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Northland rail upgrade a strategic, not commercial investment - Aecom

Monday 20th May 2019

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Building a new rail link to Marsden Point and upgrading the existing Northland line could bring forward Northport’s development as a major freight handler for Auckland and help boost the broader regional economy, an economic analysis says.

But the government, possibly with other funders, would have to be prepared to take on that strategic risk on a $700 million-plus investment that otherwise doesn’t stack up commercially, or on wider public benefit grounds, consulting engineers Aecom say in a report to the government.

Building the new 20-kilometre rail line to Northport, as well as upgrading the line from Swanson to Whangarei and restoring the lines to Otiria and Dargaville, would cost about $799 million. But that could increase rail freight 19-fold to 2.2 million tonnes a year, reduce annual truck movements by 75,000 and cut emissions by 10,072 tonnes a year.

But those benefits, as well as reduced roading costs, crash risks and congestion, would only recover about a third of the $1.3 billion cost – in present value terms - of upgrading the lines and running the business for the next 40 years.

Without investment, the existing North Auckland line – NAL – could be shut within five years, Aecom says. A commitment to the Marsden spur will provide confidence to industry and other decision-makers that an improved rail service will become a reality.

“This proposition has been discussed for almost 20 years, with many significant stakeholders wanting a definitive decision to allow them to develop their own long-term planning within this context,” Aecom says in its 202-page report to the Ministry of Transport.

“Auckland is growing rapidly and in the last 10 years faster than previously expected. Its population is now expected to grow to 2.4 million people by 2043. Around half of this future population will live north of the Waitemata Harbour, with currently much of the freight they produce and consume being moved to them from the south of the city.

“Building the Marsden Link and upgrading the NAL will likely bring this process forward. A high-quality rail connection, from Marsden Point to Auckland, is a critical pre-condition of Northport becoming an inter-regional container port.”

Northport is owned equally by Port of Tauranga and Marsden Maritime Holdings.

Aecom says that, if Northport was able to reach its 400,000-container annual capacity, the rail investment would provide a 19 percent return. Half of that benefit is from reduced road congestion in Auckland, assuming 300,000 containers are being delivered there annually by train from Northport.

Northport handled almost 11,900 containers in the six months through December.

Government coalition partner NZ First pledged an overhaul of Northland’s rail services before the 2017 election. It also mooted relocating some services from Ports of Auckland to Northport – a proposal that is being investigated separately by the Upper North Island Supply Chain study. That work is expected to be completed in September.

Aecom’s formal recommendations have been redacted from the report made public at the weekend.

Regional Economic Development Minister and Northlander Shane Jones says the paper will play a big part in the government’s decision-making. He cited two recommendations most immediately relevant to him.

Aecom says land acquisition for the rail corridor to Northport should be completed and the design for the link to the port be developed in detail. Ministers should also seek detailed advice from officials and KiwiRail on how the investment can be staged over a four- to six-year period to “facilitate early access to services and to generate revenue from the investment as soon as possible,” according to a statement from Jones.

As recently as 2000, the Northland rail line shifted almost a million tonnes of freight. But the relocation of Northport from Whangarei in 2007 saw that drop to about 300,000 tonnes, Aecom says. Now it is down to 116,000 tonnes.

Wooden bridges, minimal maintenance, and tunnels too low for modern high-cube containers limit the size, weight and speed of trains. KiwiRail also has to run a separate fleet of ageing engines and obsolete rolling stock for the service.

One return train runs from Whangarei to Auckland on weekdays. It takes three hours longer than trucking freight by road.

KiwiRail and Bond Construction estimate the cost of the upgrade from Swanson to Fonterra’s Kauri plant north of Whangarei at about $370 million. That includes renewing 65 bridges and upgrading 13 tunnels.

The new line from Oakleigh to Marsden Point could cost $329 million, based on “high-level” estimates.

Aecom’s modelling assumed the total package of work, including reopening lines to Otiria near Moerewa and to Tangawahine east of Dargaville, would be completed simultaneously over a four-year period.

It said that work could be staged over a longer period, particularly given the competition for resources from other major infrastructure projects underway in Auckland, but that would delay the benefits.

Enlarging the tunnels on the existing link in one early programme would enable the line to carry extra volume relatively quickly, subject to rolling stock availability.

Work on the Dargaville line, expected to cost $32 million, could be deferred given the “considerable reconstruction” required and the fact freight volumes are unlikely to be economic near-term.

But the $67 million renewal of the link to Otiria is required, given the volume of logs and wood expected to come from that part of the region.

KiwiRail chief executive Greg Miller welcomed the report’s endorsement of the strategic role rail can play supporting the economy.

He said the type of investment Aecom recommends could be as transformative for Northland as rail investments in the 1950s to 1970s – including the Te Rapa yard, the Kinleith and Murupara branch lines and the Kaimai tunnel – were for Waikato and the Bay of Plenty.

(BusinessDesk)

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