Obscured By Clouds – Part One

By Paul Bugler

The original plan announced by the Queensland Premier in June this year was to sell all QR’s non-passenger assets, both the freight business and the non-metropolitan track. This was modified in August with a commitment to sell the “coal network – above and below rail” and to "examine" the sale of the other freight businesses – but not the remaining Queensland non-metropolitan network. The Premier also indicated an intention to negotiate with the federal government to have ARTC take over the majority of the narrow gauge network. It is an intriguing mix that might be on offer.
The jewel in the crown is the coal business, which has some assets exclusively related to coal. The Goonyella and Newlands systems have the greatest potential to closely resemble the highly efficient Western Australian iron ore railways. The benefit of having a dedicated coal railway is, unfortunately, diluted in the Moura system and even more in the Blackwater system which uses the main north coast line for a third of the journey.
One might imagine that the coal industry would be a keen purchaser of at least the Goonyella and Newlands systems, both above and below rail. This would sit well with the industry-run Dalrymple Bay Coal Terminal, allowing a significantly improved opportunity to manage both short term scheduling and longer term investment decisions. Things are a little less simple for the Newlands system as the Abbot Point Coal Terminal is run by a single coal producer, Xstrata, rather than by an industry consortium. Even so, Abbot Point provides services to other producers and there again seems to be the opportunity for bringing improvement to the system through combining ownership if Xstrata was willing to throw the port into a broader industry management.
But things are never that simple. Even in the Goonyella system, BHP Billiton owns Hay Point Coal Terminal and unlike Abbot Point, provides services only for its own mines. It is not clear where BHP would gain an advantage by closely integrating with other producers through a common ownership of the Hay Point facility. One could imagine that BHP might have mixed feelings about an industry owned network and train operator. And there is also the small matter of above rail competition to consider. After years of competition existing in theory only, at last a second operator is running in the coalfields. One can imagine several parties finding the prospect of an industry-owned QR uncomfortable.
And those are the simplest issues. The further one moves away from the pure minerals railway model, such as the Blackwater system, the less likely it is the coal industry will want to own the network, let alone non-coal above rail assets. In this context, the Blackwater system would be a real headache having both passenger and non-coal freight in abundance. So the coal industry might not be so interested after all, especially if the government doesn’t want to problem of untangling the different assets. But more on this next week...

*Paul Bugler has worked in the rail industry for over 30 years. In recent years he has been influential in the area of access regulation and has been heavily involved in business development in the rail freight area with the development of open access. In 2009 he formed Lacertus Verum, a consulting firm offering rail management services particularly in the areas of business development, infrastructure access and contract negotiation. www.lacertusverum.com.au

To read Part Two click here
To read Part Three click here