Tasmanian Government submission to the National Infrastructure Audit

July 2008

EXECUTIVE SUMMARY

The Tasmanian economy has undergone significant structural change in the past decade, which has contributed to the State’s long-term recovery in economic performance characterised by strong employment growth, a substantial reduction in unemployment, high levels of private sector investment and population growth. These structural changes include:

• growth in Tasmania’s total productive capacity, and the potential to improve Tasmania’s productivity, through increased private and public investment;

• increased household wealth due, in part, to the realignment of Tasmanian house prices with those on the mainland;

• an expanded tourism sector due to the budget airline market;

• the development of a natural gas market in Tasmania and increased competition in the electricity and gas retail markets;

• closer integration with the national and international economies; and

• a transformed fiscal position, including the elimination of State net debt, which has led to improved tax competitiveness and higher levels of business confidence.

The effect of these structural changes has been a change in Tasmania’s industrial base, with high productivity industries such as mining, finance and insurance, and some high value manufacturing growing at a faster average rate in the five years to 2006-07 than experienced nationally. These industries have, in recent years, also accounted for a greater share of total factor income than previously.

Essential to sustaining this economic growth over future decades is further infrastructure investment targeted at maximising Tasmania’s competitive advantages and facilitating productivity improvements and industry investment.

An interpretation of ‘nationally significant infrastructure’ that focuses solely on urban congestion and bottlenecks in the major cities ignores the potential productivity gains to be realised by investing in nationally significant regional infrastructure.

Tasmania has a diverse range of agricultural, mining, forestry resources and significant potential for additional value adding service industries if key infrastructure challenges can be overcome.

While Tasmania shares many of its challenges with other regional jurisdictions, it is important to highlight that we are in many ways unique. The State’s infrastructure needs stem from a number of factors including:

• the nature of its transport and freight task;

• a small, dispersed population;

• ‘island-based disadvantages’;

Tasmanian Government submission to the National Infrastructure Audit 2 • historic investment patterns that have failed to achieve economies of scale;

• challenging topography; and

• a legacy rail system.

Tasmania has always been an outwardly focused export-oriented part of the Australian economy. The Tasmanian economy is going through a major period of sustained growth and diversification and is currently playing a more vibrant role in the economic development of Australia than it has for decades. It is critically important to the economic and social health of the State and to sustaining our contribution to national economic progress that there is investment in infrastructure to underpin this.

Tasmania has demonstrated that a regional economy can change and grow through targeted infrastructure investment that fosters continued and sustained regional economic growth. It is important that Tasmania and other regional economies can continue to contribute to, rather than be a burden on, national productivity growth.

Transport

Transport productivity improvements are important in a value added and bulk commodity market, such as Tasmania, where cost savings in the transport of goods increase the scope for competitive pricing. As an export-oriented state, Tasmania faces major challenges in a carbon and oil constrained future due to distance from export markets and cost of importing retail goods.

Over 99 percent of Tasmania’s interstate export movements are by sea. The container market, in particular, has been undergoing major growth. Future export and industry growth will require land transport investment that links to the future role of the ports, including the long-term potential to focus container movements at Bell Bay, from the current focal point at Burnie. Tasmania’s major intermodal facilities are currently port-based. Operational and land use constraints limit improvements to efficiency, capacity and transit times at all intermodal facilities.

Tasmania has an extensive, substantially mature transport system with a high maintenance liability. The freight and passenger task is highly dispersed across the AusLink and regional road networks. Industry relies on regional road networks for the movement of product to export and processing points. Without significant investment in regional road infrastructure and maintenance, sections of Tasmania’s road network will not support future freight productivity reforms, including longer and higher mass vehicles, leading to higher transport costs for industry and infrastructure maintenance costs for Government.

Tasmanian Government submission to the National Infrastructure Audit 3 Historically, Tasmania’s rail network has received limited investment compared to road. As a mode, rail is suited to Tasmania’s bulk commodity freight task, however infrastructure deficiencies, duplication by the road network, a generally short-haul task and volatility in rail ownership and management since the late 1990s are significant issues affecting the viability and attractiveness of rail. Significant improvement in rail efficiency and productivity is necessary for rail to remain competitive.

Tasmania relies on air services for interstate passenger travel and the movement of time- sensitive freight. Maintaining the existing level and competitiveness of air services to Tasmania is essential.

Priority projects

• Brighton Bypass (stages one and two): address significant safety, efficiency and amenity issues • Frankford-Birralee-Batman Bridge: significant upgrade of strategic freight route • Brooker Highway: upgrade of strategic urban freight route, including key intersections, and sections of three lanes • Bass Highway: Port Sorell to Deloraine, Deloraine to Illawarra Main Road and west of Wynyard • New Bridgewater Bridge • Brighton Transport Hub: address current intermodal operational deficiencies, improving north- south connections • North east forestry freight strategy: separate heavy vehicle and passenger traffic on key passenger routes (includes upgrades to Bridport Main Road and strategies to address deficiencies on the Tasman Highway) • Bathurst-Wellington: Measures to address through freight movements and traffic flows • Rhyndaston rail capacity improvements: remove tight curves on approaches to Rhyndaston tunnel and sections south of Antill Ponds • Rail upgrades, Melba line: includes additional spurs to link to mine sites • Rail upgrades, Main and Western lines, to support higher speeds and increased axle loads • Murchison Highway: road upgrades to support a growing mining freight task • Projects to separate heavy vehicle and passenger traffic, south and North West regions (includes potential rail upgrades, Derwent Valley and Wiltshire lines) • Bell Bay intermodal - realignment of rail access to Port; future expansion and land reclamation; development of new siding to cater to a higher volume freight task • Tasman Highway to Airport: Pavement reinstatement/improve eastern approaches to Bridge • Midland Highway: targeted improvements to support heavy freight task and safety • Illawarra Main Road: improved safety, efficiency and level of service • Urban freight route improvements – to improve freight movements and access on major urban freight routes that are at or approaching capacity (Brooker and Tasman Highways, Bathurst-Wellington couplet)

Tasmanian Government submission to the National Infrastructure Audit 4

Water

Irrigation

The Tasmanian Government is currently implementing a strategy to realise the economic potential of agricultural areas by removing constraints on irrigated agriculture. Up to $220 million has been committed to Tasmanian water development projects, aimed at drought-proofing Tasmania and securing more reliable water supply for irrigation and towns.

Without additional Government funding, the balance of the total project cost will need to be provided through private sector investment.

The Tasmanian Government has recently established the Irrigation Development Board to direct the development of these projects.

The Australian Government has committed $140 million towards six of the projects. This is unlikely to be sufficient to complete all of the projects and additional funding may be required.

All of the remaining first priority projects have been identified as filling strategic gaps in irrigation water demand to both underpin the existing investment in irrigation businesses to meet the challenges of drought and climate change, and capture opportunities for growth of irrigated agriculture in the State.

Tasmania has huge potential for further irrigation development and additional Government funding will be required to realise this potential, through both ensuring the successful completion of the priority projects and progressing a second suite of larger scale projects currently being investigated by stakeholders.

Urban water

A recent review of the State’s water and sewerage sector found up to $1 billion of new infrastructure is required over the next decade to improve environmental and public health standards, improve the asset management practices of many service providers, hasten economic regulation in the sector, which is about a decade behind most other jurisdictions, and to upgrade infrastructure.

Priority Projects • Investing in larger scale irrigation development projects to capture agricultural growth opportunities and address drought and climate change impacts. • Investing in critically urgent community projects to improve urban water and sewerage supply. • Extending reticulated water and sewerage supply to new areas to improve public health and environmental outcomes. • Improving water quality for areas on permanent boil water alerts • Implementing consumption-based pricing for all Tasmanian urban water users.

Tasmanian Government submission to the National Infrastructure Audit 5 Information and Communications Technology

Telstra has a virtual monopoly in relation to wholesale telecommunication services in Tasmania. The State is connected to Australia's national telecommunications networks via two undersea optic fibre cables controlled and operated by Telstra. The only other backhaul paths into and out of the State are via satellites operated by Singtel Optus Pty Limited (Optus) or a single optic fibre cable embedded with the BassLink electricity connector. This cable is expected to be in commercial operation by September 2008.

The facilitation of competition at all layers of the State's telecommunications market through the development of independent fibre optic backhaul infrastructure throughout the State and across Bass Strait, and the establishment of independent points of presence in major population centres, will reduce pricing for backhaul connectivity. This will create an incentive for retail service providers, who currently struggle to offer parity against their nationally available services, to consider the Tasmanian market. Expansion in telecommunications options is essential for the development of information intensive industry in the State, particularly the call centre industry, ICT sector, creative new media sector, shared services sector and the broader research and scientific community.

Priority Projects

• Establishment of an independent open access fibre optic backhaul link connecting Hobart and Melbourne via Bass Strait.

• Establishment of independent open access fibre optic extensions to the Tasmanian Government’s on-island backhaul network enabling increased redundancy and linking underserved regions of the state such as the East and West Coasts, Huon and Channel districts and the Upper Derwent Valley.

• Establishment of independent Points of Presence in population centres that can be linked along the route of the Tasmanian Government’s extended on-island backhaul network.

• Competitive Third Generation mobile telephone networks with similar coverage to the incumbent.

Energy

Renewable energy generation in Tasmania is currently constrained by a weak transmission network. Considerable expenditure will be required to strengthen the transmission network, particularly in western and northwestern Tasmania.

The development of a liquefied natural gas (LNG) capability in Tasmania will improve the productivity and environmental sustainability of freight vehicles and the extension of Tasmania’s recently rolled-out natural gas pipelines will have wide-ranging benefits.

Tasmanian Government submission to the National Infrastructure Audit 6 Priority Projects

• Strengthening/upgrade of the transmission network;

• Development of LNG capability; and

• Extension of natural gas pipeline network.

Tasmanian Government submission to the National Infrastructure Audit 7 CONTENTS

Executive summary 2

1. Land transport 9

2. Sea ports 32

3. Airports 40

4. Energy 44

5. Information communications technology 58

6. Water 66

Tasmanian Government submission to the National Infrastructure Audit 8 1. LAND TRANSPORT

Current and emerging challenges

• Forecast freight growth will see larger volumes of freight moving through Tasmania’s ports, intermodal facilities and over the land transport network. Tasmania’s road and rail networks face significant infrastructure deficiencies in supporting this growth.

• As an island, Tasmania is reliant on interstate air and sea links. Tasmanian exporters must use multiple transport modes to access export markets, making the efficiency of transport networks and interchange points critical to reducing time and cost.

• High traffic volumes on major urban freight routes (Brooker and Tasman Highways, and the Bathurst-Wellington couplet) will continue to impact on travel times, reliability and access to major industrial areas and distribution centres for freight vehicles.

• Tasmania has an extensive, substantially mature road network, with a high maintenance cost.

• Tasmania’s rail network has significant infrastructure constraints affecting rail efficiency and performance. Major investment is needed to improve reliability, increase travel speeds and support higher axle loads.

• Sections of the road network have constrained alignments for freight vehicles and are unable to support future freight productivity reforms (longer and higher mass vehicles).

• Tasmania has a highly decentralised population, with three major urban centres: Hobart, Launceston and Burnie-Devonport. Growth in outer areas (urban and coastal) combined with a population of less than half a million people make it difficult to achieve economies of scale in transport infrastructure and service provision.

• Tasmania faces major challenges in a carbon and oil constrained future due to distance from export markets and cost of importing retail goods. Market environment

Transport productivity improvements are critical in a value added and bulk commodity market, such as Tasmania, where cost savings in the transport of goods increase the scope for competitive pricing. Economic modelling undertaken by the Productivity Commission in 2007 indicated that Tasmania, whose industries have a relatively high export content and large freight demand, would experience a larger increase in economic activity from freight industry productivity improvements than for Australia as a whole. The modelling found that a 5 percent increase in productivity applied to road and rail resulted in a national GDP increase of 0.4 percent, compared to a 0.7 percent increase in Tasmania’s GSP.

Tasmania has a bulk commodity freight task. Forestry, mining and agriculture are the key

Tasmanian Government submission to the National Infrastructure Audit 9 export sectors and all are expected to undergo significant growth over the long term, with significantly higher volumes of freight moving through the State’s ports, intermodal facilities and over the land transport network.

The AusLink Network is the core of Tasmania’s intrastate freight and passenger transport network, connecting major export ports and carrying the largest freight volumes. The changed direction in trade from the Southern Region – 86 percent of total exports from the region are now exported via the northern ports – has increased the importance of north-south AusLink connections.

The majority of product from the key mining, forestry and agricultural export sectors originates in areas remote from export points and processing facilities. Tasmania’s regional road network is critical in supporting these industries, with some regional roads carrying higher freight tonnages than sections of the AusLink Network.

Major urban freight routes, including the Brooker Highway and Bathurst-Wellington couplet, are key links in the north-south supply chain. Congestion and forecast high traffic growth along both routes will continue to affect travel reliability and freight access to adjacent industrial areas.

Significant investment is required in Tasmania’s rail network to improve its performance and efficiency over the longer term. Major industry sectors

Forestry and value added processing

Forestry is Tasmania’s second largest economic sector, contributing around $1 billion each year to the Tasmanian economy. The forestry freight task is highly dispersed across the state, reflecting the location of resources and major processing facilities. Gunns operates three woodchip mills at Hampshire (North West), Triabunna (South) and Bell Bay (North). There has been recent investment in veneer production at the Newood integrated timber centre (Huon Valley, southern Tasmania) and at Smithton in the North West, and by Forest Enterprises Australia at Bell Bay for semi-processed wood products. Major paper mills are located at Burnie and Wesley Vale in the North West and Boyer in the South.

By tonnage and number of trips, forestry is the single biggest contributor to Tasmania’s land freight task. In 2005/06, forest products represented over 30 percent of Tasmania’s total freight mass, and 21 percent of all freight trips.1 Future projections indicate a growth rate of around 15 percent over the next 25 years, as large areas of plantations mature for harvesting. 99 percent of forestry-related trips use a regional road network for at least part of the trip.

Mining and mineral processing

Mineral, metallic ores and coal contribute 50 percent of Tasmania’s gross export income. In

1 Department of Infrastructure, Energy and Resources 2005/06 Freight Demanders Survey

Tasmanian Government submission to the National Infrastructure Audit 10 2005/06, the value of mining to the Tasmanian economy was $2.2 billion, a 30 percent increase from 2004/05. In 2005/06, industry value-added metal products including zinc and aluminium were valued at $631 million.

A survey of mining companies conducted by Canada's Fraser Institute ranked Tasmania third for mineral potential among other Australian States and eighteenth in the global market.

Tasmania’s mining sector is experiencing strong, renewed activity, with major new developments focused on the West Coast. In 2005/06, around 450,000 tonnes of mineral and metallic ores was transported from the West Coast, the majority by rail (335,000 tonnes). By 2010, this task is forecast to increase to nearly 1.1 million tonnes, split between road (600,000 tonnes) and rail (500,000 tonnes).

The difficult terrain, remoteness and dispersed location of mining sites create major impediments for the movement of mining product out of the West Coast. Many roads are narrow, with highly constrained alignments for freight vehicles. Rail network limitations include few passing loops and steep gradients limiting train length and carrying capacity.

Agriculture

Over 58 percent of Tasmania’s food product is exported, at a total value of $1.51 billion, contributing 13 percent of Tasmania’s total freight task by value. In 2004/05, the value of food at farm gate/beach was $984 million, while the value of packaged and processed food was $2.1 billion. The majority of Tasmania’s agricultural products are moved by road and then by sea, with a small percentage of time sensitive products moved by air.

Over the last ten years, food production has increased 5 percent per year, with overseas exports increasing by 3 percent per year. This trend is expected to continue, based on ongoing innovation, rising global food prices, branding and productivity improvements through water development. Growth is expected to be highest in the dairy, wine and aquaculture sectors. Planning and regulatory environment

The Tasmanian Government’s objective for the State’s transport system is to support the seamless movement of freight and people across modes and jurisdictions, focusing on improved efficiency, accessibility and safety. Statewide, regional and local plans and strategies underpin these core policy objectives and provide guidance in relation to geographic areas, network assets and user groups.

• Tasmanian Auslink Corridor Strategy outlines the strategic challenges and priorities for the Tasmanian AusLink Network over the long-term. The Strategy is based on significant analysis and takes a system-wide approach across road, rail, major ports and airports.

• Tasmanian State Road Hierarchy 2008. The Tasmanian Government-owned State Road network is planned via a 5-hierarchy system. Category 1 roads carry the largest

Tasmanian Government submission to the National Infrastructure Audit 11 vehicle and freight volumes, and include the AusLink Network. Category 2-3 roads carry large volumes of heavy freight and passenger vehicles, and connect major resource locations to the AusLink Network and export points.

• The Tasmanian Transport Infrastructure Investment Strategy identifies the major investment priorities for Tasmania’s road network over a five year period.

• Tasmanian Road Safety Strategy 2007-2016 provides the Government’s strategic approach to road safety, focusing on behavioural, education, regulatory and infrastructure measures.

• Regional Integrated Transport Plans provide frameworks to address regional challenges over the long term. The focus is on high priority issues and principles to improve integrated land use and transport planning and inform investment decisions.

