A rail line for six trucks a day equivalent!

January 19th, 2013 at 1:00 pm by David Farrar

John Armstrong writes:

It was almost serendipity that one of the last acts of the summer silly season was to throw up the Business and Economic Research Ltd report questioning ’s mothballing of the freight-only Napier to Gisborne line.

The line costs $8 million a year to run and requires $4 million to repair according to Kiwirail.

But I have a solution. If BERL is really convinced that Kiwirail (whose job is to run rail on a commercial basis) has their numbers wrong, they should ask Kiwirail to sub-let the lines to BERL for a $1 a year. I’m sure BERL has enough confidence in their numbers that they’ll jump at the opportunity to make some money based on their projections of revenue growth etc.

Not that long ago would have ducked for cover and called for a comprehensive cost-benefit analysis of the line’s future potential and risks.

Shearer clearly believes the time for such fudging is past. Labour has to be clear about where it stands. Shearer says Labour would reopen the line. Full stop.

Labour is saying that they will force the company to operate at an even bigger loss than they already do. They are also saying politicians will decide what services are provided, not the board of the company.

Such intervention is not without political risk, however. Transporting logs by train has long been flagged as the saviour of the Napier-Gisborne line. But it has become a mirage. The reality is that for the last decade the line has carried minimal tonnages, such that closure would increase the number of trucks on the state highway by just six per working day.

Now read that part. Labour have just announced that they will spend tens of millions of dollars on keeping a rail line operating, even though it would take just six trucks a day off the state highway!

This is desperate populism, and Greek style economics. We are struggling to get out of deficit and start paying down debt. And Labour will throw tens of millions ($28 mil over three years) at a rail line that would have almost no business!

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37 Responses to “A rail line for six trucks a day equivalent!”

  1. thor42 (970 comments) says:

    Well said, DPF!
    Labour don’t give a toss about whether something is economically-viable or not. If this line costs Kiwirail “x million” in losses each year to run, but Labour gets (say) 5,000 more votes by promising to keep it open, then that’s fine with them. Taxpayers be damned…..

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  2. Johnboy (15,537 comments) says:

    Ah I can remember the good old days of the 90 mile limit. Goods transhipped from truck to rail and from rail back to truck.

    Shunting seemed to be a competition as to how small a space a wagon load could be compressed into.

    Damage and pilfering was par for the course, 20,000 were employed… :) in this game of course!

    Labour will be back soon in tandem with the mad Greenies.

    God help us all! :)

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  3. Rodders (1,790 comments) says:

    Ah I can remember the good old days

    Johnboy, that would have been before live sheep exports were allowed too :)

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  4. Johnboy (15,537 comments) says:

    Since last night I’m beginning to suspect you’re stalking me?

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  5. Rodders (1,790 comments) says:

    Last night? Nah – you’re a good source of :) though.

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  6. Johnboy (15,537 comments) says:

    If all one can do in one’s passage through life is create a few… :) ‘s then one has done well! :)

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  7. Rodders (1,790 comments) says:

    :)

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  8. nasska (10,866 comments) says:

    Johnboy

    Wasn’t that sixty miles?

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  9. Johnboy (15,537 comments) says:

    Last time I walked that far it felt like 90! :)

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  10. Johnboy (15,537 comments) says:

    As an old Truckie you are right of course. It was 60 miles. I seem to remember you could ship from Wellington to Parmie but Wanganui required a special permit. Correct me if wrong.

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  11. nasska (10,866 comments) says:

    Johnboy

    Advancing years must be taking a toll on my memory. I would have happily sworn that the limit was 60 miles but you raised enough doubt for me to check. From Wikipedia:

    ….”In 1936, the protection of railways was extended to cover all freight conveyed over distances greater than those specified by the Act. This was by far the most crucial regulation, as it gave rail an effective monopoly on long-distance freight transport. Originally this limit was 30 miles (48 km). In 1962 it was increased to 40 miles (64 km), and in 1977 to 150 kilometres (93 mi).”……

    Most of my time as a driver was spent carting stock which was pretty much open slather as Railways wanted out of that work. There were also exemptions for agricultural equipment & household furniture. Effectively though if you were operating out of your area, whatever you were carting, you could expect to spend a fair part of the day on the side of the road chatting to the goose stepping little tyrants in black & white Holdens with a cherry on top.

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  12. Johnboy (15,537 comments) says:

    “goose stepping little tyrants in black & white Holdens with a cherry on top.”

    Remind me to tell you one day of the time I forced one of those sad little fucks (in a Cortina) off the road at the bottom of the Wainui hill! :)

    The Labour and Wussel’s folk would gayly lead us back to those sad days.

    God help all of us in NZ who are stupid enough to vote the Luddites in next time.

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  13. Johnboy (15,537 comments) says:

    77 was the first time I got involved in transport so that’s about right! :)

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  14. Paulus (2,554 comments) says:

    Labour Piss and Wind – media love it – like 100,000 cheap houses – 30 second soundbite, but will it actually resonate ?
    If Winston pushes it the media will salivate continuously.
    Shearer should talk to Winston to see how it is done to keep the media dribbling.

