10 December 2015
by Max Berry

Melbourne’s storm in a port is derailing freight

The deferment of a rail project entangled with the Victorian Government’s vexed plans to privatise the Port of Melbourne is keeping thousands of trucks on the road that could be replaced by a small number of trains, writes Max Berry.

OPENING AUSRAIL, the Australasian Railways Association’s annual talkfest in late November, Victorian Premier Dan Andrews listed a range of transport projects his government committed to in its first year in office: the removal of 50 level crossings, orders for 100 locally-built metropolitan trains, new trams and regional trains, the Metro rail tunnel, and the upgrading of the rail freight network in north-west Victoria.

But a conspicuous omission from the list was the Port-Rail Shuttle — despite $58 million in state and federal funding being allocated to this project already, but frozen. The Port-Rail Shuttle has fallen victim to the Andrews Government’s plan to privatise the Port of Melbourne and its fate, probably, will be public only when the lease is signed.

In the whole scheme of engineering challenges facing transport planners, the Port-Rail Shuttle is a relatively simple piece of work. It involves reinstating a disused, short rail spur to Swanson Dock and connecting that line to two existing freight terminals on Melbourne’s northern and eastern fringes (a terminal at Altona is connected already), with provision to link to a new freight terminal planned for Melbourne’s western suburbs, where containers can be transferred from trains to trucks for distribution around the city, or put on trains headed for regional centres or interstate.

The shuttle promises to rapidly move containers by rail between the port and a large new freight hub, eliminating thousands of daily truck movements to and from the port and reducing pollution, noise, congestion and road danger. To say nothing of the greenhouse emissions that Andrews’ Federal counterpart has vowed to sharply reduce.

So it’s worth examining what has caused this delay and its wider implications.

The 50-year lease of the Port of Melbourne – with an option for a further 20 years – is expected to reap the Andrews Government up to $7 billion, funds already earmarked to pay for its signature promise to remove 50 level crossings.

But the privatisation has been contentious from the start. In a transparent attempt to fatten the lease value, the State Government-owned Port of Melbourne Corporation this year sought to raise the rent payable by its tenant, stevedore DP World, by 750 per cent. PMC had to backpedal on this attempted price gouging after the Australian Competition and Consumer Commission entered the fray.

But for Victorian taxpayers, another serious concern remains. Privatised or not, the Port of Melbourne is expected to reach capacity within 20 years, necessitating a second Victorian container port.

The current lease proposal exposes Victorians to a compensation payout to the Port of Melbourne-leaseholder if a second container port is built. The size of the compensation is not clear, but what is clear is Labor’s preference to build a new container port between Melbourne and Geelong. The Port Phillip Bay location has clear advantages of proximity to railways and distribution centres over the previous Coalition Government’s preferred site for a new container port on Westernport Bay.

Forward-thinking cities – for example, London – have relocated ports well away from central business districts, not just because of capacity constraints, but because thriving cities have better uses for the inner-city land they occupy. Unless Melbourne does this, it may one day be knocked off its “most liveable city” perch.

But, after committing Victorian taxpayers to a $600 million-plus compensation bill to the consortium building the now-abandoned East West Link, the prospect of more unproductive compensation payments linked to a new port has prompted some rather desperate-looking proposals to expand the existing port. The Age revealed in November that under “Project Phillip”, one idea was a floating container island in Hobson’s Bay, south of the existing Webb Dock at the mouth of the Yarra River.

Let’s examine this thought bubble. There’s no rail link to Webb Dock — it was severed to make way for the nearby Docklands development in the early 1990s. And now plans are under way for a new suburb between Webb Dock and Docklands, at Fishermen’s Bend. A proposal for a new rail link with a liftable, bascule bridge over the Yarra already has been strongly opposed by Docklands residents. Similarly, prospective residents of the new Fishermen’s Bend estate are unlikely to warm to the Project Phillip idea of a rail viaduct and freight trains running past their apartment windows.

Indeed, once the new Fishermen’s Bend suburb is occupied, it may not be feasible to operate Webb Dock at all – let alone an expanded facility – which calls into question the conversion for container handling currently under way. And, given the projected rise in container volumes, any expansion soon would be insufficient. A proposal to confer seabed rights to the leaseholder also has drawn widespread objections.

Showing contempt for parliamentary process, the Andrews Government has promised to use its essential services powers to lease the port should the Liberal Opposition honour its vow to block legislation to privatise the port in the Upper House unless the lease bill is amended. But that option would cruel the price tag, because the leaseholder wouldn’t have the security afforded by legislation.

The Liberals outlined their concerns in a parliamentary inquiry report released on December 8 and one of its earliest recommendations (4 of 15) is for the Government to “immediately” commit to the Port-Rail Shuttle project, ensuring that

'... the short-term delivery of the Port-Rail Shuttle is fully reflected in the [lease] transaction documents.'

GHD Consultants advised the committee that even Stage 1 of the project would remove nearly 3,500 truck trips from the port per day, cut carbon dioxide emissions by 23,000 tonnes a year and expand Swanson Dock’s capacity by 1.4 million containers a year. Completing the project would add $545 million to the lease proceeds, GHD estimated.

