FINKELSTEIN J
2 This case raises an important question arising under Part IIIA of the Trade Practices Act 1974 (Cth) upon which different views have been expressed, both at trial level and now on appeal. The differences can be attributed substantially to the lack of precision in the language of Part IIIA, resulting in different approaches to the construction of the relevant provisions. The point in issue is how to apply an apparently simple statutory expression, "production process", to uncontested facts.
3 There is a description of the relevant provisions of Part IIIA in the judgment of Greenwood J. It will suffice for me to restate the chief features, omitting unimportant qualifications. In broad outline, Part IIIA establishes a regime to facilitate third party access to the services of certain essential facilities. The purpose is to encourage competition in markets downstream or upstream of the market for the services. In the main, the problem that Part IIIA seeks to address is that of the vertically integrated firm with a natural monopoly facility in one market which, by refusing to share its facility, is able to foreclose competition in upstream or downstream markets. Not every owner of a natural monopoly facility is a vertically integrated firm. It may be integrated horizontally and capable of extracting monopoly rents in the market in which it operates. This is regulated elsewhere by price control.
4 The first step in the process of obtaining access is that the third party applies to the National Competition Council asking it to recommend that a particular "service" be declared: s 44F. It will be necessary later to return to the definition of "service". The Competition Council can only recommend that a service be declared if it is satisfied, among other things, that: (a) access to the service would promote competition in at least one market, other than the market for the service; (b) it would be uneconomical for anyone to develop another facility to provide the service; and (c) the facility is of national significance: s 44G(2). If the Competition Council makes a positive recommendation the Minister must either declare or decide not to declare the service: s 44H. In making his (or her) decision the Minister must be satisfied of the same matters as must the Competition Council in making a recommendation: s 44H(4). If a declaration is made the third party and the owner or operator of the service must attempt to reach agreement on the terms and condition of access. Where the parties are unable to reach agreement the terms and conditions will be determined by the Australian Competition and Consumer Commission (ss 44S, 44U, 44V), whose decision is subject to review by the Australian Competition Tribunal: (s 44ZP).
5 The matters about which the Competition Council and the Minister must be satisfied before making their respective determinations show that the services to which access may be given are those provided by significant bottleneck facilities. The facilities often form an essential foundation for maintaining a modern economy. They include transportation and communications systems, power facilities, ports (including airports) and harbours, water systems and so on. The underlying assumption is that if access is given to natural monopoly facilities, consumer welfare will be enhanced by the competition that will result.
6 "Service" is defined in s 44B to mean "a service provided by means of a facility and includes: (a) the use of an infrastructure facility such as a road or railway line; (b) handling or transporting things such as goods or people; (c) a communications service or similar service; but does not include: (d) the supply of goods; or (e) the use of intellectual property; or (f) the use of a production process; except to the extent that it is an integral but subsidiary part of the service." There are three things to note about this definition. First, a service is a service provided "by means of a facility". In Rail Access Corp v New South Wales Minerals Council Ltd (1998) 87 FCR 517 the Full Court said this showed the "service" was "separate and distinct from a facility" and "may consist merely of the use of a facility". Second, at least according to the argument in this case, the examples of services that are given in paras (a), (b) and (c) are themselves qualified by the exclusions in paras (d), (e) and (f). This argument is not, however, self-evidently correct. Another possible construction is that a service includes without qualification each of the services described in paras (a), (b) and (c) and only excludes other services that meet the descriptions in paras (d), (e) and (f). In other words, paras (d), (e) and (f) qualify "services" but not the kinds of services described in paras (a), (b) and (c). But as no party has contended for this construction it is not appropriate to consider it any further.
7 The third point about the definition is that the expression "production process" is itself not defined. It was common ground both at trial and on appeal that the expression is not a term of art and should be given its ordinary meaning. The problem is that the expression is slippery and it is not at all clear what it means and how it should be applied to the facts.
8 It is to the facts that I now turn. The appellant, BHP Billiton Iron Ore Pty Ltd, in its capacity as manager, conducts mining operations in four areas in the Pilbara region of Western Australia. The mines are located in four mining areas known as Newman, Yandi, Area C and Goldsworthy. The lessees of the mining tenements (and thus the owners of the ore extracted from the mines) are participants in various joint ventures, each comprising a BHP company holding a majority interest, several Japanese companies and, dependent upon the tenement, Australian subsidiaries of Chinese or Korean steel mills owners.
