<span class="" id="parent-fieldname-description"> The imminent implementation of new rail access arrangements for the NSW Hunter Valley coal chain is a vital step forward to aligning the commercial arrangements with the growing demand for coal haulage capacity. </span> <p> By Paul Bugler*</p><p>The major rail track owner in the Hunter Valley, Australian Rail Track Corporation (ARTC) has been working with coal producers and service providers in the coal chain to introduce a radically different commercial model for access to the rail network. These arrangements will be introduced in the first quarter of 2010, with a number of coal producers negotiating the new contracts with ARTC. In addition, the ACCC is reviewing ARTC’s Hunter Valley access undertaking that will provide the regulatory framework for the new model.<br />The aim of the new model is to fix the disconnect that arises under the current arrangements and properly align the commercial relationships with the appropriate parties. The problem with the current model is that the access contracts are between ARTC and the train operators. While this works well for many rail traffics around Australia, it falls down when there is a requirement for significant investment in the track to meet increased demand, coupled with competition between bulk haul train operators so that they are not able to sign up to long-term commitments to pay for the investment. The structure of those contracts was not related to specific coal hauls but of a more general nature, thus further distancing the investor from those who have a direct interest in the investment. This potentially blocks investment in the track – an undesirable outcome when coal volumes are expected to double in the next few years.<br />The new commercial model realigns the relationships. Instead of contracting with train operators, ARTC is contracting directly with coal producers, providing them with a specific amount of track capacity in return for a commitment to pay for the track, including new investments. This provides certainty to coal producers and ARTC that was not possible previously.<br />ARTC will still contract with train operators, but the new operator contracts deal with the technical interface between track owner and train operator rather than commercial matters. The train operator contracts are linked to the producer contracts so that the operator uses the capacity committed to each producer to haul that producer’s coal. This removes the problem that producers would otherwise be responsible for the train operators as sub-contractors – a responsibility they are reluctant to shoulder.<br />The new model also fits in well with the other commercial changes being put in place by the ports and train operators to achieve the contractual alignment that is the cornerstone for securing the long-term capacity requirements of the coal chain.<br />As with any new system, chances are that it will require fine tuning. But it is good to see a problem being addressed imaginatively and constructively with every prospect of delivering the track capacity required by the coal chain.</p><p>*Disclosure: the author is currently engaged by ARTC as a consultant in relation to certain aspects of the new access arrangements for the Hunter Valley coal chain.</p><p> </p>
