RAILWAYS (OPERATIONS AND ACCESS) (ACCESS REGIME REVIEW) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 14 September 2011.)

Mr GRIFFITHS (Goyder) (11:04): I rise to indicate that I will be the lead speaker for the opposition on the Railways (Operations and Access) (Access Regime Review) Amendment Bill 2011 and that the opposition will be supporting the bill. It is only a—

The Hon. A. Koutsantonis: You support his bills but not mine.

Mr GRIFFITHS: We had a good debate about yours though, Tom.

The Hon. P.F. Conlon interjecting:

Mr GRIFFITHS: Yes; it is only basically one clause, minister, and it does not impact upon so many issues, as we discussed in our contribution on the other bill. I certainly respect that this bill is relatively minor in nature, but it is important because it ensures, as part of the accreditation process, that there will be an opportunity for review by ESCOSA of rail access regimes every five years. Accreditation permission for 10 years will be in place on the basis of this bill being passed in this house, but a requirement of the bill and for the accreditation to be in place was that ESCOSA has the opportunity to undertake consultation every five years to determine that the access regimes are appropriate.

I do put on record my appreciation to the minister's staff for being available for a briefing. I must admit, when they came in, after having read the second reading explanation and the bill, that I was rather embarrassed that I had pulled everybody together for that, but it was important that we had a chance to discuss some things. I did flag during that discussion one point that I will raise now, and I think it is quite possible that other members of the chamber might raise the issue, too. It relates to a comment that I heard the member for Frome made at a meeting with the Yorke Peninsula Council Alliance.

He talked about the work that he and other members of the parliament have done on the grain handling select committee and the possibility of an exclusivity agreement existing between a rail company, Genesee & Wyoming, and one of the major grain handling companies in South Australia, and whether that has an impact upon the review that ESCOSA will undertake and the opportunity for other operators or other grain handlers to get into the rail market. In the October 2009 report done by the Essential Services Commission and the 2009 South Australian Rail Access Regime Inquiry, it says on page 3:

On the other hand, private companies such as Genesee and Wyoming Australia Pty Ltd (GWA) control various other intra-state lines, with an open access regime in place.

My general question is—and I did flag this with the minister's staff that it was quite possible that one member from the opposition would be asking this question—is this an issue that this bill will consider and have some impact on, and is there a situation where an exclusive arrangement for access to rail infrastructure with only one grain handler is of some concern either to the minister or ESCOSA? As I understand it, the intention is to ensure that there is an openness to the infrastructure access and that a variety of people have the opportunity to enter into negotiations with rail transporters.

We recognise that this bill is an appropriate measure of ensuring that reviews are in place for the shorter time and it gives an accreditation opportunity for 10 years, but we do raise that point. From my point of view, I am happy if the minister wants to provide an answer on this issue during the second reading, or there might be some members who want to get into some detail during the committee stage.

The Hon. P.F. Conlon interjecting:

Mr GRIFFITHS: He is here peaceably waiting for an opportunity, no doubt.

Mr Venning: You raised it.

Mr GRIFFITHS: And he's ready to leap to his feet at all times. The Liberal Party does support the bill and we hope that it moves swiftly through the house.

Mr PEDERICK (Hammond) (11:08): I rise to support the comments made by the member for Goyder regarding the Railways (Operations and Access) (Access Regime Review) Amendment Bill 2011. I note that only last year we discussed in this place the Railways (Operations and Access) (Miscellaneous) Amendment Bill 2010, and that bill was supported throughout the South Australian parliament. This legislation intended to provide a consistent national system of economic regulation for nationally significant infrastructure, including railways, and that has been enacted.

The 2010 bill also implemented efficiencies into the act. Such efficiencies were based on recommendations following an inquiry conducted by the Essential Services Commission of South Australia in 2009. These reforms aim to reduce regulatory uncertainty and compliance costs for owners, users and investors. The intention of the 2011 amendment bill is to include the requirement for the Essential Services Commission of South Australia (ESCOSA) to conduct five-yearly reviews of the South Australian rail access regime. This amendment is the result of an application submitted to the National Competition Council on 29 December 2010 for the certification of the South Australian rail access regime as an effective regime for a period of 10 years.

