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THE ROAD AHEAD

Economic Development Study on State Highway 3 North FULL REPORT Venture

TARANAKI Te Puna Umanga

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â&#x20AC;&#x153;This report is as much about changing attitudes to our infrastructural funding as it is about driving economic transformation.â&#x20AC;?

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Executive Summary

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Ensuring SH3 is maintained/enhanced to an acceptable standard and that there is confidence in the road maintenance system. i.e. that SH3 pavement quality, bridge abutments etc achieve to a minimum standard.

More passing opportunities and other route improvements such as road shoulders Enhanced route maintenance.

Widen existing tunnels, open tight corners

Identify and quantify the next constraint with SH3

Seek a mechanism to ensure that there is ongoing incremental improvement in the transport networks of regions such as Taranaki’s beyond 2015.

Economic transformation of Taranaki region and nation, utilising road/infrastructure as driver.

Route maintenance

Make the route safer

Relieve specific constraints

The next constraint

Review of Funding Scheme for regional roads (R-Funding)

Long term strategic and policy changes fostering inter-generational economic development transformation

Strategic conversation with Government on: • Infrastructure as driver of economic development • R-funding • Policy and funding formula for infrastructure • Taranaki’s position in national economy • Transformational strategies for regional and national economic development

Discussion and decision with Government on the future funding scheme for regional roads. An ‘R Fund equivalent’ type source will be essential.

• Opportunity to be established.

• Review and progress Beca report on widening SH3 Awakino and Mount Messenger tunnels

• Review, discuss, progress passing lane study sites and route areas requiring attention. • Investigate funding options e.g. block project funding possibilities for the construction of passing lanes. • Ensure maintenance and safety service levels and strategies encompass Taranaki’s unique economic factors and and route utilisation considerations e.g. O&G industry, heavy engineering.

• Investigate past and current maintenance investment • Understand and influence future levels of service • Account for damage to vehicles/trucks – discuss reinstatement of this evaluation criteria

• Design and construction can be achieved in 3-5 years with government support. • Hold Government accountable.

Actions

$16.4 -$22.4m

To be determined

To be demonstrated

$5m

$3.4m+

$8-$14m

Costs

2012-2013

2014-2015

2016-2025

Timetable 2026-2055

These recommendations relate only to SH3 (North). They exclude the projects relating to SH3 (South) such as the Normanby bridge and the HVMP route improvements, which are also considered critical for the region but are not included in this report, for the above reason.

* Estimate of quantified projects only

Enhance eastern access to New Plymouth (includes Waiwakaiho bridge)

Fix Vickers bottleneck

TOTAL*

Description

Remedies

Table 1 Summary of Report Recommendations

FORWARD

Detailed Independent Analysis in association with NZIER and Beca

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Contents

Detailed Independent Analysis Key Findings 3

3.2.3 Safer Journeys — New Zealand’s road

Background 9

3.2.4 The NZ Transport Agency’s funding

1.1

Overview

1.2

Context 9

1.3

Study approach and aims

The SH3 corridor

2.1

Description of the corridor

2.2

The region’s views about the corridor

safety strategy 2010–2020

allocation framework

3.2.5 State highway classification project

3.2.6 Maintenance of SH3

The relationship between SH3 and Taranaki development 33

4.1

The Taranaki economy

4.2

Oil and gas sector and energy network resilience

2.2.2 Initial stakeholder survey undertaken

4.3

The heavy engineering sector, and oversized loads 36

2.2.3 Survey of effects following 1997 Awakino

4.4

Dairy

4.5

Forestry

A framework for economic development

2.2.1 Venture Taranaki’s 2011 perceptions study 11

for this study

Gorge slip

2.3

Is there a current SH3 corridor investment strategy? 12

2.3.1 State Highway Classification

2.3.2 Passing lanes

5.1

Introduction

2.3.3 2002 Mount Messenger study

5.2

Role of project appraisal

2.3.4 The ‘Blue Highway’ strategy

5.3

Prevailing economic appraisal methods

2.3.5 The ‘East-West’ corridor concept

5.3.1 Measuring ‘user benefits’

5.3.2 Prevailing appraisal methods

2.3.6 The Waikato Inter-Regional Transportation

Study (IRTS)

2.3.7 The SH3 Vickers Road to New Plymouth

alleged ‘good enough’

39 40

5.3.3 The case for ‘wider economic benefits’

(WEBs)

