Report spells out the costs and benefits of upgrading Northland's rail network to cater for port growth

Report spells out the costs and benefits of upgrading Northland's rail network to cater for port growth

A new report by consultants AECOM New Zealand and Deloitte on the feasibility of upgrading Northland’s rail network makes for interesting reading and highlights some of the potential issues involved in moving the Ports of Auckland north.

The business case was produced for the Ministry of Transport and paid for by the Provincial Growth Fund (PGF) and says upgrading the Northland rail network and building a new rail spur from the main line to Northport would cost $1.3 billion.

Last year the Government established the Upper North Island Supply Chain Strategy working group to look at the development and delivery of a freight and logistics in the country’s Upper North Island. It has also been tasked with investigating the feasibility of relocating the Ports of Auckland to Northport in Whangarei. But before that can happen the rail network north of Auckland would need to be upgraded to handle the massive amounts of freight that would be involved.   

The working group released an interim report on its work to date on April 27 and is expected to present its final findings to the Government in September. Associate Transport Minister Shane Jones is hoping the newly released AECOM and Deloitte paper, coupled with the working group’s findings expected later this year, will help him convince his cabinet colleagues of the viability of shifting the Ports of Auckland to Whangarei.

He says connecting Northport to rail and enabling it to service Auckland-bound freight would make a major contribution to the region’s economic development.

“The Northland Rail business case, together with the recently released interim report from the Upper North Island Supply Chain Strategy, present a bold vision for investment in how freight moves around the upper North Island,” Jones says. “The business case shows how Northland could play a role in transforming New Zealand’s golden triangle – Auckland/Hamilton/Tauranga - into a golden diamond if Northland is once again a fully functioning part of the national rail network.”

Jones says the next step in the process will involve the acquisition of land required for the rail corridor to Northport to be completed and the design for the link to the port be developed in detail. He says ministers will also seek more detailed advice from officials and KiwiRail on how investment in rail can be rolled out over a four to six year period to facilitate early access to services and to generate revenue from the investment as soon as possible.

But while the AECOM and Deloitte paper outlines some of the potential benefits to the Northland region, it also raises some flags over who is going to pay for the rail upgrades and what the exact benefits will be. It states:

“There is currently no committed funding identified to deliver the preferred Northland rail project option. There are a number of sources of potential funding, including the Provincial Growth Fund (PGF), which initial conversations have highlighted as a potential source for at least some of the required funding. At this stage of the project funding and financing of the project has not been determined.”

It says the Government has committed to investing $1 billion a year in regional economic development projects through the Provincial Growth Fund over three years (2018–2021). And Northland has been identified as an area for early investment and funding.

However, to develop the funding strategy further there will need to be further discussions with central and local government, as well as with third parties who may benefit from the redevelopment of Northport. While other funding options such as a Public-Private Partnerships (PPP) should also be considered.

Other sources of funding include the National Land Transport Fund (NLTF), which uses revenue collected from fuel excise duties, road user charges and motor vehicle registrations, as well as through the sale of surplus state highway land and Crown allocations. While the Super City is even listed as a potential source of funds, even though it admits securing funding would be a long shot and states:

“Auckland Transport and Auckland Council may see tangible benefits in the form of reduced congestion, improved journey times as well as safety benefits in moving freight from road to rail. These benefits within an Auckland context are unlikely to provide for a compelling funding case for regional authorities.”

The report describes the rail upgrades as “marginal projects” that aren’t being driven by existing demand.

“While they will deliver in part on the Government’s regional development and transport policy objectives the identifiable benefits will be less than the indicative costs of building and operating the rail infrastructure. While the rail investment will measurably mitigate some of the problems associated with road transport to, from and within Northland, the region will still require ongoing upgrades to its road and highway networks to improve access, safety, productivity and regional development.

“However the two potential rail investments, which are inherently linked, do provide considerable future strategic option value for providing significantly improved connectivity for heavy industry and freight volumes between the flat industrial area around Marsden Point and the natural deep-water access at Northport. This proposition has been discussed for almost 20 years, with many significant stakeholders wanting a definitive decision to allow them to develop their own long-term planning within this context.”

It says because there is no existing demand for either the Northland to Auckland rail line upgrade, or the rail spur to Northport, further work is needed to establish who would actually use it.

“Unlike most infrastructure built in New Zealand, this investment is not responding to existing demand. Rather, investment in the NAL and the new link to the port will be lead infrastructure made in advance of, and to stimulate, freight demand. Such an investment can only be made on the attributes of the origin and destination that this rail connection will serve, these being our largest economic centre – Auckland and Marsden Point with its freight handling and industrial potential.”

And Northport’s ability to fund the works could also create problems.

“Installation of the Marsden Link for current trade will have the effect of creating significant cost for Northport, as it integrates the railway into its operations, without additional revenue. The construction of the Marsden Link in advance of additional freight will likewise create significant costs for the port, without revenue."

But despite such issues it does say there would be regional economic development benefits.

“Upgrading the NAL and providing the Marsden Link will provide an option for some cargo owners to move a proportion (up to 5-7%) of the region’s freight. The renewal of the NAL and the construction of the Marsden Point rail link will provide an initial benefit of increased local economic activity, as well as the potential to train younger Northlanders in infrastructure projects. This workforce could then be used in future infrastructure projects across Northland and Auckland.

“With the greater uptake of rail, road-rail terminals will be required at a number of strategic locations such as Otiria/Moerewa, Helensville, Wellsford, Maungaturoto and Dargaville. Hubs are important for freight to access the rail network, usually being transferred to and from road. The development and operation of these road-rail terminals will generate ongoing employment opportunities in those areas. These hubs will also potentially attract future industrial development around them, to make use of the transport connection they provide.”

