- BHP Billiton and Rio Tinto would have to give rivals access to their railways taking iron ore to the Australian coast under a proposal from the government of Western Australia on Tuesday.

The draft Pilbara Railways Regime would act as a safety net that will provide the Third Party with a legislated right of access to BHP and Rio's iron ore haulage, if commercial terms cannot be reached, it said in a public consultation paper.

The Pilbara region is home to the main iron ore production of both Rio and BHP, the world's second- and third-biggest producers of the commodity, which has been in great demand because of the rapid growth of Chinese steelmaking over the last few years.

Until last month, BHP and Rio were the only firms with their own railways taking iron ore out of the Pilbara region, giving them a much stronger market position than smaller producers. But last month Fortescue Metals Group exported its first cargo to China, having built a new Pilbara railway from scratch.

Other mining firms have teamed up to demand access to BHP and Rio's railways, which they have refused to give. Fortescue has taken both BHP and Rio to court to demand access for all.

Iron ore mining is a low-margin, high-cost business, where hundreds of millions of tonnes of material must be dug up and transported by railway to distant ports.

BHP is attempting to eke more profit out of its iron ore by buying Rio Tinto, with the Pilbara likely to provide a large part of its hoped-for synergies of $3.7 billion a year.

But antitrust regulators considering the takeover bid, which would be the second biggest ever if it went ahead, may also focus on the firms' dominance of railway infrastructure in the region.

The draft plan would only cover haulage of iron ore, and would not allow rival companies to run trains on the tracks owned by BHP and Rio.

The Pilbara Rail Access Interdepartmental Committee which drew up the draft plan said there were a number of important issues that remained to be resolved.

The plan was not expected to be unilateral and needed to be considered by the government, it said.

The proposal, available on the Web site of Western Australia http://www.dtf.wa.gov.au/cms/tre_content.asp?ID=714, would be open to public consultation, with submissions accepted until July 25, it said.

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