It’s been a year since Watchdog devoted an article to Toll, the Australian transnational corporation (TNC) which owns New Zealand’s railways. That was a very detailed analysis of one highly contentious aspect of Toll’s operations in one part of the country, namely the environmental impact of its interisland ferries on the Marlborough Sounds, specifically that of its newest ferry, Kaitaki (see Watchdog 110, December 2005, “Arrogant Toll Bullies Small District Council With Big Fat Ferry”, by Joe Hendren, which can be read online at http://www.converge.org.nz/watchdog/10/04.htm). Joe’s article chronicled how Toll rode roughshod over the wishes of the Marlborough District Council that those ferries should reduce their speed in the Sounds in order to stop their wakes endangering residents, their homes and boats, and to stop damaging the Sounds’ environment. The waves generated by ships of this size travelling at speed through a confined waterway can be fearsomely destructive things. The Council took Toll to the Environment Court and residents mounted an unprecedented series of waterborne protests to physically force the ferries to slow down.

At the beginning of 2005 the Council introduced Variation Three, which required that any vessel in the Marlborough Sounds over 500 tonnes would have to keep to 15 knots or pass a wave-height test and apply for a resource consent. It was this Variation that was in dispute, with Toll’s ferries running at 20 knots (although it was prepared to reduce that to 18 knots) and the larger question of who is in charge of the Marlborough Sounds – a TNC which claims that the national interest requires that it be allowed to operate its interisland ferries as if they are in the open seas of Cook Strait, or a District Council responsible to its residents and ratepayers who live in and use the Sounds? The case was heard by the Environment Court over three sittings in late 2005 and early 06.

Council Wins Court Case

In May 2006, Judge Shonagh Kenderdine issued an interim ruling in favour of the Council, saying that the extra 15 minutes the Picton-Wellington voyage would take was a small price to pay to protect Queen Charlotte Sound and Tory Channel. Toll continued to insist that it has an existing right to operate at a higher speed but will now have to get a resource consent for Kaitaki. However, the judge gave Toll six months to apply for that consent, which means that nothing changes in the meantime. She also lifted the wave-height threshold so it is similar to that of the wake produced by Toll’s older ferry, Arahura, which has not been the subject of any complaints. Marlborough Mayor, Alistair Sowman, said: “It is a win for the Council and the people of Marlborough because it supports our desire to limit the wake effects of large vessels in order to protect the environment for future generations. The environment has always been our focus in this matter” ( Press, 2/6/06, “Ferries must slow down: ‘Price’ of protecting Sounds”, Dan Hutchinson).

But it was only an interim ruling and the judge ordered all parties (the Council, Toll, the shipping industry and Friends of Nelson Haven) to hold talks to resolve how the speed monitoring and enforcement system will work. Surprise, surprise, things went no more smoothly than a ferry’s wake. By October 2006, the Council announced that it looked very likely that the whole business will go back to the Environment Court to sort out the details. No date has yet been set. But while the dispute grinds its way through the court system, the ferries carry on in their damaging ways as if nothing had happened. And the locals are getting increasingly upset, to the extent of going to prison in one case. In November 2006, boat skipper Darryl Thompson was imprisoned for three months for twice sailing tiny craft into the path of ferries to force them to slow down. Thompson and his two companions yelled “15 knots” at one ferry, which was forced to take evasive manoeuvres to avoid a collision. The Blenheim District Court judge told him: “You may have a legitimate beef with the ferries, but there are ways of taking up that argument without jeopardising the public” ( Press, 2/11/06; “Protester jailed over ferry row”). Like going to the Environment Court, perhaps?

