KiwiRail must pay its way

Transport Minister Steven Joyce told Q&A that if the decision to buy KiwiRail had been his he would never have bought it.

It was one of the more costly legacies of the previous adminsitration:

KiwiRail is projecting a deficit of almost 50 million dollars next year, rising to more than 300 million in 2012.

“It’s cost New Zealand around $900 million already in terms of the purchase price, plus the loans we took over when we purchased it back. It has very high fixed costs,” says Joyce.

It’s not difficult to think of many other areas where that $900 million could have done something good; and the opportunity cost of $50 million next year rising to more than $300 million in 2012 which is being wasted on the railways is eye watering.

Joyce said the government isn’t prepared to keep paying for KiwiRail and is trying to get it to a form where it can be self-sustaining.

“(So) it can at least, to use the term, wash its own face. And that is going to be a challenge, don’t underestimate the size of that challenge,” he says.

“We can’t just keep tipping tax payers money in the back of it.”

Phil Goff didn’t say sorry for this profligate expensditure of taxpayers’ money when he was doing his mea culpa. Does that mean Labour still thinks it was a good idea?

17 Responses to KiwiRail must pay its way

  1. murrayg1 says:

    Until you accept -or investigate for yourself – the truth of what I say about energy, I suggest (politely)that you aren’t really qualified to comment.
    Goff is a residual Rogernome, and will be in Business As Usual denial too. Cullen was in denial (see Hansard, 2004? Fitzsimmons/Cullen/Peak oil?) until late in the piece, then saw where it will go.
    Post peak energy, growth-based monetarism is dead, you saw the first shudder a year ago. Current monetarism needs growth – read the Peter Lyons op/ed, ODT yesterday.
    The oil makes bitumen, and makes trucks, they will not so much get expensive, as rapidly go off the radar. Think Cuba.
    Local food production, rail, public transport and coastal shipping will be part of the triage. This is why you are seeing Farmer’s Markets, Transition Towns, and the home insulation crash-course.
    To not have rail would be morally bankrupt in that scenario. Private ownership has already proven a disaster, but in the situation I foretell, it will have to comandeered at any rate. Think of it as a wartime footing.
    Gerry Brownlee went on Morning Report, stating that ‘we are facing a global energy crisis’, and he’s only working(in reply to my ODT letter)on the IEA Nov. 2008 report – way optimistic and since bypassed (see: Dr Fatih Birol / The Independent).
    Timescale? You won’t be driving private cars in ten years (you should have seen Nick Smith’s body language and heard his reply to my throwing that one at him in the Skeggs Gallery recently)
    Only on that basis should you evaluate the future of rail. It is understandable that most folk don’t want to know that things may get worse rather than better, and I understand that. There was probably denial on the Titanic decks, too, but it is still better to address pending realities head-on. I’ll post you a copy of Solar Action Bulletin No90 – it’s on rail!


  2. PaulL says:

    murrayg1: missing the point a bit. If trains use more energy than alternative means of tranportation, plus people don’t like using them because they’re inconvenient, then it really doesn’t matter how much energy shortage we have. People still won’t use the trains.

    The short story here is that coastal shipping is way more energy efficient and more convenient, so if we run out of energy, we’ll be using coastal shipping, not trains. And for short commutes in cities, busways are far more convenient and (given our likely loadings) use less energy.

    You’ve made a number of leaps of faith in your assertion that trains have any future at all in NZ.


  3. murrayg1 says:

    Trains don’t use more energy than road, load for load. Coastal shipping is indeed way more efficient, but has place and interface limitations. No coincidence the buying of rail and a boost for coastal shipping were announced together.
    Rail however, beats road, hands down. Steel-on-steel, gentle gradient, good load/prime-mover ratios, Diesel/electric is very efficient.
    One of the catch-22 repercussions of reduced oil, will presumably be less in-city work, and therefore less daily commuting – I think of rail more as long-haul goods. It will have a place for passengers long-haul too, for the same efficiency reasons (hope the Clinton sandwich and tea are better)
    And, of course, the tracks aren’t made of an oil-based substance.
    I do miss the clockwork orange,though…..remember it? Now there was a service!


  4. PaulL says:

    You seem very interested about bitumen. Steel has an enormous amount of embedded energy. Bitumen is produced from oil, but given enough energy input, can be synthesised in other ways. But, realistically, we’d just use concrete instead if we ran out of oil – as many countries already do. And yes, concrete also has an enormous amount of embedded energy.

