Questions To Kiwi Rail

( The following draft is based on a list of questions compiled by the Gisborne Napier Rail Action Group in April 2011 )

It will be useful for all groups working for the preservation of our rail infrastructure to put together some questions to KiwiRail to quantify and clarify their position.

And just in case you're worried that they will not supply answers:

"Official information laws cover almost all official information and almost all government agencies, including state-owned enterprises and local government. Local government is covered by the Local Government Official Information and Meetings Act, but this is largely identical to the OIA."

For more on how to use the Official Information Act click here.

1. Which businesses and organisations in Whangarei, Dargaville and the rest of Northland (and beyond) has the Kiwirail 'commercial team' been in contact with, when and what have been the barriers for those businesses utilising the rail line more frequently?

2. What does Kiwirail consider to be the 'wider social, economic and environmental considerations' that could be considered by regional and central government agencies in their decisions about the future of the North Auckland line?

3. Who is doing the 'thorough review' that is being undertaken and what are the Terms of Reference for it?

4. Do Kiwirail considerations of 'commercial viability' include factoring in the opportunity costs of externalities such as the positive impact on public safety and environmental benefits of the railway line being retained?

5. Is Kiwirail required to make a profit for its shareholder or just break even and what mechanisms are at the government's disposal if it were to consider new funding for Kiwirail to support the North Auckland Line?

6. What assumptions (particularly diesel prices) and timeframes are the current business models for the North Auckland line based on?

7. Would they consider commissioning ( outsiders ) to undertake an independent business feasibility study like the one attached?

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Kiwirail’s Statement of Intent includes keeping the minor lines open if there is “proven future potential” (or an imminent anchor customer).

They could be asked what they mean by the future…it could be ten years as there is suggestion of a ten-year plan, but there is also a prediction (in the growth-economy mindset) that freight will grow by 75% by 2031, implying perhaps a twenty-year plan.

Valuing the line as a capital investment brings in another order of magnitude—a hundred-year plan.

It seems that the future potential is easily proved if one has a long enough focus, and in fact cannot be disproved except by grossly shortsighted business assumptions.

Kiwirail needs public pressure to explain this to the government.

The government has given the company little room to move and scant financial support, but the company can at least do the feasibility studies and insist that unfeasibility is not proven.

Questions:

1. How much consideration is given to future oil prices?

A good economist could do calculations on the competitiveness of rail over road for oil priced at 5, 10 and 20 times its present value.

We should see these projections.

2. Given that such price changes will eventuate sometime, how far into the future does Kiwirail estimate them to be?

3. How much consideration is given to passenger transport under the same oil-price regimes?

4. Given that the haste of air-travel is largely frivolous, the air-passenger market should be thoroughly analysed as a potential source of rail custom.

A flat rate of, say $100 to Wellington, rather than a lottery of grossly differing and largely higher prices, would be immensely popular to all income groups.

5. The same analysis of how oil prices affect current car travel should reveal a huge potential passenger market.

(The present bus market is of negligible size as it is such an unattractive journey.)

A revenue of $2m per year translates into $40,000 per week, or less than $8,000 per day.

There should be scenarios of this, composed of a mixture of passengers and freight. Surely such calculations have been done?

6. Ravensdown still trucks a third of their fertiliser to Gisborne because of a shortage of rolling-stock. Can Kiwirail not insist on the government making their own business viable by investing in sufficient wheels? Does an “anchor customer” have to provide their own?

7. How much importance is placed on the capital value of the line?

To replace it would cost $1b, on top of considerable previous destruction costs.

This is equivalent to 500 years of maintenance at $2m per year, disregarding any increase in revenue.

The question is important as Kiwirail is state-owned, and although companies keep a capital account, the government in its annual budget does not.

The government should be challenged to recognise capital when it sees it, by both the company and the public.

The potential of multiple custom is at present higher than that of a single anchor customer, and multiple custom requires an agency.

It appears that neither Kiwirail nor the government itself is prepared to be the agent.

It is not responsible to sit back and hope that some great entrepreneur will come in with carriages, personnel and administrative structure for an attractive passenger service; and that another will turn up with extra freight capacity; and yet another—perhaps the most important—to run a freight service that does not expect full containers, but manages a freight centre where containers are filled by small customers.

If this is beyond Kiwirail’s brief, they should be complaining, and presenting a feasibility study to promote the same.

Gavin Maclean, 9 June 11, Gisborne Rail Action Group

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What do you reckon ? Would you like to add or amend anything ? Please e-mail us at : thewayforward2011@gmail.com