A problem of foreseeable demand: Cameron Dick, Adani and the QCA

I stumbled onto the opportunity to make a request for declaration of Adani’s rail corridor as a ‘service’ by chance. I was seeking information from the Queensland Competition Authority (QCA) about the Mackay Conservation Group (MCG) declaration request made in October 2019 when they made me aware that I could make a request. QCA staff informed me that the MCG request was found to be “out of scope” and no recommendations were given to the treasurer for consideration. I recognised an opportunity to access valuable information about Adani’s secretive rail plans.

A short statement was placed on the QCA website following the MCG request:

On 24 October 2019, we received a request from the Mackay Conservation Group to review and recommend declaration of Adani Australia’s proposed Carmichael rail network for regulation by the QCA under Part 5 of the QCA Act.

After review it was determined that at the time there was no scope for the QCA to substantively consider the request to declare the proposed Carmichael rail network.

https://www.qca.org.au/project/declared-infrastructure/

I have to say the QCA did not manage my expectations well. I didn’t get a sense that they deal with members of the public very often, but they provided me with every courtesy that the QCA Act would allow. I semi-blindly worked my way through the submission process which included an opportunity to respond to material from Adani.

When my contact at the QCA informed me that they had provided recommendations to the treasurer following my request, I asked if that meant it was found to be “in scope”, but they declined to give me an answer. Clearly the QCA provided recommendations following my request because the infrastructure making up the ‘facility’ providing the ‘service’ was more developed than it was in October 2019 allowing them to substantively consider my application. The consideration given by the QCA is outlined in their letter of recommendations provided to the treasurer:

We provided Mr Swifte with an opportunity to comment on Adani’s submissions, including Adani’s submission that his request was not made in good faith.

https://www.qca.org.au/project/declared-infrastructure/

The QCA recommended that my request be found to be in ‘bad faith’, but the treasurer found that my request did not satisfy the access criteria and decided against making a declaration on that basis. The most significant failing of my request was the lack of supporting information regarding foreseeable demand and the dependent markets that come with that demand.

*The problem we have is that all the other proposed Galilee Basin coal mines have been effectively mothballed while Adani has established its own: vertically integrated rail corridor developer and rail infrastructure manager; rolling stock operators; and port operations. Without any firm information about other market operators and their service providers there is no way to foresee demand.

While my request failed to secure a declaration, it succeeded in unpacking some key components of Adani’s plans to make their rail corridor operational.

The following statement can be found on the QCA website along with links to the QCA recommendations and the treasurer’s statement of reasons:

On 6 September 2021, we received a request to review and recommend declaration of the Carmichael rail network service under Part 5 of the QCA Act.

Part 5 sets out the criteria for declaration recommendations, as well as the steps that are required before we can recommend to the Minister that a service be declared.

On 17 December, we provided our recommendation (see below) to the Minister, in accordance with section 79(1) of the QCA Act.

On 17 March, the Treasurer’s decision on this matter was published in the Queensland Government Gazette (Extraordinary Queensland Government Gazette no 41, vol 389).

https://www.qca.org.au/project/declared-infrastructure/

*Link for the QCA Act: Queensland Competition Authority Act 1997 (legislation.qld.gov.au)

An opportunity to comment and a positive outcome

The QCA gave me the opportunity to add to my initial request and respond to two letters provided by Adani Australia CEO Lucas Dow representing Adani’s rail proponent Carmichael Rail Network Pty Ltd. While both letters made roughly the same arguments, the second was supported by legal advice regarding requests made in bad faith, the ‘service’ under consideration and the QCA Act access criteria. I had the opportunity to offer counter-arguments to Lucas Dow’s assertions about the non-operational state of the Carmichael Rail Network (CRN). Cameron Dick and Shane Doyle QC both concurred with my interpretation of Section 72 of the QCA Act.

In a letter to the QCA CEO on September 15, 2021 Lucas Dow stated:

The CRN remains under construction and has not been commissioned (and is therefore not yet operational). At this point, it is not a facility that is sufficiently developed to be capable of supplying a service of the kind contemplated by s 77(1) of the QCA Act.

