Karara warns on Mid West rail

Struggling iron ore miner Karara fears inadequate regulation of WA's freight rail network will curtail development of the industry in the Mid West.

Karara chief executive Dale Harris is involved in tough negotiations over an access agreement with Brookfield Rail which has an exclusive lease over the State-owned network.

Mr Harris said Karara - a joint venture between Gindalbie Metals and China's Ansteel - was effectively flying blind in negotiations with a monopoly supplier of vital infrastructure.

He told a parliamentary committee the 15-year access deal struck with BR in 2011 included "very high" fixed costs.

In a damning assessment of WA's regulatory framework, Mr Harris said the Economic Regulation Authority process was ineffective in trying to determine floor and ceiling costs.

"If you look at the Queensland situation, at least there is register of previous deals and transparency on what has gone before in terms in access," he said.

Mr Harris said Karara would pay about $1.5 billion in access tariffs and other charges over the life of the take-or-pay deal.

He revealed the contract excluded Karara from making use of the provisions in the Railways Access Code.

"The point I would make is that I think there could have been a better deal if there was a stronger regulatory framework that supported getting that better deal," he said. "Having reasonable access to infrastructure at a fair price is a prerequisite to seeing the Mid-West reach its full potential."

Mr Harris said the rail issue was not the cause of Karara's woes but flagged trying to renegotiate the take-or-pay contract.

BR chief executive Paul Larsen said the deal between the two companies had transformed Mid West rail infrastructure for the benefit of the region.

"The terms of this contract are confidential to both parties and were mutually agreed to facilitate the financing and investment of $550 million by BR," he said in a statement.

Mr Larsen said the upgrades financed by BR had provided the Mid West with a robust, safe and sustainable rail freight network, and were delivered ahead of schedule. "These sorts of investments are not without risk, during both the construction and operation phase," he said.

Karara built a 85km rail spur to the existing network and was required to provide a $300 million bank guarantee over the upgrade of about 200km of track from Morawa to Geraldton to export magnetite concentrate.

Mr Larsen said Karara was a valued customer and the railway - built to support production at 8mtpa and 16mtpa levels - was performing "exceptionally well".

The Legislative Assembly's economic and industry standing committee is investigating the impact of the BR lease and the State's management of the freight rail network on development in WA.

The West Australian

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