16 July 2018 Professor Flavio Menezes Chair Queensland Competition Authority Dear Professor Menezes DBCT Declaration Review - Response to Initial Submissions 1. Attached for the QCA's consideration is DBCTM's response to initial submissions on the DBCT Declaration Review. No rationally probative evidence to support declaration 2. Declaration of the DBCT service expires on 8 September 2020. 3. Accordingly, for the DBCT service to be declared after 8 September 2020 the QCA must be affirmatively satisfied that each of the access criteria in section 76(2) of the Queensland Competition Authority Act 1997 are met. 4. To be affirmatively satisfied that each of the declaration criteria are met, the QCA must have a logical and rational basis for each such determination. 5. The QCA cannot have a logical and rational basis if it cannot be reasonably satisfied of the existence of critical and fundamental facts of a criterion. 6. The QCA cannot be reasonably satisfied of the existence of critical and fundamental facts of each criterion without rationally probative evidence of the existence of such facts. 7. Accordingly, the QCA cannot determine that an access criterion is satisfied based upon mere speculation and conjecture. 8. The User Group has provided no rationally probative evidence to the QCA of the existence of critical and fundamental facts required for the satisfaction of declaration criteria, only unsubstantiated assertions which are no more than speculation and conjecture and must be dismissed. 9. The User Group Submission is no more than unsubstantiated assertions because it does not contain any rationally probative evidence. Furthermore, there are serious questions as to the veracity of material sought to be relied upon by the User Group, to such a degree that it should be given no weight or very little weight by the QCA. (a) Key factual premises relied upon by the User Group have not been provided. For example, the DBCT User Group and PwC do not disclose the production forecast numbers from which their demand forecasts are derived. Therefore, the lack of transparency means that these factual premises cannot be tested and accordingly cannot be given any weight by the QCA. (b) Some key facts sought to be relied upon by the User Group have been manipulated by the User Group. For example, the User Group further manipulate Wood Mackenzie production forecast figures to determine an adjusted forecast of DBCT throughput, without disclosing the precise adjustments made to the Wood Mackenzie data. Therefore, serious questions as to the veracity of such manipulated data are raised and accordingly cannot be given any weight by the QCA. (c) The User Group Submission contains misrepresentations of alleged facts. For example, the User Group and PwC incorrectly label an email from DBCTM showing a snapshot of DBCT's expected contract profile as at 21 February 2018 to be DBCTM's demand forecast. (d) The PWC Report does not disclose the author of the report and accordingly the relevant experience and expertise of the author(s) is unknown. Until the QCA is satisfied that the author has relevant experience and expertise in declaration matters the QCA must treat the report as no more than a submission and not as an expert report. Furthermore, the underlying data relied upon by PWC has not been provided and accordingly the factual basis for the PWC opinions cannot be tested and therefore they cannot be given any weight by the QCA. DBCT Management (07) 3002 3100 Level 15 Waterfront Place, Brisbane QLD 4001 www.dbctm.com.au DBCT Management (e) The Castalia Report does not disclose the author of the report and accordingly the relevant experience and expertise of the author(s) is unknown. DBCTM is aware that certain employees of Castalia have been involved in declaration matters and accordingly it is possible that the authors may have relevant experience and expertise sufficient for the QCA to give some weight to the opinions contained in the report. However, until the QCA is satisfied that the author has relevant experience and expertise in declaration matters the QCA must treat the report as no more than a submission and not as an expert report. User Group's failure to engage 10. DBCTM offered on 12 June and 26 June to meet with members of the User Group to explain the operation of the DBCT Access Framework. DBCTM sought to provide the Users with an opportunity to ask questions about the operation of the Access Framework, to ensure that there was no misunderstanding as to how it will apply. Minimising misunderstanding as to the exact operation of the Access Framework should ensure future submissions to the QCA by the User Group are made on a fully informed and factual basis, to the benefit of all stakeholders and the QCA. In addition, DBCTM was seeking to determine if it could address any of the concerns the User Group may have with the proposed Access Framework. 11. The User Group (through their representative, Allens) expressly rejected both offers. Accordingly, serious questions are raised about the bona fides of the User Group's willingness to engage in constructive commercial discussions other than through a formal regulatory process relying upon the QCA to make determinations in the User Group's interests. The User Group notes in its submission that it is reliant on the QCA to consider and protect its position in this declaration review. Therefore, the QCA should give no weight to any future submission by the User Group expressly or impliedly that the operation of the Access Framework is uncertain as they have been provided two opportunities before submissions are due on 16 July to actively engage with DBCTM on the operation of the Access Framework. QCA's failure to engage 12. DBCTM on 8 June 2018 offered to explain to the QCA material evidence upon which it relies. The QCA did not respond to this offer. The QCA's lack of engagement raises the possibility that the QCA could overlook or misunderstand the material evidence before it, increasing the risk of error. DBCTM expects that the QCA will in its draft recommendation fully describe the material evidence provided by DBCTM, the weight provided to such material and the reasons for the weighting. 13. Furthermore, the QCA on 3 July 2018 stated that it would not take into account the DBCTM submission of 29 June 2018, attaching the completed drafting of the DBCT Access Framework, and that this material could be provided as part of the submissions on the QCA draft recommendation in some 6 months' time. Considering the generous time periods the QCA has granted itself to consider material before it, there appears no rational basis for the QCA's express failure to consider this material until much later in the process. Further, the significant delay in the QCA's consideration of this material increases the risk of delay in the finalisation of the matter as DBCTM must be afforded the opportunity to respond to the QCA's comments and assessment of the material prior to the QCA's final recommendation. Yours sincerely Anthony Timbrell Chief Executive Officer DBCT Management Attachment 1: DBCTM response to initial submissions on the DBCT declaration review DBCT Declaration Review 2 DBCT declaration review DBCT Management response to initial submissions 16 July 2018 DBCT Management Level 15 Waterfront Place, Brisbane QLD 4001 PO Box 7823, Waterfront Place QLD 4001 (07) 3002 3100 www.dbctm.com.au DBCT Management Contents Contents Contents ....................................................................................................................................................................... 2 Figures .......................................................................................................................................................................... 3 1 Executive Summary ............................................................................................................................................ 4 2 Criterion (b) ........................................................................................................................................................ 7 2.1 Summary ............................................................................................................................................. 7 2.2 Lack of probative evidence ................................................................................................................. 8 2.3 Relevance of previous Tribunal decisions to criterion (b) .................................................................. 9 2.4 Relevant period over which foreseeable demand should be measured .......................................... 10 2.5 Maximum capacity of facility for the service .................................................................................... 12 2.6 Service definition .............................................................................................................................. 14 2.7 Market in which the service is provided ........................................................................................... 15 2.8 Total foreseeable demand in the market ......................................................................................... 31 2.9 Meeting total foreseeable demand in the market at least cost ....................................................... 45 2.10 Response to QCA Staff questions on criterion (b) ............................................................................ 53 2.11 Conclusion on criterion (b) ..............................................................................................................