Freight Rail, Passenger Rail

The road ahead for NZ rail

After years of uncertainty and limited funding certainty, a new policy framework is building a solid future for rail in New Zealand.

On January 11, the upgraded Northland Line re-opened to rail traffic. The line, which connects the northern port city of Whangārei with Auckland and the wider New Zealand rail network, had undergone a major upgrade throughout 2020.

Having invested over NZ$200 million ($185m) already, for locals and businesses in the region the line opened not a moment too soon. In late 2020, congestion at the Ports of Auckland saw the 261m container ship Constantinos P rerouted from Auckland to Northport, leading to thousands of extra truck movements on local roads. With congestion forecast to continue in Auckland and at the country’s main container port at Tauranga, another route for imports and exports will be welcomed by industry and the community.

The upgrades to the Northland Line not only repaired the line, but significantly increased its utility. A series of tunnels prevented hi-cube shipping containers from being carried by rail. With the tracks now lowered, traffic has already doubled to two trains a day.

As chief executive of the NZ Ministry of Transport, Peter Mersi, explained to attendees at AusRAIL Live & On Demand, the re-opened Northland Line is a world away from the line’s former state.

“That rail line was previously facing the prospect of closing, so the investment will see track improvements and a section re-opened, there’ll be some bridges replaced and importantly, tunnels will be lowered so that hi-cube shipping containers can be transported to and from Whangārei. This investment is all designed to allow rail to serve the containerised freight market in Northland that currently has to be carried by road.”

Current investments in rail

Northland is not the only region of New Zealand to see major investments in rail. In fact, there is barely a region that is not part of the country’s rail renaissance.

The national network provider and freight operator, KiwiRail, is benefitting from government investment of over NZ$2 billion ($1.85bn). In addition, the urban passenger networks in Auckland and Wellington have received a combined NZ$1.5bn in investment. The country’s COVID-19 recovery funding also invested in rail to encourage regional economic development, with the Napier to Wairoa line reopened due to this funding.

In Auckland, the City Rail Link will open up the rail network in the centre of the city and is being delivered alongside other major works on the network.

“The City Rail Link will be a game changer, with rail patronage expected to reach 46m passengers in 2028,” said Mersi. “To enable this growth, KiwiRail is currently delivering a program of works, including almost $1 billion of investment in three separate projects, which have been brought together under what we call our New Zealand Up program. These are a new third main line, which will remove bottlenecks in the busy metro network used by commuter and freight services in Auckland, electrification of the rail line from Papakura to Pukekohe, which will extend commuter services into new housing areas, and stations around Drury to support the development of new housing.”

A similar level of transformation is occurring in Wellington.

“Upgrades across the Wellington metro network are addressing renewals and maintenance and enabling commuter growth,” said Mersi.

“The Wairarapa line is long overdue for an upgrade, this includes double tracking, between Trentham and Upper Hutt, and station upgrades. These are really important because again we have bottlenecks in the network where we’ve got metro commuter trains intersecting with our regional Wairarapa passenger train and freight trains. Improvements to the Wairarapa Line will also enable us to remove speed restrictions and allow for commuter and freight growth.”

These investments in track and stations for the benefits of freight and passenger traffic are complemented by a new Regional Freight Hub in Palmerston North. The intermodal facility will handle the increased volume of freight expected to be generated in the North Island by having a centralised hub to get freight off roads and onto rail.

From “managed decline” to a “resilient and reliable rail system”

If you had told a New Zealand rail observer prior to 2017 that this level of investment around the country would occur in the next few years, it’s likely that you’d be laughed out of the room.

Mersi, who took up the reins at the Ministry of Transport in 2016, knows what state the network was in.

“It’s fair to say, for a number of years, KiwiRail has been operating in a very challenging environment, and what I mean by that is that they have a network which they have needed to invest in annually for its maintenance and they had to go through a process where they had to bid every year for money to enable them to make that investment.”

According to Mersi, although there was investment in rail in the cities, in the regions, the network was running on the smell of an oily rag.

“The freight network was running on assets that were approaching or past the end of their economic life.”

This changed with the change of government in 2017, with the incoming Ardern government signalling that they were willing to alter the rules of the National Transport Fund to enable it to fund projects outside of the road sector.

Following the election, the Transport Ministry was tasked with producing the Future of Rail Review, to consider a longer term and more sustainable funding and planning model for rail.

The report, published in 2019, looked at whether New Zealand’s rail network was enabling the accessibility and mobility needed to transport people and goods to where they need to go, while meeting productivity, sustainability, and safety goals.

“The review found that the rail network was in a state of what we called managed decline,” said Mersi, “which, in part, was caused by the short-term funding decisions around long-lived assets. There was a lack of clarity about what we were investing in and why, with investment decisions being made as part of an annual budget cycle and the decisions taken primarily using a commercial frame. The existing planning and funding frameworks frankly weren’t set up to enable rail to fulfil its purpose, or to deliver the broader public benefits that government was seeking.”

The review identified significant remedial investment that would be required to get New Zealand to the point of having a resilient and reliable rail system.

 A shift in the policy framework

Following the review, the New Zealand government began to put in place the policy and legislative framework that would enable rail to fulfil the task set out for it. This included not only the commercial task, but the requirement to reduce transport emissions, support regional connectivity, and urban economic development.

To do this, a major shakeup of the regulation governing transport in New Zealand was required. For rail to access the National Land Transport Fund, which includes revenue from the petrol excise tax and road user charges, changes to legislation was required. In addition, longer term planning was required, and the review recommended changes to the Land Transport Management Act to solve these issues.

Mersi described that this would be “firstly around better investment decision making, across road and rail investments”.

“We wanted to provide KiwiRail with longer term funding and greater certainty, but we also wanted to achieve greater transparency of government expenditure, both on rail projects and on any spending that was attributed through the National Land Transport Fund. By doing this, we aimed to restore the asset base to a state that would enable it to meet customer needs support mode shift and deliver the benefits the government was seeking.”

These efforts led to the Draft New Zealand Rail Plan. A non-statutory, strategic document, it outlines the government’s 10-year vision for rail and priorities for investment.

“A long-term plan is important to reduce the risk that we fall back into a state of managed decline, and to provide certainty for others in the transport sector to invest and plan,” said Mersi.

These changes were solidified in the passing of the Land Transport (Rail) Legislation Act, which came into force on 1 July 2020. With funding now secured through the National Land Transport Fund, KiwiRail will establish a Rail Network Investment Programme by July 1, 2021.

“It supports us to take complimentary and integrated transport planning and funding decisions across road, rail, public transport and it’s even being extended to include coastal shipping. We’re implementing more deliberate and transparent funding decisions through clear funding principles for the network,” said Mersi.

The new reality

As of mid 2021, with funding provided through the National Land Transport Fund, rail will also pay track user charges into the fund, to increase transparency around funding. Mersi noted that additional funding will be required over the next years to continue to rebuild the rail network and overcome the deficit that had existed from years of underinvestment.

With the structure in place, the future is looking firm for rail in New Zealand. In what Mersi described as the most significant changes to the land transport system since the original transport management act was passed in 2003, the reforms set up the New Zealand transport system to be safer and more sustainable than ever.

“What this shift has done is enabled KiwiRail to plan with more certainty. The 10-year plan gives direction, certainty, and it gives everyone a sense of what it is that we’re all trying to achieve and how we’re going to go about that,” said Mersi.


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