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Review of Port Planning August 2007

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Review of Port Planning August 2007 Level 2, 35 Spring St Melbourne 3000, Australia Telephone +61 3 9651 0222 +61 1300 664 969 Facsimile +61 3 9651 3688 REVIEW OF PORT PLANNING ISSUES PAPER AUGUST 2007 An appropriate citation for this paper is: Essential Services Commission 2007, Review of Port Planning: Issues Paper © Essential Services Commission. This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968 and the permission of the Essential Services Commission. CONTENTS Contents III 1 Introduction 1 1.1 Background 1 1.2 Terms of Reference for this Review 2 1.3 Conduct of the Review 4 1.4 Consultation & timeframes 5 1.5 Making a submission 6 1.6 Structure of this Issues Paper 6 2 Structure of the Port Industry 8 2.1 Ports 8 2.2 Port services 13 3 Port Planning Framework 22 3.1 Planning provisions and requirements 23 3.2 Government Freight and Logistics Strategies 27 3.3 PoMC and PoHC port planning 31 4 Competitive Entry of Port Service Providers 36 4.1 Nature of entry restrictions 36 4.2 Impacts of port planning on competition 38 4.3 Economic barriers to entry 40 4.4 Restriction of access by the port 44 5 Land Side Efficiency & Market Structure 46 5.1 Objectives and strategies 46 5.2 Improving truck utilisation 47 5.3 Relocation of container-related services 49 5.4 Improving the road network 49 5.5 Rail infrastructure 50 5.6 Market structure issues 54 6 Summary of Questions for Submissions 58 Appendix 1: Terms of Reference 62 ESSENTIAL SERVICES COMMISSION REVIEW OF PORT PLANNING CONTENTS III VICTORIA 1 INTRODUCTION On 25 July 2007 the Minister for Finance (the Minister), under section 41 of the Essential Services Commission Act 2001 (the ESC Act), directed the Essential Services Commission (the Commission) to undertake a review of the impact of port planning on competition in the provision of container stevedoring and related services in Victorian ports. 1.1 Background At the 10 February 2006 meeting of the Council of Australian Governments (COAG), the Commonwealth, State and Territory Governments signed the Competition and Infrastructure Reform Agreement (the CIRA), which, among other things, requires each jurisdiction to undertake a review of port competition and regulation. The CIRA includes principles to guide regulation of ports, including a clear preference for commercial outcomes, light handed regulation if regulation is necessary and, only as a last resort, more interventionist regulation. Section 4 of the CIRA sets out the scope of the review of ports agreed to by COAG1. Several of the requirements in section 4 of the CIRA have already been addressed in prior reviews.2 In order to avoid duplication, the Minister has stated that the purpose of the review is to address Victoria’s requirements under clauses 4.2(a) and 4.3 of the CIRA, and other related matters that the Government has identified. Sections 4.2(a) and 4.3 of the CIRA state: 4.2 The Parties agree to allow for competition in the provision of port and related infrastructure facility services, unless a transparent public review by the relevant Party indicates that the benefits of restricting competition outweigh the costs to the community, including through the implementation of the following: 1 Section 4 of the CIRA is reproduced in Attachment A of the Terms of Reference, Review of the Impact of Port Planning on Competition in Container Stevedoring and Related Services in Victorian Ports, in Appendix 1. 2 In particular by the Commission reports: Port Channel Access in Victoria – Final Report (May 2003) and Regulation of the Victorian Ports – Final Report (June 2004). ESSENTIAL SERVICES COMMISSION REVIEW OF PORT PLANNING 1 INTRODUCTION 1 VICTORIA a. port planning should, consistent with the efficient use of port infrastructure, facilitate the entry of new suppliers of port and related infrastructure services; … 4.3 Each Party will review the regulation of ports and port authority, handling and storage facility operations at significant ports within its jurisdiction to ensure they are consistent with the principles set out in clauses 4.1 and 4.2. Significant ports include: i. Major capital city ports and port facilities at these ports; ii. Major bulk commodity export ports and port facilities, except those considered part of integrated production processes; and iii. Major regional ports catering to agricultural and other exports The Minister considers that the requirements of section 4.3 have been met except in respect of section 4.2(a) as it applies to the Port of Melbourne, as a significant port, and Hastings in relation to its potential role in container stevedoring and related services. 