I responded on October 4, 2021 by arguing that the QCA Act can apply to a service that can be provided in the future:

In regard to the assertion that because the Carmichael Rail Network is not yet commissioned or operational and therefore “it is not a facility that is sufficiently developed to be capable of supplying a service of the kind contemplated by s 77(1) of the QCA Act.”, I would direct you to Section 70 ‘Meaning of a facility’ and Section 72 ‘Meaning of service’ of the QCA Act. Section 70(1)(a) reads “rail transport infrastructure”. Section 72(1) reads “Service is a service provided or to be provided, by means of a facility”.

In a letter to the QCA CEO on October 5, 2021 Lucas Dow restated his position:

(i) The CRN is not operational, and no coal has been railed, so matters such as the likely cost of the facility and technical and operational characteristics of the facility and service are not able to be determined.

The redacted legal advice letter dated October 8, 2021 that accompanied the Lucas Dow letter dated October 5, 2021 contains an interpretation of the QCA Act, Section 72(1) that concurred with my interpretation. Section 4.2 of the ‘Statement of Reasons’ provided to me by the Queensland Treasury Office on March 16, 2022 contains a refutation of Lucas Dow’s argument.

4.2.5 I accept the submissions made by Mr Swifte and in Mr Doyle’s advice that the QCA Act permits declaration of a service that is anticipated or a future service or a service associated with an anticipated or future facility. For this reason, I do not accept Adani’s submission that the application for declaration cannot be assessed in relation to the CRN service/facility as it is not sufficiently developed.

https://www.publications.qld.gov.au/ckan-publications-attachments-prod/resources/04ee3497-3d7f-4550-9caa-6b0f1d4e6b4d/18.03.22-combined.pdf?ETag=%2281667823cfcc78147f4e99be688bc7cf%22

On October 27, 2021 I sent through my final responses in support of my request. This was the same day that Bowen Rail Company received its rolling stock operator accreditation from the Office of the National Rail Safety Regulator (ONRSR). One week earlier Carmichael Rail Network Pty Ltd varied their ONRSR accreditation for the third time that year. I had been so busy with my various complaints to the Office of the Coordinator-General and the Ombudsman that I had neglected to check the ONRSR website which had switched to real time reporting of new accreditations and variations.

On November 15, 2021 Bowen Rail Company were delayed by activists while load testing their new locomotives on Aurizon rail infrastructure. By late December Adani were claiming that they had their first shipment of export coal ready to go. It is clear that the rail infrastructure was very close to being operational at the time I made my request.

Defining the facility and the service ‘to be provided’

Lucas Dow’s redacted October 5, 2022 letter includes the assertion that my description of ‘the service’ which was amended at the request of the QCA was wrong in every key respect:

(A) fails to properly define the facility, the service or the owner/operator;

The information that would clarify my understanding and support the Adani CEO’s argument is either not included in the letter/legal advice or is part of the redacted sections of each document.

Here’s my description of ‘the service’ before making amendments to improve clarity which I negotiated with QCA staff:

Rail service infrastructure known as Carmichael Rail Network generally and as the North Galilee Basin Rail Project combined with Separable Portion 1 of the rail component of the Carmichael Coal Mine and Rail Project specifically.

The amended description of ‘the service’:

the service that is the use of the Rail service infrastructure known as Carmichael Rail Network generally and as the North Galilee Basin Rail Project combined with Separable Portion 1 of the rail component of the Carmichael Coal Mine and Rail Project specifically

In my request I asserted that Carmichael Rail Network Pty Ltd were the likely owner/operator of the service to be provided having assumed rail infrastructure management accreditations in May 2017 when they were relinquished by Adani Mining Pty Ltd. Documents exist on the public record explaining that the CRN is constituted of two sections attached to two projects, but sharing a single proponent, Carmichael Rail Network Pty Ltd. One of those documents is titled ‘Adani Infrastructure Pty Ltd: Supporting Information for an Application for a Water Licence to Take Unallocated Water from the Strategic Reserve in Sub-Catchment E of the Burdekin Basin’ that was included in the Department of Natural Resources, Mines and Energy right to information disclosure 16-417 made to Lock the Gate. The application for a water licence by Adani Infrastructure Pty Ltd was intended to facilitate the North Galilee Water Scheme.