The Tasmanian Government has developed detailed information and analysis systems to support strategic planning.

The State Infrastructure Planning System (SIPS) is a spatially enabled system supporting the modelling of current and future infrastructure demand. SIPS supports improved, repeatable and transparent infrastructure planning across the State.

The Freight Demanders Survey (FDS) examines freight movement across Tasmania’s land transport network. The FDS provides information on the location of freight trips, including movements between and through major sea and air ports; between industrial areas and across network segments (road and rail). Information recorded includes tonnage, value, commodity type, mode and vehicle type.

The Tasmanian Government has a range of regulatory responsibilities across road and rail including: • Legislative ability to restrict access onto major arterial roads. • Approval of HPV and HML routes and regulation of heavy vehicles. • Development and implementation of road safety programs for passenger and heavy vehicles. • Rail safety based on a co-regulatory approach with industry and performance based obligations. Existing infrastructure and task

In 2005/06, Tasmania’s heavy freight task (road and rail) was valued at over $15 billion – an increase of 30 percent from 2002/03 – with a total combined commodity mass of 49.6 million tonnes – an increase of 30 percent from 1998.

Tasmanian Government submission to the National Infrastructure Audit 12 Major freight generators include resource industries (e.g. forestry, mining, local construction materials), the consumer goods sector (e.g. groceries, fuel) and agriculture and food (Figure 1). Forestry, mining and agriculture are Tasmania’s key export sectors.

Figure 1 Commodities by mass, value and trips

% Mass %Value 30% % Laden Road Trips

25%

20%

15%

10%

5%

0%

t y s nt ts s s s s a res ete oal al er les r cal s Logs O C li ab mal oduc ti Cemen lic onc aw Milk and Fruit hemi R Miner er Pr r & BoardsF eget Woodchips al C V ve Ani Metal ed C ic be Li Met ne, Sand & Cl Petroleum Fuel emix Bas Mixed Groceries to ic S Pr Bas Sawn Tim Processed

Pulp, Paper and NewspriFresh Vegetables Dairy Products & Chocolate

Road transport is the dominant freight transport mode, moving over 47 million tonnes of freight annually.2 While rail carries around 2.6 million tonnes or less than 6 percent of the State’s land transport freight task, it accounts for 14 percent of the State’s freight task in net tonne kilometres.

Map 1 shows Tasmania’s major transport networks and assets.

Tasmania has an extensive road network, with one of the highest per capita road lengths of any Australian state. The Tasmanian Government owned State Road network, including the AusLink Network and major regional roads, carries the most intensive transport task. In 2005/06, 26.6 million tonnes valued at $14.1 billion was carried on the State road network.

Sections of Tasmania’s road network are deficient in terms of alignment for existing and future heavy vehicle configurations. If these deficiencies are not addressed, the network will not be able to support the introduction of longer and higher mass freight vehicles, with potentially significant impacts on freight productivity.

Tasmania’s road network has a maintenance backlog of around $100 million. The structural funding needed to achieve sustainable maintenance levels is significant, with the average funding maintenance gap per year over the next four years estimated at $18M. Joint funding arrangements on the AusLink Network will impact on funding patterns over the remainder of the State’s road network and there is potential for an increased gap in performance standards between the AusLink Network and regionally significant roads.

2 Includes heavy vehicle and light commercial vehicles

Tasmanian Government submission to the National Infrastructure Audit 13 Map 1. Tasmania’s strategic transport network

AusLink Network

Tasmania’s AusLink road network covers 393 kilometres. Together with the key links identified in the Tasmanian AusLink Corridor Strategy, and extensions announced as part of the 2007 Federal election, the Network forms the core of Tasmania’s intra-state transport system, connecting major export ports and intermodal facilities, regional roads and major population centres (Hobart, Burnie, Devonport and Launceston).

Major features of the AusLink road network include:

Tasmanian Government submission to the National Infrastructure Audit 14 • 63 percent of heavy vehicle freight by tonnage uses the Network for part of the journey.

• The majority of freight on the Network originates from regional areas, using lower category regional roads.

• The Network has many high tonnage entry and exit nodes. The ports of Bell Bay and Burnie are the State’s highest interchange points, exporting 3.8 million tonnes and 3 million tonnes per annum respectively.

• Victoria Bridge, connecting west and east Devonport port, carries the highest volume of road freight. In 2005-06, the Bridge carried over 3.7 million tonnes, valued at over $3.3 billion.

• Illawarra Main Road is a key link between the North West (Bass Highway) and Southern (Midland Highway) Regions, and carries over 1.57 million tonnes.

• The Midland Highway is Tasmania’s major north-south freight route, supporting the export reliance of the Southern Region on the northern ports. Containerised traffic comprises almost half the tonnage (44 percent) and more than three quarters of the value (83 percent) of the Highway’s freight task.

• The Brooker Highway (Hobart) and Bathurst-Wellington Streets (Launceston) are major urban freight routes. The Brooker Highway carries 1.5 million tonnes at a value of $2.5 billion and Bathurst-Wellington Streets carries 2.4 million tonnes at a value of $1.7 billion.

• The majority of passenger movements occur between the urban centres of Burnie and Devonport, and urban areas of Launceston and Hobart.

Regional road network

Tasmania’s regional roads carry high volumes of freight – over 24.4 million tonnes at a total value of $12.6 billion in 2005/06 – and are critical in linking remote resource areas to the AusLink Network, export ports and industrial centres. Individual regional roads carry a high proportion of the statewide freight task (Table 1) with some carrying higher freight volumes than sections of the AusLink Network – for example, the Ridgley Highway carries over 2.3 million tonnes, more than sections of the Midland Highway.

TABLE 1 MAJOR REGIONAL ROADS Road Function Tonnage and Percentage value (2005/06) statewide road freight Ridgley Key sub-regional freight link between 2.3 million tonnes 8.8% Highway the West Coast and Burnie port for $1.4 billion minerals and forestry products. Biralee- Major inter-regional freight route 2 million tonnes 6.5% Frankford linking North West, Bell Bay and $538 million North East production areas. Bridport Main Key sub-regional link connecting 1.7 million tonnes 6.7%

Tasmanian Government submission to the National Infrastructure Audit 15 Road forestry and agricultural resources in $288 million the North East to Bell Bay. Bass Highway Connects agricultural and forestry 1.5 million tonnes 5.8% (Wynyard to areas in the North West to major $674 million Smithton) ports. Huon Highway Sub-regional link, Huon Valley to 1 million tonnes 2.8% Hobart via the Southern Outlet. $808 million

Major regional freight roads

North West North East BBBrrriiidddpppooorrrttt MMMaaaiiinnn RRRoooaaaddd Agriculture /forestry Exports 1.5 million tonnes Exports 3.4M tonnes 14% of regional sector task Smithton 2.9M tonnes Exports Burnie 1.8M tonnes

BBBaaassssss HHHiiiggghhhwwwaaayyy Devonport Bell Bay Agriculture, forestry 1.2 million tonnes $258 million 27% of regional Launceston agriculture/forestry taskkk

FFFrrraaannnkkkfffooorrrddd///BBBiiirrrrrraaallleeeeee RRRoooaaaddd 1.3 million tonnes RRRiiidddgggllleeeyyy HHHiiiggghhhwwwaaayyy/// 12% of regional sector task MMMeeelllbbbaaa rrraaaiiilll llliiinnneee Mining Melba Flats 450,000 tonnes $884 million 59% of regional mining task

Brighton Transport Hub HHHuuuooonnn aaannnddd CCChhhaaannnnnneeelll HHHiiiggghhhwwwaaayyysss Forestry, aquaculture, agriculture 653,000 tonnes $538 million Hobart 26% of regional sector task Port

South

*Note: figures exclude wharves at Nyrstar, Selfs Point, and Triabunna Exports 124,300 tonnes*

Tasmanian Government submission to the National Infrastructure Audit 16 Urban freight links

Capacity and traffic flow issues exist on Tasmania’s major urban freight routes. Average daily traffic volumes on Hobart’s key urban arterial routes grew by 79 percent between 1983 and 2003.

In Greater Hobart, the most heavily trafficked roads are the Brooker and Tasman Highways carrying between 50 000 and 65 000 vehicles a day, respectively. The Brooker Highway has a high freight task – almost 2 million tones – reflecting its strategic role in connecting the Southern Region’s major industrial areas and freight distribution centres with the north-south freight supply chain.

The Bathurst-Wellington couplet is the major northern urban link in the north-south freight supply chain, connecting to key industrial areas in Launceston and the port at Bell Bay. In 2005/06, this couplet carried 2.6 million tonnes valued at over $1.5 billion, an increase of 25 percent from 2002/03.

The Tasman Highway is a key passenger and freight road connecting major eastern suburbs to the Hobart CBD, and linking to expanding light industrial and commercial areas at Cambridge, Hobart International Airport and Mornington. Sections of the Highway carry high traffic volumes.

Passenger network

Vehicle ownership and kilometres travelled are forecast to increase over the long term. Past trends (1998 to 2006) saw a 14 percent increase in the number of passenger vehicles, 17 percent increase in total passenger vehicle kilometres travelled (VKT) and 15 percent increase in average distances travelled.

Tasmania has a bus-based urban public passenger transport system, which operates in Tasmania’s four major urban areas (Hobart, Launceston, Devonport and Burnie). This system is supported by school buses, community transport and inter-regional services connecting rural/regional areas to major centres. The urban bus system carries over 10 million passengers per year and is supported by a service standard of 90 percent of dwellings within 500 metres route (peak) and 1000 metres (off-peak) of a bus route.

Tasmania’s public transport patronage is low compared to other states. In 2006, trips by public transport accounted for less than 3.5 percent of total journey to work trips. Rising fuel prices, climate change policies or congestion management may increase patronage levels in the future. Rail

Tasmania’s rail network carries 2.6 million tonnes of freight a year. While rail accounts for 6 percent of Tasmania’s heavy vehicle road and rail freight task, it carries around 14 percent

Tasmanian Government submission to the National Infrastructure Audit 17 of the State’s total heavy road and rail task in tonne kilometres. Since 2002/03, total tonnages carried by rail have declined (Table 2 and Map 2).

TABLE 2 RAIL FREIGHT VOLUMES FROM 2002/03 - 2006/07 Commodity Type 2002/03 2005/06 2006/07 Bulk (cement, mining and value 1,733,013 1,491,820 1,485,000 added forest products) Intermodal 1,445,373 1,360,468 1,160,000 TOTAL 3,178,386 2,852,288 2,645,000

As a mode, rail is suited to Tasmania’s bulk commodity freight task and provides an alternative freight transport mode to road, supporting competitive transport options for industry. However, infrastructure deficiencies, a generally short-haul task and volatility in rail ownership and management since the late 1990s are significant issues affecting the viability and attractiveness of rail.

Tasmania’s rail system was designed in the late 1800s and has changed little since. The State’s Network is a single line, narrow gauge consisting of 835 km of track, of which 626 km is currently operational. The AusLink rail network (432km) connects major ports and cities, with additional lines connecting three manufacturers to the AusLink Network.

Tasmania’s rail network has received limited investment compared to road. Over the last three decades, $45 million was spent on the network for maintenance and minor upgrades compared to around $798 million on major road upgrades to substantially increase road productivity. Much of Tasmania’s rail infrastructure and rolling stock is now considerably aged and inefficient and overall infrastructure condition is poor.

Significant improvement in the efficiency and productivity performance of the rail network is necessary for rail to remain competitive for contestable freight for both existing and new industries.

Ownership of the majority of the rail network was recently transferred to the Tasmanian Government. The Melba line from the West Coast remains privately owned by Pacific National Tasmania (PNT). All rail freight operations across the State are currently undertaken exclusively by PNT.

The owner of PNT is currently selling Tasmanian above rail operations and assets. The Tasmanian Government is committed to a policy of retaining separate below and above rail operations and is seeking a market outcome for above rail operations.

Tasmanian Government submission to the National Infrastructure Audit 18 Map 2. Rail Freight Task 2005/06

Features of Tasmania’s rail network include:

• Rail is important for the movement of bulk freight, including minerals from the West Coast to Burnie port and cement from Railton to Devonport port.

• The West Coast line carried 335 000 tonnes of mineral commodities in 2005/06. This is forecast to increase to 500 000 tonnes by 2010 with increased mining activity.

• The Western line, part of the AusLink Network, carries the highest number of containers and highest value freight to/from Burnie Port and other parts of the State. In 2005/06, total tonnage carried on this line was 2.05 million tonnes, including 343,000 tonnes of containers worth $527 million, and 1.15 million tonnes of cement.

• The Main line between Hobart and Launceston, also part of the AusLink Network carries the second highest container volumes and bulk freight tonnages (newsprint, refined zinc, pulp). In 2005/06 the line carried over 351,000 tonnes of containers and 663 000 tonnes of bulk freight.

Tasmanian Government submission to the National Infrastructure Audit 19 Intermodal facilities

Tasmania’s major intermodal facilities are co-located with the State’s major ports in Burnie, Devonport, Bell Bay and Hobart, and their freight task largely reflects the freight task of the ports. In 2006/07, the four major ports handled 15.2 million tonnes of freight comprising 99 percent of Tasmania’s interstate freight task. In the last ten years, total port tonnage has grown significantly at over 3 percent a year. Containers have experienced higher levels of growth at over 5.5 percent per annum over the last ten years.

Road is the major freight mode to individual ports, and carries the majority of the container task. In 2005/06, port throughput was:

• Bell Bay – 4.62 million tonnes by road and 0.13 million tonnes by rail.

• Burnie – 3.07 million tonnes by road and 1.07 million tonnes by rail.

• Devonport – 1.92 million tonnes by road and 1.2 million tonnes by rail (predominately cement for export).

Bell Bay is the only intermodal facility with direct access to the AusLink road and rail network. Burnie, Devonport and Hobart intermodals are located in close proximity to the AusLink road network, however direct access is via local roads. In Devonport and Hobart, freight travels through a mix of commercial and residential areas.

The proposed Brighton Transport Hub will address major deficiencies at the existing Hobart Port intermodal. The Hub will provide direct access to the AusLink road and rail networks, and contribute to significant improvements along the north-south freight supply chain. Future task

Future growth in Tasmania’s freight task will be focused on the road network and northern ports.

Tasmania’s road freight task has grown significantly in recent years, and is forecast to reach 78 million tonnes by 2023, an increase of 65 percent from 20063. Current trends have seen significantly higher volumes of freight moving through the State’s ports, intermodal facilities and over the road network. Tasmania’s rail freight task has decreased in recent years from 3.2 million tonnes in 2002/03 to 2.6 million tonnes in 2005/06, with these volumes now carried on the road network.

Continued growth in volumes through Tasmania’s three northern ports, supported by a changed direction of trade from the Southern Region, will impact on the land transport system. Total port throughput is forecast to grow by 60 percent and port container movements by over 80 percent between 2007 and 2023. This growth will place increased pressure on north-south road and rail connections.

3 Based on Australian Bureau of Statistics 2006 Survey of Motor Vehicle Usage data.

Tasmanian Government submission to the National Infrastructure Audit 20 Based on historic compound growth rates, tonne kilometres travelled by rigid and articulated trucks are forecast to grow from 2.7 billion to 5.2 billion by 2023, an increase of 91 percent4. Forecast growth in light commercial vehicles in Tasmania is projected to be high – around 3.2 percent per year to 2015. Road

Generally, freight traffic is forecast to grow at a faster rate than passenger traffic across both the AusLink and regional road networks. Map 3 shows forecast growth across the AusLink and regional road networks.

AusLink Network

• Road freight tonnage is forecast to grow at nearly 2 percent per annum from 24 million tonnes in 2008 to 32 million tonnes in 2023.

• In net tonne kilometres (NTK), the forecast freight growth is from 1,029 million NTK in 2008 to 1,419 million NTK in 2023, a growth rate of 2.16 percent per annum.

• Passenger volumes are expected to grow at a slower rate with a forecast growth in passenger vehicle kilometres of 1.36 percent per annum between 2008 and 2023.

• Passenger and freight volumes will grow faster on some road segments than others. The highest levels of passenger traffic growth are forecast to occur in the vicinity of Hobart and Launceston, where ongoing residential, commercial and industrial decentralisation combined with population growth will increase the amount of travel.

• The highest level of freight growth is expected on the Bass Highway between Carrick and Launceston, largely due to a high proportion of general container freight.

Some segments of the AusLink Network are at or will experience capacity problems over the longer term (based on level of service D). These segments include:

Brooker Highway, • Urban section (Berriedale to Burnett Street) at capacity Hobart to Bridgewater • Northern section (Berriedale to Bridgewater) will exceed capacity by 2023 Midland Highway, • At capacity Bridgewater to Brighton Tasman Highway, • Tasman Bridge at capacity Hobart to Hobart • Western section of highway to Brooker Avenue at capacity Airport • Tasman Bridge to Mornington Roundabout at capacity within seven years Bass Highway, Burnie • Approaching capacity by 2023. Bass Highway through Burnie to Wynyard likely to be most affected

4 Australian Bureau of Statistics 2006 Survey of Motor Vehicle Usage

Tasmanian Government submission to the National Infrastructure Audit 21 Regional roads

Growth rates will vary across roads:

• Ridgley Highway – forecast freight growth of 2.12 percent per year, largely based on mining and forestry activity, to 3.2 million tonnes by 2023.