I note that the National Competition Council released its draft recommendation on the certification application on 16 March 2011. The National Competition Council recommended that the regime be certified for a period of five years, but it advised that certification for a period of 10 years would be considered if the act was amended to formalise the requirement that ESCOSA conduct on a regular basis a review of the railway services covered by the regime, and I note that could be every five years.

As the member for Goyder has indicated, the grain handling committee, which I introduced into this place in March and of which I am a member, is very interested in operators having access into the rail network, through Genesee & Wyoming. There is comment that Viterra has a stranglehold over the services of Genesee & Wyoming. I will listen intently to the minister's response to questions about what third-party access, and open and transparent access, is being made available—or should be made available—to third-party operators.

We note the difficulties experienced during the last harvest in South Australia. Let's hope we never see those difficulties again. The wet harvest and sprouted grain gave third parties or other operators in Australia, other than Viterra, which has about 90 to 95 per cent of the network, the opportunity to have grain put through their systems because they are operating falling numbers machines.

I have not driven right around the state but, as I see it, the issue is that I still see a lot of stored grain, a lot of bunkers, in these third-party operator sites. I would like to see these third-party operators having equivalent access to trains—essentially, Genesee & Wyoming has this network stitched up—and I hope we get a qualified response from the minister today in regard to this.

I would hate to see Eyre Peninsula GrainFlow sites (previously Australian Wheat Board sites but now owned by Cargill) disadvantaged in the process in that they are not able to access the rail, railcars and the whole system through to the port. I have one of these sites in my electorate, at Pinnaroo. I know that, later on next month, we will be having a major committee briefing on this issue, including with Flinders Ports and Genesee & Wyoming. However, I think we might be able to get some of these issues cleared up today in the debate around this bill.

The grain industry is a vital industry to this state, contributing well over $3 billion to the economy last year. Agriculture has been the single biggest supporter of the economy in this state in the last 12 months because of the wet season we had last year. Sadly, we have seen a few dry times in the last couple weeks; it was looking like a bin buster there for a while. It still could be a pretty good harvest, as long as we get the forecast rain—the 15 to 20 millimetres—that people are talking about. It would have been pretty handy getting it two to three weeks ago, but let's hope that this happens very shortly to help get our farmers back on track.

We certainly need farmers to sell, market or store their grain at third-party sites, such as Cargill (the old Wheat Board sites), and there are four of these across South Australia, so that those sites have the ability to get that grain onto the trains and to the ports and out of the state so that they can free up room for this coming harvest, because it still has the potential to be a significant harvest. As I indicated earlier, the sooner it rains the better.

As we have learnt through our grain industry select committee, there are quite a few competitive impediments to the situation here in South Australia where we have a deregulated market essentially working under a monopoly. We are certainly looking at ways that we can improve this so that industry, growers and everyone in the system can get the benefit of a competitive access regime for grain producers in this state.

Mr VENNING (Schubert) (11:15): I thought initially that I had already spoken on this bill but, of course, I looked at it and it was June—

An honourable member: It's a new one.

Mr VENNING: It's a new one. It was 30 June 2010, so time stands still. I always welcome the opportunity to speak in support of our rail system in South Australia. Can I say that I have given the current minister a few accolades in recent times about what he has been able to achieve in our rail system, particularly the port. I do not hand out accolades lightly, and I think this minister did get this right in relation to where that port should be, and it is working now and working very well.

The Hon. P.F. Conlon: There are a lot of ships out there at the moment.

Mr VENNING: I know. Minister, it works. You got something right. Make the most of it. I wish the rest of your front bench could say that. I am sorry, but you are about the only one I can say who has had a positive outcome to the deliberations you had. You sought proper advice, took notice of it and did it.

I rise to speak in support of this bill. As I said, I spoke to this bill last on 30 June 2010. I have always taken a keen interest in any issue regarding rail, whether it be trains (freight or passenger) or, indeed, trams. I note also how important it is that we should always have a viable, convenient rail system in South Australia. As a grain grower, and I declare that interest, it is a critical part of the grain pathway here in South Australia and, as the most important export earner for South Australia, it is a critical part of the state economy.

