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| Action for Public Transport (N.S.W.) Inc. |
| P O Box K606 | |
| Haymarket NSW 1240 | |
| 16 November 2020 | |
Introduction
Action for Public Transport (NSW) is a transport advocacy group which has been active in Sydney since 1974. We regard any investment in rail freight as an investment in carbon emission reduction, urban amenity and liveability, and road safety.
We are also mindful of the role freight transport demand has played in driving road-building schemes, at the expense of investment in both freight rail and public transport. Moving more freight on rail is an alternative, and superior, option for managing urban road congestion.
Accordingly, we make the following submission on the October 2020 draft document M3 - Freight Rail.
General comments
After decades of neglect and under-investment, it is past time for significant capital investment to lift the standard of Australia's freight rail track.
More freight on roads has meant higher road safety risk, more road congestion, more use of diesel fuel (rail is generally three times more fuel efficient than road to move freight) and so more greenhouse emissions. It has also created more noise and air pollution in urban areas, and a continuing loss of wildlife.
As we have said in earlier submissions, APTNSW has long been concerned about the systematic bias against rail investment embedded in transport analysis and appraisal techniques. The ATAP Guidelines have a big role to play, either as part of the problem, or part of the solution.
Moving in the wrong direction
In Australia, rail performs a growing bulk freight task. This includes the moving of over 800 million tonnes a year of iron ore for export on the most efficient freight railways in the world, and over 300 million tonnes a year of coal for export. Rail also moves grain for export and quarry products to capital cities. The 2019 BITRE Trainline report notes that in 2015-16 the bulk rail freight task was about 381 net billion tonne km (btkm).
However, in moving non-bulk freight, including containers, rail during the 2010s showed very restrained growth. The 2019 BITRE report notes that in 2015-16 the non-bulk rail freight task was a mere 32.4 btkm.
By way of contrast, the road freight task performed by articulated trucks grew from about 144 btkm in 2005-06 to 165 btkm in 2017-18 (with ABS data - up a huge 15 per cent in 8 years). The rigid truck freight task showed similar high growth (to 40 btkm).
NSW is not on track to meet its strategic 2021 goal for a larger share of containers to be shifted by train to Port Botany.
About 17.7 per cent of containers were carried by rail to and from Port Botany in 2018, down from 19.4 per cent in 2017. This falls well short of the government's goal of 28 per cent, or 930,000 containers, by 2021. Freight operators have expressed concern that the State government is derailing its own policy and pushing more trucks onto Sydney roads (SMH 2 November 2020, https://www.smh.com.au/national/nsw/congestion-compounded-as-more-trucks-added-to-sydney-roads-20201101-p56aix.html.)
There has also been an abject failure to speed up Melbourne - Sydney freight trains (or the XPT) and to meet 2008 targets for rail to carry 30 per cent of inter capital city freight. Instead, well over 10 million tonnes of freight are now moved between these cities each year by about 3000 trucks per day (and night). Rail's share has steadily fallen, now reportedly less than one mtpa of intercity rail freight.1
The 2019 National Freight and Supply Chain Strategy projects on a "business as usual" basis an increase in road freight from about 240 billion tonne km (btkm) to about 400 btkm from 2018 to 2040.
APTNSW suggests that Australia simply should not accept this scenario. As noted by the International Monetary Fund in 2018, Australia throughout the 2010s overspent on roads at a time it should have been increasing its investment in ports and rail.
Clearly, a better balance between road and rail investment is needed.
Neglect of the freight rail system
The ongoing construction of urban and intercity motorways to modern engineering standards, whilst leaving rail tracks with inadequate separation of freight and passenger trains, and intercity track that has not has grade or curvature easing for 100 years, puts more 'loads on roads'.
In 2007, the House of Representatives Standing Committee on Transport and Regional Services found that "reconstruction and realignment of the main freight networks" is needed2. Examples noted in the report include the Wentworth route south of Sydney (that could tie in with completion of the Maldon-Dombarton 35km rail link) and construction of a new 67km line from Hexham to Stroud Road. This would get rid of 97km of "steam age" alignment, cut fuel use and reduce train transit times from 82 to 42 minutes.
