

    PNO’s incentives

22. Second, it is not in PNO’s long-term interests for Port users to experience such uncertainty around access charges at the Port if this risks significantly less investment in coal mining activity in the Newcastle catchment. As discussed earlier, PNO’s position within the Hunter Valley coal supply chain, in which the coal export market is effectively competitive and coal producers are price takers, significantly constrains PNO’s pricing behaviour. PNO has an incentive to set prices in a way that has regard to its ability to maximise its expected profits over the term of the lease, which would require it to take account of the negative effect on future investment of any attempt to extract economic rents through price increases in the short term.

    PNO’s pricing behaviour and the effect of the Deeds

23. Third, PNO’s pricing behaviour since the revocation of the previous declaration is inconsistent with NSWMC’s principal concern.

24. The “open access” rate of the navigation service charge published by PNO in December 2019 was set at a rate equivalent to that determined as reasonable by the Tribunal (albeit under a decision that was set aside by the Full Federal Court).

1. More significantly, PNO also offered access terms under the Pro Forma Pricing Deeds. By those Deeds, PNO agrees to bind itself, and has bound itself, for a period of 10 years to a starting rate of navigation service charge which is the mid-point of the rates determined by the ACCC and the Tribunal. The Deeds provide for an annual increase in the navigation service charge and other adjustments to be made pursuant to arbitration to be conducted pursuant to pricing principles which are similar to those that would be applied in an arbitration under Division 3 of Part IIIA. PNO has entered into Vessel Agent Pricing Deeds in respect of all of the coal vessels calling at the Port.

2. Both the open access arrangements and the Pro Forma Pricing Deeds make provision for dispute resolution. Those arrangements assist coal producers in mitigating the risks that may otherwise arise from pricing and other uncertainties at the Port.

   Investment risks in the coal tenements market

3. Fourth, the navigation service charge represents only a small proportion of the overall cost of the production and sale of coal for export from the Hunter Valley. The risks associated with uncertainty over access charges for the shipping channel service would not contribute significantly to an investor’s expected valuation of future mining projects in the Newcastle catchment.

4. The NCC Recommendation included publicly available information about the average production costs per tonne disclosed by Hunter Valley coal producers in the 2019 reporting period, which were as follows ([7.120]):

Glencore	BHP	Peabody Energy	Whitehaven Coal	Yancoal
$47.00	$69.94	$47.17	$67.00	$61.00

1. As observed by the NCC, the navigation service charge represents only a small component of the overall cost of the production and sale of coal for export from the Hunter Valley (at [7.118]). The NCC also observed (at [7.126]) that coal producers face commercial uncertainty from a range of factors including coal (export) prices, labour costs and taxes. The NCC concluded that the investment uncertainty that arises from those factors is far more significant to investment decisions than any uncertainty over charges for the shipping channel service (given its relative proportion of production costs or sale prices), and that uncertainty associated with the charges for the shipping channel service would not contribute significantly to an investor’s expected valuation of future mining projects in the Newcastle catchment.

2. It would have been helpful if the NCC Recommendation had contained further information and data concerning fluctuations in relevant costs, prices and taxes over time, correlated with investments in the coal tenements market in the Hunter Valley. However, the NSWMC did not provide financial data to the NCC to support its assertions with respect to investment uncertainty and the Tribunal has no reason to doubt the NCC’s conclusions with respect to the relative insignificance of the navigation service charge on investment decisions in the coal tenements market.

3. The Tribunal does not accept, in absolute terms, PNO’s submission that the fact that the navigation service charge is only a small proportion of the overall cost of production and sale of coal means that the charge could never impact negatively on investment decisions in the coal tenements market. The Tribunal agrees with the view expressed by the NCC (at [7.121]) that a range of financial data will inform a decision to invest in the coal tenements market and that expectations of cost are a material consideration that inform expectations of profitability. Nevertheless, the relative size of the navigation service charge compared to the overall cost of production and sale of coal is relevant to an assessment of the materiality of the “hold-up” risk, particularly in light of PNO’s pricing behaviour and the effect of the Pro Forma Pricing Deeds that have been entered into. Taken together, the Tribunal considers that the prospect of PNO increasing the rate of the navigation service charge to an extent that would give rise to a material effect on future investment decisions is remote.