    My point being that your only argument here is that rail is more efficient than road for long haul journeys. And coastal is still more efficient, NZ is a long and narrow country. Most places you can get to with rail, you can get to with coastal shipping. In your envisaged world there may be a place for rail on a few very specific routes – particularly moving bulk produce from inland to the sea, but that hardly justifies keeping the whole network running.

    Note here that I’m not agreeing with your initial hypothesis that we’re all about to run out of energy – I think you’re way underestimating the potential for innovation and alternative options, and way underestimating the ability to use existing fuel reserves such as coal and oil. But, if we accept your initial hypothesis, we can still have an discussion about the internal consistency of your argument. At present I don’t think your assumptions lead to your conclusion.


  5. PaulL says:

    And (Ele, wish you had an edit function…) I forgot to say. Most of the routes that rail would make sense for (short rail journeys taking bulk product to ports for shipping) are predominately for products like coal, bulk farm produce, other extractive industries. In fact, all the things you reckon would disappear. So even those routes would be in question.


  6. murrayg1 says:

    Triage. Steel simply lasts longer. That’s why local produce is the go too, simply closer. Try something – look around you now, and see if you can spot three things oil wasn’t involved in.
    If anyone thinks things will blunder onward and upward, courtesy of ‘they’,think on this:
    Most people here would have voted for ‘growth’, most media bleat growth, our fiscal system demands it, yes?
    What’s a small growth rate – shall we pick 2%? Sounds innoculuos – you can keep it going forever, right?
    Actually, it doubles in 35 years.
    So, starting now, you would have to do again everything mankind has ever done up until now, by 2045. Use up the same amount of materials again, the same amount of fuel again, produce twice the produce, make twice the dams, trawl twice the fish – it ain’t gonna happen, is it? So we’ve now established that the end must be less than 35 years away, and that the path to there would lay waste to the planet long before that.
    I can tell you that we actually peaked last year. There are ways to sustainability, and the consensus is that we will make the effort to retain rail. Long after the potholes have joined hands across the highways, steel tracks will be usable. The triage will be the inside-curve thrust-faces, but that’s not a major headache. The sections like Mosgiel-Dunedin we should be electrifying too, while we have the chance.
    We need to triage the existing housing stock too, but that’s not for this thread.
    I see you’re a thinker…there are a lot who can’t:
    Back in the ’70’s, somebody in Britain came up with the bright (and it is) idea of putting a bus on the rails. The project was given to the railway engineers. They designed it to existing standards, including the ability to hit another loco. They designed what they knew – a railcar – couldn’t think outside the square. I put the idea to the railway engineer at the initiating Waitati train meeting, and got the same response. No cranial advancement in 40 years. Makes you weep.


  7. PaulL says:

    Sorry, still not convinced. What do you think the useful life is of a railway line under high usage? I wouldn’t have thought any longer than a concrete road.

    Doubling our GDP over 35 years doesn’t imply doubling all mankind’s production since the beginning of time. It is very poor thinking to even claim that.

    I’m interested in whom has this consensus that you report. I certainly wasn’t involved, and a consensus usually covers everyone :-). I think you mean that most of the people in the circles you move in agree with you. That isn’t actually a consensus.

    I don’t see why we’d be electrifying railways – in your scenario, where’s the power coming from anyway? If we have an energy shortage, electrified railway is surely not a good use of what we have. Transmission losses are huge.

    Bus on rails. Agree, except I wouldn’t have the rails – I’d have a bus on a busway. A dedicated concrete busway, if it had the same gradients and curves as the railway it replaced, I think would have a similar life expectency. A busway is enormously more practical for the population.

    When we double our GDP, we don’t typically double inputs like food (twice the fish). We might have higher value fish (fresh instead of tinned perhaps), but I don’t think that there is any intention to eat twice the amount of fish – unless you’re talking population growth again.

    What we do double are manufactured goods and services. We eat out more (no more food inputs in eating out, but much higher GDP. Arguably less food input, as restaurants are more efficient than home).

    As we get richer, services are the largest component. If there are no more people, but there are more services, then that means services productivity has increased – we get more service from each person. This is typically driven from automation and other efficiencies, not from massive additional energy inputs.