City project

2.4

5.3.4 The NZTA’s ‘National Strategic Factors’

Transport use

2.4.1 Introduction and summary

5.4

40 42

Additional factors to consider in a general SH3 appraisal 43

2.4.2 General use of SH3 compared

5.4.1 Growing the economy by making

to similar routes elsewhere

a step-change improvement to SH3

2.4.3 Daily traffic analysis

5.4.2 Supporting exporters

2.4.4 Closures on SH3

5.4.3 Addressing the circularity of transport

2.4.5 Other highways closures

and economic development

as a cause for volume spikes

In summary

2.5

Safety performance

References

2.5.1 Safety rating

Appendix A

2.5.2 Risk

Initial stakeholder survey responses

Policies relating to the SH3 corridor

Appendix B

3.1

Economic development strategy

Box and whisker data

3.2

Transport strategies and funding policies

Appendix C

3.2.1 GPS on Land Transport Funding

Comparison of closures on other state highways

3.2.2 Connecting New Zealand

Appendix D

Indicative cost estimates to widen SH3 for oversized loads

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Figures

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Figure 1

SH3 corridor New Plymouth to Waikato

Figure 2

Three stage process for the SH Classification system

Figure 3

NZTAâ&#x20AC;&#x2122;s State Highway Classification (North Island)

Figure 4

Mokau to SH3A passing lane study sites

Figure 5

Corridors considered in 2002 for alternative Mt Messenger route

Figure 6

Waikato SH3 road use

Figure 7

Taranaki SH3 road use

Figure 8

Annual average daily traffic â&#x20AC;&#x201C; vehicle flows

Figure 9

Daily SH3 traffic counts 2007-2011

Figure 10

Box and whisker chart for all traffic

Figure 11

Daily SH3 heavy traffic counts 2007-2011

Figure 12

Box and whisker chart for heavy traffic

Figure 13

Traffic growth indexes

Figure 14

SH3 closure causes 2008-2011 (Taranaki & Waikato)

Figure 15

Waikato only section of SH3 closure causes 2001-2011

Figure 16

Waikato SH3 safety ratings

Figure 17

Taranaki SH3 safety ratings

Figure 18

National strategic criteria

Figure 19

Regional strategic criteria

Figure 20

State highway road condition index 2012/13

Figure 21

Taranaki Performance 2000-2010

Figure 22

National gas pipeline network

Figure 23

Benefit from a travel cost reduction

Figure 24

Awakino Tunnel and easing of corners north and south

Figure 25

Mt Messenger tunnel daylighting and easing of corner south

Figure 26

Standard benefits + economic growth benefits

Figure 27

Undiscounted benefits over 30+30 years

Figure 28

Discounted benefits over 30+30 years at 4%

Figure 29

Potential circularity of transport investment

Figure 30

Average responses to importance of enhancement

Figure 31

The region will be better linked to the rest of New Zealand

Figure 32

It will be easier for visitors to travel between regions

Figure 33

Average responses to impacted industries

Figure 34

Average responses to impacted industries

Figure 35

Average responses to importance of improvement options

Figure 36

SH3 as a barrier to economic development

Figure 37

SH3 as a barrier to future economic development

Figure 38

Time to feel benefits of upgrade

Figure 39

Impact of SH3 on recreation

Detailed Independent Analysis – Key Findings Venture Taranaki Trust commissioned NZIER (with support by Beca Infrastructure) to review the case of investing in State Highway 3 (SH3) to improve long-term benefits to New Zealand as a whole. This report describes the evidence and analysis from their independent economic review. This section sets out their key findings and assessment from the body of the main report, allowing readers access to the core elements of their review and the remedies that they propose.

Overview State Highway 3 between New Plymouth and the upper North Island is the only direct major road link between Taranaki and the north. The route has stretches where there are no passing lanes, where the road surface is uneven to be unsafe, where it is so narrow larger loads cannot pass through and sections that are accident prone. This results in several problems, a poor safety performance, restrictions on large trucks, a lack of safe passing opportunities, and poor network resilience to closures. SH3 struggles to make a case for significant new investment under the government’s current transport funding framework. The current investment framework targets unmet high levels of real traffic demand. Our review of previous studies and the data available has not revealed enough concrete evidence to justify a case for significant investment in SH3 under this framework. This is because the use of SH3 is materially lower than similar routes. Decisions on transport funding are made using a periodic national tournament of roading projects. Funding is not determined on how good a project is in isolation, but on whether it is better, relative to other projects competing for the same limited pool of funds. From a national perspective, there are currently enough capacity bottlenecks (particularly in the major cities), and mandated priority spend (such as the Roads of National Significance, or RoNS), to mean SH3 will likely not qualify for significant new spending without a ‘transformation’ of Taranaki to generate additional traffic. We understand this situation but suspect that the current state of SH3 is inhibiting possible development of economic activities in Taranaki that might support the improvements