• Bass Highway from Wynyard to Smithton – 1.53 percent increase per year based on agriculture/food and forestry.

• Biralee-Frankford and Batman corridor –2.24 million tonnes by 2023, based on increased forestry activity and increased freight movements between the North West and northern ports and production areas.

• Bridport Main Road – forecast to carry 2.01 million tonnes by 2023.

Existing infrastructure constraints and safety risks on sections of the regional road network will intensify as freight and passenger demand increases. Past under-funding of maintenance on regional roads has – and will continue to – create a gap in performance standards between the AusLink Network and regionally significant roads.

Many regional roads are deficient in terms of width, horizontal and vertical alignment and will require significant pavement strengthening in order to cater for heavy freight. An inability of the road network to cater to future freight vehicle reforms will generate higher transport costs for industry and infrastructure maintenance costs for government due to: • Additional heavy vehicles on the road as a result of no additional gains in tonnages and length. • Larger number of trips to move product. • Potential need to use longer routes suited to HPV and/or HML vehicles.

Regional roads with constrained alignments for freight vehicles, variable road condition and /or high collective and individual risk include:

• Bridport Main Road, Scottsdale to Bridport – inadequate width and pavement strength, alignment constraints and unsealed shoulders. The highway has a medium to high safety risk between Scottsdale and Bridport.

• Birralee-Frankford-Batman corridor – generally poor condition, with freight constraints west of Glengarry to Selbourne, poor horizontal and vertical alignment, inadequate pavement width and strength, unsealed shoulders and inadequate junction layouts.

• Bass Highway, Wynyard and Smithton – small sections with freight constraints due to poor horizontal and vertical alignments, unsealed shoulders and inadequate access and junction layouts.

Tasmanian Government submission to the National Infrastructure Audit 22 Map 3. Future Freight Task – AusLink Network and Regional roads

• Murchison Highway, Zeehan to Ridgley Highway – major freight constraints between Zeehan and Anthony Main Road. Sections with poor horizontal and vertical alignments and unsealed shoulders. Safety risk is medium to high.

• Tasman Highway from Hobart Airport to Triabunna – freight constraints particularly around Sorell and Sorell to Triabunna. Sections with inadequate pavement, junction and access arrangements.

• Tea Tree-Fingerpost Roads – overall condition is fair, with some freight constraints and inadequate access and junction layouts and pavement strength issues.

• Huon Highway from Huonville to Southern Outlet – sections with pavement strength issues and inadequate junction and access layout conditions.

Tasmanian Government submission to the National Infrastructure Audit 23 Urban arterial freight links

Hobart - Traffic forecasting

Major urban freight roads into central Hobart have the highest traffic volumes – the Brooker Highway and Tasman Highway and are forecast to remain as the highest volume roads in 2023. The western section of the Tasman Highway is experiencing the highest traffic volume growth rates in Hobart at around 2.25 percent per year.

Key urban roads that are already below Level of Service D (LOS-D) include (Map 4):

• Midland Highway – Bridgewater to Brighton

• Brooker Highway – urban section, Berriedale to Burnett Street

• Tasman Highway – Tasman Bridge; Tasman Bridge (western section).

Map 4. Greater Hobart, traffic forecasting

Midland Highway 2006 AADT 17 900 2031 AADT 26 000 1.50% traffic growth pa

Tasman Highway (Mornington Interchange) 2006 AADT 35 250 2031 AADT 57 718 1.99% traffic growth pa

Glenorchy! Brooker Highway 2006 AADT 48 150 2031 AADT 68 500 1.42% traffic growth pa

Hobart Southern Outlet ! 2006 AADT 32 000 2031 AADT 42 000 Tasman Bridge 1.09% growth pa 2006 AADT 62 600 2031 AADT 80 639 1.02% traffic growth pa

! Already at LOS-D or Lower Kingston 6 Years to LOS-D 7 Years to LOS-D 12 Years to LOS-D 18 Years to LOS-D 20 Years to LOS-D 24 Years to LOS-D Longer than 25 Years to LOS-D

Tasmanian Government submission to the National Infrastructure Audit 24 Launceston – traffic volumes

The Bathurst-Wellington couplet through central Launceston carries high traffic volumes – 40 000 AADT – and is already below LOS D. Passenger and freight volumes are expected to increase as the overall freight and passenger task increases. Additional analysis and traffic forecasting is required in Launceston to more fully understand impacts on freight efficiency. Rail

The major potential areas for additional rail freight are in bulk commodities, in particular forestry and mining products. A more competitive rail network would also offer an ongoing modal alternative for contestable intermodal freight, particularly between the northern ports and the Southern Region.

Gunns has indicated a preference to use rail for the inter-regional movement of forest product to its proposed pulp mill site at Bell Bay. The use of rail for forestry freight will have infrastructure, amenity, safety and environmental benefits by reducing the number of log trucks along both the road network.

Significant investment is required in the north-south line to improve reliability and performance, including improved travel speeds and higher axle loads.

Intermodal

Freight forecasts

Tasmania’s intermodal facilities are largely port-based, and forecasts for facilities are based on port freight activity.

By 2023, total freight movement through the ports is forecast to be 24.3 million tonnes, representing an annual growth of approximately 3 percent per year. Container movements will continue to experience high levels of growth with the number of containers expected to grow at an annual rate of 3.85 percent to 2023. This represents an 80 percent increase in container movements through ports to over 800 000 TEU, combined with a forecast increase of over 2 percent per annum in bulk freight – this will have a significant impact on both intermodal points and the land transport system.

Future rationalisation of container freight at Bell Bay

Over the long-term, there is the potential for shift in container traffic to Bell Bay as Tasmania’s principal container port. This will have potentially significant impacts on the land transport network, with higher volumes of freight traveling from the North West and Southern Region to Bell Bay. Initial analysis shows the following impact across strategic roads: • Frankford-Birralee-Batman freight corridor: additional 1.4 million tonnes annually (241 trucks per day). • East Tamar Highway: additional 1 million tonnes annually (204 trucks per day).

Tasmanian Government submission to the National Infrastructure Audit 25 • Bathurst/Wellington Street: additional 0.8 million tonnes annually (167 trucks per day).

Intermodal facilities: constraints

All of Tasmania’s current intermodal facilities have operational and land use constraints limiting improvements to efficiency, capacity and transit times:

• Burnie, Bell Bay and Hobart have inefficient rail infrastructure connections, causing extensive shunting and time delays.

• The container port at Devonport (east) has no rail link.

• Burnie, Devonport and Hobart are constrained by adjacent land uses, significantly limiting future expansion. Expansion at Bell Bay through reclamation is likely to come at a high cost.

The proposed Brighton Transport Hub will significantly improve intermodal efficiencies in the Southern Region and reduce rail turnaround times.

TABLE 3 CURRENT INTERMODAL CONSTRAINTS Location Constraints Hobart • Space constraints with no expansion opportunities. • Inefficient rail and road access. • Inefficient rail infrastructure requiring extensive shunting. Bell Bay • Inefficient rail infrastructure requiring extensive shunting. (Launceston) • Current rail line has topographic limitations • No land use constraints – topographic limitations on land expansion. Burnie • Space constraints causing congestion and inefficient road and rail operations. • Inefficient rail infrastructure requires extensive shunting. • Surrounding land use constraints. Devonport • No rail access to container port • Space constraints. • Surrounding land use constraints.

Infrastructure adequacy

Road

Tasmania’s road network has a maintenance backlog of around $100 million. The structural funding needed to achieve sustainable maintenance levels is significant, with the average funding maintenance gap per year over the next four years estimated at $18 million or 30 percent of total structural funding required. Joint funding arrangements on the AusLink Network will impact on funding patterns over the remainder of the State’s road network and there is potential for an increased gap in performance standards between the AusLink Network and regionally significant roads.

Tasmanian Government submission to the National Infrastructure Audit 26 AusLink Network

Infrastructure investment and improvements will be required to improve performance and productivity on sections of the Network. For example, the Brighton to Dysart section of the Midland Highway requires a short-term investment of $304 million – $164 million Brighton bypass (Stage 1), $140 million Pontville to Dysart bypass (Stage 2) – to improve north-south road connections. An additional $330 million would be required to support future freight productivity reforms, including longer and higher mass vehicles.

The Bass Highway, between Port Sorell Main Road and Deloraine, has constrained alignments for freight vehicles, including high productivity vehicles (HPVs), and requires investment of over $100 million to improve level of service and freight efficiency.

The Tasmanian AusLink Corridor Strategy identifies short and long-term priorities for the AusLink Network including:

Short-term

• Midland Highway, Brighton to Dysart – low level of service; high crash risk and density; multiple direct accesses; narrow lane and shoulder widths; and pedestrians crossing at multiple places.

• Brooker Highway, Hobart to Elwick Road – low level of service; high crash risk and density.

• Bass Highway, Port Sorell Main Road to Deloraine – low level of service; high crash risk and density; multiple direct accesses; and narrow lanes and shoulder widths.

• Bass Highway, Howth to Wynyard – low level of service; high crash risk and density; multiple direct accesses; narrow lane and shoulder widths; and pedestrians crossing at multiple places.

Long-term

• Bridgewater Bridge – reliability constraints and high maintenance needs.

• Wellington and Bathurst Streets – low level of service; high crash risk and density; narrow lane widths; and pedestrians crossing at multiple places.

• Midland Highway (Perth to Breadalbane) – high crash risk and density; multiple direct accesses; narrow lane and shoulder widths.

• Bass Highway (Don Hill area) – high crash risk and density.

• Illawarra Main Road – high crash risk, density and a low level of service.

Regional roads

Sections of Tasmania’s regional road network are deficient in terms of alignment and infrastructure condition for existing heavy vehicle configurations. These deficiencies will

Tasmanian Government submission to the National Infrastructure Audit 27 intensify in response to increasing freight volumes, and if not addressed, the network will not support the introduction of longer and higher mass freight vehicles, impacting on future freight productivity gains. For example:

• The Birralee-Frankford-Batman freight corridor requires significant infrastructure upgrades to cater for higher freight growth and changes to freight patterns under any future container rationalisation at Bell Bay. The estimated cost of upgrades is over $100 million to bring the corridor to an appropriate standard.

• The Ridgley Highway will require over $30 million investment to bring it up to an appropriate standard to meet the region’s growing mining freight task. There is no alternative HPV access to the West Coast or to Gunn’s Hampshire woodchip mill.

Key regional roads with a forecast high freight task and significant efficiency and safety constraints include Bridport Main Road (Scottsdale to Bridport); Birralee-Frankford-Batman freight corridor; Bass Highway (Wynyard to Smithton); Ridgley Highway; Murchison Highway (Zeehan to Ridgley Highway); Tea Tree/Fingerpost Roads; and Huon Highway.

Urban freight links

Low levels of service, slow travel speeds and travel delays are significant issues on the Brooker and Tasman Highways and Bathurst-Wellington couplet. These roads have existing low levels of service that are predicted to significantly decline by 2023.

The cost of infrastructure upgrades to increase capacity on these urban links is significant. For example, additional lanes and grade separated interchanges at key intersections on the Brooker Highway carries an estimated cost over $100 million.

As industrial and large-scale commercial land availability declines in inner urban areas, ongoing development in fringe areas will continue to affect network capacity. For example, commercial growth at Hobart International Airport and adjacent Cambridge light industrial estate has generated a need for infrastructure upgrades on the Tasman Highway to cater for higher traffic volumes and turning movements.

There is a need to target improvements on major urban routes to support improved access to industrial areas, and support the urban sections of the broader north-south freight supply chain.

Programmed upgrades on the road network

The Tasmanian Transport and Infrastructure Investment Strategy outlines the State’s infrastructure investment priorities, including current and planned infrastructure and maintenance projects over a five-year forward work program.

The Tasmanian Government has also developed a comprehensive transport investment programme for Southern Tasmania. Phase 1 (2007-2011) involves an investment of more

Tasmanian Government submission to the National Infrastructure Audit 28 than $280 million and will see major capital upgrade investments on the road and rail approaches to Hobart, delivering significant safety and efficiency benefits across both modes.

Over the next three years, major projects include:

North West Cost Bass Highway as part of the Ulverstone duplication $42M Bass Highway Sisters Hill upgrade $30M Lake Secondary Road upgrade $8M Port Sorell Main Road $4M North Cost East Tamar Highway $68.3M Strategic upgrades to the North East regional freight network $42.5M Illawarra Main Road $6M Bell Bay rail and road improvements 9.6 South Cost Brighton bypass. $164M Kingston Bypass $33M Lyell Highway - Granton to New Norfolk $14M Bridgewater Bridge - ongoing maintenance $14M South Arm Road - Shoreline Roundabout to the Police Academy $10M Brooker Highway $10M Midland Highway - safety improvements $5.6M Tea Tree Road $4M

Rail

Tasmania’s rail network is significantly constrained by infrastructure performance and capacity, with slow speeds and low axle loads. The main constraints to the State’s rail system are summarised below: • Configuration - Current alignment includes steep gradients and tight curves, which limit train speeds and axle loads. • Short haul distance - Average trip distance on Tasmania’s rail network is 167km. • Constrained intermodal facilities - With the exception of Bell Bay, most intermodal terminals in the State have limited scope for expansion. • Slow turnaround time - Currently unable to achieve a 24-hour turnaround time between Hobart and the northern ports (particularly Burnie). • Narrow gauge - Restricts stock rolling capabilities, speed and load height and limits markets from which second hand equipment can be obtained. • Duplication by road - The network is almost entirely duplicated by the road network, meaning it has no unique markets or geographic advantage in serving markets.

Tasmanian Government submission to the National Infrastructure Audit 29 The Australian and Tasmanian Governments have jointly funded a range of capital investment and maintenance projects, including main line rail improvements – removal of tight curves on the approaches to Rhyndaston tunnel and sections south of Antill Ponds. The projects will reduce north-south turnaround times, increase pulling capacity of northbound trains to increase productivity.

Significant investment is still required to support rail competitiveness.

The key deficiencies expected to affect performance over the next 20 years are: • Inefficient intermodal facilities where operational constraints currently prevent improvements to efficiency, reliability, growth and transit time. • Limitations on load capacity of trains and operating speed, due to tight curves and steep gradients. • Recent under-investment in rolling stock by the private rail operator. Intermodal facilities

An increasing freight task means Tasmania will need to cater for a greater convergence of freight at intermodal points, including the ability to efficiently process larger freight volumes, cater to larger volumes of heavy vehicles and handle potentially longer train lengths.

While the Brighton Transport Hub will address efficiency and capacity constraints in the Southern Region, inefficiencies at the northern intermodal facilities will remain. As the northern ports handle the majority of the states imports and exports, deficiencies in their infrastructure handling capacity, particularly for rail will affect the efficient operation of those facilities and ability to cater for an increasing freight task.

$85.5 million has been committed to intermodal improvements:

• Brighton Transport Hub – $79 million; and

• Realign the rail line and port access road at Bell Bay –$9.6 million.

The key deficiencies expected to affect performance over the next 20 years are:

• Limited expansion opportunities at Burnie and Devonport, due to a lack of available land and adjacent land use constraints.

• Inefficient rail infrastructure at Bell Bay - extensive shunting, and time delays affecting the efficiency and reliability of rail freight loading and unloading.

• Higher volumes of heavy vehicles accessing ports for the growing container market. Priority projects

• Brighton Bypass (stages one and two): address significant safety, efficiency and amenity issues • Frankford-Birralee-Batman Bridge: significant upgrade of strategic freight route

Tasmanian Government submission to the National Infrastructure Audit 30 • Brooker Highway: upgrade of strategic urban freight route, including key intersections, and sections of three lanes • Bass Highway: Port Sorell to Deloraine, Deloraine to Illawarra Main Road and west of Wynyard • New Bridgewater Bridge • Brighton Transport Hub: address current intermodal operational deficiencies, improving north-south connections • North east forestry freight strategy: separate heavy vehicle and passenger traffic on key passenger routes (includes upgrades to Bridport Main Road and strategies to address deficiencies on the Tasman Highway) • Bathurst-Wellington: Measures to address through freight movements and traffic flows • Rhyndaston rail capacity improvements: remove tight curves on approaches to Rhyndaston tunnel and sections south of Antill Ponds • Rail upgrades, Melba line: includes additional spurs to link to mine sites • Rail upgrades, Main and Western lines, to support higher speeds and increased axle loads • Murchison Highway: road upgrades to suppor t a growing mining freight task • Projects to separate heavy vehicle and passenger traffic, south and North West regions (includes potential rail upgrades, Derwent Valley and Wiltshire lines) • Bell Bay intermodal - realignment of rail access to Port; future expansion and land reclamation; development of new siding to cater to a higher volume freight task • Tasman Highway to Airport: Pavement reinstatement/improve eastern approaches to Bridge • Midland Highway: targeted improvements to support heavy freight task and safety • Illawarra Main Road: improved safety, efficiency and level of service • Urban freight route improvements – to improve freight movements and access on major urban freight routes that are at or approaching capacity (Brooker and Tasman Highways, Bathurst-Wellington couplet)

Tasmanian Government submission to the National Infrastructure Audit 31 2. SEA PORTS

• Over 99 percent of all Tasmania’s exports are by sea.