At the time of the application Adani Mining Pty Ltd were still listed as the rail proponent by the Office of the Coordinator-General. It was not until May 2018 that Carmichael Rail Network Pty Ltd were formally acknowledged as the rail proponent for both the Carmichael Coal Mine and Rail Project (CCMR) and North Galilee Basin Rail Project (NGBR).

Here is a quote from RTI 16-417(A). I’ve made key phrases bold for emphasis:

Due to the size of the Project, Adani Mining has progressed the assessment for much of the rail, and the Port, separately to the CCP. The entire rail line from the mine to the Port of Abbot Point will be approximately 388 kilometres (km) long, known as the Carmichael Rail Network (CRN). The proponent for the CRN is the Carmichael Rail Network Pty Ltd as trustee for the Carmichael Rail Network Trust.


The CRN will comprise one contiguous rail corridor that has been subject to two separate assessments: the first 77 km (called the Carmichael Rail Line) was included in the CCP EIS and SEIS documentation, whilst the remaining 311 km was assessed as the North Galilee Basin Rail Project (NGBR Project).

The Carmichael Rail Line starts from the proposed Carmichael Mine, and heads east towards Mistake Creek west of the Gregory Developmental Road. This section of rail was assessed as part of the Carmichael Coal Mine and Rail Project EIS, SEIS and AEIS, in which it was known as Separable Portion 1 (SP1). The NGBR section of rail consists of approximately 311 km standard gauge rail from the connection with SP1 to the Port of Abbot Point.

‘Adani Infrastructure Pty Ltd: Supporting Information for an Application for a Water Licence to Take Unallocated Water from the Strategic Reserve in Sub-Catchment E of the Burdekin Basin’

The meaning of “not made in good faith”

I have never made a secret of the fact that I don’t want Adani’s rail corridor to succeed. Competition law in Queensland is founded on the assumption that infrastructure that is already approved and under development should exist and function well. My world view does not embrace the primacy of resource development and I have no faith in the regulatory frameworks and functions that are currently in place. My stated intention was to disclose information about the operations of Carmichael Rail Network Pty Ltd in anticipation of the opening of the means of export for Galilee Basin coal.

In the recommendations provided by the QCA is a quote from my final responses that captures my intentions and appeals to the desire for effective regulation:

I am exercising my fiduciary responsibility as a citizen/resident of Queensland to support the development of a political economy that does not damage the rights and interests of those impacted by infrastructure of ‘state significance’. Providing the QCA with ample time to investigate an anticipated facility that is to provide a service can help deliver robust regulation and transparency to support competition.

https://www.qca.org.au/wp-content/uploads/2019/05/request-for-declaration-recommendation-carmichael-rail-network.pdf

My request was assessed under Part 5 of the QCA Act which identifies a concern with “significant infrastructure” in Section 69(E), Object of Part 5:

The object of this part is to promote the economically efficient operation of, use of and investment in, significant infrastructure by which services are provided, with the effect of promoting effective competition in upstream and downstream markets.

Part 5: Section 76(2)(c) on ‘access criteria’ states:

that the facility for the service is significant, having regard to its size or its importance to the Queensland economy;

The idea of ‘importance’ to the economy is the object under contestation for some First Nations people, some farmers, environmentalists and climate campaigners. It is the fact that I want to see Adani’s rail corridor scrutinised in the public sphere and that I see the importance of the CRN not succeeding that I was not seen as making my request in ‘good faith’.

Shane Doyle QC cited a phrase from case law “fidelity to the bargain” in reference to how ‘good faith’ might be understood under the QCA Act:

an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.

https://jade.io/article/388086

Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50 – BarNet Jade – BarNet Jade

The way I understand it: I entered into a preexisting bargain in which the success of infrastructure deemed “significant” by government and industry is assumed to be the primary objective.