in the first place. There is an issue of circularity that needs to be addressed. A better route north may attract more activity to the region by making more productive opportunities viable for businesses and households. These wider benefits would come hand-in-hand with increased use of the route. It is possible that increased demand may be sufficient to elevate SH3 in the national funding tournament. If a way can be found to test the notion that roading investment can influence future demand, then it is a reasonable move to undertake carefully planned investment. One way to do this is to deal with a limited number of the factors that most restrict development. SH3 is uniquely positioned to be made more supportive of economic development without high upfront costs. The factors that most constrain development are few. Widening/‘daylighting’ the two narrow tunnels, straightening tight corners, and providing safe passing opportunities would cost less than $10 million. In an upside scenario these improvements would encourage traffic growth sufficient to return costs several times over. Even in a downside scenario the longer term benefits are expected to fully cover the costs. Other possible improvements to SH3 would complement this. These include ensuring SH3 in and out of New Plymouth is not a bottleneck and that the road surface is appropriate for heavy trucks. In summary, a package of incremental improvements to SH3 may induce additional traffic by opening up new productive opportunities to businesses and households. The upshot has a reasonable chance of being more in the national interest than competing projects.

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Taranaki and SH3

A strategy for investment

A recent Venture Taranaki survey revealed that road transport connectivity to the upper North Island and to the east of New Plymouth is Taranaki residents’ number one issue — of all issues. The region is perceived as being particularly isolated from the ‘golden triangle’ of Auckland, Hamilton and Tauranga. In the same manner as for Northland, Taranaki neighbours these GDP growth engines but also like Northland it has a poor standard of road connectivity to them. However, unlike Northland, Taranaki does not have an inter-regional Road of National Significance in the pipeline.

Transport investments generally target where the need is most

While the New Plymouth area has shown strong growth compared to national performance, the population growth of the Taranaki region has not kept up with major centres. The growth in road-based freight between Taranaki and the upper North Island has been relatively low as well. The region does have a high dependence on land transport - roads, energy (gas) pipelines, and rail, to link products including dairy, with markets. Despite this regional setting, New Plymouth district has seen strong, sustained growth in a number of economic indicators, while overall regional growth has picked up recently with significant exploration going on in the oil and gas (O&G) business. Dairy production is strong on the back of world demand, and the heavy engineering sector in Taranaki continues to compete nationally and internationally. Indications are that Taranaki will remain ‘home base’ for O&G exploration activities throughout New Zealand.1 We have identified supply side constraints with SH3 associated with trucking supplies from points north for the O&G sector in Taranaki that will likely worsen with new discoveries requiring increasing levels of product handling and inputs. We have also identified that O&G discoveries on the East Coast of the North Island, now being further explored, will compound this supply side constraint on SH3. TAG Oil are about to start drilling on the East Coast and, while it is early days, they have expressed concerns about the ability of SH3 to be an effective and efficient route to link their exploration activities. TAG Oil expect to be more definitive about their requirements by mid-2013.

real and evident – typically where there is congestion. This leads to roading investments being relatively safe bets, as it fixes the problems. However, these choices are not necessarily the best investments that could be made. Other projects may ‘release a brake’ on a region’s development by opening up new areas and providing new productive opportunities. If such a project is successful in causing these kinds of ‘transformations’ the benefits can in principle be of a larger order than for more routine roading projects. The trade-offs with these more speculative projects are increased uncertainty and typically higher cost. They are riskier because it is less clear what the long-term effects will be and whether the uptake anticipated will occur. They are typically costly because multiple improvements to a network are often needed to make the step-change improvements required. In the case of SH3, however, an incremental approach looks possible. We have identified a limited set of interrelated improvements that will likely cause a step-change improvement in accessibility. What is notable for SH3 is that despite these improvements being not unduly costly they would seem to have a chance of opening up the broader development outcomes desired. Staging investment in SH3 in this way is a ‘learn by doing’ approach that can be used to test support for the notion that a better SH3 route would help grow the national economy via growth in Taranaki. This would buy the future option (i.e. flexibility) of additional investment to further grow and accommodate new activities related to the region.

1 For instance, Shell’s new exploration campaign in the Great Southern Basin will continue to base its exploration, technical and support teams in New Plymouth. ‘Taranaki base for southern search’ Taranaki Daily News, Friday, May 4, 2012, page 5.

