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RAILWAY AND PORT (THE PILBARA INFRASTRUCTURE PTY LTD) AGREEMENT BILL 2004
Introduction and First Reading

Bill introduced, on motion by Hon Ken Travers (Parliamentary Secretary), and read a first time.

Second Reading

HON KEN TRAVERS (North Metropolitan - Parliamentary Secretary) [3.16 pm]: I move -

That the Bill be now read a second time.

The purpose of the Bill is to ratify and authorise an agreement, scheduled to the Bill, between the State, Fortescue Metals Group Ltd and The Pilbara Infrastructure Pty Ltd for the development of new multi-user infrastructure in the Pilbara; to facilitate the development of a multi-user railway, multi-user port facilities and additional infrastructure that may be required for the transport and export of iron ore, freight goods and other products; to gain parliamentary approval for the railway and enable the grant of a licence for the railway; and to give statutory backing to open access arrangements for the multi-user railway and put in place a process to establish open access arrangements for the port facilities. The agreement is with FMG and TPI. TPI is a wholly owned subsidiary of FMG. The proponent for the purposes of the agreement is TPI, and FMG enters into the agreement as guarantor of TPI.
This is the first of two agreements that the Government intends to make for the Pilbara iron ore and infrastructure project. The other agreement is for iron ore mining operations in the vicinity of the Chichester Range, which the Government will negotiate with FMG Chichester Pty Ltd. The agreement, if ratified by Parliament, will not come into effect until all parties to the mining agreement have signed the mining agreement. FMG has stated that it intends to dilute its interest in TPI to no more than 40 per cent, so the mining and infrastructure components of the Pilbara iron ore and infrastructure project will be separately funded and managed. The Government anticipates that the multi-user railway and port facilities to be developed under the Railway and Port (The Pilbara Infrastructure Pty Ltd) Agreement will open the Pilbara iron ore industry to new entrants seeking to supply growing demand for iron ore, especially from China.

The Government is facilitating the development of the new multi-user infrastructure to promote the growth of the Western Australian iron ore industry in the expectation that it will help new producers in the Pilbara capitalise on continuing strong global iron ore demand, build industry capacity and increase the State’s share of the world iron ore market. The initial investment in the railway and port facilities to be developed under the agreement is likely to be underpinned by demand for iron ore transport and export services from FMG Chichester. However, any excess capacity of the railway and port facilities will be available to other customers in accordance with the applicable access regime.

FMG is examining the feasibility of FMG Chichester developing iron ore prospects in the vicinity of the Chichester Range in the eastern Pilbara, which will involve the upgrade and export of Marra Mamba ore to China, commencing in 2007 for 20 years. FMG’s plans in that regard are the subject of a detailed project feasibility study, which is due to be completed in mid 2005. The plans of FMG and others would see the value of iron ore exports from the Pilbara expanding significantly over the next two to three years. The Government is keen to support the expansion of the Pilbara iron ore industry as a response to customers’ demands for diversified sources of iron ore supply. TPI is seeking to construct a railway from the vicinity of the Chichester Range in the eastern Pilbara tracking the existing BHP Billiton line for much of its north-south length to Port Hedland.

The agreement requires the initial capacity of the railway to be at least 70 million tonnes per annum. The agreement outlines a process for TPI and the minister to agree a route for the proposed railway and for the submission of detailed proposals prior to construction of the railway. The agreement also describes how the railway is to be owned, controlled, managed and operated.

Land constraints within the port of Port Hedland may require the railway to end outside the port, in which case there will be a requirement for the conveyor and other additional infrastructure to transport product from the rail loop to the port facilities. The agreement makes such provision. Tenure for the railway outside the port of Port Hedland will be established through a miscellaneous licence under the Mining Act 1978 for a term of 50 years or for the term of the agreement if it is determined earlier.

