National Significance of the Ruakura Intermodal Terminal June 2013 Copyright Castalia Limited. All rights reserved. Castalia is not liable for any loss caused by reliance on this document. Castalia is a part of the worldwide Castalia Advisory Group. Acronyms and Abbreviations BCR Benefit Cost Ratio ECMT East Coast Main Trunk Rail Line EPA Environmental Protection Agency GDP Gross Domestic Product GRP Gross Regional Product Ha Hectares NPV Net Present Value NZD New Zealand Dollar PPC Private Plan Change PUD Pick Up and Delivery RMA Resource Management Act RONS Roads of National Significance TEU Twenty Foot Equivalent Unit TGH Tainui Group Holdings UNI Upper North Island UNIFS Upper North Island Freight Study UNISA Upper North Island Strategic Alliance Table of Contents 1 Introduction 1 1.1 Relevant Factors for a Call-in Decision 1 1.2 Contents of this Report 1 2 The Scale of the Ruakura Development 2 2.1 Unique Features of the Ruakura Development 2 2.2 Freight Demand in the Upper North Island 4 2.3 Constraints at Existing Intermodal Terminals 7 2.4 Estimated Freight Demand for the Terminal 8 3 Impacts on Areas Outside of Hamilton and Waikato 9 3.1 Impacts on the Waikato Regional Economy 9 3.2 Economic Benefits Outside the Waikato region 10 Possible direct employment impacts for Waikato 12 Aggregate employment impacts 12 3.3 Other Social and Environmental Impacts 14 4 Impacts on Transport Networks in the UNI 18 5 Estimating the Costs of Delay 21 6 Conclusion 22 Appendices Appendix A : Summary of Work Completed by Castalia to Date 23 Appendix B : Success Factors for Ruakura (October 2010) 24 Appendix C : Implications for the Waikato Expressway (October 2011) 30 Appendix D : Economic Impacts in the Waikato Region (October 2012) 36 Appendix E : BERL Peer Review of Castalia Report on Economic Impacts in the Waikato Region 42 Tables Table 2.1: Forecast Growth in Total Freight Movements in the UNIFS Area (2006-2031) 4 Table 2.2: Growth Projections for UNI Ports (excl. transhipments) 5 Table 2.3: Ruakura Estimated Market Share of Waikato Contestable Freight Task 8 Table 3.1: Waikato Gross Regional Economic Impact Analysis 10 Table 3.2: Employment Densities of Business Land 12 Table B.1: Indicative Average Transport Price Comparisons 25 Table B.2: Estimated Container Volumes in the Golden Triangle: 2009 26 Table B.3: Estimated Market Share for the Proposed Intermodal Service 28 Table D.1: Waikato Gross Regional Economic Impact Analysis 2019-2061 (NPV Billions NZD) 38 Figures Figure 2.1: Location of the Ruakura Development 3 Figure 2.2: Forecast Growth in Freight Movements by Region (million tonnes) 6 Figure 3.1: Links between Efficient Transport Investment and Economic Growth 11 Figure 3.2: Historical Relationship between Employment and GDP 13 Figure 3.3: Employment Effects of GDP Growth 14 Figure 3.4: Reduced Freight Cost Analysis Ports of Auckland – South Auckland 15 Figure 3.5: Reduced Freight Cost Analysis South Auckland – Ports of Auckland 16 Figure 3.6: Estimated Annual Change in Carbon Emissions (tonnes) 17 Figure B.1: Rail versus Road Indicative Pricing: Freight Volumes ─ Auckland 26 Figure B.2: Rail versus Road Indicative Pricing: Freight Volumes ─ Tauranga 26 Figure B.3: Ports of Auckland: Projected Container Freight Volumes 2008-2040 29 Figure C.1: Overview of Freight Transport Routes with Expressway and Ruakura 31 Figure D.1: Waikato Regional Economic Impact Assessment 39 Executive Summary This report assesses whether the proposed development of an intermodal terminal and logistics hub at Ruakura (“the Ruakura development”) is nationally significant. The purpose of this assessment is to inform a Ministerial decision on a direct referral application under the Resource Management Act 1991 (“the RMA”). The Minister can consider any relevant factor when deciding whether the matter is part of a proposal of national significance (section 142 of the RMA).Examples of factors that might indicate national significance are listed in section 142(3) of the RMA. The factors that are directly relevant in this case are that the impacts of the Ruakura development will span more than one region or district, and that the development will have significant impacts on network utilities. We conclude that the proposed Ruakura development is a project of national significance because it: . Will be the largest integrated master-plan transport and logistics hub ever developed in New Zealand, and will change freight market dynamics by providing an intermodal facility that is not owned by a port or logistics firm . Will have economic effects that span the Upper North Island (UNI) area (with particular impacts in Auckland), and contribute to economic growth through the improved competitiveness of New Zealand firms (especially exporting firms) . Will have significant effects on transport networks in the UNI area by altering freight flows across road and rail infrastructure and redirecting patterns of logistics-oriented development. The significance of this particular site to