• Over the past decade, total port tonnage has grown at over 3 percent a year, with the container market growing at over 5.5 percent per year.

• Exports account for around two-thirds of the total tonnage moving through Tasmania’s ports. Around 45 percent of Tasmania’s freight is for international export.

• Unlike mainland competitors, who have access to 24-hour road and rail networks for interstate freight, Tasmanian exporters must coordinate their freight movements around scheduled shipping services.

• Expansion at Burnie, Hobart and Devonport ports is highly constrained by adjacent land uses.

Current and emerging challenges

• Small market player – Tasmania is an origin and /destination point in global and national logistics chains. Changes in demand and supply influencing transport services and costs impact on exports and imports to Tasmania.

• Island status – Tasmanian exporters rely on multiple transport modes to access markets. This results in increased logistical complexity and higher transport costs. The Bass Strait sea crossing and intemodal points at each end are more costly and time consuming for industry than equivalent rail and road transport options interstate.

• Growing freight task – Tasmania’s freight task is predicted to grow significantly resulting in higher volumes moving through ports and intermodal facilities.

• Infrastructure deficiencies on connecting road and rail networks – Connecting road and rail networks have known infrastructure deficiencies affecting freight movement. This includes sections of the AusLink and regional road network and the rail network.

• Increasing fuel costs and carbon constrained economy – A decline in global oil supplies will generate higher transport costs, and may impact on shipping patterns and service frequency. Market environment

Tasmania has an export-oriented, bulk commodity economy. Over 99 percent of Tasmania’s total export freight task by volume is moved by sea, making the reliability, capacity, efficiency and frequency of shipping services and the efficiency of port and intermodal infrastructure and operations a significant factor in industry competitiveness.

Around 45 percent of Tasmania’s freight is for international export, and is dominated by forest products.

Tasmanian Government submission to the National Infrastructure Audit 32 Unlike mainland competitors with access to 24-hour operations for freight transport, Tasmanian exporters must coordinate their freight movements around scheduled shipping services. In order to remain competitive in the global market, industry and business have adopted just-in-time supply chains and more efficient manufacturing processes, and are looking for improved transport productivity to ensure the costs of their products remain price competitive. This is a critical consideration in value added and bulk commodity markets where cost savings in the transport of goods increases the scope for competitive pricing.

Tasmania’s port activity is expected to increase significantly over the next 20 years, with growth in total tonnage, bulk trade and containers. Planning and regulatory environment

TasPorts

In 2006, the Tasmanian Government transferred ownership of Tasmania’s four major ports, and a number of minor ports into a single state-owned port company, Tasports, with responsibility for port operations and administration, port planning and capital investment. Centralised port planning provides the structures required to manage increased port activity, support improved operational efficiencies and more efficient use of assets across ports.

Commonwealth assistance schemes

The Tasmanian Freight Equalisation Scheme (TFES) compensates shippers for the cost disadvantage of transporting non-bulk commodities across Bass Strait. The TFES is estimated to add between $150 and $300 million to State GSP annually, and has contributed over $1.1 billion in industry payments since 1976/77. Under existing arrangements the Australian Government has allocated $101 million for the 2008/09 financial year, and an additional $2.8 million over four years to cover freight shipped between King and Flinders Islands and mainland Tasmania.

The Bass Strait Passenger Vehicle Equalisation Scheme (BSPVES) provides a direct cost reduction of the vehicle fare for drivers of an eligible vehicle. In 2008/09 $34.4 million has been allocated for the BSPVES. The Scheme is considered to have had a substantial positive impact on passenger numbers and the broader tourism industry since its introduction in 1996.

Tasmanian Government submission to the National Infrastructure Audit 33 Existing infrastructure and task

Tasmania’s major ports are located at Burnie, Devonport, Bell Bay (Launceston) and Hobart (Map 1). Ports at Triabunna (Tasports) and Port Latta (Australian Bulk Minerals) provide dedicated facilities for the movement of woodchips and pelletised iron ore, respectively.

Map 1. Port throughput, and relationship to Southern Region

Total Exports 2,899,000 tonnes Total Imports Total Exports 1,251,000 tonnes 1,842,000 tonnes Total Imports Total Exports 1,298,000 tonnes 3,425,000 tonnes Total Imports 1,512,000 tonnes

Burnie Devonport Bell Bay

Launceston

Southern Region 86 percent of total regional exports via Northern Ports 99 percent of total regional imports via Northern Ports

Hobart

Total Exports 124,000 tonnes Total Imports 600 tonnes

Southern region tonnages exclude Nystar Wharf, Triabunna, Longreach and Selfs Point

Tasmanian Government submission to the National Infrastructure Audit 34 Major features of Tasmania’s ports system include:

• Bell Bay is Tasmania’s highest tonnage port, moving over 5.2 million tonnes in 2006/07. It is a major container and bulk goods port.

• Burnie is a major woodchip port and supports mineral exports from the West Coast. The port handles over 4.2 million tonnes.

• Devonport is Tasmania’s major passenger port, home to the Spirit of Tasmania I and II. It also provides daily container services between Devonport and Melbourne. Devonport port moves over 3.1 million tones.

• Hobart Port is Tasmania’s major cruise and naval ship destination and a base for Antarctic supply vessels. It moves significantly lower volumes of freight – only 124,600 tonnes in 2006/07.

Road and rail connections

All major ports have direct rail access. Devonport port has rail access to the western side only, while Hobart port has a highly constrained rail access.

Bell Bay has direct access to the AusLink road network. Devonport and Burnie ports are located in proximity to the AusLink road network, with direct access via short local road connections.

Table 1 outlines services, infrastructure and modal connections across major ports.

TABLE 1 CHARACTERISTICS OF TASMANIA’S MAJOR PORTS Port Services Infrastructure Modal connections Bell Bay Domestic and Constrained rail access, including Rail – direct international container siding length; location on berths and shipping services. steep departure grade. Road – connects direct to AusLink Bulk shipping services Permanent access for vessels up to Network via Bell including woodchips. 170m in length and draught of 11.5m. Bay Main Road. Vessels up to 250m enter on a flood tide; longer vessels enter by agreement. Substantial land available for future expansion of port facilities; complementary adjacent industrial land uses. Burnie Daily domestic and Road and rail infrastructure with a rail Rail – direct weekly international spur extending into the container container shipping yard. Road – connects services. to AusLink (Bass Roll-on roll-off berths. Hwy) via local Bulk trades include council road mineral ores, Permanent access for vessels up to woodchips, pulp and 9m draught and less than 280m in logs. length. Vessels between 9m and 11.5m draught constrained by tidal Services Tasmania’s conditions. major West Cost mines. Constrained by land availability and adjacent land uses. Some capacity to

Tasmanian Government submission to the National Infrastructure Audit 35 expand through reclamation. Issues related to protection of expanded port berthing facilities through additional breakwater provision. Devonport Tasmania’s major Spans both sides of Mersey River, Rail – western side passenger port with creating a division of facilities. only. daily passenger Services for container freight and services to Melbourne. passengers are located on the Road – connects eastern shore; while the western to AusLink (Bass Bulk shipping services, shore handles bulk freight. Hwy) via local including cement, council roads livestock exports and Dedicated berths have no tidal passing through bulk fertilizer. constraints and can accommodate residential and vessels with a maximum 10.5m commercial areas. Daily container draught (12m on the eastern shore) services. and 235m length. Routine dredging (around 3 years) due to silt build-up in Mersey River. Dredging has increased port capacity and allowed entry to larger vessels. Both sides constrained by land availability and surrounding land uses - residential and commercial. Hobart Major port for cruise Deep-water port. Maximum vessel Rail – direct ships and Antarctic length of 289m with hull draught vessels. maximum of 12.6m. Road – connects to Tasman Upstream facility for The Hobart Coldstore Centre is Highway (key bulk fuels (Selfs Point). located at the port along with crane AusLink link) via facilities. local council road. Private wharf catering for bulk products Constrained by surrounding land associated with zinc uses - residential and commercial. production.

Freight and passenger task

In 2006/07, Tasmania’s four major ports handled 15.2 million tonnes of freight comprising 99 percent of Tasmanians interstate freight task. In the last 10 years, total port tonnage grew at over 3 percent a year, with the container market growing at over 5.5 percent per year. Bulk cargo dominates Tasmania’s freight task – bulk imports make up about 55 percent of total imports and bulk exports, including forest products and mineral resources, account for around 70 percent of total exports.

In 2005/06, exports through Tasmania’s ports were valued at $3.3 billion and imports at $1.5 billion. Asia is Tasmania’s major export destination, with key markets including Japan and China. Major export commodities include:

• Forest products - almost one third of Tasmania’s export freight in 2005/06. Bell Bay (2 million tonnes), Burnie (1.2 million tonnes) and Triabunna (0.98 million tonnes) are the major forestry export ports. • Mineral products – over 500 000 tonnes of mineral products are exported through Burnie and Bell Bay ports, respectively, every year. High value products include zinc, aluminum and copper.

Tasmanian Government submission to the National Infrastructure Audit 36 • Cement is the major export commodity through Devonport port at 1.12 million tonnes.

The operation of two ferries – the Spirit of Tasmania I and II – between Devonport, and Melbourne has significantly increased capacity for people and freight traveling via sea, and supported improved efficiencies for high value, time sensitive fresh produce. Freight on the Spirits operates on a roll-on roll-off basis suitable for vehicle-based commodities in contrast to straight container handling.

Freight volumes on the Spirits are increasing, with annual growth rates of 12.9 percent over the last four years to 77 734 TEUs in 2006/07, representing almost 50 percent of TEUs through Devonport port. In 2006/07, 393 000 passengers travelled on the Spirits, a slight decrease on previous years mainly attributable to the effect of low-cost airlines.

Over the past two decades, freight throughput at Hobart port has declined significantly and the Southern Region is now reliant on the northern ports for exports/imports. Over 86 percent of the total regional exports and 99 percent of total regional imports move through one of the northern ports. Future task and infrastructure

Freight forecasting

Tasmania’s port activity is expected to increase significantly over the next 20 years, with growth in total tonnage, bulk trade and containers. By 2023, total freight movement through the ports is forecast to reach 24.3 million tonnes, representing an annual growth of approximately 3 percent per year. While the recent rapid growth in container movements of over 5.5 percent per year is not expected to continue over the long term, the container task will still continue to increase significantly at around 3.8 percent per year, resulting in over 800 000 TEU in container movements.

Bulk freight has grown at a lower annual growth rate of less than 1 percent, reflecting a significant downturn in bulk movements during 2005/06. However, in the future, this task is forecast to grow at a higher rate of over 2 percent per year to around 14 million tonnes by 2023.

Port constraints

A growing container freight task and steady growth in bulk freight will generate significant demand across the freight supply network. Major constraints will come from freight movements into and out of ports, in particular, loading/unloading facilities. While Tasmania’s major ports have unutilised capacity, reclamation and significant reconfiguration are likely to be required to handle higher container volumes and bulk freight in the future. Investment could include:

Tasmanian Government submission to the National Infrastructure Audit 37 • Upgrades to existing intermodal facilities to improve efficiency and handle larger volumes of freight. This includes capacity to handle longer trains if rail network infrastructure improvements support this, and would include a new rail staging area at Bell Bay. • Reclamation to cater for an increased freight task, and to provide increased storage and operational areas. • Provision of suitable channel infrastructure for navigation purposes (greater depths, larger turning basins etc). • Handling equipment such as cranes and loading/discharge machinery. • Supporting work areas required for freight handling (hard stands, storage, etc).

All existing ports face expansion and operational constraints. Burnie, Devonport and Hobart are constrained by adjacent land uses and Bell Bay by topography. Additional capacity could be achieved through land reclamation at Burnie, however this would be adjacent to sensitive commercial, residential and recreational areas. There are few options for expanding capacity at Devonport and Hobart ports.

In the short term, smaller-scale reclamation works are planned at Bell Bay to support rail upgrades. However, over the longer term, more extensive reclamation would be required to support higher freight volumes and activity at the port.

Future roles

A port system that plans for relative strengths across Tasmania’s four major ports in terms of land transport linkages, freight task, infrastructure and services will support improved port system efficiencies. Future opportunities for port specialisation could include: • Bell Bay – international container and Bass Strait roll-on/roll-off general container port. • Burnie – major bulk commodity port. • Devonport – multi-user port, with a focus on passenger ferry services. • Hobart – centre for cruise ships, Antarctic and naval vessel visits.

The proposed Brighton intermodal hub will provide a new, purpose-built facility in the Southern Region with direct access to the AusLink road and rail network. The hub will address many of the operational deficiencies at the existing facilities at Hobart port, and will significantly improving freight efficiencies and turnaround times. Infrastructure adequacy

While Tasmania’s ports have spare capacity, significant reconfiguration and reclamation may be required to handle higher container volumes and bulk freight in the future. If Bell Bay becomes Tasmania’s principal container port, additional land reclamation would be required to support higher freight volumes and levels of activity.

Tasmanian Government submission to the National Infrastructure Audit 38 Depending on the future function of individual ports, significant investment in intermodal facilities will be required to process larger freight volumes. This may include an ability to handle longer lengths of train, particularly at Bell Bay.

The key deficiencies expected to affect performance over the next 20 years are:

• Inefficient port infrastructure, unable to cater to higher freight volumes: channel infrastructure, storage and handling areas, wharf infrastructure and handling equipment.

• Requirement for significant expansion at Bell Bay to support future higher freight volumes and activity.

• Further expansion at Burnie, Hobart and Devonport is highly constrained by adjacent residential and commercial uses.

• The existing rail network at Bell Bay is inefficient, resulting in extensive shunting, and time delays.

• Existing port access road to Bell Bay port is deficient. Priority projects

• Brighton Transport Hub – major new inland intermodal facility with AusLink road and rail connections.

• Bell Bay intermodal – realignment of rail access to Port; future expansion and land reclamation; development of a staging area to cater for higher volumes and potentially longer trains.

Tasmanian Government submission to the National Infrastructure Audit 39 3. AIRPORTS

• Tasmania is highly reliant on air transport for the movement of passengers, and time sensitive freight.

• Tasmania is highly vulnerable to changes affecting the efficient and price competitive delivery of air services.

• All of Tasmania’s major airports have adequate infrastructure capacity.

• Commercial development at and adjacent to Hobart and Launceston Airports is generating higher traffic volumes and a need for road infrastructure upgrades. Market environment

Tasmania’s reliance on air transport sets it apart it from most other states where alternative modes for interstate passenger and freight transport exist. Over 88 percent of Tasmanian passenger arrivals and departures are by air.

While only about 1 percent of Tasmania’s freight by mass is carried by air, it is a critical mode for time sensitive products.

Changes in international and national air services and costs can significantly impact on access into and out of Tasmania. Efficient and competitively priced air services are a key factor affecting industry competitiveness and growth and passenger accessibility. Improved accessibility can deliver economic and productivity benefits by supporting businesses to interact and trade outside the state, access a higher number of suppliers and target a larger customer base.

Improving connectivity between the major airports, major population and commercial centres and the AusLink road network will support the efficient movement of air export freight and improved passenger accessibility. Planning and regulatory environment

The Tasmanian Government does not fund airport infrastructure or directly subsidise regular passenger transport services. The Government recognises that airlines provide services to Tasmania on a commercial basis and will make service and capacity decisions accordingly.

The Government monitors aviation services to and from the State to ensure services meet the access needs of the Tasmanian community, industry and visitors. It has a particular interest in monitoring services to the Bass Strait Islands (King and Flinders Islands) to ensure appropriate levels of service. The Government works with airport corporations and new and existing carriers to develop business cases for service growth in Tasmania.

Airport ownership consists of private and Government owned companies:

Tasmanian Government submission to the National Infrastructure Audit 40 • Hobart International Airport – Owned by Hobart International Airport Pty Ltd (HIAPL), a privately owned company. Leased Commonwealth land.

• Launceston Airport – Owned by Australia Pacific Airports (Launceston) Pty Ltd, 10 percent ownership by Launceston City Council. Leased Commonwealth land.

• Devonport Airport – Owned by Tasports, which is a State owned company.

• Burnie Airport – Owned by Burnie Airport Corporation Pty Ltd, which is part owned by Burnie City Council.

• Flinders and King Island Airports – Owned wholly by Local Government.

Tasmania’s two major airports at Hobart and Launceston are located on Commonwealth Government land, and are subject to Commonwealth planning and approvals processes. All other airports are subject to approvals under the Tasmanian Resource Management and Planning System with assessment of all development by local Government. The Tasmanian Government planning process offers greater opportunity for community input and third party appeals, and coordination of development and infrastructure impacts under the relevant planning scheme. Existing infrastructure and task

Tasmania has four major airports and a number of minor airports. Hobart is the State’s major passenger airport.

