Upgrading Northland's rail line to Auckland and building a spur to Marsden Pt would cost around $1.3 billion over the next 40 years.
But a new report examining the business case for the rail network says such an upgrade will only really be worth it if operations are expanded at Northport, the deep water port at Marsden Pt.
The business case by the Ministry of Transport looked at the cost of upgrading the rail line between Whangārei and Auckland, reopening the mothballed tracks north to Otiria, near Moerewa and west to Dargaville, and also building a new spur to Northport from Oakleigh.
It estimates the total cost at $1.3b over 40 years - $730 million in the first four years during the construction phase and $3m for improvements and maintenance in the years after.
However, the economic assessment says the benefit-cost-ratio (BCR) of the plan only really stacks up if Northport expands its operation, essentially by taking over some of the work done by Ports of Auckland.
The best-case gives the investment a benefit-cost-ratio (BCR) of 1.19, meaning for every $1 spent there would be a $1.19 return. This would require a major expansion of Northport which would see it handling 400,000 containers, 100,000 from within Northland and 300,000 from Auckland. In the year to June 2019 Northport expects to handle 12,500 containers, up from 8000.
Without expansion of Northport, the BCR falls to 0.32, meaning the Government would only get back 32 cents for every $1 spent.
The majority of the economic benefits come from easing congestion on Northland and Auckland's roads and by reducing truck trips by 75,000 a year. A 2017 report found congestion costs Auckland between $900m and $1.9 billion a year.
Just 1.4 per cent of freight in Northland is moved by train due to the lack of rail to Northport and the tunnels and bridges, many of which would need major upgrades to fit modern containers or support heavier loads.
If the investment was to go ahead, the amount of freight being transported by rail in Northland is expected to grow to 10 to 14 per cent, around two million tonnes, which is above the national average of 7 per cent of freight transported by rail.
Other benefits include saving $20 million in road crashes involving trucks, saving $3.8 million in annual road maintenance and reducing carbon emissions by 10,000 tonnes.
The business case suggests that if Whangārei's growth figures were similar to that of Waikato or Tauranga, which have both benefited from strong road and rail connections, then it could see a further 2000 to 10,000 jobs over a 12-year-period.
However it does not include job creation in its BCRs, nor the impact such an investment would have on spurring business investment decisions in Northland.
Connecting Northport to rail and enabling it to service Auckland-bound freight can make a major contribution to the development of the region, said Associate Transport Minister Shane Jones when releasing the business case on Northland rail today.
"The Northland Rail business case, together with the recently released interim report from the Upper North Island Supply Chain Strategy, present a bold vision for investment in how freight moves around the upper North Island," Jones said.
"At the moment only 1.4 per cent of Northland's freight moves by rail compared with 7 per cent nationally. This is the result of many years of what both the business case and the supply chain study call 'managed decline', including the failures to connect Northport to the main Northland rail line and upgrade tunnels to accommodate modern containers.
"Because of these failures, Northland products are often trucked to Auckland then packed into containers which then move by rail to the Port of Tauranga for export. This business case will play a major role in government decision-making about major investments in Northland rail after the final report from the Upper North Island Supply Chain Study is completed in September," Jones said.
KiwiRail has welcomed the report, saying it recognises the strategic value of a viable rail network for the region.
"Northport is, other than Nelson, the only key port that does not have a rail connection and as a result Northland's railway lines are underused. The newest parts of the North Auckland rail line are almost 100 years old, and the oldest parts up to 140 years old. Without investment, the line will likely need to close within the next three to five years, because of the state of its infrastructure. That would mean even more heavy vehicles on the region's roads,'' KiwiRail Group chief executive Greg Miller said.
"We have supported the business case with work to better understand what is needed to bring the existing lines up to a modern standard and advancing design of a rail connection to Northport."