Government should fund Tier 3 lines: Brookfield

Date: 11.01.2013

Brookfield Rail CEO Paul Larsen says the state government should fund WA’s “Tier 3” grain rail lines, but only if they can be commercially viable

By Anna Game-Lopata | January 11, 2013

Brookfield Rail CEO Paul Larsen says the state government should fund Western Australia’s "Tier 3" grain rail lines, but only if they can be commercially viable.

The lines remain in state ownership, but the private rail network operator, owned by Canadian
asset manager
Brookfield Infrastructure, has leased them, as part of Western Australia's 5,600 km rail freight network, until 2049.

A decision was made in October last year by the government, Brookfield Rail and its key customer, grain handler CBH to keep the Tier 3 lines operational at least
12 months to ascertain if there is enough demand to justify further investment.

Transport Minister Troy Buswell would not make a commitment to continue funding of the lines after 2013 either way, telling SupplyChain Review in a statement it was up to Brookfield Rail to determine if the lines are commercial viable.

According to Auditor General Colin Murphy’s report last week, the Tier 3 lines, which carry 10 percent of the state’s 4.5 billion grain export industry, require $93.5 million of work to replace enough degraded timber to enable the track to comprise 50 percent steel sleepers.

But Larsen, who met with Minister Troy Buswell prior to Christmas to discuss the state of the Tier 3 lines, says their use is declining as CBH focuses on its new Tier 1 and 2 line fleet.

Larsen says to remain competitive, the Tier 3 lines require the equivalent funding support given to the Tier 1 and 2 lines, which currently carry 90 percent of the grain task.

Of the $352 million over four years the state and federal governments have spenton the grain network, Larsen says just $180 million was allocated to rail, with $165 million designated to re-sleepering Tier 1 and 2 lines.

"The lines should get the same level of investment," Larsen says. "Currently Brookfield Rail is maintaining the Tier 3 lines at a loss."

In addition the fact that the grain rail sector must compete with a "subsidised" road industry in regional WA rankles with Larsen, especially given the investment Brookfield Rail has made into both local grain and iron ore networks.

Trains on Brookfield Rail’s new $500 million Midwest Railway to Geraldton Port have been running for two months.

"They're running beautifully and that’s because that industry has been able to afford the appropriate level of investment to support that outcome," Larson says.

"Meanwhile the efficiency of the grain task, where we've been forced to compete with road rates, has been suffering. The lack of capital reinvestment both in below and above rail, ultimately leads to market failure.

"We have to recover the full cost of providing infrastructure to our grain customers whereas the truck industry doesn’t.

"Basically while the government isn’t planning to level the playing field in terms of charging the true cost of road, we would like to see capital investment put into rail infrastructure.

"If the government does not invest the capital required to replace the Tier 3 line sleepers it is unlikely the lines will remain open," he says.

"Private investment in the networks, together with state and federal government commitments, will continue to see infrastructure developed and utilised well into the future."

According to the Auditor General’s January 3 report between 2000 and 2011, state funds spent or committed to the road and rail grain network totalled around $102 million, with an additional $258 million from the Commonwealth.