Here, the observations made c2006 in an AusLink Sydney - Brisbane strategy document are still relevant:
The rail network is heavily capacity constrained for freight services, particularly between Sydney and Newcastle, ... Freight trains are timetabled outside of the morning and evening peaks due to the priority given to passenger trains. ... In addition, performance issues also arise from track curvature, alignment and gradients which limit capacity and wheel loads of trains, and there are several bridges with structural deficiencies. .... Steep hills to the north of Sydney at Cowan Bank also make it difficult for freight trains as their heavier loads mean they travel more slowly than commuter trains and their greater length adds to line congestion.The excessive curvature on the NSW Main South line is mostly due to a series of deviations constructed between 1912 and 1922 as part of duplication to ease ruling gradients for loaded north-bound trains from 1 in 40 to 1 in 75.This was at the expense of increasing point to point distance by 24.5 km and adding more curvature. In fact, trains moving between Melbourne and Sydney traverse some 72 circles of curvature.
A particular case in point is the section between Goulburn and Yass. This was extended in length, c1920, from 84.6 kilometres (km) to 93.1 km as a result of duplication and deviations. Along with an extra 8.5 km the "new" alignment had numerous tight curves. On the other hand, the Whitton alignment that it replaced had few tight curves.
Indeed, train simulation has demonstrated that a modern superfreighter moving over the 19th Century alignment would give transit time savings of 12 per cent and fuel savings of 12 per cent when compared with the present track, which was designed for steam trains. Moreover, upgrading this section to modest Fast Freight Train standards (with a ruling gradient of 1 in 66 and no curve tighter than 800 metres) would yield 25 per cent savings in time and fuel for freight trains.
By way of contrast, by 2013, the entire Hume Highway had been reconstructed to modern engineering standards at a cost of as much as $20 billion in 2013 terms. Such work continues on the Pacific Highway, even on sections with low traffic volumes.
Road trains, or real trains?
The purpose of the ATAP guidelines is to provide a decision-support system for governments that are contemplating public investment in a transport project.
The M3 freight rail document needs to be revised, with a view to removing any bias against freight rail projects that could make it more difficult to correct the present deficient situation.
APTNSW has identified areas of concern in the treatment of costs and benefits in the draft issued for public comment.
Treatment of costs
The approach to assessing freight rail proposals recommended in M3 is to apply the guidelines in T2 Cost Benefit Analysis, supplemented by the mode-specific guidance in M3.
The advice given in M3 (Section 6) is to include all the costs associated with running a freight rail operation in a CBA for a freight rail line:
A key component in the economic appraisal of any freight rail initiative is the difference in recurrent costs (operating and maintenance) between the Base Case and the Project Case. As required in ATAP Part T2 Section 5.2, recurrent costs need to be projected over the entire appraisal period for the Base Case and the Project Case. This allows the differences between them to be calculated for the entire appraisal period.This applies regardless of whether government incurs any of these costs. As noted in M3 Section 3.5, privatisation has in most cases separated "above rail" operations from "below rail" operations. Section 1.2 of M3 notes that, in fact:
(Section 6, p.23)
The majority of above rail operators in Australia are represented by private companies as opposed to public ownership. As a result, many freight rail initiatives will be considered on a financial basis by private operators.The same section further notes that:
The distribution of freight rail transport costs and benefits contrasts with road-based operations where, apart from toll roads, the infrastructure is supplied as a public good. Some rail infrastructure is however publicly owned, for example, the Australian Rail Track Corporation (ARTC) network, which theoretically is available to all comers.Later in M3 (Section 3.5) is the observation that:
In the era of the commercial railway as opposed to the government railway, there has been a significant change in rail operations, finance and investment. Almost without exception, financial analysis has overtaken economic appraisal as the tool for investment decision making for above rail operations. Below rail investments, which are still largely financed by governments are typically conducted using an economic cost-benefit analysis framework.By implication, it is only the freight line to be built by government that is intended to be the subject of CBA in this circumstance. Lumbering the CBA with the costs of a private operator using the line constitutes an inbuilt bias against freight rail line projects.
This approach (also taken in M1 Public Transport) is at odds with the approach taken to road project assessment, which does not include the expenditure of users of the infrastructure on their private vehicles or wages and associated costs for the driver/operator as costs of the road project itself.
Scale of operating costs
The recurrent operating costs that would be included in an assessment of a proposed freight line are set out in Chapter 6 of M3. They are divided into five categories:
In addition to these considerable costs, M3 6.3.3 (p.30) advises assessors to add ongoing maintenance costs for "above rail" assets to the CBA for a freight line project:
Re-investment in assets such as half-life component change out (CCO) refits, although an ongoing cost in a timing sense, are generally treated as a capital cost rather than as an operating expense ...Palimpsest
Given the vehicle economic lives assumed, allowance should be made for a major ('mid-life') rehabilitation during the life of wagons. For rail vehicles, rehabilitation costs are typically in the range 25% to 35% of new vehicle costs as some elements of the vehicles such as braking and control systems may be technologically obsolescent by the time of rehabilitation.
