Queensland’s declaration triple-header takes shape

July 2018

The three, newly minted, economic criteria governing the ‘declaration’ of infrastructure services under Part IIIA of the Competition and Consumer Act 2010 (CCA) are being given a thorough work out in an unprecedented, triple-header declaration review being undertaken by Queensland’s Competition Authority (QCA).

In the 23 year history of the Competition and Consumer Act 2010 (CCA) framework for third party access, no infrastructure service in Queensland has been found to satisfy all the criteria for declaration. Side-stepping the national regime, the state of Queensland deemed three services to be declared and developed bespoke regimes for the economic regulation of their terms of access. Those declared services are:

  • below rail services provided by Aurizon’s central Queensland coal network;
  • coal handling services provided at Dalrymple Bay coal terminal (DBCT); and
  • below rail services provided by Queensland Rail’s network, comprising all Queensland’s rail lines other the coal network operated by Aurizon.

Following legislative change in 2010, the declared status of each these services is set to expire in September 2020, and the QCA is charged with undertaking a review and recommending whether each should continue to be declared. The Queensland Treasurer will be the ultimate decision-maker, upon recommendation from the QCA.

 Source: Shutterstock

Source: Shutterstock

The declaration criteria to be applied by the QCA are essentially the same as those under the national access regime set out in the CCA, but with two important procedural distinctions. First, the declaration review body (normally, the independent National Competition Council) is the same as that which regulates the services concerned. A QCA recommendation that any of the services should no longer be declared would see it voting to discontinue a substantial portion of its existing functions. Expect close scrutiny of the QCA’s reasoning for any hint of self-interest.

Second, there is no right for interested parties to seek merit-based review of the Treasurer’s decision. In contrast, most declaration decisions made under the national regime have been referred for merits review by the Competition Tribunal and, in several instances, judicial review by the Full Federal Court. On three occasions, critical elements of the declaration regime have been decided by the High Court. Expect close scrutiny of the QCA’s reasoning (or, if different, that of the Treasurer) for any hint of procedural or legal irregularity.

 Source: Dalrymple Bay Coal Terminal Pty Ltd

Source: Dalrymple Bay Coal Terminal Pty Ltd

The Queensland process presents complex issues, each to be assessed against new criteria. The service providers have all contended their particular service should no longer be declared, but each cites different combinations of criteria that are said not to be satisfied:

  • Aurizon contends that its continued declaration does not satisfy the criterion (d) net public interest test, citing evidence of ‘regulatory failure’ under the present regime;
  • DBCT Management maintains that its service does not satisfy the material promotion of competition test under criterion (a), the criterion (b) natural monopoly test, and that its continued declaration is not in the public interest, as required by criterion (d); and
  • Queensland Rail contends that its heavily subsided services do not satisfy declaration criteria (a) or (d), that competition from road may mean its rail lines do not satisfy the criterion (b) natural monopoly test, and that five of its eight rail systems do not meet the Queensland significance test under criterion (c).

All four criteria must be satisfied for a declaration recommendation to be made.

The various submissions from service providers and users are supported by legal opinions and expert economic reports, as well as a second round of further material submitted in response to the first. Come late July, the QCA will slip into ‘regulatory purdah’ to consider all the material, with its eagerly awaited, precedent-setting draft decision anticipated by December 2018.

HoustonKemp’s economic experts are advising DBCT Management and Queensland Rail throughout the declaration review, and have filed four expert reports for consideration by the QCA.