    I can see where your arguments are taking you, but I still believe that all your arguments are a consequence of your basic assumptions. And I still don’t believe those assumptions are correct.


  8. murrayg1 says:

    concrete has a service life under load too, but it’s real problem is that it produces a ton of carbon for a ton of cement. Makes it a hot road.
    If you don’t do you doubling in a physical (goods and services) sense, then I don’t care how much paper scrip goes back and forth, if it isn’t underwritten you get what happened last year. Dollar notes are no use if you can’t buy something with them. You have to double the something – which is where my pile of economic textbooks (bought to get informed) go wrong.
    The consensus is, of course of those who think like me. We call it sustainability. Not sustainable development – that’s an oxymoron, and not sustainable management, which allows for morphing regimes.Sustainability – long-term equillibrium.
    Power efficiencies are us. I live in a 1.5 amp / 12 volt house. Even if every house only got twice as efficient, we’d have power coming out of our ears – provided some idiot didn’t mop it up with ‘growth’.
    You can’t argue no fish but more goods and services. It’s all just consumption, and it has to double – eat up!
    Service productivity? I’d argue that paper-shuffling is a zero-sum game in physical terms. Sooner or later, your increased ‘wealth’ has to buy something – you have to consume. Maybe you can argue that your measure of GDP is inclusive of paper-shuffling, and I’d grant you it’s not an accurate measure. It’s history – and it’s author’s reluctance for it to be used in a peace-time world – is a good read. It does fail – it takes no account of environmental degradation, nor of energy, nor of depletion of finites. We only get ‘richer’ because we don’t include them. If you’re depleting natural capital and not accounting for it…..that’s the same as not taking account of drawing-down your start-up capital.
    Take a look at graphs of energy consumption overlaid with economic gain, per year (I can zap you some. They overlay. Total correlation.
    I don’t ever mind debating with a thinker – especially a polite one – even if we’re off-thread! Maybe we could re-gain our train of thought, get back on track – I’ll leave bogey out of the pun-list…


  9. PaulL says:

    How much carbon emission per ton of steel? I’d guess not much different than concrete. And all the railway ties are made of concrete these days.

    I had two points on doubling, probably wasn’t clear on that.

    Firstly, you seem to be suggesting that double the GDP means we’re creating double the total output of the world since time began – you were doubling capital stock, rather than just the rate of addition to that capital stock.

    My second point was that a doubling of income – call it GDP per head, call it worker utility, call it what you want – doesn’t have to imply a doubling of goods, raw inputs, or energy inputs. It is entirely possible to have growth without energy increases, it is just that we don’t do it today because energy is very cheap.

    And then I come back to our discussion from last week – I don’t agree that we’re running out of energy. I read some of your links and your arguments, and I just don’t agree. That one is probably not worth debating much further on.


  10. murrayg1 says:

    Probably true that we’ll have to agree to differ.
    Growth without energy increases and without using more resources, is growth on paper. That just ‘values’ existing things higher, then the pidgies come home to roost. When it comes time to divvy up, there’s nothing there. Repeat cycle.
    What we saw the last two years can only be a curtain-raiser, it hasn’t been resolved. The next shudder will be bigger – the more so because the believers will be seriously shaken. The Fed (a private bank) is currently loaning at 0%, where does it go from there?
    If you were correct, growth shouldn’t need an attack on DoC land, seaweed, Hoki, lignite, water etc, it should just happen with magic things like ‘productivity gains’ – which are a lowering of wages and?
    That is reflected in the Bongard (I never saw it coming) approach. He went for ‘productivity gains’, by moving to low wages offshore – but…. he sells a ‘corolla’ type mass-market product. Not a Lamborghini one. If everyone in his position did the same, who is his/their market? He/they just put them all out of work! His mistake – and it’s a common one – was to take the ‘now’ as an unchanging field on which to make his moves. He forgot that the moves change the field.
    Income needs to be underwritten by real stuff it can buy – so any growth beyong the supply of goods and services will inevitably burst and recoil.
    The important thing to remember is that nobody ‘lost’ money – it wasn’t underwritten in the first place. Remember that in the next 3-5 years.
    I see a time where growth stops, and energy is the basis for currency. You simply can’t do anything without it.


