Government Says No To Napier – Gisborne Rail

Minister of Transport Gerry Brownlee, along with Economic Development Minister Steven Joyce, issued a press release on Wednesday stating there is little evidence to support the reinstatement of the Gisborne – Napier railway line:

Transport Minister Gerry Brownlee and Economic Development Minister Steven Joyce today released a study of the East Coast region’s economic potential over the next 30 years.

The East Coast Regional Economic Potential Study assesses the region’s economic performance and barriers to development, and models five economic growth scenarios along with their implications for transport infrastructure and the skills needed.

Mr Brownlee says the study shows the economic importance of maintaining and boosting the road network in the East Coast, particularly in Gisborne.

“There will be an increase in logging freight over the next decade and improved roading will be vital to support that and other industries,” Mr Brownlee says.

“The study illustrates the need to develop further capacity for heavy vehicles on State Highway 35 north of Gisborne and to maintain the quality of State Highway 2 between Gisborne and Napier, and northwest of Gisborne to the Bay of Plenty.

“I will be asking the New Zealand Transport Agency to review its plans for these highways in light of this study.”

The report also concludes there is little evidence to support the case for reinstatement of the damaged rail line from Gisborne to Napier.

“When operational, rail only accounted for 2 to 3 per cent of freight from the region and the report finds no clear evidence of a significant economic impact following its closure,” Mr Brownlee says.

To provide context, a map of the area shows the distances involved in the region:

Hawke's Bay and Gisborne

Hawke’s Bay and Gisborne

 

It is a distance of 214 km from Napier to Gisborne, and it takes about 2 hrs 40 minutes to drive according to Google maps.  Tolaga Bay to Gisborne is 55 km.

The study referred to in the press release comes in two parts.  The first is a desk-based review of available research and analysis of economic data, which runs to 197 pages. The second is a relatively lightweight 141 page document called “Economic forecasting and transport and skills implications“.  The Transport and freight section of the second document on page 33 contains an analysis of heavy commercial vehicle (HCV) use, and also talks about proposed plans to use Tolaga Bay as an inland port for Gisborne’s Eastland Port.  Bear in mind that traffic counts on the state highways in the area are low, with around 3,000 veh/day or less away from the main urban areas of Gisborne and Wairoa.

report-hcv2

Storage space at both Napier and Gisborne is an issue for logs, but it isn’t clear from the report why Tolaga Bay has been chosen as the inland port for Eastland Port, who made the decision, or why the Government has effectively chosen to subsidise Eastland port by upgrading the road to HPMV (“big truck”) standards. The last sentence looks like consultant-speak for “upgrading SH2 between Gisborne and Napier to support heavy trucks will be bloody expensive and will have ongoing high maintenance costs”.

The report states that logs currently make up 97% of export traffic through Eastland Port.   There are very few imports.

The Port of Napier exports a slightly less volume of logs and timber than Eastland Port – 1.4m tonnes vs 1.9m tonnes annually. However Port of Napier imports a significant amount of fertiliser, lime and cement.

The report sets out rail freight flows between Gisborne and Napier, before the line was mothballed in 2012:

report-rail-freight

Note that 2011 rail freight volumes were less than half of the 2005.

The report goes on to make assumptions about future economic growth over the next 20 years, including oil and gas production encouraging between $11bn and $85bn worth of investment.  The report does not analyse how likely either of these scenarios are.

Page 75 of the report looks at the role of the railway between Napier and Gisborne:

report-rail-role

The report’s conclusion on rail is:

We also emphasise that, even if rail services are reinstated, the majority of freight traffic and surface passenger transport will continue to travel by road. The possible resumption of rail services does not detract from the need to improve the road network to ensure the resilience and reliability necessary for providing attractive linkages in the region and minimising the effects of distance from the neighbouring cities and the rest of the country.

Not everyone shares KiwiRail’s pessimism about the viability of the line, however.  A  report by BERL in December 2012 called KiwiRail’s analysis “very conservative”, and there are fundamental flaws with the way KiwiRail have determined profitable freight volumes. That report states that the cash flow neutral tonnage is only 226,000 tonnes per year.  The same report also states:

The spending on the Napier to Gisborne road in the last ten years has totalled $102 million. In the last four years it averaged $14.8 million per year. If the number of trucks, and heavy trucks at that, increased by 33% to 38% because the rail line is not available for wood freight, the annual spend on the road can be expected to increase at least proportionately, namely by $4.9 million to $5.6 million per year. This indicates that it would likely be in the national interest to make the capital expenditure required on the rail rather than having to increase spending on the road, and suffer the negative externalities on the road.

In their Draft Annual Plan, the Hawke’s Bay Regional Council is proposing to invest $4.5m in the Napier Gisborne Rail Establishment Group, which estimates that $10.7 million will be needed to finance capital and operating budgets, including $5.3 million to buy rolling stock, $2.4 million for working capital and a $3 million disaster contingency reserve.

A 51 per cent shareholding from the regional council is proposed, with a contribution of about $5.46 million through to the 2018-2019 year, with investors from Hawke’s Bay and the Gisborne region holding the remaining 49 per cent interest in a holding company, which would be formed especially for the purpose.

Submissions on the HBRC Annual Plan close on Monday 12th May.  You can find out more and make your own submission here.