   The threat of future declaration

4. Fifth, notwithstanding the Tribunal’s decision in the present proceeding to affirm the Treasurer’s decision not to declare the shipping channel service, PNO will continue to face an ongoing threat of declaration which will be a continuing constraint on PNO’s commercial behaviour. That threat will be most relevant in the third last year of the current Vessel Agent Pricing Deeds, at which time the parties have an opportunity to negotiate an extension of the term of the Deeds. PNO’s proposed terms of access at that time will be able to be assessed by relevant Port users, and the negotiations will occur under the threat of a renewed application for declaration.

   Conclusion on criterion (a)

5. Having regard to all of those matters, the Tribunal is not persuaded that, across the medium term, any difference between the rate of the navigation service charge with and without declaration would have any material impact on the conditions or environment for competition in the coal tenements market. In particular, the Tribunal is not persuaded that, without declaration, participants in the coal tenements market face a material “hold-up” risk of investment across the medium term by reason of PNO increasing the rate of the navigation service charge. It follows that declaration would not affect any such risk.

6. In all the circumstances, the Tribunal is not satisfied that access (or increased access) to the shipping channel service, on reasonable terms and conditions, as a result of a declaration of the service would promote a material increase in competition in the coal tenements market or any other dependent market. In those circumstances, the Treasurer’s decision not to declare the shipping channel service must be affirmed.

   G.       CONSIDERATION OF CRITERION (D)

7. NSWMC’s submissions with respect to criterion (d) were dependent on the Tribunal being satisfied in relation to criterion (a). In circumstances where the Tribunal is not satisfied in relation to criterion (a), there is no need to consider criterion (d) further.

8. Nevertheless, the Tribunal records its general agreement with the following findings of the NCC with respect to the mandatory considerations in s 44CA(3):

   (a)In relation to investment in Port infrastructure (used to provide the shipping channel service), the risk of error (thereby deterring future investment) may arise in both regulatory arbitration and in commercial arbitration and, while it is possible that declaration of the shipping channel service could have an adverse effect on efficient investment in Port infrastructure, it is possible that this risk is also present absent declaration (at [10.29]). On balance, it is not clear that the risk of deterring future investment in the Port is substantial (at [10.30]).

   (b)In relation to investment in the coal tenements market, there is a range of commercial and regulatory uncertainties that will impact on investment decisions and, relative to these, uncertainty arising from the difference in the pricing of access to the shipping channel service with and without declaration would be unlikely to be material (at [10.38]).

   (c)The administrative and compliance costs that would arise if the shipping channel service were declared are unlikely to be materially different if the service were not declared (at [10.44]).

   H.       CONCLUSION AND COSTS

9. In conclusion, for the reasons given above, the Tribunal affirms the Treasurer’s decision not to declare the shipping channel service at the Port.

10. On the assumption that NSWMC would not be successful in its application for review, PNO applied for an order of costs against NSWMC under s 44KB(1). At the hearing of this matter, PNO and NSWMC made submissions as to whether the Tribunal should exercise a discretion to award costs against NSWMC and in favour of PNO. Neither party addressed the question whether s 44KB empowered the Tribunal to award costs in a review of a decision not to declare a service under s 44K(2), as opposed to a review of a declaration under s 44K(1).

11. Section 44KB relevantly provides as follows:

    44KB Tribunal may order costs be awarded

    (1)If the Tribunal is satisfied that it is appropriate to do so, the Tribunal may order that a person who has been made a party to proceedings for a review of a declaration under section 44K pay all or a specified part of the costs of another person who has been made a party to the proceedings.

    (2)…

    (3)If the Tribunal makes an order under subsection (1), it may make further orders that it considers appropriate in relation to the assessment or taxation of the costs.

    (4)The regulations may make provision for and in relation to fees payable for the assessment or taxation of costs ordered by the Tribunal to be paid.

    (5)If a party (the first party) is ordered to pay some or all of the costs of another party under subsection (1), the amount of the costs may be recovered in the Federal Court as a debt due by the first party to the other party.

12. It can be seen that s 44KB(1) empowers the Tribunal to order that a person who has been made a party to proceedings for a review of a declaration under section 44K pay all or a specified part of the costs of another person who has been made a party to the proceedings. Thus, the power is only enlivened in the context of a proceeding for a review of a declaration under section 44K.

