Re: QR going national?

[Ian Harvey <ian_harvey@do.not.spam.me>]

A lot of the following is IMHO, and I'm a bit tipsy at the moment too,
but anyway...

Switched On wrote:
> Ian Harvey <ian_harvey@do.not.spam.me> wrote in message
> news:37F388A8.CE0DD553@do.not.spam.me...
...
>
> > QR may well have efficient coal haulage but unfortunately I doubt these
> > efficiencies are passed onto the coal mining companies as reduced
> > freight rates.
> 
> Question:
> 
> Should there be cheaper coal haulage rates and if so, why?

Depends - see below...
...
> > In short, the Qld Govt use high coal freight rates to collect royalties
> > from the mines.
> 
> Which, of course, goes back into the community and funds infrastructure
> (including the railway.) This is the equivalent of profit-taking and
> re-investment in the corporate world. Why is this wrong?

In most situations in the corporate world competition acts as a limiting
factor.  This is why unregulated monopolies are a bad thing.

I have no complaint at all about the Qld Govt collecting royalties -
that's totally justified and fair.  The problem comes from them
collecting them via QR via rail freight rates (and even then, that's
fine
as long as it's acknowledged that that's the case):

a. It grants QR an amazing cash cow to subsidise the rest of its
operations.  This is great, in that QR now has a really good rail system
for the coastal strip south of Rockhampton.  Personally I reckon this is
fantastic.  Just bear the subsidy in mind when comparing QR against
other Australian rail systems.  If the royalties were collected via
normal means it is (unfortunately from a rail advocates point of view)
unlikely that the same amount of money would have been directed towards
QR.  

Subsidies can take away the incentive for an operation to push for
greater and greater efficiency, e.g - why should QR CityTrain continue
to push for greater efficiency - in the big picture the coal rates will
cover the costs anyway.  The subsidy has even more significance if QR
enters the national market - if the interstate operation is not operated
so that it covers its own costs then Qld residents will be donating
their money to other states transport systems! 

b. The mining companies contribution to govt revenue for use of state
resources is distorted, as the royalty or usage charge is hidden as
freight rates.  

I have no issue with the amount of money changing hands - it just needs
to be acknowledged that it is a royalty being charged, and not a
commercially determined freight rate.

...

> I would argue that freight charges are _exactly_ where the profit should be
> collected because it the point where the mines have one of their biggest
> impacts on the community infrastructure. 

I'll go out on a limb here with a completely unsubstantiated claim, but
I'll say what I suspect anyway (corrections welcome :)) - "Coal trains
are mainly run over dedicated lines (built at least in part by the
mining company ?) running dedicated rolling stock (paid for at least in
part by the mining company ?)" - its not like they are trundling 2km
long trains through Central station at peak hour - so I'd argue that
their impact on community infrastructure in order to transport the
product is actually pretty small.

> The other area where they should be
> paying more is for their massive consumption of underground water in some of
> the most arid regions of the country, and the further destruction of some
> already very environmentally poor country, but that's another story.

See point b - maybe they already are paying for it, the Qld Govt has
just chosen for the compensation for water usage (or whatever) to go
into better rail systems.

> Profit taking at the freight charge level is the perfect place to do it and
> it means the mines can't fake their production figures.

There are so many ways of checking mine production that faking figures
for any reasonable size operation would be almost impossible to do. 
Regardless, I think my comments still apply.  Go ahead - charge them
royalties based on QR's estimate of the railed tonnage, just have the
royalty deposited into consolidated revenue rather than as QR income,
and then see how QR's financial performance stacks up.

> > As for competition, BHP and Rio Tinto both have extensive experience
> > with heavy haul rail systems for bulk commodities within Australia.
> > There are differences (density of coal versus iron ore, rails are a bit
> > closer together) but nothing that seems too dramatic.
> 
> The major difference is an operational one - the fact that they would have
> to run under safety guidelines designed for mixed-traffic, which can be an
> annoyance to those who want to cut-corners to increase the profits.

Mixed traffic (how mixed are the coal lines anyway ?) probably has more
impact on scheduling than on safety.  From observation the iron ore
lines seem to use very similar safeworking to the public systems, except
they tend to rely more on CTC and other automated systems (these
days with in-cab signalling for their modern locomotives running over
regularly maintained track) - which I would argue indicates increased
safety.

> > I imagine that
> > they would be absolutely delighted with the opportunity to set up their
> > own rail operations for their coal mines in Qld.  However I suspect that
> > their mining lease agreements with the state govt prevents it, granting
> > QR a monopoly.
> 
> I'm not sure about this, because if you read the Network Access policies,
> those mines are quite welcome to set up their own operations, and in fact
> the rules governing their access state that QR's control centres have to
> guarantee them equal access regardless of who they are... a fact which is
> sort of overlooked by some of the southern fanatics who have been posting
> disparaging remarks about the fairness of QR's operation. There really isn't
> anything stopping them apart from fierce competition.

Again, I have no background knowledge of this so take it all with a
grain of
salt - but while QR network access policies may allow them to run their
own trains, their mining lease agreements probably specify in some form
or other that they must use QR to transport their coal.  

QR run a fantastic operation when compared against other Govt railways,
and I'm sure that there are many things that the other operators could
learn from their progressive attitude (Westrail's suburban service,
while lacking coverage, maybe an equal here).  It's really unfortunate
that other states have not committed the same level of resources to
their rail systems to bring them up to an equivalent standard, because
from my personal experience it's the QR system that I'd want in my
state.  Just don't let the massive home-ground advantage granted by the
coal freights hide any areas where improvement may still be required.
-- 
IanH
Comments and questions welcome at ian_harvey at bigpond dot com
However, do _not_ send me unsolicited commercial email.