rail, page-4

Dcata – thanks for posting the info.

Re Dalrymple Bay comment by Twiggy. I was an investor in BBI for a period of time given the pressure I saw the regulator was under to provide a favourable regulatory decision. The regulator finally set a rate of return after an eternity. The users wanted the rate of return to be kept down, while the infrastructure provider wanted the rate of return up. The provider was also rightfully confused by how much to expand the facility given existing unprecedent demand and uncertainty about future demand.

The regulatory arbitrated between the two parties and eventually set the user charge indirectly via a revenue cap (lets say its $10). The users then bought capacity (ie access). A blackmarket then developed (you could be kind and call it a secondary market) whereby some users that had deliberately bought too much access on sold their future capacity at non-regulated prices (ie $30). You see - the regulators just don’t need to fine tune to the detail they did.

My point is that there is no market failure here such that the government needs to start building the infrastructure. The real failure is government failure. Governments are failing to make regulators make decisions more expeditiously. Governments are failing to just tell BHP/RIO that you’ve had it good for quite a while, but now third parties will be provided access to your infrastructure. If you don’t expand your infrastructure to meet third party needs then these third parties will do it for you. FMG will happily carry some of the investment burden by investing in BHP/RIO infrastructure (by assisting to remove bottlenecks, loops/sidings, spur lines etc) if it has guaranteed access to the track with its locomotives. FMG will not invest without it. The investment would have massive stranded asset risk. Who could they sell it too? Third party access is vital to stimulate investment, yet the Government talks of removing it for export industries. They have surely been listening to BHP/RIO too much.

It isn’t rocket science. Governments fail all the time. They are failing to deal with climate change. You may think it’s a market failure (greed of capitalism etc). Its not. Capitalism is doing what capitalism does - make money via whatever means whether its pollution creating or not. Climate change is about government failure to set the regulatory boundaries that control the capitalist beast. Governments just need to make some obvious decisions in the Pilbara, but fail to do so because they will be unpopular with some powerful parties the government doesn’t want to offend.

Do we seriously want 5 separately owned rail networks in the Pilbara in 20 years time because no one will share? Where are the economies of scale in that? Extend that – do we really want three sets of telephone/electricity/internet posts/cables going past our house because no one will share? Of course not. Everyone shares in these industries. If the parties wont share then governments must make them share.

If BRM does not get BHP access (option 1) at commercial access rates, we will all know the Government has failed again. You cant blame BHP. They are just doing what a good capitalist firm should.

A very annoyed Bleasby!!