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  15. nasska (10,866 comments) says:

    A bit earlier for me JB. I wanted to go farming but a little thing like a lack of money & the fact that my family didn’t have a farm to bequeath was a small stumbling block. I was offered a job as a driver after a stint as a farm worker came unglued & stayed in the industry until a steer tried to ram me through the side of a stock crate about eighteen years later.

    They were good times & I worked with some great people.

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  16. Johnboy (15,537 comments) says:

    Sad not being part of the squatocracy. :)

    I had to run the odd factory to get to my present state.

    None of it matters of course once you have flicked off the mortal coil! :)

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  17. Manolo (13,514 comments) says:

    After being used, abused and manipulated by the Luddites, (and now socialist Labour), BERL has no credibility left. It has become a left-leaning mob of fantasising economists.

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  18. MT_Tinman (3,043 comments) says:

    I seem to remember having to have a permit to transport building supplies to the ChCh women’s prison because it was more than 12 miles from the yard. Maybe a different law because it was not ex-rail.

    The big winds in ’76 were great for business. Not enough railway wagons in the SI so we carted stuff everywhere for a while.

    Agree about those jumped up little bastards in the Black and Whites with that big black fly swatter on the rear guard although the bastards on motorbikes were worse, always trying to get in the blind spot away from the mirrors – did score one in Blenheim Road though – my load was secure and I could stop quickly :-)

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  19. Johnboy (15,537 comments) says:

    I continually enjoy reading of your faith in the establishment Manolo!!! :)

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  20. Manolo (13,514 comments) says:

    I knew that speaking the truth would endear me with a bastion of veracity like yourself, Johnboy!

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  21. Johnboy (15,537 comments) says:

    Is that how you spell “bastion” then Manolo?

    Well I never! :)

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  22. Manolo (13,514 comments) says:

    I’d never dare comparing my halting English, my second language after all, with your Shakespearean one.
    Please forgive my glaring mistakes. :D

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  23. Johnboy (15,537 comments) says:

    I seem to have inadvertently touched a nerve Manolo. It was never intended. Please accept my apologies.

    If I was gay I would still fancy your butt! :)

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  24. Manolo (13,514 comments) says:

    Nothing to apologise for, mate. I never took any offense. It’s all light-hearted and fun.
    Let the debate continues!

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  25. tvb (4,240 comments) says:

    Rail has been a political plaything for well over 100 years with disasterous consequences for the tax payers. Just let it die please

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  26. The Scorned (719 comments) says:

    Nationals ad campaign for the next election…already hand delivered….Just point out the economic nonsense of their promises in simple stick figure B&W ads and let the public work it out…easy. ” Want these monkeys spending more of your future money how they would have been spending it now?…..sort of line.

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  27. emmess (1,393 comments) says:

    Rail has been a political plaything for well over 100 years with disasterous consequences for the tax payers.

    Yup, it’s the world’s oldest start up, alright.

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  28. Raider580 (13 comments) says:

    Why not go right back to the future and by pass the train and bring back coastal shipping. Maybe they could bring back the Motuhora line and extend it through to the BOP.

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  29. OECD rank 22 kiwi (2,820 comments) says:

    … If it saves just one polar bear it will be worth it. :roll:

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  30. Paulus (2,554 comments) says:

    Will such discussion of this defunct railline get votes – otherwise who cares.

    Good Socialist are happy to waste other people’s money.

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  31. Pete Burdon (19 comments) says:

    It’s a pretty simple equation and one the Greens don’t get. Trucks are generally cheaper as a form of transport. The only way to grow the use of rail is by making businesses use it, or increase the price of using trucks. All this will do is increase the cost we pay for goods and reduce the competitiveness of our exports. Full Stop.

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  32. campit (467 comments) says:

    I’m not sure where Armstrong gets his figures from, but the BERL report points out that the number of logging trucks on SH2 can be expected to increase by up to 33% by 2020 as forests in the area mature. Without a rail option, every road user in New Zealand will subsidise logging trucks and freight on SH2 for the foreseeable future.

    There is a contradiction here where the Gisborne rail line must recover all costs and return a profit, while road freight on State Highway 2 is subsidised by all road users around New Zealand on a “tax and spend” basis. An additional $4m in crown funding from general taxation has also been committed to SH2.

    NZTA expenditure on the Napier- Gisborne highway over the past nine years is recorded as $102 million. In the past four years, the spend has been just under $60 million, or $14.8 million per year. NZTA is not required to return a profit on this expenditure, nor does it charge the users of SH2 for wear and tear of the road.

    As long as this cross- subsidy exists, KiwiRail will always have an uphill battle competing against road freight.

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  33. Swampy (273 comments) says:

    Kiwirail have not bothered to focus on this line, they signed up a Gisborne company to put more freight on rail. The fact is Kiwirail have been told the government will not give them any money to fix up the many run down lines all over NZ which is from years og neglect. This is because National wants to spend enormous sums of money on roads that will never pay their wy like the holiday highway and Transmission Gully.