Tasmania’s airports handle low numbers of aircraft movements and there is no immediate demand for airports with more than one high-strength runway suitable for heavy jet aircraft. Only two airports (Hobart and Launceston) have runways suitable for heavy jet aircraft while Devonport and Burnie handle high-impact aircraft. Tasmania, particularly in the North and North West is well serviced with airport infrastructure, with three major airports located within two hours drive of each other.

Table 1 shows the operational and infrastructure capacity of the States airports.

TABLE 1 AIRPORT OPERATIONAL AND INFRASTRUCTURE CAPACITY Airport Operational and infrastructure capacity Hobart • One sealed main runway, 2,251 metres, suitable for heavy jet International operations, including Boeing 747. • Eleven taxiways for movements between runway, passenger terminals and freight terminal. • One apron for domestic and international flights and one freight apron. • Large domestic passenger terminal, adequate international terminal. • Terminals for airfreight operations. • Approximately 50 RPT aircraft movements per day with no curfews. • Air traffic control tower.

Tasmanian Government submission to the National Infrastructure Audit 41 Launceston • One sealed main runway, 1,981 metres, suitable for medium jet operations (e.g. Boeing 737) and limited heavy jet operations (e.g. Boeing 767). • Two grass runways for light aircraft (700 metres and 690 metres). • Four main taxiways between runway and aprons. • One main terminal apron, one freight terminal apron and one general aviation apron (light aircraft). • Large domestic terminal, freight terminal, general aviation hangars. • Approximately 27 RPT aircraft movements per day with no curfews. • Air traffic control tower. Devonport • One sealed main runway, 1,838 metres, suitable for turboprop aircraft and possible limited light/medium jet operations. • Grass runway, 880 metres, limited to light aircraft below 5,700 kg MTOW. • Four taxiways joining runways to terminal apron. • Adequate passenger terminal. • Approximately 10 or more RPT aircraft movements per day Burnie/ • One sealed main runway, 1,650 metres, suitable for turboprop Wynyard aircraft, but probably not jet operations. • Second runway, partly gravel, 767 metres, limited to light aircraft below 5,700 kg MTOW. • Two taxiways joining main runway to terminal apron. • Small terminal and other facilities. • Approximately 10 or more RPT aircraft movements per day.

Passenger task

There has been significant growth in air travel to and from Tasmania in recent years, mainly due to an increased tourist numbers. Visitors to Tasmania have nearly doubled in eight years, with Tasmania now attracting almost 800 000 visitors each year, the majority of which arrive by air.

In 2006/07, there were around 3.1 1,800,000 million passenger trips between 1,600,000 1,400,000 Tasmania and mainland Australia, 1,200,000 of which air travel accounted for 1,000,000 800,000 about 2.7 million or 88 percent. Most 600,000 of this growth has been at Hobart 400,000 200,000 and Launceston airports, which 0 handle over 94 percent of 2003-04 2004 -05 2005 -06 2006-07 passengers (Figure 1). Hobart Launceston Devonport Burnie

Hobart International Airport is Figure 1 Growth in air passenger volumes, 2003/04 -2006/07 Tasmania’s major passenger and freight airport. Between 1994/95 and 2006/07, Hobart’s share of total passenger traffic grew from 49 percent to over 58 percent of total passengers (1.62 million passengers). Launceston increased to 36 percent (990,000 passengers). Devonport and Burnie airports have steadily

Tasmanian Government submission to the National Infrastructure Audit 42 declined, with both handling less than 3 percent of passengers.

The introduction of low-cost airlines has raised seat capacity to an all-time high with lower airfares providing more affordable air transport options. Between 1994/95 and 2005/06, the number of seats available on Tasmania’s major air routes (Hobart and Launceston to Melbourne and Sydney) increased by around 72 percent.

Freight task

While only about 1 percent of Tasmania’s freight is carried by air, it is a critical mode for time- sensitive produce such as fresh and live seafood, fruit and vegetables and domestic consumables. In 2002/03, 5,516 tonnes of freight was exported by air from Tasmania to international destinations. Food and live animals (including seafood and fruit) accounted for 84 percent of total air freight. Future task

Despite strong growth in passenger numbers over the past five years, there is excess capacity at all major airports.

Historically, Tasmania’s major airports have been well maintained. Terminal infrastructure at Hobart airport has recently undergone major upgrades and work has recently commenced on the upgrade of Launceston Airport.

Hobart Airport is considering the possibility of international flights in the future in the form of overseas chartered flights. There has also been a focus on capacity and frequency gains on major trunk routes to Tasmania and the establishment of new direct services from other origin ports around Australia. Infrastructure adequacy

Tasmania relies on air transport for the movement of passengers and time sensitive freight and is highly vulnerable to changes affecting service delivery and cost.

Key deficiencies over the next 15 to 20 years that are expected to adversely affect airport infrastructure performance in Tasmania include:

• Ensuring air services met the access needs of the Tasmanian community, industry and visitors, particularly to the Bass Strait Islands.

• Monitoring airport infrastructure capacity and viability of the State’s major airports, particularly in the event of airport rationalisation.

• Improving connectivity between the States major airports and the AusLink road network to support the efficient movement of air export freight and improve passenger accessibility.

• Addressing the impact of non-aviation development on the strategic road network.

Tasmanian Government submission to the National Infrastructure Audit 43 4. ENERGY

• Tasmania produces approximately 47 percent of the grid electricity in Australia that comes from renewable energy sources.

• The extension of the Renewable Energy Targets scheme is likely to encourage investment in Tasmania's outstanding renewable energy resources, and especially wind technology, which is already performing at world-class standards in Tasmania. Further development in this area will be limited by constraints in the transmission network if there is not significant investment in this infrastructure.

• The majority of Tasmania’s electrical transmission and distribution assets have been in service for more than thirty years.

• Strong growth in demand for energy services is anticipated for Tasmania, as in other States, in the period to 2020.

• There are opportunities to make Tasmania's energy supply more secure by diversifying supplies, incorporating more gas in applications where it is more suitable than electricity, and improving infrastructure to enable the incorporation and export of greater amounts of renewable energy. Market environment

Tasmania is connected to the National Energy Market (NEM) via the Basslink undersea cable. This allows Tasmania to export renewable energy to the NEM in times of surplus, or to meet peak demands, but also to import energy in times of shortage, as has been the case recently. Tasmania is now a full participant in the NEM.

The Tasmanian energy market is characterised by a small number of participants, with the electricity industry dominated by State-owned entities.

The electricity supply industry consists of participants in the generation, transmission, distribution and retail sectors. Transmission and distribution are natural monopolies, while generation and retail are open to competition.

Within this framework, the principal participants in the Tasmanian electricity supply industry are:

• Hydro Tasmania, a Government Business Enterprise (GBE), and Tasmania’s dominant generation company;

• Roaring Forties, a joint venture company between Hydro Tasmania and the China Light and Power Group, that owns and operates the Woolnorth/Studland Bay wind farm;

• Bell Bay Power, which owns and operates the gas-fired Bell Bay Power Station;

Tasmanian Government submission to the National Infrastructure Audit 44 • Transend Networks, a State-owned Company (SOC) that is the monopoly transmission provider with an exclusive licence for electricity transmission within Tasmania;

• Aurora Energy a SOC with responsibility for electricity distribution and retailing. Aurora Energy has both a distribution and retail licence for mainland Tasmania. Aurora Distribution is the monopoly provider of distribution services within Tasmania;

• Basslink Pty Ltd, a subsidiary of CitySpring Infrastructure Management Trust of Singapore who own and operate the Basslink electricity inter-connector between Tasmania and the NEM; and

• Babcock and Brown Energy who are developing the Tamar Valley Gas project involving a combined cycle gas generator and a several open cycle gas generators.

There are also a number of other licensees who operate smaller generation systems, including AGL.

Retail competition is being phased in over a number of years in Tasmania. Already all customers consuming above 0.75GWh are able choose their retailer. Prices for these customers are not regulated, but are subject to market forces and negotiation between the parties. The Government has reserved a decision on the extension of full retail competition to the smallest customers, households and small business, and will undertake a cost-benefit analysis to determine if competition will be extended to this group of customers.

The following retailers have been granted electricity retail licences in Tasmania: Aurora Energy; Integral Energy; TRUenergy; Country Energy; and ERM Power Retail. Gas

The reticulated gas industry in Tasmania is a recent development, and as such there are a limited number of industry participants.

The Tasmanian Gas Pipeline, which includes the gas transmission pipeline connecting Tasmania to the Eastern gas grid and also the gas transmission network within the State, is now owned by Babcock and Brown Infrastructure. Powerco Tasmania, also owned by Babcock and Brown, owns and operates the gas distribution network.

Gas retailing in Tasmania has been open to competition since commencement and gas retail prices are not regulated, but are subject to competitive market forces. The following four companies hold gas retail licences: Option One; Aurora Energy; TRUenergy; and Country Energy.

Investment in energy infrastructure varies depending on the industry, industry sector and role in the energy supply chain. Investment in electricity generation and the transmission and distribution of gas is market-based. That is, market forces provide the stimulus or otherwise for investment in these areas of the energy supply chain.

As in all NEM jurisdictions, investment in electricity transmission and distribution infrastructure

Tasmanian Government submission to the National Infrastructure Audit 45 is determined through a mix of market forces and economic regulation. That is, potential network investments are identified by the market through constraints and price signals. The specific type and level of investment can be directed by the regulatory assessments that the Australian Energy Regulator undertakes for each electricity transmission and distribution network business. Planning and regulatory environment

Regulation

Regulation of the Tasmanian electricity supply industry is achieved through a mix of local and national regulation.

Locally, Tasmanian electricity retail prices are controlled by the Tasmanian Energy Regulator through regular Pricing Determinations made under the Tasmanian Electricity Supply Industry Act 1998.

With respect to electricity transmission, revenues are controlled through determinations made by the Australian Energy Regulator (AER) under the framework established under the National Electricity Law (NEL) and National Electricity Rules (NER).

The Tasmanian Energy Regulator through its pricing determination process also sets distribution prices. Unlike retail prices, distribution prices are now regulated under the framework established by the NEL and NER. In accordance with commitments made under the Australian Energy Market Agreement the AER will be responsible for conducting any future distribution pricing determinations in Tasmania.

It is likely that the Tasmanian Energy Regulator will continue to administer the current distribution pricing determination until it expires, at which time the AER will become responsible for pricing.

The Tasmanian gas supply industry is subject to light handed local regulation. Retail prices are not regulated in recognition of the strong competition faced by gas retailers in an energy market dominated by the mature electricity supply industry. The Tasmanian gas supply industry is subject to the national gas access regime, previously embodied in the Gas Pipelines Access Law, and now replaced by the National Gas Law. Under the gas access regime, Tasmania’s transmission and distribution networks are not subject to economic regulation (i.e. they are not ‘covered’). Transmission and distribution charges are not regulated but are established through market forces. Planning

Electricity system infrastructure planning is currently undertaken through an integrated process. This process relies heavily on electricity industry participants, with support and oversight from governance, regulatory and advisory bodies at the state and national level. With the introduction of the Australian Energy Market Operator, which will house the

Tasmanian Government submission to the National Infrastructure Audit 46 Australian National Transmission Planner, this integrated process will continue, but will be undertaken by this body rather than NEMMCO. For the purposes of this exercise the current system is described below.

NEMMCO is both the market operator of the NEM, and operator of the power system that underpins NEM operation. NEMMCO’s responsibilities include delivering security and reliability of electricity supply, developing the market by improving efficiency, and coordinating power system infrastructure planning.

With respect to power system infrastructure planning NEMMCO is responsible for publishing two critical annual documents: the Statement of Opportunities for the National Electricity Market (SOO) and the Annual National Transmission Statement (ANTS). The SOO and ANTS are key references for Australia’s electricity supply industry and a key input to investment decisions crucial to maintain the long-term reliability of the nation’s electricity supply.

The SOO is published as part of NEMMCO’s obligations under the National Electricity Rules. The SOO is intended to be a source of technical and market data to provide relevant and useful information regarding opportunities in the NEM. The SOO reviews the adequacy of NEM electricity supplies to meet projected electricity demand over a 10-year timeframe, and assists market participants when assessing:

• the future need for electricity generating capacity;

• demand management capacity; or

• augmentation of the power system to support NEM operations.

Specifically the SOO must provide the following information:

• projections of aggregate MW demand and energy requirements for each region;

• generating capabilities of existing generating units and generating units for which formal commitments have been made for construction or installation;

• planned plant retirements;

• a summary of network capabilities and constraints based upon transmission network Annual Planning Reports; and

• operational and economic information to assist planning by current and potential generators and market participants.

The ANTS is the outcome of NEMMCO’s annual transmission review. It provides an integrated overview of current and potential future national transmission flow paths (NTFPs). It includes a review of NTFPs, forecast constraints for NTFPs and options that are technically capable of relieving these forecast constraints.

Tasmanian Government submission to the National Infrastructure Audit 47 For the ANTS:

• market simulations are used to forecast network congestion and identify the potential need for NTFP augmentations from a market benefits perspective; and

• conceptual augmentations are developed in consultation with jurisdictional planning bodies (JPBs), taking information from their annual planning reviews into account.

From this a prioritised list of NTFP and interconnector augmentation opportunities is developed, focusing attention on augmentations that may deliver a positive net market benefit. This priorities list of augmentation opportunities is then used to support the national transmission planning process by indicating where attention is best focused for further and more targeted investigations.

An important input to the SOO, ANTS and the national transmission planning process is the JPBs’ annual planning reports (APR). See below for details of the APR published by Tasmania’s JPB, Transend Networks.

In addition to compiling the SOO and ANTS, NEMMCO is responsible for ensuring the availability of sufficient generating capacity, through administering the short-term and medium-term Projected Assessments of System Adequacy (PASA).

The PASA is a comprehensive program of information collection, analysis and disclosure to electricity market participants that enables them to make decisions about available generation capacity, maximum demand and outages of system components for periods of up to two years in advance. The PASA process includes consideration of:

• forecasts of power system load and energy consumption for the total power system plus reserve margin;

• aggregate generation capacity availability; and

• projected violations of power system security, low reserve or lack of reserve, and transmission network constraints that may affect dispatch of generation or load.

In the Tasmanian context, Transend Networks plays a central role in informing NEMMCO’s planning and review activities as the State’s jurisdictional planning body.

As required under the National Electricity Rules and its transmission licence, Transend is required to publish an Annual Planning Report (APR). Transend’s APR is published to provide information about the Tasmanian electricity supply industry in respect to:

• Forecast electricity use and demand in Tasmania;

• Supply projections;

• Transmission system operation;

• Location of existing or emerging transmission network constraints;

Tasmanian Government submission to the National Infrastructure Audit 48 • Proposals for system augmentations; and

• Proposals for small transmission network assets.

Information in the APR is in part based on outcomes of regular consultations between Transend and Aurora Energy Pty Ltd and an Annual Planning Review meeting. The information presented in the APR is focused on meeting the needs of the NEM.

Transend also publishes the Tasmanian Annual Planning Statement (TAPS). This is published to provide information about the Tasmanian electricity supply industry that is additional to that provided in Transend’s APR. The TAPS focuses on issues of particular interest to the Tasmanian electricity supply industry and provides information about:

• electricity supply industry structure;

• an overview of the Tasmanian electricity supply industry and it’s ongoing development;

• electricity supply industry performance; and

• proposals for distribution connection point developments.

• Forecast electricity use and demand in Tasmania;

• Supply projections;

• Transmission system operation;

• Location of existing or emerging transmission network constraints;

• Proposals for system augmentations; and

• Proposals for small transmission network assets.

With respect to the gas supply industry, there are currently no national or local planning arrangements. However, with the establishment of the Australian Energy Market Operator in the future, this body will undertake the development and publication of a Gas Statement of Opportunities, which will be a source of technical and market data to provide relevant and useful information regarding opportunities in the national gas market Supply and demand outlook

Load forecasts

Tasmanian forecasts are prepared by NIEIR and published in Transend’s Annual Planning Statement. The NIEIR forecasts indicate 1.46 percent p.a average annual growth in electrical energy use and demand from 2005 to 2020, and 1.62 percent p.a average increase in winter maximum demand and 1.76 percent p.a average increase in summer maximum demand over the same period. Increases in demand are also projected for other States.

Tasmanian Government submission to the National Infrastructure Audit 49 Existing infrastructure

Electricity generation

Electricity generation in Tasmania is primarily derived from hydro-electric resources supported by wind and gas-fired generation. The total installed capacity of all power stations on mainland Tasmania is 2677.8 MW.

The capability of the generation system in Tasmania is determined not only by the amount of installed capacity available to meet the load but also by the amount of energy it can supply from stored water. The Tasmanian hydro-electric system has much greater installed capacity that is required to meet peak loads, in order to enable a higher proportion of rainfall to be captured in water storages.

It is therefore energy constrained; in other words the amount of energy that can be produced over an extended period is the critical factor and not whether it can meet maximum demand at any one point in time. In this respect it is fundamentally different to thermal systems where maximum demand determines the amount of generation capacity installed.

Hydro Tasmania owns 28 hydro-electric stations in Tasmania grouped across seven separate catchments. The total installed capacity of these power stations is approximately 2270 MW. With over 17000 million cubic metres of water capacity, the total useable storage is equivalent to over 16 months of Tasmania's total electricity generation.