1.2 Terms of Reference for this Review The reference from the Minster titled the Essential Services Commission Act 2001 Part 5 Inquiry and Report: Notice of reference – Port Planning (the Review) is reproduced in Appendix 1. It includes background information to the review and a discussion of the CIRA and which aspects of the CIRA have already been addressed in previous inquiries, and how the present Review is to be conducted (see section 1.3 below). For the purposes of undertaking and guiding this Review, the Commission considers that the sections ‘ports and services to be reviewed’ and ‘specific terms of reference’ respectively, are most relevant in defining the scope of the Review. These sections are reproduced below: Ports and Services to be Reviewed For the purposes of the CIRA, the main focus of the Review is the Port of Melbourne. However, particularly in relation to the container trade, the impact of current Victorian port planning on competition in the provision of services also extends to the Port of Hastings, which has been earmarked as the preferred overflow port for container handling once Melbourne reaches full capacity sometime beyond 2030. Therefore, the Review will also consider the potential role of the Port of Hastings in facilitating the entry of new service providers to the container trade. ESSENTIAL SERVICES COMMISSION REVIEW OF PORT PLANNING 1 INTRODUCTION 2 VICTORIA The particular port and port related services to be reviewed in this context are: • Container stevedoring services • Container handling and storage services • Container transport (road and rail) and intermodal services In addition, where it is considered that competition for or in the market for other port or port related services is being adversely impacted by current planning frameworks, these services may also be included in the Review. Specific Terms of Reference The Review will examine and report on, and make recommendations in relation to, the interaction between Victorian port planning frameworks and competition in the provision of key port services, particularly container stevedoring and related handling and transport services in the Port of Melbourne (and the Port of Hastings, where appropriate), including consideration of the following matters: (a) An analysis and assessment of the extent to which, and the manner in which, the current planning frameworks impact on the entry of a new provider(s) of stevedoring services; (b) To the extent that these frameworks restrict entry to the stevedoring market, an assessment of the costs and benefits of such restriction in terms of the efficient use of port infrastructure and whether the benefits of restricting entry outweigh the costs to the community; (c) Consideration of the matters set out in (a) and (b) above in relation to related container handling, storage, transport and intermodal services; (d) Consideration of the matters set out in (a) and (b) above in relation to other relevant port or port related services identified during the course of the Review; (e) An analysis and assessment of the relationship between the current market structure for container stevedoring services and the provision of container handling, storage, transport and intermodal services which form the land-side interface of the port, particularly in terms of impact on competition and efficiency in the provision of these latter services; (f) An analysis and assessment of the relationship between the current market structure for the provision of container stevedoring and related land-side services and the achievement of the Government’s policy objectives, including the 30% port rail mode share target; and (g) Any other matters that may be considered relevant by the Commission and are agreed with the Minister for Finance in consultation with the Minister for Roads and Ports.” ESSENTIAL SERVICES COMMISSION REVIEW OF PORT PLANNING 1 INTRODUCTION 3 VICTORIA The terms of reference indicate that the ports that are the subject of the Review are the Port of Melbourne and, in relation to the potential entry of new service providers to the container trade, the Port of Hastings. Ports provide services to ships and to freight. Services to ships include such activities as towage, pilotage, and mooring. There are four broad freight categories – container, break bulk, liquid bulk and dry bulk; the focus of this Review is on services provided to container freight. Specifically, the Commission’s focus is container stevedoring, container handling and storage, and container transport (road and rail) and intermodal services. However, it is open to the Commission to include other related services in the Review, where it has identified that competition in the provision of these services is being adversely affected by current planning frameworks. For these ports and services, the terms of reference direct the Commission to consider a range of matters. These matters broadly fall into two broad categories: • Restrictions on entry or other barriers to competition in the provision of stevedoring and related services in current planning frameworks, and an assessment of the costs and benefits of such restrictions. The Commission understands that planning frameworks are not only those established by the Victorian Government, but also other parties such as the port authorities themselves3 and local councils.
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