  11. What would Hayek say says:

    PaulL – I’d suggest in this argument that you are doing a great job of covering the Hotelling principle (Economics of Exhaustable resources). I deeply suspect that Murrayg1 does not understand the productivity story from a ‘pin factory”.


  12. murrayg1 says:

    Hayek – have you ever read about Easter Island, the Greenland Norse, the Roman Empire fall (the real one, 200 years before the end), the Mayan collapse? They all had money – but ran out of things like food, and trees. Died out with coin in pocket.
    Economics as a construct has only advanced as far as physic had post-Newton, it’s sort of got thermodynamics to go.
    I’m not familiar with you hotel (give me a URL?) but most economic constructs merely talk of substitution, and growth of consumption thereof. Can’t happen forever.
    If you have a regime which can devour no extra resources, but can have economic growth, I’m all ears. Perhaps you can pass it on to all the folk currently eyeing-up the finite resources hereabouts.
    I’m not against mental, social or lifestyle advancement, nor do I care if any particular person gets ‘wealthy’, but it must be done under a non-impactive regime.
    Bring it on. But you can’t, can you? Your approach needs to incessantly encroach on farmland, for instance, to house people, who need to be fed. That goes forever? Hogwash. It’s exponential, you need an infinite planet.
    I’ll be interested to know how much energy your ‘pin factory’ needed from outside………


  13. murrayg1 says:

    I found what I presume was your ‘pin factory’. How sad. That’s it? That is just specialisation – the law of diminishing returns applies in exactly the same way it applies to the more-in-a-micro-chip fellow. You still hit the max that can be done in either discipline.
    That scenario is esoteric cloud-cuckoo-land – relative to nothing real and/or external. Where’s the ’embedded energy’, the ‘operations and maintainence’, the ……..
    If that’s a process you seriously think can be carried on forever, I feel sorry for you.
    PaulL at least did some cogitation – although he failed too, just later. He actually acknowledged the finite nature of resources, and that exponential growth in the use of them would end. His only objections though, seemed to be that the folk hollering the warning are ‘doomers’ (and therefore presumably to be discounted, notwithstanding Churchill or George Andrews), and that the graph should be so drawn that the piece of it that transected his life doesn’t alter in any major way.
    Sounds like faith, optimism, denial or cognitive dissonance, to me.
    I prefer finding out facts, and reacting to them. If the Titanic is sinking, it’s sinking. If the Germans are gearing up for war, there won’t be peace in our time.
    The only problem is that we have a short window to get onto a sustainable footing, and folk like you are helping waste it.


  14. PaulL says:

    Ah murray, quick to speak ill of me when I’m not around!! Weekend again though.

    I was reading today in New Scientist. Not one of my favourite magazines, very poor research and very poorly written articles. But it was free on the plane.

    Anyway, I see an article amongst many talking about population growth and the environment. In it the writer pointed out that agricultural productivity is growing at 2% per annum (and has for many years), and that population is growing at 1% per annum and tapering off. He points out that means that each year, we need 1% less farmland to produce the same food. Or, to put it another way, in 75 years we’ll need half as much farmland as we do today to feed the forecast future population if the growth rate stays at 1%. If the growth rate tapers off and goes negative, then even less.

    Even with allowance for increase in standard of living, this should be more than enough for food.

    I know you’ll come back to energy as the problem. In the same magazine I see research on using the cooling water from nuclear power stations (i.e. excess heat) to drive commercial processes that need heat. An important one being the creation of fertilizer. I seem to recall a couple of weeks back a discussion of fertilizer, and your concern that it requires a lot of energy, is non-renewable, and emits carbon. So far as I can tell, if we build a nuclear power station beside the coal seam, use the coal as input to make urea (no carbon emission in the reaction), and the excess heat to drive the process (no carbon emission in the energy input) we end up with large amounts of electricity from the nuclear power plant, and lots of fertilizer.

    Sure, the coal is still non-renewable, so in 300 years we’ll have to stop making fertilizer from this particular seam. I’m sure we’ll sort something out by then.

    You seem to be predicting demise of our civilisation in the next 20-30 years. I’m seeing problems arising in a couple hundred years, and predicting that we’ll find a way around them before then.


