Infrastructure Australia released a report on Friday, Corridor Protection, recommending that corridors for seven critical transport infrastructure projects should be protected by acquiring properties early. It examined key rail and road projects in urban and country Australia and concluded:
According to the independently audited model, the protection and early acquisition of just these seven corridors could save Australian taxpayers $10.8 billion in land purchase and construction costs (measured in discounted 2016 dollars).
The projects are East Coast High Speed Rail (HSR), Outer Sydney Orbital, Outer Melbourne Ring Road, Western Sydney Airport Rail Line, Western Sydney Freight Line, Port of Brisbane Rail Line, Hunter Valley Rail Freight Line.
My interest this time is in East Coast HSR. Infrastructure Australia estimates it’s recommendation to “protect and acquire now” would save $1.9 Billion (NPV) in the long term compared to the “do not protect now but acquire at the time of construction” option, and $3.5 Billion (NPV) compared to the “do not protect, but tunnel” option.
The Chairman of Infrastructure Australia, Mark Birrell, told the media (see Act now on high-speed rail or pay heavy price later: Infrastructure Australia):
No one is saying we won’t need high-speed rail in 20 years, but to do that you need to preserve the corridor now.
I expect there’s a broad consensus that protecting corridors makes good sense if the proposed project makes good sense. But in the case of HSR that’s arguable. Contrary to Mr Birrell’s assertion, there are plenty outside politics who’re saying the case hasn’t been made that we’ll need this project in 20 years or even 50 years; for example, I first questioned it in April 2010 (see Is the Very Fast Train all huff and no puff?).
Here are some issues to take into account when considering Infrastructure Australia’s recommendation to “protect and acquire”:
- If East Coast HSR isn’t worth doing in the first place, then the case for incurring the costs of protection is non-existent. This is a project that’s attractive politically, but is doubtful because the distances between the earmarked major population centres are big; because we already have an efficient and competitive airline system for inter-urban travel; because the net environmental benefits are tiny relative to the cost; because the regional development benefits are small to non-existent; and because most of the benefits accrue to business travellers who can pay the full cost themselves (see Is High Speed Rail our national boondoggle?)
- Protection isn’t cost-free. Notwithstanding the “protect and acquire now” title, the recommended option mostly relies on imposing controls on properties rather than buying them early (the great bulk of acquisition – $4 Billion of a total of $4.3 Billion – would still occur at the time of construction). The history of protecting corridors over long periods shows it leads to uncertainty for landowners and to properties being used inefficiently, and in some cases to blight. The alignment hasn’t been determined yet, so protection of a wide corridor necessarily forces controls on land that ultimately won’t be required for the project
- The relatively small sum required for early acquisition ($0.3 Billion) will doubtless be attractive to politicians, but it could be optimistic given the long time frame for the project. Landowners are likely to put intense pressure on future governments to acquire their properties earlier rather than later, potentially inflating this figure significantly. Funds spent earlier on acquisition are effectively tied up in a real estate investment portfolio; they’re not available for other productive public uses, e.g. improving urban transport, building schools. At this stage it’s not evident the return to the community of investing that money in HSR would give a higher social return than other options
- This is a huge project implemented over a long time frame. There’s a risk large parts of it won’t happen or will be delayed indefinitely because of cost issues, political difficulties, or technological developments e.g.that make air travel more competitive. The costs imposed on landowners should be assessed against these risks
- The estimated $1.9 – 3.5 Billion potential saving under the recommended “protect and acquire now” option is a large sum, but given the high level of risk associated with the project, foregoing it might be viewed as a modest “penalty” in the context of a project estimated by the AECOM feasibility study to cost $114 – 127 Billion and to take 50 years to construct. History shows broad-brush preliminary studies invariably under-estimate the true cost; based on the experience with major projects around the world, it would be foolish not to expect the final cost to be at least 50% higher than the initial estimate (see Are cost estimates for transport projects reliable?)
- There could be a case for reserving some short corridors where alternative modes are less competitive and where population at both ends and at intermediate stops is large e.g. Sydney to Newcastle (see Does Labor’s Sydney-Newcastle High Speed train make sense?). But it doesn’t follow that the best solution in these sorts of situations would necessarily be HSR; something less dazzling would probably make more sense.
Politicians love HSR because it’s glamorous, looks forward-thinking, and because such a long-term project won’t cost much in the current political cycle. Business doesn’t question it because government’s footing the bill and it’s a gold mine for rent-seeking.
Infrastructure Australia makes the case that protecting corridors reduces the cost of building good projects in the future. That seems obvious; protecting corridors is like mother’s milk. But it’s not obvious East Coast HSR is a good project and that the costs of protection in this particular case are therefore justified. Infrastructure Australia still needs to explain why this project is worth it and how corridor protection would work.