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  34. libertyscott (358 comments) says:

    Campit: Except that the logging trucks are not running from the railhead at Gisborne or Wairoa, but from the forests, and the costs of double handling the logs to go on a train for a very short trip are simply not worth it.

    Your arguments are ones I once believed in, but simply found to be unsubstantiated some years ago. The Surface Transport Costs and Charges study of MoT undertook a specific case study into Napier-Gisborne freight, and found the revenue from trucks on SH2 between Napier and Gisborne was significantly in excess of the expenditure on maintenance, so it is utter nonsense to claim that “every road user” will subsidise logging trucks on that route. Trucks more than pay their fair share of road maintenance costs on the state highway network, the Cost Allocation Model of RUC has been used to set RUC in recent years for this very purpose.

    Yes, there is a point that the state highway network doesn’t make a formal profit, but it does make an informal one as it generates far more than enough revenue to maintain the network at a steady state (i.e. retaining the capital value of the assets), so that a surplus is reinvested in the network in new works. Of course virtually all motorists are charged for using public roads through FED and RUC, albeit poor as they are in reflecting localised costs.

    So these sorts of misrepresentations are nonsense. The rail line has been running at a loss for many years, it now needs a lot of money to fix some bridges (and should have been insured for that, but it appears not worthwhile to do so), to run trains that can’t even come close to covering the cost of keeping the line in a steady state.

    The basic economics are clear. Railways are only efficient at handling freight if they can handle large volumes of bulk or containerised goods. That means volumes such as coal from the West Coast, which sees 6 or more return trains a day of relatively long trains. Gisborne hasn’t had 6 return freight trains for literally decades, it didn’t even have it when rail had a monopoly on long haul freight.

    It’s a shame, it would be a scenic route to run occasional excursions, but it may be better converted into another rail trail, like the Central Otago one in the long run. In the short run, it is cheaper to mothball it, on the fairly low chance there will be enough freight to justify reviving it.

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  35. campit (467 comments) says:

    Liberty that’s interesting – do you have a link to the study? Maintenance costs have gone up a lot since then. The report references 220 trucks per day on average on SH2 between Napier and Mohaka. To cover costs of $14m per annum then that would be average RUCs of $174 per trip, and off memory I don’t think RUCs are that high, even for the heavy trucks. (I’m ignoring cars here since they do minimal damage in relation to trucks.)

    the costs of double handling the logs to go on a train for a very short trip are simply not worth it

    The BERL report claims:

    Other relatively short rail hauls appear to be economic for logs. These include Wairarapa to Centreport, Wellington (90km); Otiria to Portland (about 80km)… KR says Kawerau to Tauranga moves 8,000 tonnes per kilometre per year, and that line appears to be about 95 kilometres long

    … so I don’t think your claim about double handling can be correct. If volumes are sufficient then short hauling logs can be profitable. (The difference with the Napier – Gisborne line of course is that it needs $ to restore the track)

    Also if anyone wants to actually read the BERL report, it is here:

    http://logjam.files.wordpress.com/2013/01/berl-economics-napier-gisborne-rail11dec.pdf

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  36. libertyscott (358 comments) says:

    Campit: The study is no longer available online on the MoT website, but I have a copy which I should upload to my blog in the next few days. I believe there are more trucks than that, because there are many which are simply not vehicles that carry freight transferable to rail (e.g. livestock, furniture, mail). Maintenance costs can’t be fully allocated to trucks because around half of all road maintenance costs in NZ are fixed (attributable to the elements not traffic), so are best allocated on a per vehicle basis, which means it is fair for the majority of vehicles to bear the majority of those costs (i.e. cars). The marginal costs are almost all attributable to heavy vehicles (those over 3.5 tonnes).

    BERL is being disingenuous about double handling, because its plain wrong with those examples. Wairarapa to Centreport works because the Rimutaka Tunnel is so superior to SH2 over the Rimutakas, and even then it is marginal and there is no other port, unlike the choice of Gisborne and Napier (and Gisborne is significant). Otiria to Portland is on an uneconomic line as well, which will close when it needs major capital investment. Like the Gisborne line, it is operationally positive without serious capex, but not enough surplus is generated to represent a return on capital. Kawerau to Tauranga involves pulp and paper products that are literally door to door from the Tasman Mill to the Port, no double handling.

    You’re right, the difference is in fixing the track, but this happens time and time on this line. Dr Cullen poured several million into the line about 6 or 7 years ago, and serious money was poured into it in the late 1980s to fix it again. On average I am guessing it needs about $1-$2 million capital year in year out to keep this up, bear in mind the rail bridge at the Ahuriri estuary is on its last legs, it wouldn’t survive a moderately strong earthquake, and is a good $5 million to replace. The line has a lot of this, and sad to say it really isn’t going to be worth it to keep doing this.

    I wish it was different, I caught the Wellington-Gisborne express as a child, but I just don’t think the volumes will ever justify the rail link.

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  37. RRM (9,632 comments) says:

    Six trucks a day right now DPF.

    There are a lot of pine trees up in those hills that will need felling and transporting over the next few years, that equation is about to change, big time.

    But in your heart you “know” railways are no good, so why even go there huh?

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