This 2011 amendment bill is mainly—I think only—to include the requirement that the Essential Services Commission of South Australia (ESCOSA) is able to conduct five-year reviews of the South Australian access regime. It has been said how important this is now—not that I ever supported the current situation where we have a monopoly in charge of, basically, the storage and a large proportion of the marketing. The worst thing is that it is an overseas-owned monopoly now. I declare also that my brother is a director of Viterra. It is very important that we enable these reviews to take place so that everybody, particularly third parties, can have access to the system.

There have been accusations—and they are accusations, I believe—that at the moment Viterra's main opposition here is the old GrainFlow, now Cargill. They own certain sites—there are two or three across the state. I have noted that not much grain has moved from them. I have asked the question, coming into a big harvest, hopefully, why these bunkers are still full: what is happening here? I have been told that, allegedly, they cannot get access to the port and, when they can, they cannot get access to the railway line to get the grain there.

There are all sorts of accusations—and I have spoken to various stakeholders about that—that allegedly sweetheart deals may have been done between Genesee & Wyoming and Viterra. I do not believe that they are true—I do not believe for one minute they are true—but, in this instance, thank goodness we have ESCOSA to have a very good look to make sure that access is open for any third party to come along. As the member for Hammond has just said, we need this to be a level playing field. Anybody out there wanting to buy or deal in grain has to have the same ability to export that grain without the prohibitive extra costs. So, it is most important that this part of the bill is supported.

Railways have a long history in this state, and I say again how much I regret that many years ago, when my father was involved with the bulk handling company, they shut down the rail unloader at the port of Wallaroo. Wallaroo is a port but, because they did that, there is no rail access to it. It was only a few kilometres away to the main line at Snowtown. That railway line should never have been shut down; it should have been upgraded. I know that it is in the member for Goyder's electorate (I think), but put a couple of D9s in there and you would have lowered the grade of that rail from Snowtown through to Bute and then onto Wallaroo, and then that line would be the most viable line.

It would have given us a second port on this side of the gulf, which we now really do need, because I can see problems in the future with Outer Harbor because of these huge trains that are coming in being a disruptive influence to the community living in and around the port facility. It is very sad that the bulk handling company made that decision to shut down the rail unloader, and that is why we do not have rail deliveries to Wallaroo. That would have been the obvious thing.

Over the years, right back with the sale of SAR, of course we were dealing with bags. Then we moved into the bulk handling of grain and we built our silos on the railway lines, and now you see that a lot of these silos are not viable or not being used. It is certainly an interesting scenario. I do note, too, the death this week of Mr Keith Smith, the longest serving commissioner in rail history. He died, and there was an obituary to him in last weekend's paper.

I also note that another very prominent person—Mr Don Williams—who headed the railways as general manager many years ago has also departed this world. He also headed up submarines after leaving the railways. While these men were in charge of railway, AN certainly did some fantastic works. That is when they upgraded the main line to standard gauge. They got rid of the broad and a lot of work was done, so I pay tribute to these gentlemen because back then we had a fair bit of criticism. Between Mr Smith and Mr Williams a lot was achieved, and I think it is a great memorial to them.

I do support this bill and, again, commend the minister for being straightforward in relation to matters like this. No-one wants politics in railways; and, certainly, if we are able to give everyone access to the system via the rail and via the ports, we will certainly support that. I have much pleasure in supporting this bill, and I hope that it goes through speedily.

The Hon. P.F. CONLON (Elder—Minister for Transport, Minister for Infrastructure) (11:22): It has been pointed that what we have here is a regime for access if the Regulator does need to impose an access regime. It has not been necessary so far. One point I think has been raised about arrangements between Genesee & Wyoming and Viterra. Can I say that, first, Viterra does not have a rail access undertaking with Genesee & Wyoming: they have a commercial arrangement to ship grain, right? But even if that were not the case, what is absolutely clear is that it is not open to a rail operator to contract out of its legislative obligations—even if there were some undertaking, it is not open to the rail operator.

There would be no point in having the legislation if the rail operator could by contract alter that—cannot do it. I think that there is an associated area where people may have some concerns, and it is not about rail: it is about port access. I can advise people, though it is not directly related to this act, that, under the Wheat Export Marketing Act, an access test would have to be passed by any accredited exporter (which is also a significant holder of port terminals), and an agreement to an access undertaking to the ACCC that is compliant needs to be made.

