UPDATE 2-BHP moves to avoid logjams at Australia coal port

* Queue-cutting plan in disarray after missed deadline

* BHP says in talks with govt on coal-port reform proposal

* BHP says industry-supported solution possible (Adds traders, analyst's comments)

By Fayen Wong

PERTH, Sept 2 (Reuters) - BHP Billiton Ltd (BHP.AX) (BLT.L) worked on Wednesday to resume progress on a plan to eliminate endemic congestion at Australia's Newcastle terminal, the world's biggest coal port, after exporters missed a key deadline.

BHP is leading a group of coal miners working to find an equitable way to share limited export capacity at Newcastle, which was forced to implement a temporary quota system for allocating space to producers as surging output caused long shipping queues when miners scrambled to export more coal.

The allocation system, which had required special clearance from Australia's competition authorities because it involved the collaboration of rival miners, fell into disarray this week after the BHP-backed Newcastle Coal Industry Group (NCIG) missed an Aug 31 deadline to agree on a long-term port-sharing proposal.

That in turn prompted Australia's competition regulator on Tuesday to withdraw anti-trust immunity for the interim quota management system, a move that could trigger a surge in vessel queues and boost demurrage costs for producers. [ID:nSYD519196]

BHP sought to get negotiations between the port operator, the state authorities and the miners back on track on Wednesday, saying it was it was in talks with the New South Wales government to resolve a number of "critical issues" surrounding proposals made as part of a long-term solution.

"We believe that an industry supported solution is possible and can be achieved," BHP spokesman Peter Ogden said in a statement.

Australia's government said it was extremely concerned about possible congestion problems at Newcastle port. [ID:nWNAS7280]

For a list of scenarios that could end the port crisis, click on: [ID:nSYD147389]

In the meantime, however, the lack of a quota system could encourage miners to once again scramble to export as much as they can as quickly as they can, booking vessels that may form a growing queue at the port, which operates near capacity.

That could lift freight rates, although if the system is quickly restored -- as many expect -- the seasonal low demand over the September could help prevent a blow-out in ship queues, currently hovering near a two-year high of 41 vessels.

"We are entering autumn in the northern hemisphere and coal demand's a bit weaker the next few months. That will cap the links to the queue at the (Newcastle) port," said Clyde Henderson, a consultant with Wood Mackenzie in Sydney.

RENEGING ON DEAL

Under the existing interim system, each coal producer is allocated a quota for their exports through the port, based on production capacity on a pro rata basis.

The proposed long-term solution would have seen the port operating under a take-or-pay contract, preventing producers from booking excess terminal capacity -- and creating shipping logjams -- by forcing them to pay for any unused slots.

The deal requires the joint support of existing port operator Port Waratah Coal Services (PWCS), the New South Wales government and the NCIG, which is building a new loading facility.

The government and PWCS have blamed NCIG for reneging on the long-term port and railway deal, when there was already an in-principle agreement in place.

But BHP said the proposal to end bottlenecks had been significantly changed by the New South Wales government in the lead-up to the weekend deadline for a final signing-off.

"Many of these are one-sided and create unacceptable risks for BHP Billiton and its shareholders. These issues are very significant and undermine the certainty and security regarding coal export capacity at the Port of Newcastle that we believed we had agreed to in April," BHP said.

Sources told Reuters that among the changes was a requirement that the NCIG commit to a second stage expansion, for which it has not neither completed a feasibility study nor secured bank financing.

The previous memorandum also did not stipulate that all parties had to sign off on a binding agreement by an Aug 31 deadline, sources said. "The in-principle agreement reached in April required a lot of good will on all parties. But there were some curveballs thrown at the NCIG towards the end that made the deal not possible to reach," said a producer source.

Shareholders in NCIG are BHP Billiton, which has a 35.5 percent stake, Peabody Coal (BTU.N) Felix Resources (FLX.AX), Donaldson Coal Pty Ltd, Whitehaven Coal Ltd (WHC.AX) and Centennial Coal CEN.AX. (Additional reporting by James Grubel in CANBERRA and Felicia Loo in SINGAPORE) (Reporting by Fayen Wong; Editing by Jonathan Leff)