  15. murrayg1 says:

    First para – the maths is up the shute. Seriously. The ‘green revolution won’t be replicated again – it was like breeding horses – eventually only a freak goes faster, in general you hit the natural limits.Was a one-off. To project a behind-percentage ahead is the same as that pin factory thing.
    Try this: I’m alive today, I’m alive today, I’m alive today, therefore I can project that I’ll always be alive. Sorry to be so simple, but….
    The writer is looking backwards to project forwards, and fails to include the ‘law of diminishing returns’. Also fails to account for aquifer depletion, desertification, acidification, wind-blown loss, urban encroachment, erosion, nutrient deficiency, and the biggest of all – the fact that the agriculture industry is absolutely dependent on oil!
    I saw a similar thing – think it was in Newsweek – headline was “Cheaper oil forever”. The fellow tracked increasing supplies, and dropping real prices, then projected both ahead. He would get to unlimited oil for free, on that basis. How a person capable of actually creating words, can come up with nonsense like that beats me.
    You 300 years is not there – because of the exponential function. Increased use – doubling times – is needed to continue a system that needs to underwrite profit. Thus “at current rates of usage” is the key to the whole thing. People hear “300 years at current rates of usage”, and remember the 300 bit. That was (incidentally) Australia in 1999. 350, actually. Then China got into the act – 58 coal ships anchored off Newcastle suggests amongst other things, that the demand has somewhat outstripped the infrastructure, and by a significant factor (I made a point of counting 3 ships there in 1999). One estimate is that they will now hit ‘peak coal’ in as little as 40 years. The amount hasn’t changed. The perception of 350 years hasn’t changed – but it is now monstrously erroneous.
    I’m not predicting problems in 20-30 years – I was doing that in 1975, and on the Council in 1985. We’re past that.
    Gerry Brownlee has stated “we are facing a global energy crisis”. He has also stated he’s working off the IEA data. It, until Nov. 2008, was done by projecting demand (sound familiar?) and predicting matching supply. That was it. Guesswork. Period. Governments paid for that ‘information’, as Brownlee has, and believed it. Last year, there were too many of us pointing out the numbers, and to the google-earth pix of fields like Ghawar. Plus the price was ramping, as we’d long predicted. They did a study, then a cover-of-face. 2030 peak, they said, and 30% of that was ‘yet to be found oil’. (red area, slide 7). Now,discoveries peaked in 1964, and we’re using 3 barrels for every one we currently find – spare me, the math is simple.
    Now they’re down to Peak in 2020, but – wait for it – ‘supply constraints’ from 2010. What are they again? Yeah right. Depletion rates (their figures not mine) are 6.5% cumulative. I give it to 2012 at our throttled-back rate, then I go with their 6.5% rate, and a worse EROEI. We don’t get to 2020 on that basis.
    Nuclear energy is only electricity – nobody gets their head around the fact that there is more oil represented by a pottle of yoghurt, that there is yoghurt. You have to replace that – in the same volume, at the same cost, and get there by 2020.
    We haven’t a prayer, not down that track. And we’re wasting time.
    Hope you found a way to offset you carbon! Have a good weekend.


  16. PaulL says:

    Well, same article, he points out that the most efficient farms are 300% as productive as the average, so, as he says, there is evidence that it is possible.

    Of course, CO2 increases farm output too, so if we ever stopped CO2 emissions then farm outputs might drop….


  17. murrayg1 says:

    Apples with apples – you can find a saharan market gardener and compare….it proves little. Are the efficient farms mechanised, for instance? Then they’re a temporary dominance.
    The 2% increase requires a DOUBLING of global production in 35 years – you have faith in that? GE would have to be good indeed – this is nutrients-to-food we’re talking of – you still need the chemical nutrients, the actual molecular structures, to eventually be eaten. Doubling the nutrient supply? I doubt it – you can only actually supply more – twice more – or use efficiencies to eliminate losses. You’d have to recycle city sewages for that , closing the nutrient loop rather than total-loss. Think of it as Startrek – no outside chemistry or nutrient, but years of existing in a finite vessel.
    C02 is a major. Eventually livestock farming may have to go. No ETS, and no proposal to date, actually do anything about the imbalance, and it is the actual imbalance we have to address.
    Grain is far better in energy and CO2 terms, sadly. I like my meat, but unless we accept having less people, it’s the only way. We’ve just decimated the fishes – there’s only the loaves left. Unless you just accept the majority of humanity permanently starving.
    I’m away to go sailing in the snow – have a good weekend, we should get together some day…
    Always remember that percentages are not a straight line graph….


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