13. Under s 44H(1), the Minister is empowered to make one of two decisions: to declare the relevant service or not to declare the relevant service. The right to apply to the Tribunal under s 44K to review the designated Minister’s decision reflects the binary decision-making power of the Minister under s 44H. Subsection 44K(1) provides that, if the designated Minister declares a service, the provider may apply in writing to the Tribunal for review of the declaration. Subsection (2) provides that, if the designated Minister decides not to declare a service, an application for review of the designated Minister’s decision may be made by the person who applied for the declaration recommendation.

14. On its literal terms, s 44KB(1) refers only to a proceeding for a review of a declaration; it does not refer to a proceeding for a review of a decision not to declare a service. The present proceeding is of the latter kind. There was no declaration and, accordingly, this proceeding does not involve a review of a declaration.

15. There is no apparent ambiguity in the language of s 44KB(1). If the legislature had intended the power to award costs in s 44KB(1) to extend to proceedings under s 44K(2), the subsection could have been expressed in a number of ways to refer to proceedings under either ss 44K(1) or (2) – for example “proceedings for a review of a decision of the designated Minister under section 44K”.

16. There is no obvious reason why the legislature would confine s 44KB(1) to proceedings for a review of a declaration and exclude proceedings for a review of a decision not to declare a service. In that regard s 44KB(1) can be contrasted with a number of other provisions, such as ss 44I(2) and 44KA(2), which also apply when there is an application and proceedings for a review of a declaration. Those sections empower the Tribunal to make an order staying the operation of the declaration, whereupon the declaration will not begin to operate until the Tribunal makes its determination on the review. Section 44W(4A) is to similar effect.

17. The extrinsic materials do not assist in explaining the purpose of the limitation in s 44KB(1). Section 44KB was inserted into the Act by the 2010 Amendment Act. Indeed, the extrinsic materials suggest that the limitation was unintentional. The Explanatory Memorandum to the Trade Practices Amendment (Infrastructure Access) Bill 2009 explained the object of the section as follows (at [5.8] and [5.14]):

    5.8Unlike most court proceedings, and unlike matters arising in the Tribunal in relation to the regulation of gas pipelines, there are no provisions for costs to be paid or awarded with respect to applications to the Tribunal for review of a decision-maker’s decision in relation to a declaration application. Requiring unsuccessful applicants to pay costs should reduce incentive for delaying tactics, frivolous review applications or other inappropriate behaviour. This amendment was proposed by the NCC in its Annual Report 2007-08 as a means to reduce the substantial costs and delays currently experienced during review proceedings.

    …

    5.14The Tribunal has a discretion to order that a party pays all or part of the costs of another party in a review of a declaration decision under section 44K.

18. Paragraph 5.8 assumes that the proposed s 44KB(1) will apply to “applications to the Tribunal for review of a decision-maker’s decision in relation to a declaration application”. Paragraph 5.14 likewise assumes that the proposed section will apply to “a review of a declaration decision under s 44K”. The language used in the Explanatory Memorandum is sufficiently broad to cover reviews under ss 44K(1) and (2). However, that language is not the statutory language.

19. Section 44KB was considered by the Tribunal in Re Glencore Coal No 2. Like the present proceeding, Re Glencore Coal was a proceeding under s 44K(2) for review of a decision made by the designated Minister (the Acting Federal Treasurer) not to declare the shipping channel service at the Port. Glencore was successful in its application for review and applied for an order of costs against PNO. The Tribunal declined to order costs. It appears that no party questioned the power of the Tribunal to make an order for costs under s 44KB(1) in a proceeding for review of a decision not to declare a service. The Tribunal did not address the issue and proceeded on the assumption that s 44KB(1) empowered it to make an order for costs, commenting that: “Clearly s 44KB was inserted to provide the Tribunal with a discretion to order costs in reviews of decisions of the Minister to declare, or not to declare, a service under Pt IIIA of the Act” (at [5]).

20. As presently advised, the Tribunal doubts that it has power under s 44KB(1) to make an order for costs in this proceeding, which is a proceeding for review of the Treasurer’s decision not to declare the shipping channel service under s 44K(2). However, as neither party addressed the question of power during the hearing, the Tribunal will afford PNO and NSWMC the opportunity to make further written submissions on the question of power and any supplementary submissions on the exercise of the Tribunal’s discretion (should the Tribunal reach the view that it has power to make an order for costs).

I certify that the preceding two hundred and seventy eight (278) numbered paragraphs are a true copy of the Reasons for Determination herein of the Honourable Justice O'Bryan, Dr D Abraham and Prof K Davis.

Associate:

Dated: 4 August 2021