And the local tourism industry could also see some benefits too, with the rail upgrades allowing tourist operators to attract more visitors to both Auckland and Northland.

 

 

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why would ports of auckland or the port of Tauranga both owners of northport even agree to this, let alone the ACC
ask yourselves they already own 75% and so far have shown no interest in building up that port
if he is serious he should invest the money in buying a controlling interest in northport
invest in rail and set up as competition to ports of auckland and port Tauranga,

Really need a Large Tub of lipstick to decorate this Pork Barrel. Economics just doesn't pan out.

IMO (expert on nothing) money should be spent on 2 laning the Ham/Tauranga road or at the very least investigating if a road tunnel is feasable thru the Kaimai ranges.Just thinking ahead,and if you are looking for any red cones for your roading projects have a look between Hamilton and the bottom of the Kaimai ranges.

Sounds cheap compared to connecting Wellington station to its airport, $6 billion.

Great idea. From my vantage point overlooking the Port of Tauranga, I think the Northland gig is a goer. Get Ngapuhi their Treaty settlement sorted & they can put in a quarter of a billion, which along with the remnants of Jone's PGF should just about do it. Until the price doubles of course, but that shouldn't stop them. We've got enough trucks in Tauranga already (& we could also do with a rail upgrade ourselves) but I think the move north from our Northland friends in NZ First is a top idea. The sooner the better. Then you watch the values from old Ports of Auckland land quadruple - then the bros down the road are really in the money.

I feel it would be an act of kindness to take the pressure down on Tauranga for a while, to me they look overwhelmed by their success.
The town that looks in proportion to me is Whakatane, a pretty town.

Just reading that Eastland Port has had another good year and are looking to expand so that they can berth more than i boat at a time and may also look at containers.
Just a pity its in the wopwops.

Another area with great potential and a shamefully neglected rail system

Agree.
When you see what engineers have done to rail in Canada and tru out Europe you wonder why they can't make an effort in NZ.
Stayed in a hotel a few years ago in Gizzy and all i could hear was trucks and their air brakes all bloody night.

We went to gizzie via hicks bay and loved the coast
Their wines have an economic return way better than 1.2
Accommodation was good ovelooking the port
Different to the 60s when they grew peas for Watties and had a freezing works

Trains are uneconomic due to the dominant costs of handling in freight distribution, they only work for long distance and low value density goods, so this is money down the toilet. In 5-10 years night-time electric autonomous trucks will dominate the intercity freight industry, making use of road infrastructure during the quiet hours of the night with energy efficiency similar to trains. 4 laning Whangerei-Tauranga would have far higher payback.

We could dream of that but the reality would be single lane with passing bays and non stop road works, courtesy of the NZTA

Adding to that the automated trucks dont merge terribly well...

I think it is a great idea and the fact that it hasn't hit the buttons yet is because Auckland CC want their $57M income from the Auckland Port and National was not interested in development in provincial areas. Hasn't Jones just set up some deal with China re Forestry? Deep water Port yet Auckland were/are looking at Manukau Harbour and Thames. Seriously? Just to get the trucks off the road, free up the Waterfront for the people of Auckland to enjoy and use will make so many people happy. Perhaps that is not measurable in dollars but a winner for so many.

South of Orere Point would be the answer.
Good ship access, reasonably deep water and shelter.
Decent patch of flat land to serve as import car yard.
Close to Auckland, the current road corridor does not need a lot of changing, it can either hook up with Ness Valley and on to Clevedon or go straight to Papakura. No need to go through forests.
Not much extra rail infrastructure needed, just from Wiri train yard to the new port.
Goods don't have to be transported by train for 190 odd km to get to Wiri. Or are we now thinking of a new train yard in West Auckland making it 150 km? Regardless, it makes no sense.
It will make the bridge last longer not having to carry hundreds of extra car transporters a day (and the rest).
It keeps all the port revenue and ratable income in Auckland. It will open up all of the land south east of the city for development.
The total cost of relocation will be much less then going to Northport, or Tauranga for that mattter, not to mention emission savings and ongoing transport costs.
If we take emotions out of it, what is there not to like?

$5 billion was a budget I saw for the Thames option, with ongoing dredging.

POAL land is valued at something like $5Billion, so that would be basically cost neutral.

Can you reveal how the port 70 hectares are worth $5 billion..
https://www.poal.co.nz/about-us/Documents/Value%20of%20Port%20Land.pdf
I can only see about half a billion in the report.
I need new glasses

https://www.greaterauckland.org.nz/2018/07/16/auckland-land-values/
Land around the POAL CBD land seems to be valued in range $4-8000/m². 55 Ha (I had thought it was 77Ha, but that includes other land around Auckland) is then worth at least multilple billions. If they are only getting $30 million a year profit out of it it is incredibly bad ROI.

Yes,
I was aware of the discrepancy of land values on different sides of the road.
You have a point but the other side is high rises while the port side typically is mixed development like Wynyard
A developer did offer to build a stadium on that site and the council said they valued the site at about $300 million so I guess that would be their price.

Last time I checked, the roads around Orere Point were B roads that I wouldn't run a club rally car around, let alone a 44t container truck.

Roads will need to be upgraded, certainly not suggestion not to.
Thing is that there are existing corridors that can be used, apart from a small stretch of farm land to get to Ness Valley or Papakura.
The roads will need to become 4 lanes all the way wherever we go, Northport, Tauranga or Orere.
Orere Point is a lot deeper still, with no tidal flats nearby, then Thames which will continue to silt up anyway.