9 As manager of operations the appellant is responsible for producing ore to meet the requirements of the steel mills to which the ore is sold. The steel mills (which in some cases are related to participants in the joint ventures) specify the physical and chemical properties of the ore they wish to purchase. The requirements differ from mill to mill for a variety of reasons, including the type of blast furnace used by the mill, what coke or other fuel is used in the milling process and the type of ore mix required by the mill.
10 The activities that are undertaken to produce iron ore in broad outline involve the following steps. (I put to one side the precursors to mining, such as prospecting and exploring the ore body as well as developing the mine). The first activity is mining: the extraction of iron ore from the mineral deposits. The appellant has provided only a brief description of its mining activities, but it seems to follow the basic production cycle: drill + blast + load + haul. First, blocks of ore that are to be mined are identified and prepared for blasting by drilling holes to preset depths. Explosions are placed in the holes and the ore and associated waste is blasted. The waste is removed usually by front-end loaders, extractors or shovels and is hauled by truck to waste storage areas. The ore is loaded onto haul trucks and taken to a crusher. Where the trucks are too large to dump ore directly onto the crusher or the ore is not needed for immediate use, it is deposited in stockpiles. For an excellent discussion of the production cycle, see H Hartman and J Mutmansky, Introductory Mining Engineering (2nd ed, 2002), especially ch 5.
11 The final step in the basic production cycle, haulage, has an interesting history. What follows is based on C E Gregory, A Concise History of Mining (1980). In the earliest days of underground mining, for example gold mining in ancient Egypt, the gold ore was transported in panniers by slaves. In Mitterberg, ore was carried in leather bags; at Laurium in ancient Greece, it was carried or dragged in wicker baskets. Agricola, a German scholar sometimes referred to as "the father of mineralogy", wrote of the use of wheelbarrows in underground mines where the work face was a considerable distance from the shaft. In the 17th century in British coal mines, coal was hauled in baskets called 'corves' loaded onto sleds. Pit ponies were introduced in the 18th century to haul corves, by then known as trams.
12 Following its development the locomotive became a common method of haulage, especially in large mines. The first steam locomotive was built in 1801 by Richard Trevithick, a Cornish mining engineer, for use in coal mines. The first surface railway was erected in a coal mine in 1804. In 1814 George Stephenson, another mining engineer who in 1825 built the first passenger railway, constructed a steam locomotive to operate at the Killingworth Colliery.
13 Rail haulage has a long history in Australian mining. The following are but a few examples. The once famous Sons of Gwalia Mine, formerly operated by the Broken Hill Proprietary Company Ltd, obtained power generated by gas turbines. Wood supplies needed for the boilers were transported by rail on a twenty inch track for a distance of forty miles: The BHP Recreation Review vol 12(1) (1934) reprinted in Light Railways No 164 (April, 2002). A two foot gauge railway four miles in length connected the MacGregor and Woolaroo Mines in Queensland to the main line. Three train loads carried fifty tonnes of ore per day to Ballara, carrying firewood, mine timber and general stores as return loading: Annual Report of the Mines Department (1915) (Qld). Railways were used at the Great Cobar Mine, one of Australia's great copper mines, for a range of purposes including carrying ore from the crushing plant to the smelter and transporting firewood. The Great Cobar Copper-mining Company Tramway Act 1884 (NSW) authorised the construction and operation of the railway.
14 Once ore is mined it must be concentrated or freed from the minerals that are of no value (gangue) to prepare the ore for the extraction of valuable metal. The process is called ore dressing, mineral dressing or milling. The first step in ore dressing is to reduce in size (comminution) the lumps of ore recovered from the mine. This is achieved first by crushing, which may involve primary, secondary and tertiary crushing, followed by grinding: see generally Wills' Mineral Processing Technology (7th ed, 2006). All ore from the appellant's mines undergoes primary crushing at the mine site. The ore, other than ore taken from the Goldworthy mine, also undergoes secondary crushing and screening at the mine site. Following crushing, the ore is stockpiled prior to being railed to Port Hedland.
