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Emu Bay Railway (Operation and Acquisition) Bill 2009
SECOND READING SPEECH
Mr Speaker
I move that the Bill now be read a second time.
Mr Speaker, this Government recognises that rail is, and should remain, a critical
part of the Tasmanian freight logistics sector.
Rail currently carries a significant portion of Tasmanias total freight
task.
Rail services transport mineral concentrates on the West Coast, cement from
Railton to Devonport, coal from the Fingal valley to Burnie and Railton, newsprint
from Boyer to Burnie and containerised freight across the rail network linking
Hobart to Bell Bay and Burnie.
In total, rail carries over 2.5 million tonnes of freight per annum. To give
Members a sense of the size of the task, this is the equivalent of approximately
480 heavy vehicle truck movements every day of the year.
For some freight, such as cement, rail is the only viable means of land transport
for businesses to deliver their products to the national market.
It is obvious that the cessation of rail services in Tasmania would have a serious
impact on the viability of a number of important industries, in particular the
mining sector on the West Coast.
It would lead to a shift of freight from rail and onto the roads, with the related
concerns this brings with regard to the safety of other road users.
And it would threaten the jobs of some 140 loyal Pacific National Tasmania employees,
many of whom have spent a significant portion of their lives working on the
Tasmanian railway.
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It is for these reasons, Mr Speaker, that in response to Ascianos announcement
on 10 June this year that it intended to cease Pacific National Tasmanias
operations on the West Coasts Melba Line by 30 June 2009, the Government
decided that all reasonable steps had to be taken to ensure that that rail continued
to be a viable transport option for industry in this State. Following over two
and a half months of detailed negotiations the Tasmanian Government and Pacific
National successfully concluded a Business Sale Agreement for the purchase of
Pacific Nationals Tasmanian rail business for the previously announced
price of $32 million. The Government would of course have preferred not to have
been put in the position where the purchase of the rail business was the only
realistic option to ensure the continued operation of rail of services. The
Government has said on a number of occasions that its clear preference was to
facilitate the sale of the business to a third party operator and had committed
to assisting Asciano in this task. Unfortunately, Asciano had determined that
it wished to exit the State within a much shorter timeframe than it had initially
indicated to the Government, meaning it was impossible for the Government to
engage a third party while still maintaining continuity of services. Nonetheless,
the Government has now negotiated a Business Sale Agreement that ensures our
policy objectives are met, albeit under very difficult circumstances. As I have
previously announced, under the Sale Agreement the Government will purchase
all the assets of the PNT rail business, including maintenance workshops and
all rolling stock and above rail assets, in addition to the Melba Line assets,
which include the track and the mineral concentrates loader at the Burnie Port.
Mr Speaker, this means that for the first time in history, the strategically
important Melba Line on the West Coast will be in Government ownership.
The Sale Agreement also provides for the transfer of all material contracts
- including customer and supplier contracts - and all PNT employees.
3
From 1 December, subject to Parliamentary approval, rail infrastructure and
railway operations in Tasmania will be maintained and managed by a new State-owned
rail company. In the interim, Pacific National has committed to continue to
deliver rail services and work closely with the Government to ensure a smooth
transition. The Government has committed to a transition package for capital
works and maintenance to support the ongoing delivery of services up until the
completion of the sale process, on the basis that this investment will ultimately
benefit the Government as the new business owner following the completion of
the purchase. In the spirit of supporting a seamless transition to Government
ownership, I am pleased to inform the House that relevant rail customers have
indicated that they are prepared to transfer their existing contracts to the
new State-owned Company, conditional on the sale being completed. I would like
to emphasise at this point that the security of all Pacific National Tasmania
employees jobs is front and centre in this Agreement. It has
been PNTs dedicated workforce that has kept rail services in this State
running in what have been very trying circumstances. As part of the Sale Agreement,
the Government has committed to offering all PNT employees jobs on the equivalent
terms and conditions as those under which they are currently employed. In short,
the Sale Agreement secures the continued delivery of rail services in this State
and from this perspective it represents an excellent outcome for the Government,
for industry and for the broader Tasmanian community. Furthermore, the Agreement
shows this Governments absolute commitment to the continuation of rail
as a viable transport option in Tasmania and delivers the ongoing certainty
that PNTs customers and its employees deserve.