The major catchments and their approximate installed capacities are:

• Trevallyn/North Esk 95 MW • Mersey Forth 308 MW • Pieman 475 MW • King River 143 MW • Gordon/Pedder 432 MW • Derwent 515 MW • Great Lake 302 MW

Tasmania currently has one wind farm in operation on mainland Tasmania, that being the Roaring 40s wind farm at Woolnorth Bluff and Studland Bay in the State's North West. Other wind farm developments are currently in the planning or development stage.

The Woolnorth wind farm was a staged development. Stage one, with capacity of 10.5MW, was completed in August 2002, and comprised 6 x 1.75MW wind turbines. Stage two, with a capacity of 54.25MW, was completed in April 2004 and comprises 31 x 1.75MW turbines. Stage three is at Studland Bay adjoining Woolnorth Bluff and was completed in May 2007. It has a capacity of 75MW and consists of 25 x 3W turbines. The output is fed into the Tasmanian grid via a purpose built 110kV transmission line.

A gas-fired electricity generation plant located at Bell Bay in the State’s north also provides additional generation capacity in Tasmania. The Bell Bay Power Station was converted from oil-fired to gas-fired generation in 2003 and consists of 2 x 120MW gas turbines. The site

Tasmanian Government submission to the National Infrastructure Audit 50 was sold to Alinta Energy in 2007 but the Bell Bay Units will be run by Hydro Tasmania until a new gas plant is built and then they will be decommissioned.

Another Hydro Tasmania subsidiary, Bell Bay Three, installed 3 gas turbine generator units totalling 95MW, near the Bell Bay Power Station in June 2006. These were also sold to Alinta.

The following table lists the power stations on mainland Tasmania:

Power Station Date(s) Turbines Capacity (MW) Commissioned Lake Margaret 1914-1930 7 8.4 Tarraleah 1938-1951 6 90 Butlers Gorge 1951 1 12.2 Tungatinah 1953-56 5 125 Trevallyn 1955 4 95 Lake Echo 1956 1 32 Wayatinah 1957 3 38.4 Liapootah 1960 3 83.7 Catagunya 1962 2 48 Poatina 1964, 1977 6 300 Tods Corner 1966 1 1.6 Meadowbank 1967 1 40 Cluny 1968 1 17 Repulse 1968 1 28 Rowallan 1968 1 10.4 Lemonthyme 1969 1 51 Devils Gate 1969 1 60 Wilmot 1971 1 30.6 Bell Bay 1971, 1974, 2006 2 steam, 3 gas 335 Cethana 1971 1 85 Paloona 1972 1 28 Fisher 1973 1 43.2 Gordon 1978, 1988 3 432 Mackintosh 1982 1 79.9 Bastyan 1983 1 79.9 Reece 1986, 1987 2 231.2 John Butters 1992 1 144 Tribute 1994 1 82.8 Parangana 2002 1 0.75 Woolnorth 2004 37 wind 64.75 Total 2677.8

Unlike base load generators, the capacity of hydro plant is not a good indicator of how much energy they produce, since this depends on their hydrological inflows.

The average amount of electrical energy expected from the State’s hydro generators has recently been revised downwards to be 9000 GWh per annum.

The new privately-owned Tamar Valley Power Station, to be built at Bell Bay, will comprise one 210 MW combined cycle gas turbine, three 35 MW open cycle gas turbines and one 60 MW open cycle gas turbine.

The Tamar Valley project will provide a range of benefits for the State. Combined cycle generation is one of the most efficient and reliable ways of electricity generation. The new plant will significantly improve the energy conversion efficiency of gas-fired generation in

Tasmanian Government submission to the National Infrastructure Audit 51 Tasmania. This will result in a net reduction in the greenhouse gas emissions emanating from Tasmania’s generation of electricity from gas.

The introduction of further gas generation into Tasmania will reduce the pressure of the State water reserves and reduce the reliance on Basslink to bring electricity from mainland Australia. The additional on-island generation will provide a further buffer against low water inflows in the future and provide additional opportunities for the current storage situation to be returned to more comfortable levels.

The development will provide the first substantial competition in the on-island generation sector of the Tasmania electricity supply industry.

Electricity Transmission

Transend Networks is responsible for the State's electricity transmission network. The transmission system comprises a 220kV backbone network (bulk transmission network) that connects the main generation locations with the main transmission substations and major load centres. A network operating largely at 110kV (peripheral transmission network) provides connections to other load centres and general locations.

Because this transmission system connects a large number of scattered hydro generators it has a different pattern to most other States.

Transend owns 2342 route km and 3537 circuit km of transmission lines. There are 31 transmission line circuits of 1464 km on 220kV, 68 transmission lines of 1993 km on 110kV and 2 transmission line circuits of 81 km at 88kV.

All transmission circuits are overhead with the exception of two 110kV circuits, which are entirely underground, and four 110kV circuits that are partially undergrounded. Transend also owns 45 substations and 8 switching stations. These substations operate at voltages of 220, 110, 88, 44, 33, 22, 11 and 6.6kV.

Electricity Distribution

Aurora Energy is responsible for mainland Tasmania's electricity distribution system. The Aurora owned distribution system consists of approximately 209 800 poles (excluding private poles), 26636 distribution substations, 23700 km of overhead powerlines and 1600 km of underground cables.

The backbone of the distribution system comprises approximately 14998 km of overhead high voltage (44 000 volt, 33 000 volt, 22 000 volt or 11 000 volt) powerlines and 798 km of underground high voltage powerlines. These high voltage (HV) powerlines, referred to as HV feeders, supply approximately 26636 distribution substations, which then transform the electricity to 240/415 volts, to distribute electricity at low voltage (LV) to most of Aurora’s approximately 250000 customers.

The LV distribution system comprises approximately 8 700 km of overhead and 800 km of

Tasmanian Government submission to the National Infrastructure Audit 52 underground LV circuits. However, there are a small number of HV customers with their own substations who take electricity supply directly at 22 000 volts or 11 000 volts. There are 16 major industrial (MI) customers that are either supplied directly from Transend's transmission substations or via dedicated distribution HV feeders.

Power stations are connected to the 220 kV bulk transmission network at Farrell, Sheffield, Palmerston, Liapootah, Cluny and Gordon and to the 110 kV peripheral network at Sheffield, Palmerston, Trevallyn and in the Derwent area. The Bell Bay thermal power station is connected to the 110 kV bus at George Town via 110 kV radial circuits. The Woolnorth wind farm is connected to Smithton via 110 kV radial circuits.

The main load centres are connected to the bulk transmission network at 220 kV. These are located at George Town, Chapel Street (Hobart), Sheffield (Devonport and Burnie) and Hadspen (Launceston and North-East areas). Other load centres and generation locations are connected via the 110 kV peripheral transmission network.

Power transfers take place between the bulk transmission network and the peripheral transmission network via 220/110 kV auto-transformers at Sheffield, Burnie, Palmerston, George Town, Chapel Street, Farrell and Hadspen. The 110 kV peripheral transmission network provides transmission support to the 220 kV bulk transmission network.

Basslink

Basslink is a high voltage, direct current (HVDC) bipole electricity interconnector that links the Tasmanian and Victorian electricity networks across Bass Strait.

It is the only interconnector in Australia that does not earn a regulated return. Effectively, it earns a return by carrying electricity between the Tasmanian and Victorian market regions and profiting from any price difference. It also receives a return from a facility fee from Hydro Tasmania.

Basslink allows Tasmania to participate in the National Electricity Market by enabling the trading of electricity flows between Tasmania and the NEM. Basslink has a continuous rating of 480MW, but with system stability considerations is able to export up to a maximum of 600 MW of power from Tasmania to Victoria, and import a maximum of 300 MW into Tasmania.

The Basslink cable is approximately 360km long, and extends from Loy Yang in Gippsland, Victoria, to Bell Bay in northern Tasmania. The 295km undersea cable component is the longest of its type in the world.

Basslink began operating in April 2006.

Tasmanian Government submission to the National Infrastructure Audit 53 Future task and infrastructure

Electricity

Australia has committed to significant reductions in its carbon emissions, and to a significant increase in the proportion of its electricity that comes from renewable resources. These are major challenges and the full implications for Australia’s electricity infrastructure are not yet widely understood.

Australia’s electricity grid has evolved over the past 100 years to bring electricity from large thermal generators situated near coal deposits to major load centres such as cities, mines and smelters. Putting a stop or a reduction to generation from coal and a heavier emphasis upon gas generation and renewables will require significant direct investment, but also a heavy investment in transmission infrastructure, systems support and energy storage. Without this investment in infrastructure the targets will not be met.

In recent years energy infrastructure investments have largely moved from public funding to funding by private interests and energy users directly. However, there are classic economic barriers and market failures that mean that this will not achieve the pace and scale of investment required to cope with the changes necessitated by the need to reduce emissions. There is a strong case that direct public funding is essential for meeting the targets, as well as for helping to maintain the economy and maximizing the economic, financial, social and environmental benefits.

Tasmania is well placed to make a disproportionately large contribution to meeting the targets. It has already demonstrated that its wind energy resources are the best in Australia and amongst the best in the world. Tasmania may also have worthwhile wave/tidal, geothermal and biomass resources.

The Tasmanian transmission grid is already geographically dispersed in order to connect to multiple, hydro-based generators. This means that additional Tasmanian renewables are always going to be less than 80 kilometres from a transmission line.

Tasmania’s diversified hydro generators are also better able to co-exist with large amounts of intermittent generation than large thermal generators. Hydro generation can be turned on or off within a few minutes with no loss of energy or lengthy warming up periods.

Nevertheless Tasmania will need some significant investments if its renewable energy opportunities are to be realised. The first requirement is for transmission upgrades to the North West and West in order to access the excellent wind resources in these locations. Estimated project costs are on the order of $50 million. This would enable several hundred megawatts of excellent wind resources to be developed.

The second area for potential investment is pumped water storage. This solves a number of challenges simultaneously and so is less straightforward to explain. In essence it aims to

Tasmanian Government submission to the National Infrastructure Audit 54 create large scale energy storage in Tasmania’s hydro system while at the same time maximizing the efficiency of hydro and gas generation in Tasmania and the efficiency of the Basslink inter-connector. It may also have significant benefits in reducing uncertainty and losses for Tasmanian farming caused by unreliable rainfall.

Tasmania’s hydro system already acts as a kind of default battery for wind energy. When the wind blows the hydro generation can be backed off and the energy saved for later. This is very efficient. However other technical issues can limit the amount of renewable energy that can be accepted into the grid.

Hydro generators are not very good at increasing or decreasing output on a very short timescale (sub 10 seconds). This is on account of the massive physical inertia involved in large and heavy columns of moving water.

Wind turbines provide very little system inertia. They do not increase or decrease output to help cope with sudden increases or decreases in loads or the sudden loss of other generation. Furthermore they are intermittent on a short time scale, requiring other generators to operate with some spinning reserve in order to take up the load if the wind should drop. Conversely they can surge in output if wind conditions suddenly improve for a large number of units and this can also lead to systems issues or a need to dump output (wind spill).

Pumped water storages are the most efficient form of large scale energy storage at reasonable cost. Cycle efficiencies can be as high as 90 percent.

Furthermore, pumped water storages can be operated to smooth the fluctuations caused by short term variations in consumption and short term variations in output from wind. This enables a higher penetration of wind and a higher efficiency for other operating plant (lower frequency stabilizing ancillary services costs).

Pumped storage can also act as a load leveller on a daily or weekly timescale since it can be turned off during peak periods or even reversed.

Interruptible pumping can provide a load that can be stopped suddenly if a large generator trips off, or a large inter-connector operating in inbound mode trips off. This contingency service is especially important in Tasmania due to the large size of gas generation plant or the Basslink inter-connector relative to the Tasmanian system as a whole.

Finally, pumped water systems may have attendant benefits in managing water resources for either energy or other applications. For example, they might possibly draw on water storages that are not used for either electricity or farming and relocate the water to better advantage.

Further investigation of large-scale water pumping and storage systems is warranted in Tasmania.

Tasmanian Government submission to the National Infrastructure Audit 55 Gas

Since the introduction of piped natural gas into Tasmania in 2002 many urban areas now have access to this alternative energy source. There remain some large population areas without access to natural gas, notably Kingborough and Clarence on Hobart’s outskirts. The extension of the gas distribution network to these areas would have public and private benefits. Any substitution of electricity by gas in Tasmania enables Tasmania to increase its ability to be a standby and peak period generator for electricity demands on mainland Australia.

There are many opportunities for relatively small extensions of the gas network to medium and small industries in Tasmania. These encounter the same shared infrastructure issue that affects renewable generators, but on a smaller scale. There is a high expected net present value to an investment in the enabling infrastructure, but no single entity or supplier/consumer pair can afford the risks and costs of enabling infrastructure investments. In these cases a private-public partnership can sometimes unlock the potential value gain. However, a small, budget-constrained State Government may not be able to fill this role.

As natural gas usage increases in Tasmania, the local economy will become increasingly dependent on access to natural gas. With one supply point and one transmission pipeline into the state, Tasmania is vulnerable to any single contingency event that could prevent supply to Tasmania for a considerable period. The potential of using liquefied natural gas (LNG) as an alternative fuel for trucks is being considered by a number of parties. This may lead to the development of a LNG conversion plant in Tasmania.

Exploration for gas is occurring in waters to the north and west of the State. If discovered this would provide a welcome increase in supply and diversity of supply for south east Australia at a time of increasing domestic and international pressure on existing gas resources.

Electricity/petroleum product substitution

With large increases in petroleum prices and concerns over petroleum supply security and carbon emissions, the option of using low-emissions electricity for transport becomes more attractive. Tasmania is well placed to be able to demonstrate the viability of pluggable electric vehicles and hybrids. It also provides a good opportunity to trial other forms of transport fuel, such as hydrogen.

There are potential benefits to the Tasmania's energy security if the State has the potential to make or import liquefied natural gas (LNG) and use it for gas, electricity generation or transport. This makes it less likely that a single contingency event could leave the State lacking gas and/or electricity. The feasibility of incorporating this capacity into any suitable proposed development should be examined.

Tasmanian Government submission to the National Infrastructure Audit 56 Infrastructure adequacy

Tasmania has several sizeable opportunities in its energy sector for major infrastructure projects with significant public benefits. Renewable energy generation in Tasmania is currently constrained by a weak transmission network. Considerable expenditure will be required to strengthen the transmission network, particularly in western and northwestern Tasmania.

The development of a liquefied natural gas (LNG) capability in Tasmania will improve the productivity and environmental sustainability of freight vehicles and the extension of Tasmania’s recently rolled-out natural gas pipelines will have wide-ranging benefits.

Potential infrastructure gaps:

• Tasmania is highly reliant on hydro derived electricity, and prolonged dry periods can still present difficulties, even with the Basslink cable and natural gas-derived generation. Without infrastructure investment and further diversification there is a risk of electricity rationing and harm to industry, national supply chains and the economy.

• Tasmanian load growth will eventually produce demand in excess of the energy available unless more generation is installed in Tasmania.

• There is potential for significant amounts of renewable generation to be brought online in the State if infrastructure is built to accommodate it. This especially includes high voltage transmission infrastructure connecting to the wind resources, which exist in Tasmania's North West, and pumped hydro storage infrastructure to complement it. Pumped hydro storage has the potential to allow for greater percentages of wind energy to enter the grid than would be possible without it. Priority projects

• Strengthening/upgrade of the transmission network

• Development of LNG capability

• Extension of natural gas pipeline network

Tasmanian Government submission to the National Infrastructure Audit 57 5. INFORMATION COMMUNICATIONS TECHNOLOGY

Tasmania’s small economy, combined with its relative isolation and mountainous terrain, has proved an ongoing deterrent to investment in telecommunications infrastructure. This has led to a lack of competition across all areas of the state’s infrastructure layer.

The virtual monopoly in relation to wholesale telecommunication services acts as a disincentive for retail service providers to consider Tasmanian market. Those providers that do operate in the Tasmanian market struggle to provide parity of service with nationally available services.

Enhancements of the Tasmanian Government-owned backhaul network are required for an alternative open access network, including a backhaul link across Bass Strait and establishment of independent points of presence in major population centres.

The Tasmanian Government has identified the following priorities in respect of the State’s Information Communications Technology (ICT) infrastructure needs: • Establishment of independent open access fibre optic backhaul links connecting Hobart and Melbourne via Bass Strait; • Establishment of independent open access fibre optic extensions to the Tasmanian Government’s on-island backhaul network enabling increased redundancy and linking underserved regions of the state such as the East and West Coasts, Huon and Channel districts and the Upper Derwent Valley; • Establishment of independent Points of Presence (PoP) in population centres that can be linked along the route of the Tasmanian Government’s extended on-island backhaul network; and • Competitive Third Generation mobile telephone networks with similar coverage to the incumbent.