It seems likely to APTNSW that the approach in M3 was developed in previous years in a context that no longer exists. As noted in M3 Section 3.5:
Apart from the privately owned iron ore railways in Western Australia, until privatisation of the railways in Australia around 2000, railways were vertically integrated state or commonwealth owned and operated entities. Thus each 'system' had its own track, locomotives, wagons, operating procedures, procurement branches, telecommunications, civil, mechanical and electrical engineering branches, track and facilities maintenance, staff training and safety regimes, industrial awards, OH&S, rules books etc. Each of the railways operated in isolation as geographic monopolies where the gauge of track and running rights provided a formidable barrier to entry.
APTNSW submits that it is inappropriate to add the costs of operating services on rail lines to the cost of any new rail line, whether constructed to carry passengers or freight.
In the case of freight rail however, this is especially clear. Independent private rail freight operators separately assess the viability of running services, take on the "above rail" operational and maintenance responsibilities, and enter into "access agreements" with the owner of the below rail operation. An approach reflecting vertical integration does not match present realities.
Implications
The inclusion of operational and maintenance costs borne by completely separate above-rail freight operators disadvantages freight rail projects, and works against the achievement of strategic objectives including climate change targets.
APTNSW submits that the cost of running a freight rail operation should not be added to the cost of constructing a freight line in a CBA, any more than the cost of running a trucking business should be added to the cost of a proposed new road.
Treatment of benefits
The benefits of freight rail for the wider community rest substantially on its ability to substitute for road transport i.e. benefits come in the form of costs avoided by carrying freight on rail instead of on trucks. Frameworks for evaluating freight rail investment need to take into account the high costs of overdependence on road freight.
M3 alludes to these avoided costs in Table 18 (p.48). As well as avoided road damage costs, (benefiting road providers), the Table refers to a range of third party costs associated with road crashes and environmental externalities. It also allows for savings due to the decongestion of roads if freight movement diverts from road to rail.
The reader is directed to ATAP PV2 for crash data, and to Part M1 of the Guidelines for default values relating to decongestion costs.
The Table does not refer to PV5 Environmental Parameter Values, issued as a draft for public consultation in July 2020. That document provides average unit values for eight environmental cost categories:
It is good to see these environmental costs recognised in the ATAP guidelines. The problem APTNSW sees is that these costs will never be taken into account if an a priori decision is taken labelling a proposed rail line "non contestable", eliminating it from contention. This is how M3 appears to operate.
Assessment of demand/Contestable market
M3 advises assessors to "Estimate rail market share" as Step 7 of a CBA assessment (4.5.7). It notes the importance of both price and service quality (4.3) and states (4.5.3):
In developing a conceptual railway operation, the mode's competitiveness is influenced by the overall 'package' of price and service characteristics which are critical to determining market share as illustrated in Figure 3. Against this must be compared the relative price service package offered by road competitors or alternative operations ...Earlier in the same Chapter, however, M3 suggests that assessors should decide a priori the "contestable market" for rail, meaning that the estimation of rail market share is predetermined as zero before any consideration of price and service attributes.
If both modes have identical price and service attributes and the mode specific constant is zero, market shares will be split 50:50.
Section 4.5.6 suggests:
The contestable market is a subset of the whole market that rail could win. It is impossible for rail to contest some markets, due to:We cannot disagree with the second of these points. A railway that does not exist is unlikely to compete successfully with other options for moving freight, although it could be that building a freight line is the very proposal being assessed.
- Extremely short-haul, fast transits making rail uncompetitive.
- Lack of network geographic coverage, e.g. there is no railway.
- Rail costs making it uncompetitive.
- Overcomplicated logistics chain.
- Greater flexibility of road transport.
The other points in this list however should be fairly addressed in the course of Step 7 (Estimate Market Share). Diagram 3.6 shows rail as part of a logistics chain, rarely door to door except in the case of the movement of minerals from mine to port. This may well reduce the estimated market share of rail, but if so it will emerge from the work done on step 7.
There does not seem to be any need for Step 6 (4.5.6), which to our mind looks like an invitation to prejudgment, to the detriment of freight rail proposals.
Conclusion
APTNSW thanks ATAP for the opportunity to comment on the draft version of M3. We hope that the final version does not bias decision-making away from the carriage of freight on rail and towards an unremitting growth in road freight transport.
We have no doubt that this is not an intended result. All the same, we believe that aspects of the document need to be amended, so that the environmental consequences acknowledged in the guidelines are fully brought to bear on transport investment decisions.
The consequences of continuing on the path we have followed in decades past would be genuinely dire.