High Court rules on determining access charges for Port of Newcastle

The High Court yesterday handed down its decision in Port of Newcastle Operations Pty Ltd (PNO) and Glencore Coal Assets Australia Pty Ltd (Glencore).

The High Court decided that Glencore was able to seek an access determination under Part IIIA of the Competition and Consumer Act in respect of navigation charges at the port.

However, the ACCC is concerned about the implications of yesterday’s decision regarding the calculation of the navigation charge for port users to export coal from the Port of Newcastle.

The Port of Newcastle, the largest coal exporting port in the world, is operated by PNO.

A significant part of the dispute between Glencore and PNO was about whether PNO is allowed to recover from current port users the costs for dredging the port’s shipping channel that were historically funded by previous port users. The High Court decision will allow PNO to recover the user-funded cost through the navigation charges.

“The ACCC is extremely concerned that following the High Court’s decision regarding the calculation of the navigation charges at the Port of Newcastle, the law, as it stands, means PNO will receive a return on assets that it did not invest in, and some port users could end up paying twice,” ACCC Chair Rod Sims said.

“We will consider the judgment and its implications in full and form our own views on what legislative measures may be necessary to address this situation.”

Background

Glencore is a one of the world’s largest producers and exporters of thermal and coking coal. It operates a mixture of open cut and underground coal mines across New South Wales and Queensland.

In 2018 the ACCC arbitrated a dispute relating to Glencore’s terms of access to the shipping channel and related services for exporting coal from the port. Both parties then applied to the Australian Competition Tribunal for a re-arbitration of the dispute. The Tribunal handed down its decision on 30 October 2019.

The key issue in the dispute was the scope of service and the Depreciated Optimised Replacement Cost (DORC) valuation of assets.

In its determination, the ACCC excluded user-funded contributions from PNO’s asset value because these contributions do not represent costs to PNO for providing the service, and would result in users paying these costs twice. The ACCC determined an access charge of $0.61 per gross tonne as at 1 January 2018, while the Tribunal included the user-funded contributions to determine an access charge $1.01 per gross tonne.

In November 2019, Glencore and the ACCC separately applied to the Full Federal Court for a review of the Tribunal’s decision on the terms of access by Glencore to services at the Port of Newcastle, primarily including the charge for ships entering the port to export Glencore’s coal.

In August 2020, the Full Federal Court dismissed the ACCC’s case but allowed Glencore’s appeal, finding the Tribunal had erred in failing to take regard of the user contributions in their determination of the appropriate level of costs. That judgment was appealed to the High Court by PNO.

In relation to user-contributions, the High Court decision reinstates the Tribunal decision; specifically allowing PNO to recover user-funded amounts in its access charge.