Stephen Selwood: Case for Gisborne rail not proven

KiwiRail decided after the line was washed out that reinstating it was not justified. Photo / Supplied

Opinion

Berl report does not claim to show that the line is viable

An independent review of KiwiRail's decision to mothball the Napier to Gisborne rail line highlights issues facing many of New Zealand's more remote regions and raises valid concerns about how strategic infrastructure decisions are made.

But with such low transport demand in the region, both now and into the future, it is difficult to see how three separate yet competing freight connections for Gisborne can be sustained.

After a washout last year of the only railway linking the city to the main line, KiwiRail determined that there was no justification to reinstate a service that was running a commercial loss.

Although repairs are estimated to cost what seems a small amount ($4 million) in relation to the parent company's $700 million annual turnover, the corridor generated only about $1 million in revenue the year before services stopped in March 2012.

Even if this rises to an expected $2.5 million a year by 2022, KiwiRail estimates the line will still lose between $4 million and $8 million each year.

In the report released last Tuesday, the consultants Berl argued that with some relatively minor modifications to KiwiRail's "conservative approach" to financial analysis, reinstating the line might be feasible.

With a more favourable outlook of demand for rail freight on the East Coast and a less pessimistic view of ongoing capital costs, Berl concluded that a full social cost-benefit analysis of the impact on the regional and national economies, society and environment should be completed and might result in a different decision being taken.

This conclusion is a long way from some of the interpretations that followed, which have pressed for the line to be reinstated on the basis of the Berl report.

To be clear, the report does not show, nor claim to show, that the line is viable, only that a wider view of the net costs and benefits to New Zealand arguably should be considered.

While such analysis is required from a national perspective in relation to overall transport links for the region, it is not required of KiwiRail which operates under a more commercial model.

There are some convincing reasons to take a wider view of the KiwiRail decision. Rail freight will be moved on to the state highway network with at least some impact on safety and traffic volume. Environmental effects have not to date been extensively considered, most notably carbon emissions.

Local interests have not been fully assessed; and more intangible strategic benefits to the region and nation may be possible but are difficult to quantify.

But while wider factors should be considered by central and local government, it is hard to see under what scenario reinstating the Gisborne line could become a sound policy decision.

Even if freight volumes doubled, the demand for which has not yet been identified, there is adequate capacity in the existing road connection. State Highway 2 is, and will continue to be, maintained for general traffic and carries relatively light traffic volumes.

It would be great to see a growth plan for the region that justified investment in both road and rail. But with as few as 2000 vehicles a day using the route, even Berl's ambitious projections of potential growth would have little discernible impact on the road link, except perhaps to reinforce justification for safety improvements on the highway that are already needed.

Splitting limited transport dollars between two competing modes runs the risk that investment on both road and rail corridors will be inadequate.

And although this debate has been framed unhelpfully in the context of road versus rail, potentially the biggest impact of continuing to operate uneconomic rail services is on coastal shipping.

Coastal shipping produces fewer emissions than rail and, like rail, is most competitive in the transport over long distances of non-perishable items. Road freight, in contrast, has a strong advantage in the transport of perishable goods and deliveries over shorter distances.

So while the Berl report raises some important issues around the need for a bigger picture perspective, it doesn't create a strong case for revisiting KiwiRail's decision on the Gisborne line.

Overcoming a $4-8 million shortfall each and every year indefinitely on a service that attracts only $1-3 million in revenue seems very unlikely.

For the rail line to be reopened, a long-term, fundable and economically viable transport and land use plan would need to be developed by Gisborne authorities demonstrating which activities will drive rail demand into the future and how these fit into a wider social, economic and environmental vision for the region.

In the absence of this plan, mothballing and not closing the line appears on current evidence to be the right decision.

When public money is involved, a holistic view of transport access and connectivity is required, not a mode specific decision. In this case, road and shipping capacity appears sufficient to maintain equivalent access to Gisborne and public subsidy of rail is unlikely to be justifiable.

Stephen Selwood is chief executive of the New Zealand Council for Infrastructure Development.