PERTH -(Dow Jones)- The Western Australia state government said...

PERTH -(Dow Jones)- The Western Australia state government said Tuesday that it plans to introduce a regime that would oblige BHP Billiton Ltd. (NYSE:BHP) (BHP.AU) and Rio Tinto PLC (NYSE:RTP) (RTP) to haul iron ore produced by smaller miners.

Under the proposal, which is subject to public consultation and may not be ratified until next year or later, the state government hopes to stimulate development of iron ore deposits "stranded" by a lack of rail infrastructure.

The move to set up a haulage, rather than rail track access, regime is designed to defuse opposition from Australia's two biggest iron ore exporters, Rio and BHP, which have resisted previous efforts by outside companies - mostly Fortescue Metals Group Ltd. (Australia:FMG) (FMG.AU) - to get access to their Pilbara region rail tracks.

Public consultation on the state government's proposal closes July 25 and the state's treasury department is due to provide a final report to Cabinet by October.

Western Australia Treasurer Eric Ripper said in a statement the state-based regime will provide a framework and "safety net" for the negotiation of haulage services on commercial terms.

Junior miners would be required to pay for upfront costs of expanding BHP's and Rio Tinto's rail systems to transport the ore, and will also be charged a haulage fee.

Ripper rejected suggestions that the move may threaten the state's current iron ore boom, which is largely driven by multibillion dollar expansions at Rio Tinto's and BHP's Pilbara operations.

"I think an effective access regime will stimulate the growth of the iron ore industry," he told reporters, adding that it will bring smaller tenements and junior miners' operations "into play".

Ripper said that the state government was approached by BHP, in early 2006, asking for a better process for dealing with third party haulage applications.

"So we have responded to that request from BHP Billiton," he said. "Decades ago the iron ore companies did agree to the principle of access to their monopoly infrastructure," Ripper said.

A BHP spokeswoman said that the company had been in consultation with the state government on the development of the regime.

"We will make a submission about our views in due course," she said.

A Rio Tinto spokesman was studying the proposal and wasn't immediately available for comment.

Under the regime, if commercial agreement can't be reached between third parties and the incumbent miners, the dispute would eventually go to arbitration after written notice to the state's economic regulator.

A person familiar with the situation said the regime is unlikely to have a significant commercial impact on Rio and BHP, as access requests will probably be limited to junior companies planning small export operations of less than five million metric tons per year.

Even then, the juniors may face lengthy negotiations and will need to separately secure access to the state's crowded port facilities, the person said.

The small companies will also be responsible for the cost of moving their ore to the rail networks, as well as loading and unloading facilities at both the rail siding and port.

Atlas Iron (Australia:AGO) (AGO.AU), BC Iron (Australia:BCI) (BCI.AU) and Iron Ore Holdings (Australia:IOH) (IOH) are among several companies planning relatively small iron ore mines in the Pilbara region.

Companies with larger proposals, such as Perth-based Aquila Resources Ltd. (Australia:AQA) ( AQA.AU), which plans a 30 million tons/year mine in the West Pilbara, will likely need its own railway to operate efficiently, analysts say.

Last month Aquila said that its mine plans call for construction of a new 160 kilometer-long rail line and deep water port at Cape Preston.

Perth-based Fortescue Metals Group (Australia:FMG) (FMG.AU) has been active in trying to get access to rail operated by BHP and Rio Tinto, but recently completed its own 345 km-long railway from the Cloud Break mine site to Port Hedland.

Nevertheless, the company, which is ramping up production to 45 million tons per year, is still evaluating plans for its Solomon deposit, which lies relatively close to rail lines operated by Rio Tinto.

The proposed haulage regime will not apply to Fortescue's new rail line as it operates under a state agreement that provides "track access" to third party miners.

-By Stephen Bell, contributing to Dow Jones Newswires; 61-8-9244-4243; sgbell@ bigpond.com