15 The appellant operates two heavy haulage single track rail lines between its mining operations in the Pilbara and Port Hedland: the Newman line, that runs 426 km from Mount Whaleback in the Newman mining area and the Goldsworthy line, that runs 210 km from the Yarrie mine in the Goldsworthy area.
16 The appellant has two facilities at Port Hedland. Both have crushing and screening plants and stockpiling and shiploading facilities. Ore from Goldsworthy undergoes secondary crushing at the port. Tertiary crushing of all ore occurs at the port.
17 The next step in ore dressing is classification or sorting. The object is to further separate the valuable mineral from the gangue. For useful discussions of these activities see J Gilchrist, Extraction Metallurgy (3rd ed, 1989); C Bodsworth, The Extraction and Refining of Metals (1994); Wills' Mineral Processing Technology (7th ed, 2006). A simple method of classification is screening. Other methods include flotation, electrostatic separation and magnetic separation. The evidence is all but silent on this aspect of the appellant's operations.
18 Beneficiation, often considered a part of ore dressing, is the process by which ore with a low iron grade is mixed with a higher grade ore. This is a very cost-effective process. There is a beneficiation plant at Mount Whaleback.
19 When ore or concentrate (fines) is too small for use in the blast furnace it must be re-formed into lumps of appropriate size and strength. This process is referred to as agglomeration. There are two commonly used methods of agglomeration: pelletising and sintering: J Gilchrist, op cit, ch 5; C Bodsworth, op cit, at paras 1.4 and 4.3. Pelletising involves pressing the fines into briquettes or pellets, sometimes with a suitable binder, in a drum or on a rotating disc. Pellets are normally produced by the miner. Sintering is the consolidation of metal powder by heat at a temperature below the melting point of the metal. Sintering is usually carried out by the steel mill.
20 Ore is often blended, usually prior to sintering or pelletising: J Gilchrist, op cit at 343. There are two main purposes for blending. One is to meet the requirements of a particular steel mill. The other is to maximise the ore resource by the blending of a range of diverse ores. Blending can be carried out by the steel mill, particularly if the mill agglomerates fines by sintering: R D Walker, Modern Ironmaking Methods (1986) at 44; see also the diagram in C Moore & R I Marshall, Steelmaking (1991) at 55.
21 Blending occurs at various stages of the appellant's activities. In some cases it begins when the ore is stacked on and removed from the stockpiles at the mine (although the evidence is scant about what actually occurs), in the loading and unloading of iron ore from the trains and by the stacking and reclaiming of iron ore on and from stockpiles at the port. Principally, blending occurs through the disciplined stacking and reclaiming methods at the port. It is in this respect that the management of the rail link is of critical importance. Blending is achieved by combining at Port Hedland trainloads of calculated quantities of specific ores from particular mines to produce the required grade of ore. This requires a complex system of rail scheduling to ensure that the correct tonnage and grade of ore is transferred in the required sequence.
22 The final stage in steelmaking is the extraction of the metal from the ore. This is a two stage process. The first is the production of an impure metal by smelting. The second is the removal of impurities by refining. Until quite recently BHP, the predecessor of the parent company of the appellant, owned and operated several steel mills. Indeed, for many years BHP was Australia's only steelmaker. The mills were disposed of in 2000.
23 Fortescue seeks access to the rail link from the Pilbara to Port Hedland as well as to the "associated infrastructure", including track structures, bridges, passing loops, track control systems, sidings, maintenance and protection systems and the roads and other facilities which provide access to the railway line route. The appellant says that the Competition Council cannot recommend that a declaration be made because use of the rail link involves "use of a production process" and hence is not a "service" within the meaning given to that term by s 44B.
24 In summary, the appellant's argument goes this way. The appellant manages its mine, rail and port operations as "an integrated system". Each port is operated "with the objective of optimising the integrated system as a whole, rather than seeking to optimise the individual aspects of the mine, rail and/or port operations." The rail link is "a fully integrated component of [the appellant's] iron ore operation." So it is said that all of the appellant's activities constitute a single production process and the rail link is a part of that process.