A trigger for the treasurer

Under the QCA Act, Section 77(2) Cameron Dick can choose to declare a service without the need for a request from an industry group, advocacy organisation or member of the public:

The Minister may ask the authority to consider whether a particular service should be declared by the Minister.

Section 79(5) of the QCA Act affirms that “the Minister” can make a request to the QCA for declaration:

Unless the request is made by the Minister, the authority must give a copy of the request to the Minister with the recommendation.

The Queensland treasurer can expedite proceedings and bring a declaration forward, but he is limited by a lack of information regarding foreseeable demand. Without knowledge of the Adani-Aurizon access agreement we cannot know the upper limits for coal haulage on the CRN, and without a concrete upper limit for export volumes from the Carmichael mine in the short and long term we cannot properly assess the capacity for Adani to support the promised multi-user infrastructure. The decision to build a narrow gauge rail corridor places hard limits on expanding the CRN capacity beyond 60 mpta.

Waiting for the Aurizon-Adani access agreement

The announcement of an access agreement between Adani and Aurizon – which I’m assuming is already complete – is the next key event to take place. It will likely immediately precede commercial operation or coincide with the announcement of a start date. Adani are unlikely to allow a period of scrutiny of the deal with Aurizon before commercial operations begin.

I tried to sound out my contact at the QCA regarding the likelihood of an access agreement coming through very soon, but they were not forthcoming. Access agreements are squarely within the QCA remit. I’m working with the assumption that the QCA will be called-in when the access agreement is announced.

From my reading of the QCA Act I cannot discern any triggers for publication at any time near the announcement of commencement of commercial operations. It is the information that makes it onto the public record that is of vital importance right now. There appears to be plenty of scope in the QCA Act for the regulator to seek information from Aurizon as an access provider of a declared service and Adani as an access seeker.

All this is speculative of course. I am no expert at this stuff and I wish there were more specialists speaking up. As a generalist my expertise is not in competition law or economic development, but in unpacking processes, identifying primary sources, and recognising patterns in language and information giving. I’m mindful that the CRN project is unprecedented in the history of the QCA Act.

The multi-user promise and royalty deal

There is very little information on the public record regarding Adani’s revised rail corridor. I can’t explain why the Office of the Coordinator-General has not seen fit to update the NGBR project page. I imagine that severing more than 100km of rail corridor would require some kind of ‘change request’ under the State Development and Public Works Organisations Act. The most recent project variation for the NGBR under the Environmental Protection and Biodiversity Conservation Act (EPBC) dated 25 August 2021 contains information about the “approved action” wherein the NGBR project is a 310km corridor. The variation document contains a map of the original NGBR corridor segmented into individual maps for each section including the sections that were severed in 2018. It should be noted that Adani Mining Pty Ltd remain the EPBC approval holder despite Carmichael Rail Network Pty Ltd being appointed as rail proponent for the NGBR and CCMR. Nothing exists on the public record to demonstrate how Adani’s revised rail corridor plan was instituted.

VARIATION OF CONDITIONS ATTACHED TO APPROVAL: North Galilee Basin Rail Project, Abbot Point to Galilee Basin, Queensland (EPBC 2013/6885)

http://epbcnotices.environment.gov.au/_entity/annotation/3666c674-2c09-ec11-80c8-00505684c137/a71d58ad-4cba-48b6-8dab-f3091fc31cd5?t=1649387035483

The royalty deferral deal is, in theory, contingent on Adani keeping their multi-user promise. This promise can only be kept if the access agreement and upgrades to Aurizon infrastructure demonstrate that Adani’s vertically integrated facility would retain sufficient capacity to provide a service to third parties. Other coal miners and their haulage providers would be the third parties seeking access to the CRN service. We don’t know if Adani’s statements about the capacity of the revised narrow gauge corridor are based in fact. The capacity of the original corridor was 100 mtpa with no need for an access agreement with Aurizon. The capacity of the new corridor is – as reported by Adani – is 40 mtpa. We are told in media statements put out by Adani that they will ramp up from 10 to 27.5 mtpa over a decade. It seems that without the QCA or the treasurer acting proactively, the QCA are forced to respond reactively to the approaches of third parties before any transparent multi-user framework can crystallise.

