Aurizon seeks judicial review of QCA’s ruling, says ex-chair Roy Green was conflicted
Aurizon has sought a judicial review of the draft QCA decision, claiming its former chair Roy Green was conflicted.
When Queensland Competition Authority chairman Roy Green met Newcastle Port owners for lunch at the Garfish seafood restaurant near Manly wharf last October to discuss a potential port chairmanship and port challenges including Adani’s planned Carmichael coal mine, there was no indication of the legal storm his eventual appointment would trigger.
Backed by references from CBA chairman Catherine Livingstone and former foreign minister Bob Carr, Professor Green’s appointment to Newcastle Ports was announced more than two months later, on December 17.
This was one business day after a negative draft QCA regulatory decision for Aurizon Holdings’ monopoly Central Queensland Coal rail Network.
The now former QCA chairman did not and does not see a conflict in his Newcastle Port and QCA roles and received subsequent advice to that effect.
But Aurizon, seething over the draft ruling, sees it differently.
It has sought a Supreme Court judicial review of the draft decision citing apprehended bias, drawing in Queensland’s biggest miners, including BHP, on the QCA side, saying the legal action could cost them more than $250 million by delaying a final decision on the draft ruling.
Professor Green’s talks with Newcastle Port and the potential mining industry losses have been detailed in filings to the Queensland Supreme Court.
The draft ruling, known as UT5, offers Aurizon $1 billion less revenue over four years than requested. Part of the Aurizon case is that Professor Green was in talks with the port while the ruling was being formulated.
The documents show the port first approached the QCA chair in May last year through Australia Institute chief economist Richard Denniss, who was consulting to port half-owner Gardior.
But talks did not get under way in earnest until October 2, when Professor Green met Jonathan van Rooyen and Andrew Agnew from port half-owner Gardior for lunch at the Garfish. After the lunch, Professor Green told Mr van Rooyen and Mr Agnew a strategy recalibration was needed
“Newcastle Ports strategy is now seriously challenged in three areas: Adani Carmichael mine undercutting coal export price in zero sum market, (a) damaging ACCC ruling in favour of Glencore in port fee dispute (and a) NSW government fee cap on prospective container movements,” the then QCA chairman said.
Aurizon’s Queensland rail network mainly ships coking coal, which is used to make steel, while the Hunter Valley Coal Network that exports through Newcastle is mainly thermal coal, which is burned for electricity.
The Adani factor appears important in Aurizon’s argument, because it would make Queensland a much bigger thermal coal exporter and a more direct competitor of Newcastle.
In an affidavit filed yesterday, Professor Green said the potential impact of Adani’s planned mine in Queensland’s Galilee Basin on thermal coal prices was raised by one of his lunch companions.
“Prior to that, I did not know of any relevance of the Adani Carmichael mine to the port,” he said. “There was no discussion of other coal producers or either Aurizon Network or the Central Queensland Coal Network at the meeting.”
Professor Green was formally appointed chairman on December 6, with approval from Gardior’s port partner China Merchants Ports.
“From when I was first approached about a position with the port I did not consider there to be any conflict, actual or potential,” Professor Green, who retired from the QCA when his term expired in June this year, said in the affidavit. “ I still do not consider there to be any conflict.”
According to the affidavit, the potential for the current court challenge was still far from Professor Green’s mind when he wrote to Queensland Integrity Commissioner Nikola Stepanov on December 23. He advised Dr Stepanov of the potential for perception of a conflict of interest that could arise among the QCA-regulated entities Aurizon Network, Queensland Rail and the Dalrymple Bay Coal Terminal, but now says this was not directed at Aurizon.
“I was referring to the possibility of a perceived conflict in relation to Dalrymple Bay Coal Terminal … I was not referring to any actual, potential or perceived conflict of interest in relation to Aurizon Network,” he said.
Dr Stepanov wrote back four days later saying that based on information provided, a reasonable person would not consider there to be any conflict of interest in the two positions.
At least one QCA member was not so comfortable. In a December 20 email to Professor Green, QCA corporate services director Ray Rapinette said he saw no direct conflict of interest but that the three regulated entities might.
“Aurizon Network and Dalrymple Bay Coal Terminal particularly may perceive that your knowledge and understanding and overall commitment to the Port of Newcastle may influence your thinking,” Mr Rapinette said.
“Commercial entities may take a stance and challenge QCA decisions based on their perception, particularly when decisions materially affect their bottom line.”
This is exactly what has happened. Two months after the appointment and the draft QCA rail decision were announced, then Aurizon chairman Tim Poole said in a February 20 letter to Professor Green: “We have concerns that your recent appointment as chair of the Port of Newcastle creates a conflict of interest, or at the least a very real perception of one, that may adversely impact stakeholders’ confidence in decisions made by the QCA insofar as they concern the Central Queensland Coal Network.”
On April 20, Aurizon made its application for a judicial review.
Professor Green says the UT5 draft ruling does not benefit Newcastle because CQCN and the port operate in different jurisdictions and do not handle the same type of coal.
To show the Hunter Valley and Central Queensland coal systems compete, Aurizon commissioned consultant Mark Gresswell, of Commodity Insights, to investigate whether constraints on Queensland coal could boost Hunter Valley production.
The report, specifically ordered for the court case, said the two regions competed on both types of coal, with thermal coal making up 25 per cent of central Queensland coal exports and coking coal making up 22 per cent of Hunter Valley exports.
“Several of the potential new coal projects in Queensland are in the Galilee and Surat basins, which both require a rail link to be connected to the port system for export,” the report said. “If these basins were to be developed, the degree of competition between the CQCN and the HVCN would increase significantly …” The report found there was a “real possibility” that a reduction in central Queensland coal exports would result in an increase in Hunter Valley production and an increase in coal handling at Newcastle.
In July, miners BHP, Glencore, AngloAmerican, Coronado, Idemitsu, Jellinbah, Peabody and Yancoal joined the legal action. Hearings are set for three days from October 22.
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