25 The judge accepted that as manager of the operations the appellant conducts a highly integrated process from mining iron ore to producing the product that is sold to the steel mills. There is no challenge to that finding. Based on the evidence it is difficult to see how the finding could be challenged. There is, however, a dispute whether the judge went any further. He did find that the steps engaged in by the appellant to create two finished products (Newman high grade fines and Newman high grade lump) constituted a single production process "which commence[s] at the mine [and] does not finish until the finished product is produced at the port." Each respondent says this did not amount to a finding that all the appellant's activities are to be characterised as a single production process. That may be so, although it is likely that the judge would have reached that conclusion. At any rate, the position taken by the respondents, in the alternative, was that if the judge had made a finding that there was a single production process his finding was in error.
26 Having regard to the way the judge disposed of the case it made no difference whether the appellant conducted one or more production processes. The judge said the only relevant question was whether the facility to which access was sought (that is the rail link) could, in isolation from other parts of the operation, be described as a production process. Having observed that the facility (the rail link) "does not involve a process of transformation" he concluded that it could not "in itself constitute a production process."
27 On appeal each respondent contended, among many other contentions, that what was involved in the Pilbara and at Port Hedland was not a single production process. In its written submissions Fortescue stated that: "[The appellant] does not have only one production process in the Pilbara for the purposes of producing iron ore products. There are a number of iron ore production processes managed by [the appellant] at various locations in the Pilbara." Mr O'Bryan QC, Fortescue's counsel, said it was "as plain as a pikestaff [that] it's not one production process, couldn't possibly be." He described the separate processes as including drilling and blasting, crushing and beneficiation. He said the rail link was "simply a link between the mining production operations [at the Pilbara] and the port production operations, neither more nor less."
28 Mr Scerri QC, who appeared for the Competition Council, put a similar argument. Mr Scerri said of the appellant that "it engages in a whole lot of activities all of which are undoubtedly productive". He went on to say there were "several productive - production processes" involved. When asked to identify the processes he said "they start at mining: extraction, screening … And there is - the last one is at the port where they mix some of the stockpiles." His point also was that the only function of the rail link was to move iron ore from the place of one production process to another; it was itself not part of any production process.
29 In my opinion it is of critical importance to determine what production process is, or what production processes are, conducted by the appellant. It is only when the process is (or the processes are) identified that it is possible to analyse the role played by the rail link in that process (or processes) for the purpose of deciding whether or not the rail link is part of a production process.
30 I should indicate at the outset that I incline to the view Fortescue and the Competition Council are correct in their submission that the activities engaged in by the appellant involve several production processes. Moreover, the identification of those processes is not, as the appellant would have it, much assisted by the fact (not challenged and undoubtedly correct) that the appellant conducts a highly integrated operation.
31 The appellant based its one process argument on Hamersley Iron Pty Ltd v National Competition Council (1999) 164 ALR 203, a case substantially on all fours with the case at bar. There Robe River Iron Associates, a joint venture, sought access to a rail link used by Hamersley Iron Pty Ltd in its mining operations in the Pilbara. The mining operations were in all respects the same as those conducted by the appellant. The judge, Kenny J, found that the rail link was not a "service" within s 44B because it was part of Hamersley's production process. In summary, the judge's process of reasoning was as follows. First, Kenny J held that the expression "production process" meant "the creation or manufacture by a series of operations of some marketable commodity": 164 ALR at 213. Second, Kenny J found that the only marketable commodity produced by Hamersley was an "export product", namely iron ore in the condition it was sold to steel mills. Third, the judge found that "[e]ach step in the production process [of the export product], including the use of the railway line for the carriage of ore in accordance with a recipe for a batch of product, [was] part of a highly integrated operation designed to make the export product": 164 ALR at 216. In particular "Hamersley's use of its railway line [was] an integral (indeed, essential) operation in Hamersley's production process": 164 ALR at 216. It was a "necessary component of an integrated set of operations which constitute its production process": 164 ALR 220. That is, Hamersley's production process extended from the commencement of its mining operations at the mines to the completion of the product that it sells, namely the export product: 164 ALR at 213. Put another way, the railway link did not merely convey ore by rail from mine to port, it was equivalent to a piece of machinery that, in combination with other pieces of machinery and processes, manufactured an export product.