Dangerous Ferry Crossings

In the meantime, Toll was doing a good job of jeopardising the interisland travelling public all by itself. Twice in 2006 its ferries made Cook Strait crossings in big storms and came very, very close to disaster. The worst was in March when the Aratere took seven and a half hours to make a crossing that normally takes three. 31 cars, eight vans, six trucks and seven railway wagons were damaged. More critically, a leaked draft Maritime New Zealand report concluded that the ferry came “extremely close to capsizing”, heeling over to 50 degrees on two occasions, and that if it had sunk, there would have been heavy loss of life among the 391 people on board. As it was, four passengers and one crew member were injured. The draft report blamed the skipper for showing extremely poor judgement and his master’s ticket was suspended ( Press, 11/11/06. “Aratere almost capsized – report”). This terrifying incident happened only days before the 2005 Roger Award event was held in Auckland and was singled out for mention by the only South Island judge, Nelson’s Mary Ellen O’Connor, in her speech. Toll was third in the 2005 Roger (effectively the runner up as, for the first time, there was a joint winner – BNZ and Westpac – with no actual second placegetter. The Judges’ Report, by Joe Hendren, can be read in Watchdog 111, April 2006, online at http://www.converge.org.nz/watchdog/11/03.htm).

Just about sinking one ferry in a storm might be considered a little careless but to do it twice in the space of a few months is starting to look like negligence driven by the desire for profit. In October Kaitaki’s passengers were subjected to a terrifying ten hour ordeal during another monster storm. This led to the Maritime Union calling for tighter rules to govern Cook Strait ferry crossings in bad weather. Joe Fleetwood, the union‘s Vice President, said: “Really, do you need another Wahine disaster before they do something about it? Do we worry about cargo or do we worry about killing people?” ( Press, 26/10/06, “Weather may bring ‘disaster’ on strait”, Dan Hutchinson. The Wahine was a ferry on the former Lyttelton-Wellington overnight route. It was hit by a massive storm in April 1968 and sank in Wellington Harbour, killing 51 people. That disaster played a major role in finishing off interisland ferries operating from Lyttelton, which was replaced by Picton as the sole South Island ferry port). These two episodes are a clear illustration of Toll’s profits first, safety and people second, approach to business.

Tolls Tries To Axe The Overlander

Toll has been throwing its weight around on land as well as sea. It has never made any secret of its dislike for having to run passenger train services, seeing them as an unprofitable drag on its core business of freight (and only some freight and some lines at that). In November 2004 it axed the overnight Northerner from Auckland to Wellington (see Watchdog 107, December 2004, “Northerner Rail Service Axed: More Cuts Likely To Take Their Toll”, by Joe Hendren, which can be read online at http://www.converge.org.nz/watchdog/07/05.htm. Ed.). In April 2006 Toll put its Tranz Scenic passenger trains (the South Island’s TranzAlpine from Christchurch to Greymouth and TranzCoastal, from Christchurch to Picton) on the market, defining them as “non-core assets”. They haven’t attracted any buyers yet.

But the biggie was the Overlander, the Auckland-Wellington day train, the last authentic passenger train in the country, as opposed to one marketed primarily to tourists for sightseeing. In 2006, Toll announced that it was ending the 98 year old Main Trunk Line passenger service as of the end of September. This unleashed a storm of protest, with the Green Party running an extremely popular petition to save it and the central North Island Volcanic Plateau councils combining forces to fight for its retention, pointing out that the train is a vital service for their part of the country, not only for the locals (the train provides access to areas not served by main highways) but also for tourists going to Tongariro National Park. The Government, which in 2004 had very reluctantly renationalised the country’s rail track system (but allowed Toll to become the monopoly rail operator) refused any subsidy to keep the Overlander going. The threat to axe this service was seen as the last straw by many people, even those well to the political Right. For example, Richard Long, former Dominion Editor and Chief of Staff for the former National Party Leader, Don Brash, devoted one of his Press columns (3/10/06, “Future of rail”) to describing his journey on what was scheduled to be one of the Overlander’s last trips, declaring his support for passenger rail services in ringing tones and giving Toll a good kick up the arse in the process. Long wrote:

