AFFORDABILITY CONSIDERATIONS

To assist affordability a range of opportunities have been identified, including accelerated delivery, progressive de-risking of the Programme, value engineering and effective market engagement.

The Australian Government requested development of a 10 year programme to deliver Inland Rail, however an accelerated eight year delivery schedule may deliver greater value for money and improve affordability for the Programme through reduced construction out turn cost and reduced Programme overhead and management costs resulting from a shorter delivery schedule, including the associated reduced escalation impact, and from bringing forward the full benefits of the Programme including additional revenues.

As further work is undertaken to better understand engineering, design, property and stakeholder requirements, the allocation of risk and associated allowances for contingency could potentially be reduced. Value engineering could also identify opportunities to deliver greater value as scope and design are refined. De-risking of the Programme better informs the funding requirements and enables the market to better price works packages to be delivered within the 10 year programme, improving value for money. Throughout the procurement, effective market engagement can drive innovation, improve the understanding and effective allocation of key Programme risks, and similarly improves value for money.

0.6. Port of Brisbane Extension

In mid-2014, ARTC commenced a study at the request of the Australian Government to identify the most appropriate corridor for a 24/7, dedicated freight rail route from the existing interstate line to the Port of Brisbane. This would result in possible extension of Inland Rail from its planned end point at the Acacia Ridge Intermodal Terminal, 15 kilometres south of Brisbane’s central business district, to the Port of Brisbane.36

36 _{This Programme Business Case incorporates a strategic assessment of the Port of Brisbane Extension. The Port of Brisbane Extension strategic}

assessment is at an earlier stage of the project lifecycle, therefore the costs, economic and financial analysis have not been developed to the same level of detail as Inland Rail.

INLAND RAIL PROGRAMME BUSINESS CASE

Although a railway line to the port already exists, it is part of a shared network with commuter passenger services, restricting the number of freight paths available. The route’s alignment and location through busy inner city suburbs further limits its capacity by reducing train speeds, trip frequencies and scope to accommodate longer and heavier axle load rollingstock.

The analysis considered a number of alternatives and identified two potential options:

 The Eastern Freight Rail Corridor (from the interstate standard gauge line at Algester to the Port of Brisbane, including two tunnels of 4.8 kilometres and 4.4 kilometres and broadly following the Gateway Motorway). Estimated capital costs are lower than alternatives and this route presents more opportunities for operational flexibility and future staging. The preliminary estimate of the cost to design and construct the Eastern Freight Rail Corridor is $2.51 billion ($2014-15, excluding escalation).

 The Long Tunnel (an alternative option incorporating a 17 kilometre tunnel from Acacia Ridge to near Hemmant).

This remains a feasible alternative but it carries greater cost and more risk than the Eastern Freight Rail Corridor. Further planning is required before a preferred option (and associated corridor) can be selected.

Potential demand includes the opportunity to attract current road transfers to and from the Port, along with demand that would be shared with Inland Rail (agricultural demand from northern New South Wales and southern

Queensland, and coal demand from the Surat and Clarence-Morton Basins in southern Queensland).

A key issue is when the new dedicated freight link to the Port will be needed. With Inland Rail in operation, a staged investment of $54 million (strategic, $2014-15, excluding escalation), commencing in 2022–23 when the

Calvert/Rosewood to Kagaru section of Inland Rail is completed, could lift the capacity of the existing route, enabling it to meet demand for some years to come, especially if the full Cross River Rail proposal is delivered. Modest

expenditure on the existing route is included in the Inland Rail economic evaluation to enable the demand estimate of 19.5 million tonnes of coal per annum to be realised.

Even with these upgrades, at some point in the future, a new, dedicated route will be required. Passenger services will inevitably grow over time and progressively ‘squeeze out’ freight paths on the shared network. Based on development of a Port Extension medium demand scenario for port shuttles and applying the core Inland Rail coal and agricultural demand, it is estimated that the number of paths required to support that demand requires construction of the Port of Brisbane Extension in 2040–41 or by 2029–30 if more aggressive land use and complementary investment policies are applied. Policy changes impacting the frequency of the passenger services within Brisbane's rail network could justify earlier freight rail capacity enhancements.

The preliminary CBA suggests the Port of Brisbane Extension and Inland Rail combined result in a slightly reduced Benefit Cost Ratio relative to Inland Rail alone. As shown in Table 0.8 and comparing with the Inland Rail economic results in Table 0.6, the Inland Rail Benefit Cost Ratio (BCR) is 2.62 without the Port of Brisbane Extension reducing marginally to 2.40 with the Port of Brisbane Extension. Economic viability is further reduced without complementary QR network investment to enable coal train lengths to increase to take advantage of the Inland Rail and Port of Brisbane Extension improved train capacity offering.