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Submission to Infrastructure Victoria Submission to Infrastructure Victoria: Infrastructure Victoria’s draft 30-year infrastructure strategy and Discussion Paper on Victoria’s Future Port Capacity October 2016 1 This document has been prepared by the Freight on Rail Group (the Group). The Group is a rail freight focussed industry group established to engage with Government and key stakeholders on major public policy issues. It consists of the seven major rail freight businesses in Australia: Aurizon Aurizon has rail and road-based freight and infrastructure operations across Australia. Aurizon operates above-rail freight services from Cairns through to Perth, and manages the Central Queensland Coal Network made up of approximately 2,670km of heavy haul rail infrastructure. Australian Rail Track Corporation (ARTC) ARTC has responsibility for the management of over 8,500 route kilometres of standard gauge interstate track across Australia. ARTC also manages the Hunter Valley coal rail network, and other regional rail links. Brookfield Rail Brookfield Rail manages and operates a 5,500 kilometre open access, multi-user rail freight network extending throughout the southern half of Western Australia, providing access for intermodal, iron ore, grain, alumina and various other bulk commodities. Genesee & Wyoming G&W is a global vertically integrated rail freight company with a large Australian presence in SA, NT, Victoria and NSW. G&W owns nearly 5,000 kilometres of track in SA and NT, including the 2,200-km Tarcoola-to-Darwin railway. Pacific National Pacific National is one of the largest providers of rail freight services in Australia, providing intermodal, coal and bulk rail haulage services throughout Australia. Qube Qube is Australia's largest integrated provider of import and export logistics services. It offers a broad range of logistics services with a national footprint and a primary focus on markets involved in international trade in both the bulk and container markets. SCT Logistics SCT is a national, multi-modal transport and logistics company. It operates its own intermodal rail services from the eastern States to Perth, while also providing bulk rail haulage services. It has facilities in Brisbane, Sydney, Parkes, Melbourne, Adelaide and Perth. Key contacts for this document: Aurizon: Mr Patrick Coleman, Principal National Policy Adviser 07 3019 7747, [email protected] ARTC: Mr Adrian Teaha, Manager Industry Policy & Strategy 08 8217 4397, [email protected] Pacific National: Mr Stuart Ronan, Manager Access and Regulation 02 8484 8056, [email protected] 2 Introduction The Freight on Rail Group (FORG) values the opportunity to provide a confidential submission to Infrastructure Victoria on the state’s ‘Draft 30-Year Infrastructure Strategy’ (Draft Strategy), as well as provide comments to the Discussion Paper on ‘Victoria’s Future Port Capacity’ (Ports Paper). FORG is a group of seven major freight rail companies established in August 2015 to engage with governments and key stakeholders on major public policy issues. FORG aims to contribute to a policy and regulatory environment that enables the development and operation of an efficient and commercially sustainable rail freight transport sector. The members of FORG have extensive experience in issues associated with a broad scope of infrastructure, transport and supply chain matters similar to those being addressed in the Draft Strategy. We support the Victorian Government’s establishment of Infrastructure Victoria as a body to provide independent advice on infrastructure projects and to identify and prioritise infrastructure needs in the state. FORG looks forward to working with Infrastructure Victoria on transport policies and priorities for the state. The Draft Strategy and structure of the document is based on the need for good outcomes to be delivered for the state of Victoria and its people and FORG agrees that these needs cannot be resolved with just one solution. Instead, as outlined in the Draft Strategy, a combination of good planning, investment reform and infrastructure initiatives are required. This submission focuses on rail’s role in freight movement within Victoria and specifically addresses the recommendations and initiatives mentioned in this Draft Strategy. As FORG is a freight rail advocacy group this submission limits its comments to those matters in the Draft Strategy and Ports Paper relating to freight transport. To provide greater context around the positions put forward in the submission, FORG’s 25 Year Infrastructure Strategy document has been included to reinforce our position, at Appendix A. Rather than addressing individual items or each chapter of the Draft Strategy the FORG response to the Draft Strategy is structured under three Infrastructure Management categories given that Draft Strategy initiatives cross over different chapters (for example Land Use Planning). These categories used in this submission are: Changing behaviour, managing demand, Better use of existing assets, including through improved integration, and Expending assets or building new ones. Where possible, the submission refers to the project / initiative name and the acronym used in the Draft Strategy and Ports Paper. FORG understands the next stage of the Draft Strategy, following consultation, will be the development of a ‘Final Strategy’ document. As such, this submission provides observations throughout which are considered important for the next iteration of the Draft Strategy. We welcome the opportunity to meet with Infrastructure Victoria to discuss this submission further, noting that individual members have already met with Infrastructure Victoria, and may provide separate submissions. The Freight Rail Industry To be commercially viable, railways need to achieve significant economies of scale and freight density. Given Australia’s low and dispersed population and vast geography, the primary challenge 3 for rail, in particular the non-mining networks, is achieving those economies. Rail is suited to high volume, bulk commodities, generally over long and shorter distances. The nature and strengths of the industry has meant it has traditionally handled the freight market for heavy high-volume products such as agricultural and mining commodities. Within the provision of non-bulk freight services, rail is generally more suited to longer haul distances. This occurs because of the need to offset additional handling to facilitate inter-modal operations and the use of ‘pick up’ and ‘delivery’ freight movements between rail terminals and customer facilities. It is within this segment particularly where road freight has successfully captured market share from rail. This has largely been realised through the introduction of larger, higher productivity vehicles, which can be accommodated on Australia’s national highways following decades of sustained, high value road investment. Barriers to new industry players in the freight rail industry are high, with new entrants facing a myriad of challenges, including operating a high fixed cost business, the need for considerable capital outlay, the difficulty of attracting a skilled workforce and the requirements of various compliance, regulatory and safety accreditations and approvals across multiple jurisdictions.1 FORG recommends that Victoria prioritise measures to streamline compliance and regulatory processes (including consistency between jurisdictions) in order to further facilitate efficiency in the rail sector. In addition Victoria should seek to create a level playing field for all transport modes, particularly in regard to transport infrastructure pricing. Changing Behaviour, Managing Demand Transport Network Price Regime (TNP) Versus Road Pricing Reform FORG is generally supportive of transport network price regimes which reflect costs, but FORG is concerned that there is a lack of clarity regarding the Draft Strategy’s proposed TNP (listed as a top 3 priority recommendation).2 It is not clear if the TNP is intended to manage demand for peak and non-peak traffic across the transport network and / or if it is intended to address the cost associated with building and maintaining roads in Victoria. The TNP as outlined in the Draft Strategy does not seem to be designed to recover costs at the level required for freight and does not address the competitive neutrality issues between road and rail, which are discussed in more detail within this submission. Reform to road pricing for heavy vehicles (and the associated arrangements for investing in road infrastructure) should be a priority for Infrastructure Victoria. This issue is particularly important where there is competition between road and rail freight (i.e. road pricing reform is needed on national highways and arterial roads). Aside from the long-term productivity and efficiency benefits that road-pricing reform would have on the overall transport system and broader economy, it will deliver significant social and environmental improvements by reducing congestion caused by increasing road freight. Under the current road funding arrangements there is disconnect between heavy vehicle road charges and the future funding of transport infrastructure. Funding under the current arrangement does not go to those bodies responsible for maintaining or upgrading transport infrastructure. As a consequence, the right investments in key roads for freight transport may not be undertaken. FORG supports the view that a trial of direct user charging arrangements should occur in an effort
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