“Overwhelming sentiment about keeping the Overlander has obscured a deeper debate about the future of rail in New Zealand. One element of this is how much the taxpayer should be paying to keep the trains running. The other is just what game these Australians are playing, looking to cut back services while simultaneously asking for a discount on track access charges. Did they really fail to spot the provision in the deal they signed in 2004 that exposed them to the spiralling cost of maintaining and improving the network? Or are they using the Overlander and the future of the Napier-Gisborne freight service to apply political pressure to Ontrack, the Government-owned track company, in a bid to get reduced access charges? Negotiations seem to be getting nowhere…

“…The debate over retaining the Overlander had a touch of the ‘Save the Railcars’ saga of earlier years. One argument used at the time was that railcars were essential to get pupils to school along the route. That fell over when a smart-alec from Treasury produced a calculation for his Minister that it would be cheaper to provide each pupil with a chauffeur-driven Rolls-Royce. They should bring him back to spell out to Toll that they were given exclusive access to the rail network for 66 years on the basis of getting and using the entire network. Cherry picking was not an option”.

Toll is a finalist, yet again, in the 2006 Roger Award (the finalists are listed elsewhere in this issue) and its attempt to unburden itself of the Overlander features prominently in the reasons why it received multiple detailed nominations. But, for once, public pressure paid off and at the very, very last minute (after a slew of nostalgic newspaper articles and TV reports of “the last trip”) Toll announced that it would allow the service to continue on a reduced basis, namely three days a week, reverting to daily in the busy summer months. It amounts to a stay of execution, not an acquittal, but it means that the Auckland-Wellington passenger service continues to run, at least for the time being.

Blackmailing Government Over Track Access Charge

The Overlander, however, was only one of the services under threat of closure from Toll in its game of chicken with the Government over the unresolved issue of how much it has to pay by way of the Track Access Charge. In October 2006, immediately after the decision was announced to continue running a reduced Overlander service, stories appeared in the media that Toll was looking at closing great chunks of the rail network, including the Main Trunk Line, unless it got what it wants, namely a fixed and certain access fee (in 2006 it was $52.6 million, compared to $41.1 million in 2005). Toll is, of course, also a major trucking TNC, so threats to develop an alternative road transport network is no idle threat. These media stories were quickly denied by Toll but they served the purpose of flying a kite and putting pressure on both Ontrack (the State agency which fixes the fee) and the Government. Interestingly, the road transport industry did not take Toll’s threats seriously. Tony Friedlander, Chief Executive of the Road Transport Forum, said: “The suggestion that they’re going to close down large parts of the network is nonsense. There’s clearly a role for rail in repositioning freight” ( Press, 6/10/06, “Truckers want rail open”, Andrew Janes). Rival trucking firms are also pissed off that Toll uses its rail monopoly to keep them from using rail. At present, 87% of surface freight moves by road, with rail taking the remaining 13%.

Essentially Toll’s threats to close great chunks of the rail network (threats which were floated several times in 2006) amount to blackmail on the Government to go easy on the still not settled Track Access Charge. The latter was part of the hard fought 2004 deal by which the Government renationalised the track network (for $1) and allowed Toll exclusive use of it until 2070, subject to access fees and freight levels. The Government also committed to spend a one off $200 million* fixing up the national track network (for full details of the Government-Toll 2004 deal, see Watchdog 106, August 2004, “Toll: Secret Deals Close To Witching Hour Revealed”, by Joe Hendren, which can be read online at http://www.converge.org.nz/watchdog/06/06.htm. Ed.). Toll is now concerned that the Government has spent its promised $200 million (the previous foreign owner, TranzRail – winner of three of the first six Roger Awards, until the organisers declared it ineligible in order to let somebody else have a chance – had spent nothing on maintaining infrastructure and let the whole rail network fall into a dangerous and deadly state of decay), with no more forthcoming and that Toll will have to actually start spending serious money on fixing up the rail network, of which it has exclusive and profitable use. * As an indication of the Government’s electoral priorities, bear in mind that it is spending up to $600 million on fixing Auckland’s decrepit rail network, three times more than what it has promised to the whole country’s network. MH.

