Assisting Economic Development - National Rail Strategy

Strategic Directions to 2015 Cont.

Objective: To enhance rail's contribution to sustainable economic development

Data provided by the Energy Efficiency Conservation Authority (EECA) for 2003 gives total freight movements of 36.2 billion tonne kilometres (t km), split 64% road, 25% coastal shipping and 11% rail. Adjusting to a land transport basis gives a total of 27.1 billion t km, with rail carrying 14% or 3.9 billion t km.

In the year to June 2003 Toll NZ carried 14.8 million tonnes of freight for 3.86 billion t km, or an average haul distance of 260 km.

An efficient and effective rail system is of critical importance to New Zealand's economic development; for example, around 25 percent of all inter-city freight is currently carried by rail. However, the full potential of the rail network has not been realised due to a number of factors including under-investment over several years.

Crown ownership of the rail infrastructure provides the Government with the opportunity to ensure New Zealand's rail network is maintained and developed to encourage more use of rail within a broadly commercial framework. This is particularly important in areas of regional growth or under-provision of transport infrastructure.

Priority: Upgrade the national rail network

While a 2002 review of parts of the rail infrastructure concluded that the rail network is generally 'fit for purpose'¹ for current freight operations, there is a need for investment to address a serious backlog of deferred maintenance. This is constraining the ability of rail to compete for freight business in some areas.

In the medium to long term, economic growth, coupled with any increase in rail's market share, is likely to create a need for investment in the rail infrastructure to allow for changing and growing freight and urban passenger demands.

Possible improvements include upgrading and strengthening tracks and bridges, lowering tunnel floors to allow 9'6" (2.9 m) containers to be carried, installing and lengthening crossing loops, improved signalling, and re-routing of circuitous and steep sections of track that restrict speed or load. Such changes would enable the rail operator to use locomotives more efficiently, or gain greater efficiencies if axle loadings can be increased, subject to ONTRACK's codes and standards for the network.

Beyond the initial Crown commitment to network investment, the capital funding for developments with commercial benefits will be recovered or partially recovered from users through TAC. Any improvements to the existing network, where Toll NZ has exclusive use rights, will be subject to agreement with Toll NZ that it will make use of the enhancement.

Priority: Improve rail's contribution to regional development

Transport is a critical factor in regional growth and development. Many industries identified in regional development strategies, such as forestry, place very high levels of demand on transport services and infrastructure. Growth opportunities have also been identified in the coal and dairy sectors, and in container traffic. Developing the rail network can support regional development by providing the infrastructure needed to access economic opportunities, and will also help to ensure that new or existing freight does not transfer from rail to road.

There may be scope to fund urban transport infrastructure by capturing a proportion of the increase in land values generated by the new infrastructure. A UK example is London's Jubilee Line extension, where the increase in land value was nearly four times the project cost.

Priority: Encourage more freight to be carried by rail

A key issue for New Zealand is accommodating anticipated growth in freight volumes, which are expected to expand at a faster rate than overall economic growth. Much of New Zealand's extensive rail network is relatively under-utilised, and substantial increases in the amount of freight carried on many lines can be achieved without having to develop significant new infrastructure. By contrast, some parts of the roading network would need to be expanded to handle substantial increases in traffic volumes.

There is potential to significantly increase the rail transport share of existing freight volumes. A proportion of freight traffic will be unsuited to rail, where the origins and destinations are not served by rail lines, or distances are too short and volumes too small.

Priority: Optimise the use, of the rail network within the wider transport network

The LTMA provides the framework for an approach to funding and management of land transport as a whole, rather than focusing on roads and motor vehicles. A more integrated approach to long-term transport funding, planning, and operations will help ensure the best use is made of the overall transport network. For example, increased capacity in one mode such as rail could be used to reduce the cost of providing additional capacity on the roading network.

Increased integration of transport modes includes the development of innovative and flexible approaches, for example park and ride facilities, ticketing and timetabling integrated between passenger transport modes, and 'inland ports' or transport hubs that can help ensure that passengers and freight can transition easily and conveniently between transport modes.

Rail stations can be natural focal points for commercial, industrial, or residential development, illustrating that integrating land-use planning with rail infrastructure operation planning is also important. Improving integration will require regular consultation with regional councils, industry, and other parties, and consideration of other land transport plans and regional development strategies.