32 There are several critical aspects to this reasoning. The first is that a production process is a series of "highly integrated operations" necessary to produce a "marketable commodity". The "integrated operations" were not simply physically integrated operations. To the contrary, in many respects physically distinct operations were involved and they were integrated only on an organisational basis. Indeed, the operations were integrated in a manner one would expect of an efficient profit maximising firm that has successive stages of production under its control.
33 The second critical aspect of the reasoning is that the production process must produce a "marketable commodity". It seems reasonably clear that Kenny J had in mind the production of a commodity for which there is an existing market or, if there be no existing market (as for example if a new good was produced), a commodity for which a market is likely to be established. I doubt Kenny J was contemplating merely an article that was capable of being sold. Every article will find a buyer at the right price. On the other hand, it is possible, perhaps likely, that Kenny J did consider the relevant commodity to be that which Hamersley produced for sale whether or not at any earlier stage of the process there had come into existence a commodity for which there was a market.
34 The third critical aspect is the manner in which it was determined that a particular operation is included in a production process. The test proposed is that the operation "is a necessary component of an integrated set of operations which constitute [the] production or process" to create a marketable commodity: 164 ALR at 220. This test makes irrelevant whether any particular operation is a primary or secondary operation or whether it makes a direct or indirect contribution to the production of the commodity.
35 The Hamersley case dealt with another issue that is of relevance to the instant case. Robe River was seeking access to part only of Hamersley's production process, namely the rail link. Kenny J found that the rail link was "an operation integral and essential to the production process" and that use of an integrated or essential aspect of the process is use of the process itself. She explained (164 ALR at 219): "[T]he use of a production process extends, in my view, not merely to the use of the whole process but also to the use of any operation (or step or procedure) that is integral (and perhaps essential or non-subsidiary) to that process as a whole."
36 If the reasoning in Hamersley were applied to this case the conclusion as regards the production process would be different. In Hamersley the marketable commodity produced was export grade iron ore, the production of which was completed at the port. Here, a marketable commodity (that is, a commodity that was exchanged for value) was produced before being railed to port. Ownership of ore from several mines (eg MAC, Western 4 and Jimblebar) changed hands before railing, in some cases before and in other cases after primary crushing. The exchange value does not appear in the appeal papers, but seems to have been in evidence at trial. Thus, the judge should have reached the conclusion that the appellant managed several production processes.
37 But, as I have said, the judge appears to have decided, or would have decided, that the appellant's activities constituted a single operation. He described the appellant's activities in the following way:
"[Its] overall objective … is to produce cargoes of iron ore products that meet customers' expectations as to product specifications, grade variability, tonnages and timeliness. … To consistently meet these expectations, [the appellant] uses an integrated approach to its mining, rail and port operations and marketing. … [B]y adding together each of the various operations, [the appellant] operates its production of iron ore as a whole from mine to port for the purpose of the overall objective of [the appellant]."
As regards the rail link he said:
"[The appellant's] use of the rail line is an operation which contributes to the creation of its finished product, and can even be seen as essential (as the [the appellant's] existing operations attest) to the creation of the final export product. Without the rail line, there would be no connection between mine and port."
If there was one production process Hamersley required the judge to hold that access to the rail link, being an essential part of the production process, would amount to access to the process. Nonetheless the judge found in favour of Fortescue. Although he decided that the use of the rail link was essential to the creation of the export product, he parted company with Kenny J on the importance to be attached to the fact that the rail link was an integral part of the operation. As I have explained, the judge confined his attention to the rail link and asked whether that constituted a "production process" considered in isolation to the production process of which it formed an essential part. Because the judge found that "in itself the rail line does not create or make anything", he could not characterise it as a production process.
38 I do not agree in the approach taken by the judge. Nor, for that matter, do I accept all that was decided in Hamersley. A convenient place to begin the explanation is with the meaning of "production process". In the present context, the term "production" is used as an abstract noun and it means the act or process of producing. The composite expression "production process" refers to the process by which inputs (including labour) are transformed into outputs. Such a definition, however, is of little assistance, at least in a case like this.
