Interisland rail ferries: Regulation is the problem behind the high cost - Richard Prebble

OPINION

Nicola Willis must not let her rage at Labour leaving reckless fiscal hand grenades, like the rail ferry blowout, cloud her judgment.

The decision to cancel the new rail ferries is a decision to cancel having a railway.

I am a former minister of railways. The world-famous consultants, Booz, Allan and Hamilton modelled New Zealand railways. The modelling revealed the key to a sustainable railway is the rail ferries. The ferries extend the main trunk railway line making sending freight by rail economic.

Nicola Willis says, “We want a Toyota, not a Ferrari”. A Toyota is not going to be able to carry rail freight between the islands.

The new diesel-electric hybrid ferries reduce emissions by around 40 per cent and carry an increase in rail freight. Today the three ageing, unreliable ferries cannot carry all the freight that shippers want to send by rail.

Replacing the ferries with conventional container ships is not viable. Unloading wagons makes rail uneconomic. There is no dockside capacity to load containers and passengers.

The economic, environmental, and social impact on the South Island, on exporters, importers, industry, tourism, indeed the whole country, of not having an inter-island rail service will be profound.

The issue is not the cost of the ferries. The cost explosion has come from the dockside improvements needed to handle an increase in freight and passengers.

No one would choose to build a ferry terminal in Wellington. The site is congested. The reclaimed land is on the Wellington fault which could rupture any time in the next 500 years liquefying the site.

Vehicles loading on to an Interisland ferry last week. Photo / Marty Melville

There is no choice over the location. Just as Nicola Willis has no choice but to fund schools, hospitals and the like, the Government has no choice but to fund essential infrastructure.

In Parliament last week Grant Robertson and Nicola Willis made similar aspirational statements, but both balked at the cost.

“A sustainable and resilient Cook Strait ferry crossing is essential for New Zealanders. We all agree that the cost escalations that KiwiRail proposed were unacceptable, and they were not accepted by the previous Government,” Grant Robertson said.

“Our Coalition Government is committed to having a resilient, safe, and reliable Cook Strait ferry service but that cannot mean that we have an open chequebook,” Nicolla Willis said.

As the last six years has proved, setting an aspirational goal does not make it happen.

Nicola Willis went further saying, “We continue to support rail as a means for transporting freight around New Zealand.”

Finance Minister Nicola Willis. Photo / Mark Mitchell

The tracks, trains, wagons, and employees must be paid for. If earnings are less than the fixed costs, then rail makes a loss. When I became minister the railways were losing one million dollars a day.

Without new, larger, roll-on roll-off ferries, the railway losses will be colossal. The cost to the taxpayer will rapidly exceed the $3 billion cost of the ferries and dockside improvements that have an estimated life of 60 years.

In 2013 the National-led Government cancelled having a ferry terminal at Clifford Bay that would have cut the journey from Wellington to Christchurch by nearly two hours.

The Government said the $525 million cost was too high. In a decade we will think $3 billion for new ferry terminals in Wellington and Picton plus two new ferries were a bargain.

New Zealand is not meeting its carbon reduction targets. A May 2022 report by the Ministry for the Environment showed 17 per cent of New Zealand’s gross emissions come from transport. In my view rail is the only viable way of reducing emissions from freight. If New Zealand is to meet its Paris commitments the new rail ferries are essential.

The impact on Auckland’s southern motorway and State Highway 1 of South Island freight going by truck will be severe.

There is only one variable, the cost of dockside improvements in Wellington. The dockside improvements are 80 per cent of the cost. The cost has spiralled out of control because of the expense of meeting the new earthquake code.

I am also a former director of a building company. We built buildings in Christchurch that survived the earthquake. Liquefaction meant the buildings still had to be demolished. After a major earthquake the Wellington ferry terminal will have to be rebuilt.

Does the new earthquake code make any cost/benefit sense? Have the regulations ever been subjected to a cost/benefit analysis?

It is not the ferries where the minister should be looking for a better solution but dockside.

KiwiRail does not write the earthquake code, the government does. It is KiwiRail’s insurers who are demanding 70-metre piling. The government takes the insurance risk on roads. Intermodal parity means government should also take the insurance risk for rail.

The coalition has a new Regulatory Ministry mandated to examine whether regulations make cost/benefit sense. Before the Government destroys the viability of rail the Minister of Regulations, David Seymour, should urgently consider whether it is the earthquake regulations rather than the ferries that need changing.