Other recommendations include: prohibiting a compensation clause in the lease, preventing a stevedore business from leasing the port (for obvious competition reasons), including a rent-capping mechanism, developing a comprehensive transport plan, reinstating the environment monitor, and allocating a minimum percentage of the net lease proceeds to rural and regional logistics infrastructure.

On the projected rise in container volumes, the committee noted the wildly varying estimates and chided the Government for using a 2006 forecast in its submission, saying the

'... committee is surprised that the Government would rely on 10-year old forecasts to support its decision round the future of the port.'

Port of Melboune (Image: supplied)

But submissions from industry quoted in the report were the most scathing.

On the failure to implement the Port-Rail Shuttle, Qube Holdings stated it had ceased operating an intermodal terminal on Melbourne’s northern outskirts

'... because no-one in the Port of Melbourne Corporation is really focused on metropolitan intermodal rail.'

The logistics company was handling 300,000 containers a year by rail in Sydney

'... but we have given up in Victoria.'

Chaired by a Liberal, Gordon Rich-Phillips, the Port of Melbourne Select Committee divided along party lines on many of the recommendations and the Labor Government members issued a minority report, as did Greens member Greg Barber, who opposes any privatisation, amended or not.

All of which strengthens the case for direct Federal oversight of ports. Recent years have seen state governments competing to build bigger container ports, with all the strategic national vision of schoolboys at a urinal.

The previous Victorian Government’s plans for a new container port on Westernport Bay at Hastings were based on that location being able to accommodate “mega ships” that would be unable to enter the narrow heads of Port Phillip Bay. But such ships, with a carrying capacity of 18,000 twenty-foot containers, are unlikely ever to come to Australia — even with a population of 50 million, according to Dr Hermione Parsons, of Victoria University’s Institute for Supply Chain and Logistics, who explained why in this report.

Another problem is that Hastings doesn’t have a rail link and installing one would require freight trains to travel alongside metropolitan and regional passenger trains in one of the most congested rail corridors in Australia. Lack of rail access to Hastings was a major factor in the Coalition’s determination to build the East West Link road project because of the thousands more daily truck trips Hastings would demand. In its tellingly-titled Freight State blueprint, the Napthine Government made no secret that its infrastructure plans were aimed at maintaining Victoria’s pre-eminence as a freight hub, rather than any national considerations.

Federal oversight of ports may not necessarily preclude privatisation. But, under Federal oversight, would the Port of Darwin have been leased to Chinese interests just when tensions in the South China Sea have heightened? Well, we can only hope not.

But the port-rail standoff in Victoria has wider, national implications. Having received a final implementation report for Inland Rail in September, the Federal Government is expected to provide funding in the next Budget for the $10 billion freight line connecting Melbourne and Brisbane via central NSW.


Freight train coming into northern outskirts of Melbourne (Image: supplied)

Dubbed the “Steel Mississippi” to evoke that mighty river’s importance in moving freight from America’s mid-west, Inland Rail has a strong business case (a benefit-cost ratio of 2.62) built on getting agricultural commodities more efficiently to ports for export. It will allow 1,800 metre (and in future, 3600 metre), double-stacked container trains to complete the Melbourne-Brisbane journey in less than 24 hours (down from more than 30) using one-third the fuel needed by trucks to move the same load.

But Maurice James, managing director of rail operator Qube, told AusRail that the full potential of Inland Rail will be reached only if containers can be moved efficiently all the way to the ports at each end of the route by train. The first contracts have been awarded and, happily, work is proceeding from the Queensland end. (Inland Rail will take 10 years to complete.)

It’s not only the Port-Rail Shuttle that is left uncertain in the planning of Inland Rail. In a perverse omission, the location and development of all intermodal freight terminals on the route was outside the terms of reference of the Inland Rail Implementation Group, despite IRIG’s final report stating that

'... potential benefits will be maximised if Inland Rail is supported with complementary intermodal terminal capacity.'

There needs to be the right number of terminals in the right places. Rural local councils are only too keen to push for intermodal terminals in a bid to reap economic benefits for their shires. But the benefits depend on having a big enough freight catchment to ensure the terminal’s viability. Wakefield Transport Group boss Ken Wakefield, who operates a terminal at Merbein, estimates each terminal needs at least a 100 kilometre radius.

Even before Inland Rail spurs more freight terminals, the Albury-Wodonga region, which straddles a state border, may have a looming problem, with a new intermodal terminal under construction in Wodonga adding to an existing facility over the Murray at Ettamogah. Only time will tell if the region can support two freight terminals.

With the Andrews Government keen to put the lease bill to a vote before parliament rises for the year on December 11, it’s likely that behind-the-scenes negotiations between the Andrews and Turnbull governments and freight interests are under way to sort out this logistics mess. The mess now includes Victorian Government commitment to an unsolicited Transurban plan for a $5.5 billion toll road, including a tunnel, in Melbourne’s inner west, designed to facilitate truck access to the port, and seemingly, “compensating” for not building the fully-funded Port-Rail Shuttle right now.