39 Defining a process by reference to inputs and outputs immediately raises the question: what inputs and what outputs? Putting inputs to one side, the approach in Hamersley was to define the output as a "marketable commodity". That at least established the point at which the production process came to an end. But proceeding on the basis that the relevant output is a marketable commodity is bound to create problems. Often, for example, it is not clear whether a commodity is marketable, particularly if not currently being traded. Must one then decide whether the commodity it likely to find a market? Is that consideration to be determined by factors affecting the producer or the market at large? There is, in any event, an anterior question: Why is it necessary for the output to be a commodity and to be marketable? Perhaps to an economist an output must have an exchange value. To a producer, however, the output need not be marketable. It may be sufficient if the output be an input for another process.
40 A far more serious problem is that by tying the identification of the process to an output with a particular characteristic (such as a marketable commodity) the activities that constitute the production process will be identified by the choice of the output. The result will be that dependent upon the choice of output the activities may be few or many. By way of example, the production process for producing iron ore will involve far less activities than the production of export quality iron ore.
41 Another problem with the definition is that it pays little regard to operations that are in fact separate, either in a structural or physical sense. Nor does it take into account the reason why a particular firm has organised its operations either as an integrated unit or separately, though I appreciate that some processes may be intrinsically integrated or separate.
42 If the process is to be marked out as "a highly integrated operation" (as Kenny J would have it) or as "a systematic sequence of integrated operations" (the view of the majority), the manner in which a firm is organised will determine the outcome. By way of further example, a vertically integrated firm that owns both oilfields and refineries would be able to integrate its operations so as to have only one production process. Yet, if there is separate ownership of the oilfields and refineries, there will be at least two production processes. That the structure of the firm could dictate the number of production processes that exist can hardly have been intended.
43 In any industry it is common to find more than one output and more than one production process. How are they to be identified? The place to begin is to consider the position from the perspective of those who know the industry. Among them there is likely to be consensus as regards the particular process or processes that are involved. So, in a case like this, a judge armed with the knowledge of a mining engineer and a metallurgist is better equipped to determine what production processes are involved in mining and metal extraction than a judge aided by just a dictionary. If in the opinion of industry participants there are separate production processes involved, no amount of integration of those processes will reduce the number of processes. I do not mean to deny that the integration of activities may (I emphasise "may") be a factor to consider in marking out a production process, but it will never be determinative.
44 In an attempt to get a broad understanding of what a proper analysis is likely to disclose I have looked at many textbooks (the kind of 'accepted' and 'serious' works to which, in Australian Communist Party v The Commonwealth (1951) 83 CLR 2, 196,Sir Owen Dixon said judges may have regard) dealing with mining, mineral processing and steelmaking, some of which I have already identified. The impression to be gained from those texts is that what the judge has described as an integrated process is, as the respondents contend, made up of several discrete production processes, although, in the absence of further evidence and argument, I could not confidently say how many processes are involved or, for that matter, precisely where one process ends and the next begins. Still, some conclusions seem tolerably clear and, I suspect, would be relatively uncontroversial to a mining engineer and metallurgist.
45 The first is that mining ore is a stand alone production process. Here I am referring to the steps involved in physically separating ore from the earth, namely drilling and blasting the rocks, excavating the material from the mine site and then hauling the material to an area adjacent to the mine: H Hartman & J Mutmansky, Introductory Mining Engineering (2nd ed, 2002) at para 1.5. This view is in line with the position taken in the oil and gas industry, where oil and gas is said to be produced when it is physically separated from the earth. Later processes, designed to create marketable commodities such as natural gas or stabilised crude oil, are regarded as separate production processes: see eg Oil Basins Limited v BHP Petroleum Pty Ltd (unreported, Full Court of the Supreme Court of Victoria, 27 May 1988), a case that, by the way, dealt with the production of unstabilised crude oil, which at the time was not a marketable product.