Market environment

The Tasmanian telecommunications market is characterised by the following:

• most of the services and technology found throughout Australia are available subject to capacity restrictions and cost;

• fully digital at all points across the network;

• four different Mobile Phone network operators yet only one network is third generation (3G) compliant or better;

• 65 percent of exchanges are equipped with ADSL Broadband capability;

• 23 of Australia’s licensed Carriers operate in the State;

Tasmanian Government submission to the National Infrastructure Audit 58 • over 90 percent of all telecommunications infrastructure is owned or controlled by Telstra;

• the only commercial backhaul routes on and off the island are via two undersea optic fibre cables and back up microwave links all owned and operated by Telstra; and

• it represents approximately 2 percent of the Australian Market.

Based on the ABS’s latest survey of internet activity, there were in excess of 150 000 Broadband subscribers in Tasmania as at December 2007. ABS data also indicates that the Australian communications sector was worth nearly $50 billion for the period 2005 to 2006. This would mean that the Tasmanian market would have been worth nearly $1 billion (2 percent of the national total) in the same period.

As previously mentioned Telstra dominates the Tasmanian telecommunications market. The most significant factor within the Tasmanian market is the lack of competition on backhaul trunk routes in and out of the state and between the various population centres spread across the island.

Tasmanian telecommunications subscribers are dependent on a backhaul link back to Melbourne to enable national and international connections. All service providers (both retail and wholesale) operating within the Tasmanian market offering links to national and international networks must procure backhaul transmission via Telstra. The situation is further compounded by the fact that Telstra also dominates the majority of intercity backhaul links throughout Tasmanian.

This monopoly of the backhaul network into and around the state is the single biggest impediment to competition and thus the growth and development of Tasmania’s telecommunications market.

Prices (or tariffs) for telecommunications services generally depend on the type of technology used and the locations of service provider of carrier infrastructure relative to the customer site. The difference in price between the metropolitan (short distance) and regional (longer distance) connections can be vast. This disparity between pricing in geographic bands is of particular importance to Tasmania, as most areas in the state fall outside of inner metro- access bands.

For services such as basic voice, ADSL and ISDN, infrastructure is generally located at the local exchange. For many advanced or corporate data communications services, infrastructure tends to be located in Hobart and tariffs are based on the distance from the customer site to Hobart. This applies for Frame Relay, ATM and Wideband IP services among others.

Outside of Telstra only a small number of providers have points of presence for advanced or corporate-level services in Hobart, and in some cases also in Launceston.

In most cases retail pricing for Tasmanian residential and small business services reflects the same rates found elsewhere in Australia. This means that a Plain Old Telephone Service

Tasmanian Government submission to the National Infrastructure Audit 59 (POTS) is priced the same in Hobart as it is in Sydney. This is also the same for most broadband and mobile services.

Recent discussions with some of the national ISPs that service Tasmania have indicated that their national pricing includes a premium to cover the higher cost of servicing the state. This means that non-Tasmanian subscribers are paying higher prices to subsidise the costs to link the state into the national network. This is similar to the subsidisation that has existed between suburban and regional Australia.

Corporate customers are able to negotiate pricing that reflects the volume and complexity of services and support their operational requirements. In most cases this may deliver substantial discounts on the national retail price structure. In Tasmania this can be curtailed by the higher cost of interstate and intercity backhaul.

There is evidence that this has influenced decisions by some national organisations not to locate operations in the state. A survey of the state’s call centre industry carried out in 2006 found that expenditure on telecommunications by Tasmanian operators was 20 percent higher than the National average.

As at December 2007 there were 29 Service Providers (SP) advertising voice and data services in Tasmania through Yellowpages.com.au. These SPs represent a mix of traditional fixed line providers as well as satellite and wireless network operators. The majority of these SPs only offer broadband packages. This represents less than 10 percent of the total number of known SPs operating in Australia.

In recent times a number of SPs have restricted or suspended the availability of high-speed data services in Tasmania due to the cost of backhaul across Bass Strait. Large volumes of backhaul bandwidth are required to enable such services to be linked into the national and international networks. These restrictions have negatively differentiated the Tasmanian market in comparison to the mainland.

One national ISP has indicated publicly that what it spends on connecting Tasmanian clients to its national network represents approximately 50 percent of its total monthly backhaul bill yet the state represents only three percent of its total customer base.

The other major challenge to the provision of competitive telecommunications in Tasmania rests with the difficulty in providing access to all parts of the state. Tasmania has the smallest population of all the Australian states and is the most decentralised in terms of population distribution5. Nearly 60 percent of the population lives outside the capital city.

The geography of the state also presents a number of barriers to rolling out cost effective broadband access networks regardless of the technology. Many Tasmanian towns present a marginal business case for investment in competitive telecommunications infrastructure. This

5 Source: ABS 1362.6 – Regional Statistics, Tasmania 2007

Tasmanian Government submission to the National Infrastructure Audit 60 has been demonstrated by the high reliance on government subsidy programs such as the Higher Bandwidth Incentive Scheme (HiBIS), Broadband Connect and the Australian Broadband Guarantee. These population centres simply would not attract such development without such subsidies.

Tasmanian Government’s strategic approach

The government launched a series of initiatives in 2003 aimed at facilitating a more competitive telecommunications industry in Tasmania and to encourage new investment in broadband telecommunications infrastructure within the State. The Government purchased an optic fibre backbone cable from Tas21 Pty Ltd (Tas21) on 29 May 2003, at a cost of $23.1 million. This optic fibre asset spans 420 kilometres from George Town to Hobart and across to Port Latta on the North West Coast. The cable is located in the same trench as the gas pipeline built by Duke Energy.

The Tasmanian Government has invested a further $7 million to make this backbone cable fit for purpose as a carrier grade network that will connect points of presence in Burnie, Devonport, Launceston and Hobart. This new network is known as TasGovNet.

Since the purchase of its optic fibre asset the Tasmanian Government has worked progressively towards appointing a Strategic Partner to commercialise the TasGovNet network. On 22 December 2007 Aurora Energy Pty Ltd (Aurora) was chosen as the government’s preferred strategic partner.

Aurora proposes to link TasGovNet to the extensive state network of optic fibre cabling already operated by the various Tasmanian State Owned Electricity Businesses (SOEBs). Once completed Aurora will be able to offer services in direct competition to Telstra’s wholesale backhaul network.

Tasmania’s Telecommunications Impediments

While mainland Australia has witnessed an escalation in telecommunications options Tasmania’s position has continued to stagnate. Where there are three competing third generation (3G) high-speed mobile networks operating across most of the mainland capitals, Hobart has only just received its first.

Broadband services have also been restricted within the Tasmanian market. Telstra has used its backhaul monopoly position to set wholesale carriage fees well in excess of other mainland markets. This has resulted in the Tasmanian market proving unviable for most SPs to offer anything but the basic voice, data and broadband packages.

Anecdotal evidence has suggested that the cost of backhaul between Tasmanian and the mainland (Victoria) could be as much as five times that of similar distances between other Australian capital cities. Confirming this issue has been difficult as backhaul pricing is shrouded in confidentiality unlike broader consumer based telecommunications services.

The high cost of backhaul connectivity between Tasmania and mainland Australia impacts on

Tasmanian Government submission to the National Infrastructure Audit 61 the continued viability of information intensive industry in the state. The impact is particularly felt by operators in the call centre Industry, ICT sector, creative new media sector, shared services sector and the broader research and scientific community.

Regulatory environment

Telecommunications is administered in Australia through Commonwealth legislation. The Tasmanian Government possesses no legislative powers over the State’s telecommunication market or supporting infrastructures except where the Telecommunications Act 1997 permits.

This has primarily been restricted to the assessment of telecommunications development in an overall planning context where the infrastructure involved cannot be classed as low impact. This includes overhead cabling, radio/wireless towers and arrays and housing plant (cabinets, huts and buildings) located in public spaces. In Tasmania assessment of such developments falls under the responsibility of Local Government.

Less than a quarter of the state’s municipalities have documented guidelines and principles for evaluating telecommunications infrastructure developments. The situation is further complicated given that there is little consistency amongst these documented guidelines and principles.

A project is now underway led by the Department of Economic Development and Tourism to establish a uniform standard of guidelines and principles for evaluating telecommunications infrastructure developments across Tasmania. The initial objective is to encourage Local Government in Tasmania to work collaboratively to implement this uniform standard.

Existing infrastructure

As previously indicated, Tasmania is connected to Australia’s national telecommunications networks via two undersea optic fibre cables controlled and operated by Telstra. Telstra also has the capacity to operate at least two microwave routes across Bass Strait as a backup.

The only other backhaul paths into and out of the state are via satellites operated by Singtel Optus Pty Limited (Optus) or a single optic fibre cable embedded with the BassLink electricity connector. This cable is owned by Singapore’s CitySpring Infrastructure Trust (CitySpring) and expected to be in commercial operation by September 2008.

As at December 2006 there were 205 exchange distribution areas located across Tasmania. 136 of these are equipped to provide Asynchronous Digital Subscriber Line (ADSL) based broadband services. 80 of these exchange areas were enabled for ADSL broadband through grants provided under the Australian Government’s HiBIS and Broadband Connect programs.

ADSL is the predominant type of broadband technology deployed in Tasmania. Whilst Telstra holds the largest slice of the market, a number of local and national Internet Service Providers (ISPs) are also present. In most cases these ISPs offer ADSL broadband services via Telstra infrastructure purchased under wholesale arrangements. Only two ISP’s have invested in the

Tasmanian Government submission to the National Infrastructure Audit 62 deployment of ADSL infrastructure and this is located in only two metropolitan exchanges.

Most of the ISP’s have relied upon the HiBIS and Broadband Connect programs to support provisioning activities in Tasmania. Surprisingly, Optus has chosen not to establish a terrestrial broadband presence in Tasmania and only provides connections via its satellite products.

In many locations, Telstra also offers a higher “Quality of Service” business-grade product, termed Business DSL (or BDSL), which uses Symmetrical High Bit Rate Digital Subscriber Line Technology to deliver speeds of up to 4 Megabits per second. Telstra’s BDSL roll-out in Tasmania was accelerated due to the Tasmanian Government and University of Tasmania’s Broadband for Rural Tasmania project, which funded the provision of services to 88 government and University of Tasmania sites in 46 Tasmanian towns.

It is understood that in the past two years Telstra had upgraded a number of ADSL equipped exchanges nationally to the latest ADSL two plus (ADSL2+) technology, including the possibility of over 50 sites in Tasmania. Confirmation of this has been difficult, as Telstra chose not to offer ADSL2+ as a wholesale product to other ISPs. The ADSL2+ technology creates the potential to increase the connection speeds for broadband services to a theoretical limit of 24 Mbps.

Telstra had adopted a policy whereby it would only switch on an ADSL2+ exchange where one of its competitors has already installed the same technology. In the case of Tasmania, there were only two Hobart CBD exchanges operating ADSL2+ technology. This lack of competition had effectively turned Tasmania into a broadband backwater in comparison to many of the other states and territories.

In February 2008 Telstra announced it would activate a further 900 ADSL2+ equipped exchanges and commence offering services to subscribers. In April 2008 Telstra confirmed that it had completed the activation of all its equipped ADSL2+ exchanges. Whilst a number of Tasmanian exchanges were named in Telstra press releases it has yet to clarify the exact number of activated exchanges located in the state.

A number of wireless broadband providers have established coverage areas across the state. This includes a mix of local companies primarily focusing on business and institutional clients and a couple of national providers attracted to the state through HiBIS and Broadband Connect funding.

In all there are some 100 wireless nodes in operation across the state. Most of these are servicing outer metropolitan and regional areas. Two of Tasmania’s SOEBs, Hydro Tasmania and Transend Networks, also operate microwave transmission equipment in support of their business operations. This infrastructure has not yet been made available for commercial purposes but is being considered as part of Aurora’s plans to augment the TasGovNet network.

Basic mobile telephone infrastructure in Tasmania is comparatively good, despite the island’s

Tasmanian Government submission to the National Infrastructure Audit 63 mountainous geography. The State has four mobile phone networks, yet only one of these is third generation (3G) compliant or greater. Telstra’s Next G network has the widest coverage, estimated by Telstra to include 97 percent of the population and 54 percent of Tasmania’s landmass. It includes an almost continuous coverage link between the towns and cities on major highways including Hobart to Launceston along the Midlands Highway, and Launceston to Burnie along the Bass Highway.

Telstra, Optus and Vodafone also have second generation GSM phone networks in Tasmania. Telstra has the broadest coverage but all three cover the main population centres and some highways. Optus has announced a national expansion of its 3G mobile network to cover 98 percent of the Australian population. It is unclear at this point if this will change Optus’ existing coverage area in Tasmania or merely upgrade the GSM network technology.

Infrastructure adequacy

In most regions of the state there is no evidence that a lack of physical backhaul capacity exists. The issue is more a lack of competition that has made the provision of adequate backhaul unaffordable under present pricing structures. There are however some small pockets around the state where broadband black spots still persist.

Addressing competition at all layers of the state’s telecommunications market remains a priority for the Tasmanian Government. The government has conceived a strategy to facilitate the development of independent fibre optic backhaul infrastructure throughout the state and across Bass Strait.

Access to existing infrastructure corridors and guaranteed market take up rates are key requirements to encouraging the deployment of competitive backhaul infrastructure across the state. The commercial viability of extending such competitive infrastructure outside of the major population centres remains questionable. Customer access developments in these areas have predominantly relied on state and federal government subsidies. It is expected that a similar reliance would exist for the development of backhaul infrastructure as well.

Recent discontent within the state’s broadband market clearly indicates that consumers expect to receive the full capability of the services that they subscribe to. This means that advertised speeds need to be achievable most of the time. Suspension of high-speed broadband product offerings in the Tasmanian market by some ISPs can be seen as a reaction to their inability to supply a satisfactory level of backhaul to meet consumer expectations. Current and emerging gaps

Tasmania expects to experience similar growth and demand for telecommunications services as that predicted for broader Australia. Broadband is expected to emerge as the dominant form of communications given its ability to support voice, video and data transmission across

Tasmanian Government submission to the National Infrastructure Audit 64 the one platform. It is also anticipated that evolving business models and personal preferences will continue to see a demand for greater mobility in the communications market.

As more data rich applications emerge pressure will build up to increase the capacity within the backhaul sections of the state’s telecommunications infrastructure layer. The existing capability of most customer access components of the network already surpasses the capacity available across the majority of backhaul routes. This has led to significant contention ratios being applied within the network in order to manage the transmission traffic in a cost effective manner.

The priority is to stimulate sufficient competition across Bass Strait such that tariffs fall to similar levels as that found elsewhere in Australia. This would then be followed by the pursuit of backhaul development to the remaining broadband disadvantaged areas of the state including the East Coast and the West Coast.

Further investment in next generation last mile technologies such as 3G mobile, WiMAX and Fibre-To-The-Premises would be sought once pricing for backhaul connectivity had been lowered through competitive pressures.

The Tasmanian Government recognises that the Commonwealth Government’s National Broadband Network initiative presents a significant opportunity to address both the existing and future telecommunications infrastructure and market structure challenges faced by the state.

In relation to Tasmania it is believed that a solution tailored to the state’s unique challenges would be better implemented than being part of a single national process and model. The Tasmanian Government is confident that this strategy would eliminate Tasmania’s broadband disadvantage relative to the rest of Australia and would deliver on the Commonwealth Government’s National Broadband Network objectives. Priority Projects

• Establishment of an independent open access fibre optic backhaul link connecting Hobart and Melbourne via Bass Strait.

• Establishment of independent open access fibre optic extensions to the Tasmanian Government’s on-island backhaul network enabling increased redundancy and linking underserved regions of the state such as the East and West Coasts, Huon and Channel districts and the Upper Derwent Valley.

• Establishment of independent Points of Presence in population centres that can be linked along the route of the Tasmanian Government’s extended on-island backhaul network.

• Competitive Third Generation mobile telephone networks with similar coverage to the incumbent.

Tasmanian Government submission to the National Infrastructure Audit 65 6. WATER

The Tasmanian Government has identified the following priorities in respect of the State’s water infrastructure needs:

• Development of larger scale irrigation projects to increase Tasmania’s contribution to the nation’s food supply.

• New and refurbished urban water supply and sewerage infrastructure underpin rural and regional economic growth and meet contemporary standards.

Irrigation

Unlike much of mainland Australia, the outlook for investment in irrigation infrastructure in Tasmania has never been brighter. Independent analysis has identified strong prospects for growth of irrigated agriculture in the State both for increased production and substitution for decreased production in areas such as the Murray Darling Basin.

Tasmania’s water resources, climate, farmers and land provide an excellent opportunity for achieving the objectives of the Australian Government’s “Water for the Future” national plan at a time when the nation is so dependent on their achievement.

The Australian Government has recognised this opportunity through a commitment of $140 million for six major irrigation development projects.

However, there is potential for realising further gains through increased funding to ensure a rapid completion of the existing projects and to cover additional projects.

Urban Water and Sewerage

Water is a source of competitive advantage to Tasmania that needs to be better harnessed.

A recent review of the water and sewerage sector found up to $1 billion of new infrastructure is required over the next decade in a sector with a written down value around $1.7 billion. In general, asset conditions are below optimal and asset management by councils is inadequate, which, combined with poor commercial returns on assets, has limited the capacity of councils to appropriately invest in infrastructure upgrades.

In addition, significant environmental and public health standards are not being met and economic regulation in the sector is a decade behind most other jurisdictions.