My understanding is that that is something that Viterra is in the process of doing with the ACCC. There may be some concern as to how that will relate to port access under our regime, but my understanding is that, while they are doing that, Viterra will also include an anti-overlap clause so that any agreement with the ACCC will not undermine access arrangements to ports—it is not the bill that we are dealing with today, but it is any access arrangement to ports under the state act. I think that should address all the concerns members have raised.

In short, there will be no effect on state access regime but on any contractual relationship between Genesee & Wyoming and Viterra, and there will be no effect on our access regime by whatever access arrangements they agree to with the ACCC. Having said that and unless there is anything further, I thank members for their contributions and commend the bill to the house.

Mr Venning: Could Viterra own and run their own trains?

The Hon. P.F. CONLON: Well, they could. You say, 'Could they own and run their own trains?', but if they are a rail operator they might find themselves the subject of an access application.

Bill read a second time.

Committee Stage

In committee.

Clauses 1 to 3 passed.

Clause 4.

Mr PEDERICK: I thank the minister for his extensive answer. I wanted to go into committee to get absolute clarification on this point about access to the rail network because there are a lot of claims and counterclaims out there in the farming world, and I note that the grains committee has a hearing on 28 October. Minister, the question I ask is: are you absolutely sure there is no impediment for an operator like Cargill (formerly the Australian Wheat Board) to get rail access in this state to get them to the port? You are saying it is more about issues of port access.

The Hon. P.F. CONLON: Clearly, there should not be an issue of port access, but I will come back to that. This is a regime to allow access where it has not been properly allowed. My understanding is that there are no instances of that having occurred. If that were to occur the person can go to ESCOSA to address that issue. That is why we have the access regime. I actually support light-handed regulation: it is the cheapest. Do not regulate unless you need to: it is best for everyone. There is no doubt that anyone who has been denied access—and that has never been reported to us—can go to ESCOSA. That is why we have a regime.

Let me say that Viterra, being as big as it is, has a commercial arrangement with Genesee & Wyoming at present to take rail to the port. It does not have an access agreement. It does not need an access agreement because Genesee & Wyoming is in the business of running grain rail so it wants to carry grain for the people who have a lot of grain, so that is it. It will also carry grain, as I understand it, for anyone else who wants grain brought there.

Can I make two points very clearly: it cannot contract outside of this regime, no matter what contract it does with a third party, otherwise you could not have a legislated regime. Further, I am completely unaware of any issue about anyone getting access to the rail and, if there were, this regime is there to provide a remedy for that; so, that's that.

Not associated with this, but obviously relevant to people who are exporting grain, is ports access. We have a similar regime for ports access involving ESCOSA. It has not been necessary to this point for ESCOSA to do much for similar reasons: there has not been a problem. Viterra, being under the Wheat Export Marketing Act, has to have a regime acceptable for access to the ACCC. They are in the process of doing that, but we understand that what will occur there is they will protect our state-based ports access regime as well. You have regimes that protect access to rail, access to ports and there is nothing in current operations to disturb that, so I think everyone should be happy.

Mr VENNING: Further to that, in relation to my little out-of-order question during the second reading debate in relation to how we free up the system, we have an unfortunate situation where we have Viterra—and you just said, minister, that it is a big operation—and we have the rail operated by another big operation, Genesee & Wyoming. What if some people were not happy or a third operator was not happy with Viterra, or if another trader trading in opposition to Viterra was trying to get access to the port? You can understand Genesee & Wyoming doing a very good deal with Viterra because they are the big operator so they are obviously going to do each other a very good deal here because they want the business, but another operator coming in and going to Genesee & Wyoming and asking for a similar deal without the tonnage is not going to get the same deal.

That is a commercial reality, isn't it? I presume that is a commercial reality but the question is: does Genesee & Wyoming's long-term 90-year lease of the rail system exclude somebody else running trains and if that ever came up for public debate or discussion, does that come under ESCOSA's portfolio? Would ESCOSA be the umpire in a situation like that, or is the lease or arrangement Genesee & Wyoming has so watertight that they can exclude other people from running on South Australian railway lines that they are currently operating on?

The Hon. P.F. CONLON: The whole purpose of having a legislative regime is to make sure that very large and near-monopoly providers or operators cannot freeze out small people and that is what the bill does. There is nothing in Genesee & Wyoming having a long lease or Viterra being that big that prevents an appropriate access application. You are going into the area of what would be appropriate access. Since there has never been one, are people allowed to run their own trains on someone else's line? I think that would be a matter that would need to be dealt with by the regulator in dealing with an access arrangement. Given that we have never had one, it is a bit hard to understand how that would occur.