.
Mr Speaker, the legislative package that I am introducing today supports the
Governments purchase of the Tasmanian rail
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business and therefore seeks to secure the broader objective of the continued
delivery of rail freight services in this State. While the Government has signed
the Business Sale Agreement, the formal completion of the transaction is still
contingent on supporting legislation being passed by the Tasmanian Parliament.
Specifically, it is a condition precedent to the Business Sale Agreement that,
by no later than 31 October 2009, the Tasmanian Parliament must pass legislation
rectifying historical title issues on the Melba Line, in addition to ratifying
the Agreement and approving the appropriation of monies necessary to fund the
purchase of the business. The legislative package being tabled today comprises
three Bills: the Emu Bay Railway (Operation and Acquisition) Bill 2009, the
Consolidated Fund Appropriation (Supplementary Appropriation for 2009-10) Bill
2009) and the Rail Company Bill 2009. In broad terms, through this legislative
package the Government is seeking to achieve five main objectives:
- to obtain Parliaments ratification of the Sale Agreement;
- to address the outstanding historical title issues identified with the West
Coasts Melba Line railway;
- to obtain Parliaments approval to appropriate the necessary monies from
the Consolidated Fund for the purchase of the business;
- to establish a new State-owned rail company to run rail services in Tasmania;
and
- to make a number of minor consequential amendments to relevant legislation.
Mr Speaker, there is a significant body of work to be completed over the coming
months to complete the transition of the business, including the establishment
of appropriate governance arrangements for the operation of the business.
I am introducing this package at the earliest opportunity to enable the formal
establishment of the new State-owned rail company and allow for the progression
of important transition planning
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arrangements in preparation for the formal transfer of ownership to the Government
on 30 November 2009.
. Mr Speaker, the first Bill I am introducing today
is the Emu Bay Railway (Operation and Acquisition) Bill 2009. The primary purpose
of the Bill is to address a number of historical issues with the Melba Line
that were unveiled during the negotiation of the Business Sale Agreement. One
issue that was discovered was that Pacific National Tasmania may have inadvertently
been operating the Melba Line without proper authority for the purposes of the
historical suite of legislation relating to the operation of the Melba Line
(collectively known as the Emu Bay Railway Acts). Under the Emu Bay Railway
Acts, the Emu Bay Railway Company Limited was authorised to operate, maintain
and work parts of the Melba Line. The legislative authority to operate these
parts was arguably specific to the Emu Bay Railway Company Limited. In relation
to other parts of the Melba Line, rights under legislation could be assigned
with the approval of the Governor. It would seem that the approval of the Governor
may not have been obtained. The operating status of the railway was further
complicated by the apparent failure to renew a lease of part of the railway
corridor on Crown land. While it appears that this was a simple oversight by
the company, there is a technical legal argument that the Government should
not purchase a railway that may have been operated without all proper legal
authorities. The Crown Solicitor has therefore recommended that this issue be
corrected by way of retrospective legislation granting Pacific National Tasmania
this authority. It was also discovered during due diligence that parts of the
Melba Line may currently encroach on some private freehold land. This is not
considered to be of a major concern, as these issues have never created any
impediment to the continued operation of services on the Line.
6
Having said this, it is intended that the land title issues with regard to the
Melba Line will be corrected in due course following the purchase of the business
by the Government. The legislation does not specifically deal with this issue
as any land that is needed to ensure good title to the rail corridor can already
be acquired under the existing Land Acquisition Act, as required. The legislative
package does, however, provide a right for Pacific National and, following business
transfer the new State-owned rail Company, to continue running on the Melba
Line to avoid the situation where private landowners could potentially disrupt
rail services on the Line. The legislation provides that if private landowners
had any arrangements in place with Pacific National prior to the signing of
the Business Sale Agreement then these arrangements may continue. However, the
legislation prevents both new access fee arrangements and the denial of access
by private landowners to the portion of the railway that may run across their
land to ensure that services continue to operate consistent with the status
quo.