The Track Access Charge is what Toll hates the most. In June 2006, after 18 months of unsuccessful negotiations between Toll and Ontrack (whilst operating under an interim access fee agreement), it was agreed that an independent mediator would set the Charge. Michael Cullen, the Finance Minister, said that Toll is seeking “what I think could be described as a major renegotiation of the current agreement. At this point we are in a sort of mutual haka and staring each other in the eyes position in that respect” ( Press, 16/6/06, “Mediator to decide track fee”, Andrew Janes). The Charge is set to increase to more than $60 a year million in the next year and may go as high as $100 million a year by 2013, more than double what Toll pays now. “Under the National Rail Access Agreement, a Government loan keeps the Track Access Charge low in the early years, but over time the loan has to be repaid so the Charge rises. Transport industry observers wonder why Toll agreed to a regime under which charges were likely to rise so high. They suspect the Australian company planned to renegotiate the deal down the line, or that it was not interested in running a national business in the long term” ( Press, 7/10/06, “Toll NZ faces stiff rise in fees”).

Toll’s blackmail concerning the Charge takes many forms. For example, in May 2006, it announced that although it has plans to spend $100-$125 million on 25 new locomotives, it won’t do so until the Charge is settled. To put this into perspective, Wayne Butson, General Secretary of the Rail and Maritime Transport Union (RMTU), pointed out that Toll originally promised to deliver the new locos by May 2005 and is deferring a whole lot of capital expenditure ( Press, 24/5/06, “NZ proves bumpy ride for Toll boss”, Andrew Janes). An anonymous source told the Independent Financial Review (4/10/06, “Toll threatens to close main trunk line”, Jenni McManus): “We will go broke under the current access regime. Toll wants an access agreement where the costs are fixed and certain. It buys capital equipment on a long-term basis – sometimes 40 years out – and it needs certainty, like its trucking competitors have with road user charges”.

Call Toll’s Bluff & Renationalise Railways

The latest threat by Toll, issued in late October 2006, was to halt rail services on uneconomic lines within three months unless the Government agrees to subsidise rail services. So, not only does this Australian TNC want a reduction in the Track Access Charge that it signed up to pay the Government but now it wants the taxpayer to subsidise the rail network of which it has monopoly use for 64 years. Mark Rowsthorn, Toll NZ’s Chairman, threatened: “Unless we can get some reasonable position with the Government, we just have to systematically, one after the other (close them)” ( Press, 28/10/06, “Toll leans on Govt for subsidy”, Gareth Vaughan). Rowsthorn had obviously watched too many Star Wars movies, saying: “I would’ve thought over the next two or three months that we’re facing the prospect of the dark side. It’s not where we want to go, but unless they get serious we’ve got no choice” (ibid.).

This is all about money, of course, and Toll NZ is doing quite nicely, thank you very much. It made a $53.3 million after tax profit for the year ending June 2006, up 89% on the net profit for the June 2005 year. But Toll NZ is only a small part of Toll’s big picture. Toll Holdings, the mother company, recently spent $7.8 billion taking over Australian stevedoring TNC, Patrick Corporation (which definitely puts into perspective the comparatively piddly sums about which it is arguing with the New Zealand government). As the RMTU’s Wayne Butson said: “If you have a purchase in the order of $7b then money’s going to get tight. I think New Zealand’s going to suffer as a result of the Patrick purchase” ( Press, ibid.).

There are two ways that the Government can tip the balance in its favour in this game of brinkmanship. The short term one is to let competitors have access to the rail network, similar to what it has forced on Telecom, the all time champion abuser of a monopoly. The long term solution, which is in the national interest, is to have the courage to do what it chickened out from doing in 2004 and that is to nationalise the whole railway system, not just the track. I don’t have any illusions about the State as a railway operator or employer (I worked for the old Railways from 1976-91, and was made redundant by them, one of tens of thousands to share that fate) but we’ve given the TNC alternative a decent go and it’s been a disaster. A national railway system is too valuable an asset to be allowed to be smashed up like a kid’s train set.