*The problem we have is that the Queensland government has used words like “open” and “transparent”, but each time they are tested they just kick the can down the road. We know almost nothing about the royalty deal, barely anything about the revised rail corridor, and nothing about how the Queensland government will make Adani keep its multi-user promise.

The claim made by the Queensland government is that under the secret ‘transparent policy framework’, Adani will be held to its multi-user promise. It is not clear how this instrument might be enforced other than by prospective third parties approaching the QCA with information about foreseeable demand. I imagine that in the worst case scenario the Queensland government would issue a demand for royalties with interest.

In his October 5, 2021 letter Lucas Dow stated that the policy to support the multi-user promise will be in place “at or around” the time the CRN commences operation. I can find no statements demonstrating that the Queensland government have made the timing of the release of Adani’s access policy clear. Any access policy would have to fit within the QCA Act access regime which is contingent upon the declaration of a service. Will Adani’s open access policy also be a secret?

Lucas Dow’s October 5, 2021 letter offers arguments to support the assertion that my request was “premature”. In this quote he indicates that an access framework has already been developed:

Adani has not yet put in place its commercial framework governing access to the CRN. As Mr Swifte is aware, Adani and the Queensland Government (State) have made clear that an open access policy will be put in place by Adani, at or around the time that it commences operation. [REDACTED]. It is impossible for the QCA to meaningfully assess the impact of declaration without understanding the access framework already intended to apply.

Forums where rail boffins discuss technical aspects can be informative though not always reliable. I was interested to read discussion about Adani’s shift from a standard gauge, vertically integrated rail corridor to the present largely unspecified arrangements. Like all of us the boffins are left to speculate. There appeared to be agreement that Adani reached for a ‘gold plated’ standard gauge corridor knowing they could scale back to narrow gauge.

A comment from a member of RailPage.com.au forum following the announcement of Adani’s Plan B rail corridor:

Adani likes vertical integration operations and tries to keep it’s mining, transport, ports and power generation in-house – which is where the stand-alone standard gauge line fits in. I suspect the company is now more interested in getting the coal out of the ground and making money rather than bleeding any more cash on this project.

Aurizon’s Newlands System will also need capacity upgrades to carry Adani’s traffic, this will almost certainly include double tracking several sections and extending RCS (CTC signalling) south from Collinsville to Newlands. Tonnages north of Collinsville could exceed 80-million tonnes if existing tonnages and Adani traffic are combined. I can’t say it’s clear who will be paying for those upgrades, but I assume some sort of agreement has been made prior to this announcement.

https://www.railpage.com.au/f-t11398398-0-asc-s0.htm

This is no time to give up

I’m still reeling from an interview I heard on local radio yesterday where a leader of the frontline resistance, a member of Frontline Action on Coal interviewed a leader of what I call the ‘distributed resistance’, a person variously affiliated with the StopAdani Alliance. The StopAdani aligned activist, now connected with a group called Tipping Point, effectively stated that other than pressuring some more companies and ‘standing in solidarity’ the Wangan and Jagalingou Traditional Owners resisting the mine, the battle had been lost. To be clear; I listened to a conversation between a person who is in the best position to stop Galilee Basin coal trains and a person who represents the efforts of the best funded NGOs in the climate justice movement, and it seemed like they had both given up on stopping Adani’s rail corridor from becoming operational.

For me the battle is just heating up. I would urge those with legal and public administration backgrounds to step in and interrogate Adani’s shell companies while being mindful of the bias against disclosure being demonstrated by the Queensland and federal governments. Only a clear and thorough understanding of the information that does and does not exist on the public record can help us to understand the shell games played by extractivist corporations and their friends in the establishment.

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