46 It should be made clear that, to this point, the operations to which I refer are those that contribute directly to the severance of ore from the earth. They are not the only operations involved in mining. There are support operations, often called auxiliary operations, without which mining cannot take place. The textbooks do not present a uniform picture as to whether the auxiliary operations should be treated as part of the mining production process. Perhaps there is no one answer. Some auxiliary operations, for example, the generation and supply of power to the mine, may be regarded as separate and distinct processes. So also might health services, roads and airports. Others, such as dust control, pumping and drainage, waste disposal and the maintenance of equipment, are so closely connected with the mining operation that they are likely to be treated as part of the mining production process. The evidence is silent about the nature of the auxiliary operations in the Pilbara and how they are to be regarded.
47 Haulage by rail within, or to and from, a mine site may be difficult to characterise because it can fall on either side of the (direct and indirect) divide. Rail transport that is used to haul ore from the stopes to the crushers or stockpiles makes a direct contribution to the production of ore and is likely to be treated as part of the mining production process. The same is true of haulage by haulage trucks, shuttle cars and conveyors that are used for that purpose. On the other hand, where rail is used to transport men or equipment to the mine, the use may be auxiliary and not regarded by the mining industry as part of the mining production process.
48 The identification of a service as auxiliary serves another important function. If one goes back to the definition of "service" one will see that while a production process is not to be regarded as a "service", a production process that "is an integral but subsidiary part of the service" is within the definition of "service". Auxiliary services, or at least some auxiliary services, may properly be characterised as an integral but subsidiary part of a service and hence not covered by the production process exception.
49 After the mining operation has produced ore (that is, after the miner has completed his task) the metallurgist takes over. I have described some of the activities of the metallurgist. The first is ore dressing. Several physically separate processes are involved: crushing, grinding and concentrating. Different equipment at different locations is used in each stage. Still, the standard reference books appear to treat ore dressing as a single enterprise.
50 Next there is agglomeration, either by pelletising or sintering. Agglomeration is treated in the textbooks as distinct from ore dressing, and it seems that pelletising and sintering are separate processes. It is difficult to make any comment about whether blending is a separate process. Some texts treat blending as an aspect of mineral processing or ore dressing and others as a step in smelting. Perhaps the better view is that blending is independent of either of those processes.
51 My comments concerning the division of operations into particular stages while in line with the respondents' submissions are only tentative, based as they are on the writings of authors whose object was not to identify a production process but to explain what is involved in steelmaking. In order to decide whether there is one production process or several production processes involved in preparing export grade ore and, if several, which processes are direct or auxiliary, requires a more in depth analysis. Moreover, without that analysis it is not possible to determine whether the rail link to Port Hedland make any direct or indirect contribution to production. Thus it is not possible to determine whether the rail link is available for access under Part IIIA.
52 I acknowledge that for different reasons neither the judge nor the majority think it necessary to carry out such an analysis. The judge said that if the part of the production process to which access is sought is itself not "transformative" it could not be treated as a production process. The majority take the view that the phrase "the use of a production process" does not cover access to a part of a production process. There is a qualification. The majority say that "a particular production process may well be made up of a highly integrated and inter-dependent set of steps contained within a particular physical environment such as a factory, plant or smelter such that a service sought by a third party in terms of use of [part of the process] would constitute the use of the production process." This is to deal with the situation where the "use of that step is likely to be so invasive and disruptive to the operator's use of the integrated production process (or other parts of the production process) that the third party in substance and effect is, through that use, engaged in the use of the production process."
53 With great respect, I cannot accept either the view of the judge or the majority on this issue. As regards the majority view, their approach has its own inherent problems. One is with the qualification. Without further explanation it is simply not possible to tell when it will operate. Even the explanation for the qualification suggests that the qualification will in a practical sense be difficult to apply. For one thing, the concept of "invasive and disruptive" is highly subjective. For another, dependent upon how an operation is set up, access to part of an operation may be disruptive in one circumstance or at one point in time but not in other circumstances or at different times.
54 Interestingly, the Competition Council expressly declined to adopt the majority's approach to the construction of the definition, although it was in its interest to do so. Perhaps the Competition Council foresaw how things might play out if that approach were adopted. And, in my view, the results would be so unreasonable that they could not have been within the contemplation of Parliament. Two examples will suffice, although there are many others.