TPI also has plans to construct new port facilities at Port Hedland. The port facilities will be available for use by third parties, with FMG Chichester Pty Ltd a likely initial customer. It is possible that the initial customer will commit to take the full capacity of the port facilities, but this is not settled. The agreement obliges TPI to invest in further capacity at the port of Port Hedland to meet the demands of new customers, if commercially justified, subject to the minister giving in-principle approval to any changes to TPI’s activities within the port. If the minister approves changes or an expansion in principle, the company must submit detailed proposals within 18 months for consideration by government.

The agreement sets out a process for TPI and the minister to agree regarding the area of land that will be made available within the port of Port Hedland for the port facilities, the railway, if it is to extend into the port, or additional infrastructure, if any. Also, agreement will be required on the nature, characteristics and capacity of the port facilities to be developed under the agreement. There is to be a process for the submission of detailed proposals prior to the construction of the port facilities, and an obligation for TPI to have in place an access regime for the port facilities that has been approved by the minister. Tenure for the port facilities will be the subject of a lease from the Port Hedland Port Authority under the Port Authorities Act 1999 for the same term as that for the miscellaneous licence for the railway. Tenure for the railway within the port, or for additional infrastructure, if any, as the case may be within the port, will be the subject of a licence from the Port Hedland Port Authority under the Port Authorities Act for the same term as that for the miscellaneous licence.

Together, the railway and port developments will employ 1 500 people during the construction phase, and provide ongoing jobs for 225 people, mainly in Port Hedland. The total capital investment for the railway and port is in the order of $1.4 billion.

The agreement is consistent with the Government’s vision for the Pilbara iron ore industry and with long-established practice of iron ore projects proceeding under state agreements. The agreement contains local content provisions to ensure that local suppliers stand to benefit from the investment. In the case of its labour requirements, the company is obliged to use reasonable endeavours to recruit as many people as possible from the Pilbara region. FMG has advised the Government that the framework agreements it has signed with Chinese railway and port engineering companies to finance and construct the railway and port facilities do not detract from its commitment to honour its local content obligations. The agreement breaks new ground in the area of managing the social impacts of development because, importantly, it contains provisions to promote the Government’s sustainability objectives by requiring TPI to consult with local authorities and regional communities, and to agree to a community development plan before the State will consider proposals under the agreement. The community development plan is to cover matters including training and guaranteed employment for people living in the region, regional development and local procurement of goods and services, contribution to community services and facilities, and a regionally based work force.

The community development plan must also include a process for regular consultation by TPI with relevant local governments in respect of the matters set out in the relevant clauses of the agreement. Members should note that the agreement does not contain any provisions to limit the rating capacity of local governments. The Government intends that the state laws regarding land valuation and rating are to apply to the railway and port facilities to be constructed under the agreement. The agreement makes specific provision for TPI to provide the plans, specifications and details for the railway and port facilities that would normally be required by local governments in whose area any works are to be situated. This is an important feature, which is designed to address the information needs of local governments for the purposes of their statutory approvals.

Another notable feature of the agreement, which sets it apart from previous iron ore agreements, is that it anticipates that the railway will be subject to the Railways (Access) Act 1998 and the Railways (Access) Code 2000, and provides for the port facilities to be subject to an access regime that is to be approved by the minister. The agreement also contains additional provisions relating to access to the railway and to the port facilities.

By entering into the agreement the Government is facilitating a major investment in new infrastructure to support one of the State’s most important industries. The investment will generate revenue for the State through the additional employment that it will create and the general increase in economic activity that will occur in the Pilbara region and in the State as a whole.

The agreement commits the State to introduce and sponsor this Bill in Parliament prior to 31 December 2004 or such later date as the parties may agree. The agreement, if ratified, will take effect only when all parties to the mining agreement have signed the mining agreement. Importantly, in negotiating this agreement, the Government has been very mindful of obligations it has to other parties. I now table a description of the key provisions of the Bill and the agreement for the consideration of members. I commend the Bill to the House.

[See paper No 2919.]

Debate adjourned, pursuant to standing orders.