I note that my officers have gone because they thought we had finished, but the purpose of this regime—and as I say, it is a safeguard at present because there has not been a problem—is to make sure that people cannot use their market power to freeze out little guys and that appropriate access will be given to those people should that problem occur and there is a regulator to make sure of it. I am not sure how much more of an answer I can give you than that.

The terms of access would be for those people to negotiate in the first instance, but I would point out that at present there is no access arrangement with Viterra. It is merely a commercial arrangement to carry grain. There is no access arrangement and none has been needed. I can understand that there is angst about the size of Viterra these days, but there is nothing in the size of Viterra that affects third-party rights under this. I presume if the Australian wheat board were still around and the Australian barley board—and I do remember them and I remember that they used to fight like 10-year-olds, as I recall, between each other—it would make no difference to this access regime either.

Mr VENNING: I appreciate the minister's answer, but he understands that we certainly live in times of great change. Today we learnt the grain producers of South Australia have overwhelming support to take over the running of the grain section from the Farmers Federation, and that is a huge move. The farmers of South Australia are not happy with the current arrangement, obviously, and they have made this historic move to set up a new body, Grain Producers South Australia, which is without precedent in my time in this job. It is certainly a great concern that this is what is happening.

We are now seeing the West Australians fronting their own trains. The minister only needs to look over the border and see what is happening. They are learning from us because they still have a grower-owned monopoly that operates their storage, and also the marketing is a separate arm. Now they are investing in rail rolling stock—and I do not know whether we are able to do that in South Australia or whether they will come over the border and do it here—and CBH of Western Australia is already coming over into the West Coast, and will be operating out of the West Coast, as long as it is able to get the information we have been withholding from it. Thanks to the grains committee, one of the planks of its recommendations is that they should be able to make all the information available to everybody so that they know where the grain is and its quality.

We live in times of great change. This is a very relevant bill, and we will see some huge things happen in the next five to 10 years; if it is CBH of Western Australia operating here, I certainly do not have a problem with that. We want competition here. We want to be fair, we want the most efficient path, and we want the most money for our farmers, because it is all about food and having enough to feed our people.

Mr BROCK: I thank all the other speakers for their questions. Further to what the member for Hammond has asked, the minister explained access to the rail, and I refer to the amendment of the Railways (Operations and Access)(Access Regime Review) Amendment Bill. If Genesee & Wyoming are using their rolling stock for transportation of grain, and they have come into a commercial operation with an industry, and because Viterra is big they are questioning that—it is to do with equal access for third party—would they be able to have exclusive rights or use of their rolling stock to only one organisation and it not be open to others?

The Hon. P.F. CONLON: No, that would be to drive a carriage and four (I think that was the old legal expression) through the regime. There is no use giving people access to rail if there are no carriages. I refer people not to the amendment bill but to the parent act, part 5, about access proposals. Access is not real if you cannot get on a train. In the point raised by the member for Schubert, section 31(2) allows access proposals and provides:

(2) If the implementation of an access proposal will require an additional extension to the railway infrastructure, access proposal may include a proposal for that addition or extension to railway infrastructure.

The matters are contemplated. To date, we have found that there is not an issue. We do not have an issue with access and no-one has been excluded. The regime will oblige people to negotiate and deal commercially in good faith with people, and it would not be an access regime if you could only get the railway and could not get the carts—that is a nonsense.

We are fortunate in South Australia as we have not had these issues. The port access regime is similar: we have not had issues. The member for Schubert says it is a changing world, and in particular I think we may well see people in the resources sector wanting access to rail, and they may want to change that infrastructure too. I am not sure that what will suffice for grain over on Eyre Peninsula will suffice for iron ore, for example. We will deal with that when it arises, but the purpose of the legislation is to make sure that we have a realistic legislative scheme for allowing access on proper terms in good faith.

Clause passed.

Title passed.

Bill reported without amendment.

Third Reading

The Hon. P.F. CONLON (Elder—Minister for Transport, Minister for Infrastructure) (11:40): I move:

That this bill be now read a third time.

Bill read a third time and passed.