Railways vie for government funding as state transport showdown looms

Just who is favoured more in the state’s transport sector depends largely which side of the easement you sit.

Whether its rail or road, both sides argue that the other has had a leg up from government policy in what is a vital but intensely competitive sector.

Currently, the debate is centred around the state Labor government’s focus on shifting emphasis to Western Australia’s rail freight network, which has been plagued by viability issues for years following an expansion of the road network.

Before the state’s rail assets were sold off in 2000, freight transport by rail was already becoming more expensive, largely – many argue – due to road haulage being subsidised through government investment.

However, with rising petrol prices, increased road congestion in the metropolitan area and greater volumes of trade through the state’s transport terminals, there has been a push by the government to return the focus to the rail network.

While users are generally supportive of this strategy, there has been some tension regarding who will bear the cost.

Take for instance, the grain freight network, which transports millions of tones of grain each year and is the lifeblood of our vast farming sector. It lacks the volume on marginal rail routes which penetrate the outer reaches of the Wheatbelt.

To combat this problem, the grain industry, along with several government agencies, has put together what has been called a rail rescue package to give the state’s rail freight network an $800 million makeover.

The consortium – which includes Main Roads, CBH Group, the WA Local Government Association, Australian Railroad Group Pty Ltd and WestNet Rail – has developed a plan to improve viability of marginal rail lines through installing new rail loading facilities and upgrading local roads.

Under the proposal, the federal government would contribute half of the required $800 million, with another 25 per cent coming from the state government and 25 per cent from CBH.

The grain group has indicated it would borrow the estimated $150 million required to fund construction works, in order to minimise capital costs and increase upfront benefits, although the state government has stated it would prefer to source funds through a grain growers levy.

Federal funding would most likely be provided under AusLink 2, the second stage of the government’s national land transport plan.

The $22.3 billion budget for AusLink 2 would be available to the states from financial year 2009-10.

While there is general agreement about the level of investment required, industry players have acknowledged that the plan is tenuous, considering the state government has indicated it will pull out if federal government support isn’t forthcoming.

CBH has not yet signed off on its 25 per cent commitment at board level, and has admitted it is not across all of the detail on the state government side.

CBH supply chain strategies manager Rob Voysey said it was vitally important that the governments contribute their share.

“The alternative is quite scary to contemplate. Effectively, unviable line sections would have to be closed down,” he said.

Under the current arrangement, once its lease expires, WestNet can hand services back to the state government, which must then decide whether to award the contract to another provider or run services itself.

WestNet Rail chief executive officer John Cleland said while the company was seeking clarification on whether it could surrender unviable rail lines to the government by the end of the year, this was not an option it wanted to take.

“Our strong preference is a combined industry and government solution,” he said.

Mr Cleland said the main issues were a lack of trade volume and infrastructure requirements.

“The revenue generated from regional grain lines is sufficient for operating year in and year out, but it’s insufficient for major capital requirements, such as re-sleepering,” he said.

There is also a perception among some industry figures that Queensland Rail and Babcock and Brown’s $1.6 billion acquisition of Australian Railroad Group from Wesfarmers last year was over-valued and hid the true cost of the rail freight network.

Others have suggested that a low-cost operator may come on board, although the low volume of trade on the network would make that option unlikely.

Sustainable Transport Coalition convenor David Worth said with fuel prices and environmental issues being a concern, the rail freight network had to be preserved. 

“If the agricultural sector is to remain viable, it needs cheap freight, and rail is one part of that. There may be some options with electrifying certain sections (depending on routes), and adding more freight,” he said.

“Cereal prices have gone up a lot in the past 12 months and world food stocks are at their lowest, so growers should contribute to the freight system.”

There has also been some recent tension between industry and the state government over the South West freight network, with the government moving to amend the Transport Coordination Act and regulate road haulage of timber.

From December 1, timber companies exporting from the Port of Bunbury will be required to apply for a permit to cart woodchips and logs on road networks, if rail is not a viable alternative.

The proposed system is similar to that already used by mining companies in the Mid West, where a permit system applies to companies within 100km of a serviceable railway.

However, industry has argued that this is an attempt by the government to enforce its proposed short haul route between Greenbushes and Bunbury Port.

The existing rail network would service a new Greenbushes intermodal facility, to be used primarily by local timber company, WA Plantation Resources.

Rail company ARG would provide the above-ground rail services, while the government would contribute about $14.5 million funding for track upgrades and associated infrastructure.

WA Plantation Resources general manager Ian Telfer said the company was still working through the proposal with ARG, given there had been some delays in the planning stage because of the need to ensure a continuous resource supply and drive unit costs down.

“We’re trying to make an operating plan with a cost structure that makes it viable,” he told WA Business News.

WA Plantation Resources would be the main user of the network, although other producers may utilise the route and fill volume gaps.

Meanwhile, Fremantle Port’s inner harbour rail network has also been plagued by viability issues.

Last month, former network provider, Fremantle Link Services, was replaced by new group, CBH-backed Intermodal Link Services, on an interim basis.

Fremantle Link Services – a joint venture between listed companies Patrick and Toll – had held the contract since 2002.

Under Intermodal’s proposal, a new multi-user terminal will be created at CBH’s Forrestfield site.

According to the rail providers – Stevenson Logistics Pty Ltd and Kewdale-based South Spur Rail Services Pty Ltd – which have equity in Intermodal, the new arrangement will increase efficiencies on the supply side through direct transfers and greater utilisation of train time.   

Fremantle Ports chief executive officer Kerry Sanderson acknowledged that viability issues remained, although she said an initial trial of the network had been promising.

The state government’s strategy for the metro freight network has Fremantle Port as a key player in a number of proposals to increase rail use.

A six-point plan is being implemented by the government, based on its 2002 metro freight network review, which includes the Kewdale-Hazelmere Integrated Masterplan.

Released in August last year, the 30-year plan proposes a direct rail connection be established between Fremantle Port and Kewdale intermodal terminal, as well as further development of the Port’s rail network.

The plan has been subject to a number of delays relating to the fact that some facilities in the area are privately owned, while other land is owned by the state.

In addition, land around the Perth airport is federally owned and new commercial ventures, such as warehousing facilities, are being established in the area, adding further pressure on transport networks.