Australia: Northern Territory ports management overhauled and future Port of Darwin privatisation

Key Points:

The ports privatisation model is intended to allow the Northern Territory and any private operator to work in partnership, while ensuring the Territory remains in a position to address privatisation risk.

After the Port Melville controversy last month, the regulatory regime for ports in the Northern Territory has been brought into the spotlight.

A new package of legislation recently passed by the Northern Territory Government has overhauled the existing port regulatory framework, giving it more power to impose tighter controls and regulations for designated ports, and opened the door to the privatisation of the Port of Darwin.

Privatising the Port of Darwin

The Port of Darwin is currently managed and operated by the Darwin Port Corporation, a business division of the Northern Territory Government, in accordance with powers and functions defined under the Darwin Port Corporation Act and its by-laws.

With the passing of the Port of Darwin Act 2015, private investment opportunities in the Port of Darwin can be pursued and upon commencement of this Act, the Northern Territory Government will be able to transfer to a private entity certain assets, rights and liabilities relating to, or in connection with, the Port of Darwin. However, the transfer of the land comprising the port assets will be limited to a leasing arrangement which will be for a term not exceeding 99 years. Therefore, the Northern Territory Government will retain ownership of the land as well as maintain certain rights and powers for the safe and proper operation of the Port of Darwin as afforded under the Ports Management Act 2015.

A new regulatory framework for Northern Territory ports

Currently, port regulation in the Northern Territory depends on the type of port:

  • the Port of Darwin is regulated by the Darwin Port Corporation Act and the Marine Act; and
  • ports which are associated with mining activities are regulated by the Mine Management Act.

All other ports are not currently regulated.

The new Ports Management Act 2015 establishes a regulatory framework for the management and control of the privately operated Port of Darwin, and amalgamates the other legislative regimes. Importantly, it also creates a mechanism to regulate those ports which are not currently regulated.

Designated ports

The Minister for Transport will be able to declare the boundaries of the area of water and land that constitute a designated port within the Northern Territory, and the relevant port operator for the purposes of the Act. The Port of Darwin will be the first designated port, with other declarations to follow.

Once a port is designated, its management and operation will be regulated by the new regime. The Minister will be able to enter into one or more agreements with the port operator or port lessee of a designated port in relation to the operation of the port. These may require the port operator or port lessee to meet certain standards, ensure that the port is developed in a certain way, or give certain information to the Minister or an entity specified by the Minister.

Essentially, the private port operators of designated ports will have the day-to-day control of port operations, however the Northern Territory Government will retain a number of regulatory and operational functions relating to things such as maritime safety, vessel safety, pilotage, and port access and pricing, so as to ensure the proper and safe operation of the designated port.

The Minister will also have the power to revoke the declaration of an entity as a port operator where, in the Minister's opinion the entity has engaged in conduct that is in breach of a requirement under the law of the Northern Territory or a port operating agreement and that conduct has compromised, or may compromise, the safety of people, property or the environment at the designated port.

Pricing and access regulation of designated ports

Significantly, the Ports Management Act reserves to the Minister, the Administrator and the Regulator (the Utilities Commission) wide powers over pricing and access regulation to address the risks of monopoly pricing and anti-competitive arrangements. Specifically, under Part 11 of the Ports Management Act:

  • the Regulator has a broad power to make price determinations for "prescribed services";
  • the Administrator (upon certification by the Minister acting on the recommendation of the Utilities Commission) may make regulations specifying the form or price regulation to apply to "prescribed services"; and
  • the access policy prepared by the private port operator must be in accordance with any requirements prescribed by regulation, contain matters required by the Minister, comply with any guideline requirements and be approved by the Regulator.

The extent of the Territory's economic regulation over a private port operator is uncertain without finalised regulations or guidelines. Even once regulations and guidelines have been made, however, there will likely be a continuing element of uncertainty for private operators, given the Minister's wide discretion under the Ports Management Act to change the form of price regulation, and the Utilities Commission's similarly wide discretion to make price determinations.

Changes to the Port of Darwin's major hazard facility exemption

Currently afforded to the Port of Darwin enjoys the major hazard facility exemption under the Work Health and Safety (National Uniform Legislation) Regulations.

The Ports Management (Repeals and Related and Consequential Amendments) Act 2015 has removed this exemption. It's inserted a new provision into the WHS Regulations which provides that Schedule 15 chemicals (ie. hazardous chemicals at major hazard facilities) in transit at a designated port are not to be considered in determining whether the port is a facility or a major hazard facility. "In transit" means that the thing is supplied to, or stored at, a workplace in containers that are not opened at the workplace, is not used at the workplace and is kept at the workplace for not more than five consecutive days.

The effect of this amendment is that the Port of Darwin will remain exempt from the major hazard facility requirements under the WHS Regulations while the methods of storage and handling of Schedule 15 chemicals remain consistent with the "in transit" definition. When however these methods change so as to fall outside the scope of this exemption, the requirements to register and be licensed as a major hazard facility will be triggered.

The way forward for Northern Territory ports

The Port of Darwin Act 2015, and some provisions in both the Ports Management Act 2015 and Ports Management (Repeals and Related and Consequential Amendments) Act 2015, commenced on 9 June; the remaining provisions of the latter two Acts will commence on 1 July 2015.

The commencement of this package of legislation means that ports management has become a pressing issue for potential port operators and port users in the Northern Territory, as well as paving the way for the future privatisation of the Port of Darwin.

The powers reserved to the Northern Territory Government are significant, and reflect the Territory's intention that the adopted privatisation model should allow the Territory and any private operator to work in partnership, while ensuring the Territory remains in a position to address privatisation risks – an approach that's in line with the Port of Darwin Select Committee's "Port of Darwin Lease Model" report released in April 2015.

The remaining parts of the regulatory puzzle relating to pricing and access, however, will be crucial to understanding the full framework and will, no doubt, influence and be influenced by potential bidders and interested port users as the Northern Territory progresses with its competitive process to find its preferred port operator partner.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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