. Mr Speaker, the most significant issue discovered during the negotiation
of the Business Sale Agreement was that there are some outstanding historical
legal matters relating to the old Emu Bay Railway Company that require resolution
before the Government can be certain that it will hold proper legal title for
the Melba Line following the purchase of the business. The issues relate to
a debenture scheme established by The Emu Bay Railway Company Limited in 1925.
The scheme created a mortgage over part of the Melba Line and a charge over
other assets of The Emu Bay Railway Company to secure the repayment of moneys
owing to debenture holders.
It appears that the scheme was not fully wound up, nor the securities discharged,
before the sale of the Melba Line by The Emu Bay Railway Company to Tasrail,
which was later acquired by Pacific National.
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It also appears that there may be at least one outstanding debenture under the
old scheme. These historical legal issues require resolution before the Government
can be certain that it will hold proper legal title for the Melba Line following
the transfer of the business. Mr Speaker, the Government does not believe that
historical title issues with the Melba Line should be allowed to frustrate the
continued operation of rail services in Tasmania. This is why the proposed legislation
will have the effect of bringing to an end the securities created by the 1925
scheme as they relate to Melba Line and related assets. The process being proposed
in the legislation is similar to that employed when the Government needs to
acquire private land for a recognised public purpose. Members would be aware
that under the Land Acquisition Act, the Government can exercise its power to
acquire land but in doing this it must also make sure fair and appropriate compensation
is paid to the owner of that land. Similarly, this legislation will vest in
the Crown all remaining interests relating to the Melba Line that are not purchased
by the Crown under the Business Sale Agreement and extinguish the rights and
interests of all other parties as they relate to Melba Line and related assets,
but it will also provide the opportunity for anyone who is affected by the operation
of the legislation to lodge a claim for compensation within six months of the
completion of the business sale. The legislation puts the onus on me as the
Minister to advertise widely and to notify known potential claimants directly
of their rights and options under the compensation arrangements. Affected persons
will have a six month window within which to apply for compensation.
I will be able to agree compensation claims based on independent advice provided
by the Valuer-General. Any compensation amount offered must first be approved
by the Valuer-General, who will use the methodology established under the Land
Acquisition Act - with
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any appropriate modifications - to determine whether or not to approve the amount.
Any disputes as to compensation will again be treated the same way as a dispute
under the Land Acquisition Act. This process was chosen because it is well established
and provides clear and appropriate appeal rights for claimants. Mr Speaker,
both the Crown Solicitor and the Solicitor-General have reviewed the debenture
scheme and considered the nature of the entitlements of the debenture holders.
Their advice is that, based on the documents they have sighted, the total amount
owing on the outstanding debentures may be less than $2,000 plus accrued interest.
However, in the unlikely event there are debenture holders that are unknown
to the Government, under the terms of the Business Sale Agreement, Pacific National
has agreed to allocate $1 million of the purchase amount to a trust fund to
cover compensation claims arising from the extinguishment of any rights held
under the debenture scheme. Any unused funds will be returned to Pacific National
at the end of the compensation process. It should be noted that this fund will
also provide for costs associated with the acquisition of any land necessary
to ensure good title to the rail corridor on the Melba Line up to a total of
$1 million. The one debenture holder of which the Government is aware has been
advised of the Crown Solicitors views in relation to the entitlements
of outstanding debenture holders. I have written to this individual personally,
explaining the Governments intentions with regard to proposed legislation
and the compensation regime that will be contained in it. It has been suggested
that the Government should negotiate directly with this debenture holder for
the purchase of his debenture rather than pursuing its intended course of action,
which is to legislate to wind up the debenture scheme and pay fair and appropriate
compensation to all affected parties.
