Paul BuglerDirector

What Is Regional Rail?

For purpose of this presentation, regional rail comprises the Australian rail networks and operations that are not:

Urban

Interstate

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Our Regional Rail Networks – Initial Observations

Each State (initially colony) built a railway network during the 19th and early 20th centuries predominantly for the purpose of servicing the regional hinterland to ports.

Not just about freight … the movement of passengers was also an important task.

Interstate connections were very much an afterthought (ship was still the major inter-colonial transport mode).

In their prime, these networks were vital in opening up the country and providing efficient transport of people and goods.

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4Diagram courtesy of BITRE, ARA

What’s Changed?

The rise of road transport and a comprehensive, high quality road network has fundamentally changed the role of rail in the last 50 years.

For many traffics, rail struggles to compete with the service levels offered by road transport – flexibility, accessibility, frequency, travel time.

Urban passenger rail remains strong, but regional passenger services have generally declined, though attempts have been made to revitalise the sector in some states (eg QR Tilt Train and Victorian Regional Fast Rail Project).

On the regional network, freight rail has retreated to its areas of competitive strength – bulk, high volume.

Attempts to improve competitiveness of the interstate network –particularly for intermodal movements.

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Regional Rail Now

Networks have progressively been wound down.

Branch line closures.

Minimum maintenance in some cases.

Generally no investment to improve track standards for modern rolling stock.

Low axle load rolling stock not replaced (or replaceable).

Gauge differences still restrict movements not on the interstate routes.

Complex regulatory and ownership mix.

Governments are struggling with the poor economics of regional rail systems.

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Closures – New South Wales

Diagram courtesy of CRIA

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Network Closures – Western Australia

Diagram courtesy of Brookfield Rail

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Complex Ownership Mix

Diagram courtesy of BITRE, ARA

Complex Ownership & Regulatory Mix

Diagram courtesy of CRIA10

Why do we need a regional rail network?

Despite the decline, our regional networks remain vital to our economy.

Many industries are dependent Australia’s regional rail networks – here are just some of them:

Coal

Iron ore and other minerals

Export grain

Domestic grain movements to mills

Cotton and other containerised agricultural products

Urban waste for land fill

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Policy Ambivalence

Our governments are struggling to find the right balance for regional rail:

Typically express strong support for regional rail networks, but …

Often funding does not follow

Grain branch lines in particular have suffered

Where the mining industry has shown willingness to fund investment, governments, track owners and train operators have been willing to invest.

Majority of investment in regional rail in recent years has been for coal and iron ore movements.

Various commercial models are being tried around the country.

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Commercial Models

Some of the initiatives being tried:

Privatisation

Some have worked (Genesee & Wyoming, Brookfield)

Some haven’t (Tasmania, Victoria, Tarcoola - Darwin)

Vertical Separation/Integration

Separation – ARTC, Brookfield, CRC, VicTrack

Integration – QR National, QR, RailCorp, G&W, Iron ore railways

Short-line operations (effectively exclusive use) on grain lines (GrainCorpNSW)

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Problem Of Uncertainty Of The Branch Line Network

The NSW Government has adopted a ‘short line’ approach to provide grain haulage services on the branch lines.

GrainCorp won the contract and was provided the rolling stock.

But no guarantees that the track will be maintained …

“6.2 No warranty

Without limiting the generality of clause 6.1, the Director General does not warrant that:

(a) the Branchline Network will be maintained at the standard current as at the date of this Agreement;

(b) the Branchline Network will be open for the Operating Period; …”

Extract From GrainCorp Rail Haulage Operating Agreement with NSW Government

It is very difficult to get investment where there is doubt that the basic infrastructure may not be there for the long term.

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Is The Problem More Than Just Rail Infrastructure?

Train operators have been keen to compete to provide services where there is a profit to be made but …

The branch lines are not capable of handling modern high capacity rolling stock

Existing low axle load equipment is very old

Operational costs are high when you can only travel at 20 kph, as applies on the some branch lines

Loading/unloading equipment is often unsuitable to modern operations (eg slow, low capacity)

Above rail & customer investment – chicken & egg problem. Need assurance that the network will remain viable for the long term.

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Challenges Apart From Funding

Competition for limited rail capacity from growing minerals traffic demand particularly in northern NSW but also in SA and WA.

Competition from expanding outer-urban commuter passenger services as our major cities continue to expand.

Complex ownership and regulatory structures (eg interfaces between track owners).

Complementary policy adoption – eg road user charges.

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So Where To From Here?

Need for clear government leadership ...

Long term policy based on clear understanding of:

what government wants to achieve

who will fund what

Unambiguous commitment to fund public infrastructure required to give effect to the policy.

Why must government lead?

Industry not well placed to lead. At best, industry will only ever support its direct interests & different interests make cooperation difficult.

Industry must play its part in supporting policy, to the extent this is in accord with commercial realities.

Inevitable on-going government support will be required in some cases.

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What Role Should Regional Rail Play?

What rail should not do ...

Low speed passenger:

Expensive to operate, consumes disproportionate capacity, poorly supported by public

Buses can achieve substantially better service at lower cost

May be a role for tourist trains – if they can pay their own way

Keep all lines open at any cost:

Keeping open a line that its natural customers won’t use makes no sense – it is not rail’s role to fix market failure

It is better to fund a smaller, properly maintained, modern network that has viable traffic than waste money on patching up a larger failing one

Attempt to compete with road where road is the better option

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What Role Should Regional Rail Play?

Rail should continue to do what it does best – high volume & bulk :

Coal

Iron ore

Other minerals (eg limestone, concentrates)

Grain (both bulk and increasingly containerised)

Large scale, regular intermodal movements

Potentially bulk liquids (eg fuel)

There is a role for government to fund targeted services, but it must have clear objectives and ensure they are achieved