In 2002 the Ministry of Transport commissioned an Investigation into Surface Transport Costs and Charges (STCC). This study examined the relationship between the costs (including economic, social, and environmental costs) of the use of road and rail transport and the payments users make for using each mode. The findings of the study were that:

• the charges paid by road and rail users do not cover the costs of those networks, and that some costs are not paid by anyone at all
• rail users pay a higher proportion of their costs than road users
• users of urban local roads pay a lower proportion of costs than users of rural roads
• in many cases the costs of remedying a problem (eg congestion) are much lower than the cost of the problem itself.

These findings will assist government in making decisions on the absolute and relative levels of charges for the use of road and rail networks.

Key initiatives in assisting economic development

Government purchase of network
The Government's decision to purchase the rail network is intended to secure it as a vital piece of infrastructure in the national interest.
 
Retain existing rail network
The Government intends to retain the existing rail network to preserve options for under-utilised lines where it is likely there will be more traffic in the future.
ONTRACK will be required to: 

• develop a strategy on retention or disposal of unused rail corridors
• maintain the long-term serviceability of the network that is currently in use
• where there is a reasonable prospect of future traffic, maintain under-utilised track to an appropriate standard.

Government investment of $200 million to restore and upgrade network

The Government will invest in the network to replace life-expired infrastructure and improve the capacity of the network. A key priority will be to bring the network up to the standard necessary to maintain and improve market share for freight and passenger services.

• The Government is investing $200 million in the network over five years, which will be split between: $100 million for network enhancements and $100 million for like-for-like replacement of worn-out assets such as track and sleepers. This investment will not be recovered from rail operators. Beyond this initial investment, government will expect the costs of maintaining and developing the track to be recovered from rail operators.

Investigate development of the network

There are rail projects in most regions that have high local or wider regional importance. The Government will investigate increasing the capacity of the rail network in order to maintain and improve the market share of rail, and improve the capability of the railway system as part of New Zealand's transport infrastructure.

• ONTRACK will prepare a 10-year Rail Network Development Plan as soon as is practicable, setting out its proposals for developing the network. Possible areas for future development include:
  • a new branch line to the port at Marsden Point
  • a new branch line at Clandeboye (to serve the dairy factory directly)
  • a short spur line to service the dairy factory at Edendale.
• ONTRACK and the Ministry of Transport will consult with rail operators, businesses, regional councils, territorial authorities, and communities to explore the feasibility of other proposals for new developments.
• The costs of projects that are commercially viable will be recovered from operators through TAC. The Government may partly or wholly fund projects that provide benefits to the general public. Some new developments may be funded from the Government's initial $100 million funding for network enhancement.

Operation of an efficient and safe ONTRACK

ONTRACK's objectives will include running an efficient and safe operation. ONTRACK will: 

• agree service levels and performance indicators covering reliability and timeliness of operations with Toll NZ by 30 June 2005
• agree performance indicators with any additional operators granted access rights
• prepare a 10-year Rail Development Programme for maintaining and developing the national rail network as soon as practicable.

Contribute to integration between rail and other networks

• ONTRACK's objective, under its legislation, will be to contribute to the aim of achieving an affordable, integrated, safe, responsive, and sustainable land transport system. The LTMA has similar requirements for Land Transport New Zealand and Transit New Zealand.
• Under the LTMA, approved organisations must consult on the development of their land transport programmes.
• In preparing the Rail Network Development Plan, ONTRACK will be required to take into account any national and relevant regional land transport strategies.
• Regional councils may contract new infrastructure or operations focused on transferring road freight to other transport modes, including rail, in order to contribute to the objectives of the NZTS. Land Transport New Zealand provides funding assistance for this from the NLTF as above.
• Regional councils may also contract activities to develop inter-modal links such as 'park and ride' facilities or passenger transport interchanges, through funding from Land Transport New Zealand as above.  

Investigate options for better incorporating costs of transport modes into the pricing of the transport system

• The findings of the STCC study provide information as a basis for the Ministry of Transport to provide advice to the Government on pricing policies leading to sustainable road and rail networks.
• The Ministry of Transport will investigate the possibility of land value capture in New Zealand.

Footnote

1. Halliburton KBR review undertaken for the then Land Transport Safety Authority. A 2003 review of the Midland line concluded that this line was fit for purpose only in the short term.

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