The Tasmanian Government has identified the following infrastructure priorities in respect of the State’s future urban water and sewerage infrastructure needs:

• Investing in critically urgent community projects to improve urban water and sewerage supply;

Tasmanian Government submission to the National Infrastructure Audit 66 • Extending reticulated water and sewerage supply to new areas to improve public health and environmental outcomes;

• Improving water quality for areas on permanent boil water alerts; and

• Implementing consumption-based pricing for all Tasmanian urban water users. Market environment

Irrigation

Management of Tasmania’s freshwater resources is covered by the Water Management Act 1999. All parties taking water for commercial purposes require a licence under the Act. Licences, and the attached water allocations, are personal property of the registered holder and are fully transferable on a permanent or temporary basis.

Hydro Tasmania is the holder of by far the largest water access entitlement in the State and is an active player in the water transfer market, trading various water products to irrigators on a permanent and temporary basis. Other commercial water users, primarily irrigators, trade water available from private infrastructure or as entitlements to water from larger scale publicly funded infrastructure.

The development of further larger scale irrigation infrastructure in the State would be expected to broaden and deepen the water market.

Several of the proposed development projects will also enhance the water market by providing opportunities for water entitlements of Hydro Tasmania to be exposed to the water market and potentially be utilised for other more valuable purposes, primarily irrigation and town water, by providing the necessary infrastructure for the physical transfer of the water.

Infrastructure for the provision of irrigation water in Tasmania is primarily provided by individual landholders, unlike that for much of mainland Australia. Larger scale publicly funded irrigation water storage and supply infrastructure provides only 10 percent of the total annual water used for irrigation in the State.

The development of larger scale irrigation infrastructure is generally not attractive for total private sector funding, largely because of the financial costs involved in the delay between completion of the construction and full subscription of the available water. This delay results from the need for farm businesses to develop to utilise the additional water. Hence, public funding assistance for capital costs is generally required to make the projects financially viable in the short to medium term.

Urban Water and Sewerage

Water and sewerage in Tasmania is relatively a very large business activity in the State. The total value of combined water and wastewater infrastructure in Tasmania is approximately $1.7 billion in written down value and directly employs around 500 people. However, the

Tasmanian Government submission to the National Infrastructure Audit 67 ownership of water and sewerage infrastructure is currently held by over 30 parties (local governments and bulk water authorities) with varying degrees of sophistication in management and differing funding abilities.

On average, the infrastructure was rated as approximately 50 percent through its useful life, with some infrastructure being in relatively good condition whilst other systems were in a lesser state of repair.

In summary, there are 91 water supply schemes in Tasmania, 23 of which are on permanent boil water alerts. These schemes service many different towns in the State, some of which are key tourist towns. Whilst the boil water alerts directly affect 5 000 permanent Tasmanian residents, they also affect many other national and international tourists.

There are also low levels of compliance with standards for level 2 wastewater treatment plants, with approximately 50 percent of the 81 plants in Tasmania not always compliant with their licence conditions.

These issues indicate infrastructure condition is not sufficient in many cases and requires significant and costly upgrades and extension to adequately provide water and sewerage services across Tasmania, and, at a minimum, maintain existing industries.

Current returns in the sector are generally low and historically have not been at a level sufficient to encourage investment. Two-part pricing is only partially applied due to the absence of water meters in some sections of the State. The lack of water meters results in water restrictions to limit usage, rather than usage-based charging driving efficient behaviours.

Whilst the reform currently in progress is aimed at moving the sector to a sustainable platform, this will involve a lengthy transition over many years if significant price shocks are to be avoided. Planning and regulatory environment

Irrigation

Management of Tasmania’s freshwater resources is covered by the Water Management Act 1999. All parties taking water for commercial purposes require a licence under the Act. Licence fees are imposed with the fees directly reflecting the costs of water management, as prescribed by the Water Management Regulations.

The establishment of water supply infrastructure generally requires statutory approval at State level under either the Water Management Act (for dam works); the Environmental Management and Pollution Control Act (for large dams and pipelines); the Land Use Planning and Approvals Act (pipelines, channels); and/or the Major Infrastructure Development Approvals Act (pipelines).

Tasmanian Government submission to the National Infrastructure Audit 68 Urban Water and Sewerage Regulatory Environment

The recent review of the urban water and sewerage industry in Tasmania concluded that in order to bring the sector to a sustainable footing both regulatory and structural change is required. Subsequently, two pieces of legislation, the Water and Sewerage Corporations Act 2008, which deals with structural reform and the Water and Sewerage Industry Act 2008, which deals with regulatory reform, were passed by Parliament.

The structural reform of the industry will see local government ownership of three regional water and sewerage corporations and a fourth common services corporation which will seek to eliminate any unnecessary duplication between the regional corporations.

In addition, new regulatory roles and responsibilities for the sector are being introduced.

These include a more robust approach to independent economic regulation (including pricing principles consistent with National Water Initiative requirements) and a sector-wide policy role to ensure long-term supply and demand planning for the sector occurs. The regulatory reform involves enhancing existing technical regulation by linking it to well-tested economic regulatory arrangements similar to those that apply in the electricity sector. Existing infrastructure and task

Infrastructure

Irrigation

Major water infrastructure in the State primarily provides water supply for town water, irrigation, industry and hydro-electricity generation. The major proportion of water supply is provided by dams with Tasmania having around 30 percent of the total dam storage capacity in Australia. The balance of water supply is provided by direct pumping from rivers and streams utilising pump/pipeline systems.

Hydro Tasmania is by far the largest owner of water infrastructure in the State, owning over 50 percent of the 65 largest dams in the State, covering around 98 percent of the State’s total dam storage capacity (over 21 thousand gigalitres).

There are only three Government owned irrigation dams in the State, the largest of which, the Meander Dam, was completed in 2007 with a capacity of 45 gigalitres.

Urban water supply authorities in the State own dams with total storage capacity of around 25 gigalitres.

Dam assets are generally in good condition with the major expenditure being on upgrading of Hydro Tasmania dams to meet contemporary dam safety requirements.

Urban Water and Sewerage Infrastructure

The impact of not addressing the current infrastructure deficiencies in the urban water and

Tasmanian Government submission to the National Infrastructure Audit 69 sewerage sector in Tasmania will have a number of adverse consequences for Gross State Product and, by extension, Gross Domestic Product.

Tasmania has many food and beverage manufacturers that rely on quality water services within their processing and which contribute significantly to food supply in Australia. Examples include significant fruit and vegetable processors (Simplot and McCains), the State two key beer producers (Boags and Cascade), seafood exporters (Tassal and Tasmanian Seafoods) and a number of other niche producers in dairy products. Such producers add significant value to both the local and national economy and are significant employers in the State.

Tasmania’s food and beverage exports also rely heavily on the ‘clean green’ image of the State. Any erosion of this image from a delay in reform progress has the potential to affect export and trade potential.

Some of the key water capacity constraints are in tourist significant areas. The East Coast of Tasmania, where one of Tasmania’s icon tourism drawcards is located and where tourism numbers over the summer period increase five-fold, is experiencing severe shortages of water mostly attributable to lack of storage facilities. If such challenges continue to exist for an extended period, there is a real risk of the reputation of the area being damaged amongst international tourists. Should this occur, it places at risk a significant number of accommodation, café and restaurants scattered along the region that depend on the peak tourism period to sustain them for the year.

Rapid and substantial economic growth in Tasmania places additional stress on existing water and sewerage infrastructure. As a result, Tasmania faces significant challenges to enable its water and sewerage infrastructure to keep pace with demand.

Indeed, in many areas, existing water and sewerage infrastructure is reaching capacity and emerging as a binding constraint on new residential and commercial developments. Task

Irrigation

The Australian Government’s “Water for the Future” national plan identifies key priorities as

(i) improved efficiency and productivity of water use;

(ii) better use of water markets; and

(iii) securing water supplies for current and future needs.

While the plan delivers a focus on the water crisis in the Murray Darling Basin, it fully recognises the need to provide a long term focus on securing water for all Australians – whether they be irrigation communities or suburban households.

Tasmanian Government submission to the National Infrastructure Audit 70 Never has water been more important for farming in Tasmania with the current drought and climate change predictions being stark reminders of this fact. As a result, water resource development is critical to better position Tasmania's agricultural sector and rural economies for the future.

This is achievable through making best use of Tasmania’s water advantage. We are one of very few States with the potential for additional water to be readily taken and used sustainably for town water supplies and irrigation.

Independent analysis in 2005 identified a need for an additional 250 gigalitres of annual irrigation water supply by 2015 to realise the State’s growth prospects for irrigated agriculture. The impacts of the current drought and of climate change predictions, together with increased growth opportunities through substitution for mainland agricultural production indicate that this figure is very conservative.

Over recent years, increased irrigation water supplies have been primarily provided through private sector investment in farm dams. Analysis clearly demonstrates that such smaller scale investment is insufficient to meet future needs and that larger scale investment facilitated by combined public and private sector funding is essential.

The Tasmanian and Australian Governments successfully used this model for the $35 million Meander Dam project, which provides 25 gigalitres per annum of secure irrigation water supply.

The Tasmanian Government has identified a further 11 larger scale irrigation development projects which provide a water supply equivalent to over 10 Meander Dams.

Six of these projects have been provided with capital funding assistance through a commitment of the Australian Government for $140 million. The Tasmanian Government has committed a further $80 million to progress all of the 11 projects.

In total these proposals have potential to increase irrigation water supplies by around 300 gigalitres per annum. Importantly, this water can be harvested from sources with an annual average yield of 4,500 gigalitres so the proposed harvesting is within sustainable limits.

Of course, water is only one part of the equation. Water must be turned into food through agricultural production if we are to secure the nation’s future food supplies in the face of uncertain irrigation capacity in many of Australia’s historic irrigation areas.

In this regard, Tasmania provides strong prospects for high returns from investment in irrigation infrastructure through: • reliable and sustainable water supplies, even in the face of drought and climate change predictions; • an ideal climate for relocation of temperate dairying, cropping and horticulture; • identified cost-efficient water development projects; • the nation’s most efficient irrigation farmers; and

Tasmanian Government submission to the National Infrastructure Audit 71 • large areas of good farming land for conversion to irrigated agriculture.

Further, Tasmania’s economy and social fabric is more dependent on agriculture than that of any other State. Investment in larger scale irrigation infrastructure will provide a strong boost to other economic sectors including food and beverage processing.

Urban Water and Sewerage

Tasmania has undergone a surge in growth in recent years as a result in increased population, and community demand and requirements for good quality water and sewerage services in areas not previously serviced is also increasing. This growth also provides the ability and scope for additional tourism and industries to be established in these areas, thereby contributing further to Gross Domestic Product.

Furthermore, ensuring the ongoing support for this growth will facilitate the establishment of long term investment by new industries and the growth of current industries, such as manufacturing and food and beverage industries.

Improving Tasmania’s urban water and sewerage is vital to maintaining and growing a number of essential industries that already contribute to national productivity. Industries for which good quality urban water is required include the manufacturing of beer and a wide range of manufacturing and food processing for example Cadburys.

Tasmania has experienced a growth in population and boom in tourism and fringe urban living. This is resulting in increased demand for services in regions that do not currently have the population base to fund the improvements to the infrastructure to the standard required.

Without an injection of funding for the provision of infrastructure to secure the current boom in these areas eg Tasmania’s East Coast, the opportunity provided by this growth could quickly evaporate or backslide. Future water needs

Future irrigation projects

For irrigation water supply, the Tasmanian Government has established a program to progress up to 12 large-scale irrigation development projects over the next 4-5 years. The first of these has already been completed (the $35 million Meander Dam project).

These projects have an estimated capital cost of $400 million and are planned to provide the additional 250 gigalitres per annum of irrigation water necessary to meet projected demand over the next 5-10 years.

Up to $220 million has been committed to the Tasmanian irrigation development projects, comprising $140 million from the Commonwealth and $80 million from the Tasmanian Government.

Tasmanian Government submission to the National Infrastructure Audit 72 Without additional Government funding, the balance of the total project cost will need to be provided through private sector investment.

The Tasmanian Government has recently established the Irrigation Development Board to direct the development of these projects.

The Australian Government has committed $140m towards six of the projects. This is unlikely to be sufficient to complete all of the projects and additional funding may be required.

All of the remaining first priority projects have been identified as filling strategic gaps in irrigation water demand to both underpin the existing investment in irrigation businesses to meet the challenges of drought and climate change, and capture opportunities for growth of irrigated agriculture in the State.

Tasmania has huge potential for further irrigation development and additional Government funding will be required to realise this potential, through both ensuring the successful completion of the priority projects and progressing a second suite of larger scale projects currently being investigated by stakeholders.

Details of the remaining first priority projects are provided below.

Project name Description Water volume Cost Irrigable area Poatina Tailrace to Pipeline to deliver 50,000 ML per $80 m 30,000 Oatlands Pipeline irrigation water from the annum ha (part of the tailrace of the Poatina Midlands Water Power Station to farmland Scheme proposal) as far south as Oatlands. Upper Macquarie Proposed dam in the 30,000 ML per $27 m 20,000 Dam Upper Macquarie annum ha (part of the Catchment - Upper Midlands Water Junction Hill / Maloney Hill Scheme proposal)

Upper South Esk Large-scale water 20,000 – 50,000 $21-50 20,000 Dam storages in the Upper ML per annum m ha (part of the South Esk Catchment Midlands Water Scheme proposal) Shannon-Ouse- Proposed dams to store 21,000 ML per $53 m6 11,000 Clyde Project and release water into the annum ha Clyde and Ouse Catchments Forth River Pipelines and waterways 18,000 ML per $32.4 m 12,400 Irrigation Schemes from Hydro Tasmania annum ha storages on Mersey-Forth system Meadstone Dam Proposed dam on St 30,000 ML $13 m 8,000 ha Paul’s River

6 Including Hydro Tasmania infrastructure

Tasmanian Government submission to the National Infrastructure Audit 73 North East Irrigation Proposed water storages up to 70,000ML $77 m 40,000 – Development to provide irrigation water 45,000 to Bridport-Waterhouse- ha Gladstone for dairy conversions. Meander Dam Delivery of water from up to 10,000 ML $15 m 5,000 ha Pipelines Meander Dam to per annum surrounding districts by pipeline and pumps Winnaleah Irrigation Expansion of current Additional $8 m 5,000 ha Scheme Expansion scheme 6,000ML per annum Sassafras-Wesley Utilisation of existing Additional $12 m 5,000 ha Vale Irrigation Australian Paper pipeline 6,000ML per Scheme to provide irrigation water annum to the Sassafras-Wesley Vale area of northwest Tasmania.

Infrastructure adequacy

Irrigation

For the irrigation industry, analysis indicates that at least 250 gigalitres per annum of additional water supply will be necessary within the next 5-10 years to both underpin the existing investment in irrigation businesses to meet the challenges of drought and climate change, and capture opportunities for growth of irrigated agriculture in the State.

This demand will need to be met through development of larger scale infrastructure projects, including both new dams and pipelines to draw water from existing infrastructure, primarily that owned by Hydro Tasmania.

The key risk and challenge in the irrigation industry is to roll out new water supply infrastructure at the necessary high rate to firstly, address water shortages resulting from drought and climate change, and secondly, to capture the significant growth opportunities for temperate irrigated agricultural production.

Urban Water and Sewerage

Estimated capital spend requirements for the sector over the next ten years to meet compliance with relevant environmental and technical standards and to accommodate anticipated network growth is expected to be approaching $1 billion. This is believed to be greater than any past investment program in this sector and more than half of the written down value of the sector.

Under-provision of infrastructure was also found to be an issue, with approximately 15 000 properties on the urban fringes in Tasmania with a block size of less than 1 500 square metres currently not connected to reticulated sewerage networks but should reasonably expect to be.

Tasmanian Government submission to the National Infrastructure Audit 74 Some fringe urban areas within Tasmania have already reached capacity, such that restrictions are already in place on the construction of future premises and extensions to existing premises. The recent review also identified a number of hot spot areas where such restrictions have to potential to occur if infrastructure is not installed in the near future ie 15 000 properties on urban fringes that risk being faced with similar restrictions in future years unless something is done about the infrastructure now.

The affect of such capacity constraints is to depress the construction industry. Given the location of a number of these development “hot spots’, depression of the construction industry will also impact on the ability to provide affordable housing options for the community as the land is typically in commutable districts to main urban areas and will remain vacant or underdeveloped until the urban water and sewerage infrastructure services are upgraded.

The following table summarises the cost estimate of the urban water and sewerage infrastructure projects that require funding to ensure the opportunities from Tasmania’s recent growth are captured for future economic benefits to be realised.

Project 1 Investing in critically urgent community projects to improve $135 Million urban water and sewerage supply Project 2 Extending reticulated water and sewerage supply to new $175 Million areas to improve public health and environmental outcomes Project 3 Improving water quality for areas on permanent boil water $10 Million alerts Project 4 Implementing consumption-based pricing for all $26 Million Tasmanian urban water users TOTAL $346 Million

Tasmanian Government submission to the National Infrastructure Audit 75

Tasmanian Government submission to the National Infrastructure Audit 76