an efficient UNI transport network means the decision to call-in the plan change request takes on particular importance. The scale of the Ruakura development is nationally significant (Section 2) The Ruakura Estate is a 500 hectare estate located approximately three kilometres east of Hamilton. The proposal is to develop the site to include an inland port (intermodal terminal) that will integrate the multiple rail connections, to the Port of Tauranga and the Port of Auckland, while also being situated on the planned Waikato Expressway connecting the high capacity road networks of the UNI. An extensive logistics and distribution centre hub will also be developed on land adjoining the intermodal terminal. Freight demand in the UNI is growing rapidly. The expectation is that growth between 42 and 100 percent (depending on the type) will occur over the next thirty years. The only two other similar facilities in the UNI regions are in South Auckland at Wiri and at Onehunga (MetroPort). Both of these facilities face constraints to growth that include congested road and rail links, increasing land prices and limited capacity to achieve growth due to stack height and planning restrictions. Both of these existing facilities are owned by ports, which limits the flexibility to respond to opportunities to lower overall costs by redirecting freight between ports. The Waikato region is expected to become the largest source of exports in the country over the next 30 years. Over the same period, the proportion of freight destined for Auckland will also double from around 30 percent to 60 percent of freight transported. The combination of these freight “push” and “pull” factors further underscores the value of the Ruakura development, which is located to satisfy the demands arising from both sources of market activity. Economic impacts in more than one district or region (Section 3) The Ruakura development will have major impacts outside the Hamilton district. Our economic modelling of impacts at the Waikato regional level (peer reviewed by BERL) estimates growth impacts over the next 30 years that have a present value of more than $4 billion. Some proportion of these benefits will fall within the Hamilton district, but we also expect a significant amount of spill-over into other districts within the Waikato region. In our view, many of the economic benefits of Ruakura will fall outside of the Waikato region due to the links between transport infrastructure and economic growth. Ruakura will have direct economic impacts in the entire region known as the “golden triangle”— the area between Auckland, Hamilton and Tauranga. This area has more than ten territorial authorities, and the need for better coordination among decision makers in the area has been recognised by the Productivity Commission, New Zealand Transport Agency, and others. Ruakura offers growth potential throughout the golden triangle by reducing transport costs, improving transport services and reliability, and enabling business growth. The development can reduce transport costs by optimising rail line haul and road transport for distribution (depending on the origin and destination of the goods). Ruakura may also drive down other supply chain costs and save time by using its “port neutral” position to take advantage of available capacity at either Ports of Auckland or Port of Tauranga. Ruakura will make a significant contribution to growth by offering businesses (particularly logistics firms) the opportunity to expand within an area that can accommodate long term growth. The Ruakura development means greater use of the existing infrastructure in Hamilton City and the Waikato region, as well as less future demand on Auckland’s already capacity constrained infrastructure. The development will alleviate the growing pressures on Auckland’s water, energy and transport infrastructure and will either reduce or defer the need to invest in additional infrastructure in the Auckland region. Our analysis shows that despite the longer distances involved, freighting via Ruakura to avoid congestion in Auckland is $75.5 million per year cheaper for the same volumes moved. Using an 8 percent discount rate, this totals $850 million over 30 years. As a result, future financial commitments on both the Crown and Regional Councils will be reduced and provide increased opportunities to initiate demand management measures. Impacts on road and rail network utilities (Section 4) The location of the Ruakura development is determined by the need for integration with existing and planned UNI road and rail networks. As a result, Ruakura is best viewed as a UNI facility serving the transport needs across all regions. The business case is driven in large part by more efficient utilisation of rail networks to avoid congestion on road networks, while being located close enough to fulfil the distribution tasks by road when necessary. The Waikato Expressway has not been planned or funded on the expectation of the Ruakura project occurring.