55 The first concerns the electricity industry. For the most part, electric power is produced by generators. Power plants are vital to the national economy. From the standpoint of equipment needed and maintaining an operating routine, the load demanded by users would ideally be of constant magnitude and steady duration. But industrial processes and domestic users impose highly variable demands upon the capacity of a power plant. To meet the variable load conditions, large power plants house several generators. The most economically efficient generators operate 24 hours a day to secure base-load, that is, to meet the bulk of demand. The less efficient, usually smaller units, capable of rapid start up, are put to use for incremental or peak-load - when demand is high.
56 Let it be assumed that the generation of electricity at a power plant with both base-load and peaking generators constitutes a single production process. On the majority view, if a third party seeks access to some but not all the generators at the plant, the third party is not seeking access to a production process. I cannot accept an approach that requires that conclusion. When the Hilmer Report dealt with the electricity industry it contemplated a regime that would allow access to electricity transmission grids, without which competition would be impaired or shut out, but not to electricity generators, the owners of which operated in a competitive market. As a result legislation has been put in place to establish an open access regime to transmission and distribution lines for those who generate electricity. The legislation does not deal with access to generation facilities which would still be covered by Part IIIA.
57 The second example I have in mind is a gas processing facility such as the one located at Longford which supplies most of Victoria's natural gas. There is a description of the operations at Longford in Longford Royal Commission, The Esso Longford Gas Plant Accident (1999). Gas and associated hydrocarbons are delivered to the Longford plant by pipeline from three main fields off-shore in the Bass Strait. In simplified form, processing takes the following course. The gas and liquids enter a slugcatcher which separates the liquids from the gas. The liquid is then processed separately from the gas. The gas is passed through molecular sieves to remove water vapour and hydrogen sulphide. The gas is then transferred to absorbers where lean oil absorbs the ethane, propane and butane contained in the gas. The oil is then enriched and removed for treatment. The gas is subject to further treatment and is ultimately sold as natural gas. As it turns out, there are three separate gas plants that process the gas that flows into the Longford facility. There is also a crude oil stabilisation plant at Longford that processes oil from other Bass Strait fields.
58 In my understanding there is at Longford either one production process or two processes, one for gas and the other for oil. Regardless of my view, let it be assumed that those who work in the gas industry would characterise Longford as a single production facility. If the phrase "the use of a production process" is construed not to cover part of a production process, a third party could obtain access to part only of the Longford facility, say the crude oil stabilisation plant or one or two gas plants. I doubt whether any such thing was intended. The Hilmer Report referred to the desirability of third party access to gas pipelines and there is now in place a national regime that permits that to occur. Gas plants are not covered by the regime.
59 I observe in passing that the view of the majority relies in no small measure on the expressio unius principle. Time and again the High Court has said that this maxim must be applied with care: Houssein v Under Secretary, Department of Industrial Relations and Technology (NSW) (1982) 148 CLR 88, 94; Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106, 213. Once it was referred to as no more than a "weak reed": Lee Vanit v The Queen (1997) 190 CLR 378, 399. In any event, the principle can only be applied if it is clear that the provision was intended to make exhaustive provision with respect to the topic. Here there is no room for the maxim.
60 To conclude this aspect, the task, as always, is to construe the relevant legislation having regard to its object and purpose and, when appropriate, taking into account the consequences that would follow from a particular construction, if more than one construction is available. I have made clear why I favour a construction that would deny access to part of a production process. Such an approach found favour with Kenny J in Hamersley and I agree in her reasons on this issue.
61 As regards the approach of the judge, I agree with the majority that he is in error in holding that as a matter of construction a third party is entitled to access to a part of a production process provided that part is not transformative.
62 I repeat that neither the findings made by the judge nor the evidence in the appeal book enables me to determine whether the steps beginning with the mining of ore and ending with the creation of export grade iron ore constitute one or several production processes or whether the rail link to Port Hedland is part of a production process or, if it matters, an auxiliary operation. Importantly, if, as seems likely, there are several processes involved, it will be necessary to consider in some detail what function the rail links perform - do they directly contribute to the blending process or are the rail links merely the means by which ore is taken from one place of production to another. As I have explained, those questions should be answered primarily from the perspective of those who understand and know the industry. Accordingly, I would allow each appeal with costs and remit the matters for rehearing.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.