9
However, the Government has received clear legal advice that the purchase of
the outstanding debentures will not resolve the complex title issues in relation
to the Melba Line. The main problem is that legal title to part of the Melba
Line appears to be held by the original trustees of the 1925 debenture trust
scheme, not by individual debenture holders. This is why the Government has
formed the view that, given all the circumstances, the most appropriate way
to resolve the title issues is to enact legislation. Mr Speaker, the Government
believes that the proposed process is fair and is appropriate under the circumstances.
It achieves the right balance in meeting both the legitimate private interests
of remaining debenture holders and the wider public interest of the continuation
of rail services in Tasmania.
. Mr Speaker, in addition to the resolution
of the complex issues I have just described, the Emu Bay Railway (Operation
and Acquisition) Bill 2009 also seeks Parliaments ratification of the
Business Sale Agreement and contains a range of other provisions dealing with
a number of technical legal and administrative matters necessary for the smooth
transfer of the business to Government ownership and the continued operation
of rail services. As I have already indicated, the ratification of the Business
Sale Agreement by the Tasmanian Parliament is a condition precedent to the completion
of the transaction. The Government considers that a transaction of this magnitude
and importance should be ratified by the Parliament and this provision is included
in the Bill. Members will note that the Bill also exempts the rail network from
the certain provisions under the Boundary Fences Act 1908. This purpose of this
exemption is part of a broader effort to ensure regulatory consistency between
the road and rail networks. The road network is already exempted from the provisions
of the Boundary Fences Act and the exemption of the rail network in this Bill
seeks to mirror this provision for the rail network.
10
While in effect the rail corridor has already been exempted by virtue of the
fact that it either is already, or will shortly become, Crown Land, the legislative
amendment will ensure that the exemption applies specifically to the network
regardless of who may own or operate the network in the future and that road
and rail transport networks are treated consistently. Mr Speaker, the Bill provides
for the repeal of the suite of legislation known collectively as the Emu Bay
Railway Company Acts. The continued operation of these Acts is unnecessary given
their specific historic ties to The Emu Bay Railway Company, which is now in
administration and no longer holds any assets or interests connected with the
Melba Line. There are also some minor regulatory and administrative changes
that need to be accommodated to reflect the fact that, subject to completion
of the Business Sale Agreement, the Melba Line will come into Government ownership
for the first time. For instance, the Rail Infrastructure Act 2007 will be amended
to include the Melba Line in the definition of the Tasmanian rail network for
regulatory purposes. Action is also being taken to amend the definition of the
rail network by Ministerial Order to clarify the start and end points of a number
of lines. This Order does will not, however, remove any rail lines from the
current definition of the Rail Network. It should also be noted that when the
State-owned rail company takes over management and maintenance of the rail network,
Ministerial Orders designating the State-owned Company as the Rail Infrastructure
Owner and an order revoking Pacific National Tasmania as the Rail Infrastructure
Manager under the Rail Infrastructure Act will also be required. It is anticipated
these Orders will be Gazetted upon completion of the Business Sale Agreement.
This action will enable the State rail company to exercise all of the powers
and functions under the Rail Infrastructure Act to assist with its management
and maintenance of the States rail network, including the Melba Line.
.
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Mr Speaker, I emphasise again that there is a clear imperative to pass this
legislative package as soon as possible to allow for the progression of important
transition planning arrangements in preparation for the formal transfer of ownership
to the Government on 30 November 2009. It is important in moving forward that
we have a firm legislative basis in place for the transfer of the rail business
to Government ownership. Moreover, the passage of this legislation will provide
much needed comfort and certainty to Pacific National Tasmania employees, rail
customers, and the broader Tasmanian community and send a clear message that
the recent era of uncertainty with regard to the future of rail services in
Tasmania is coming to an end. I believe that the deal that the Government has
brokered for the purchase of the Tasmanian rail business, and the outcomes it
will deliver, has the overwhelming support of both industry and of the broader
Tasmanian community. I therefore call on the Tasmanian Parliament to support
the continuation of rail services in this State by passing this important package
of legislation. I commend the Bill to the House. End