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The incremental approach can be developed along the following lines: 1. Identify real constraints on SH3 that limit the growth in demand for the corridor. 2. Consider if there is a subset of those constraints that are (or potentially are) particularly binding, and that can be relieved with modest cost to cause a real and perceived step-change improvement in accessibility to the entire route. The key element of this analysis will be to consider what an upside scenario from the improvements would look like, and the scale of benefits that might result from the step-change. 3. Undertake projects identified that most bind the long-term growth in demand in a single broad programme of work. (Essentially this would be an all-or-nothing strategy as the gains are only unlocked when all the constraints are relaxed.) 4. Monitor and review progress to confirm that demand for SH3 is in fact growing. This ‘learn by doing’ approach would complement other features of the transport system that includes balanced transport priority settings and maintaining the existing SH3 route to a reasonable minimum standard.

Analysis of the most binding constraints NZIER has identified a small number of issues associated with SH3 that have, or are perceived to have, a high impact on the region. These issues have been investigated and we believe that remedies, that is smaller step improvements to the route, could be completed quickly and be justified on the basis that:

1. SH3 north is relatively unsafe: − SH3 north does not rate well in the ‘KiwiRap’ national safety analysis. Much of the route between New Plymouth and Hamilton is below average rating at 2 stars and no part of it was rated higher than 3 [out of 5 stars]. − There is an extended stretch (79 km northbound and some 65 km southbound) with no passing lanes between Mt Messenger and Awakino Gorge and only limited lengths of safe passing distance.2 − The road is subject to an increasing level of use by trucking companies to move O&G products which exposes SH3 users to an additional level of hazard. For example, we were advised that trucks that transport LPG ideally need smoother pavement surfaces than currently exist on SH3.

2. SH3 north is difficult for freight, and particularly restrictive for Taranaki’s world-class heavy engineering industry: Various stakeholders, including heavy vehicle operators have concerns about the standard of the road surface of SH3 route. Trucks are more susceptible than cars to uneven surface conditions. Truck operators are concerned about rough bridge abutments, the uneven pavement surface, the lack of road shoulders with the damage done to the freight itself, the driver fatigue caused, and the premature deterioration caused to the truck bodies. Trucking industry costs are up to 30% higher on SH3 north (for normal travel) compared to other routes. The limitations are more severe for oversized trucks: the two tunnels and some isolated tight corners prevent oversized trucks from using the route. This more than doubles the cost of moving oversized freight, which particulalry affects the O&G and heavy engineering sectors in particular.

3. New Plymouth’s issues with its eastern arterial corridor are similar in kind to the major urban centres. Per dollar spent it is no different in kind from the urban RoNS: The ‘Vickers to City’ SH3 project covers a bottleneck between the city centre and the eastern suburbs where most of the industrial and residential growth is expected to occur.3 The preliminary findings of scheme investigations4 are that the project is economically viable and is significantly effective at providing: (i) enduring congestion relief in a main urban area, (ii) reliability improvements, and (iii) making freight supply chains more efficient. This project differs from the RoNS only in terms of scale. Undertaking this scheme would avoid suppressing the speed of economic development in the region to the extent this is a consequence of this particular bottleneck. − Historically the route has been prone to closures from slips, particularly in the Awakino Gorge. In more recent times it has been the high crash rate that has caused the most serious issues, particularly fatal incidents (section 2.4.3c)). Addressing the severe safety shortcomings would improve real and perceived route security issues. − Statistical analysis undertaken in this study (section 2.4) finds that SH3 plays an important role to the north/south lifeline for freight when the central North Island is closed by snow and ice. Heavy truck usage spikes by the addition of the equivalent of 50% of one day’s normal usage (which is spread over three days). Were SH3 to be closed at the same time then the national economic detriment could be serious. − The October 2011 Maui pipeline outage5 curtailed supply of gas to large parts of the North Island for five days, which was a nationally significant event. The possibility of SH3 being out at the same time as a Maui pipeline outage is a nationally significant risk. Stakeholders have advised us that since the outage many firms have re-plumbed their sites to be able to use bottled LPG in a similar event. Not only would a coinciding SH3 outage make it much harder to resolve a pipeline fault, it would severely curtail the emergency supply of LPG bottles to the upper North Island.

The NZTA’s ‘Mokau to SH3A Passing Lanes Study’ 2012. SH3 Vickers to City Investigation and Reporting Scoping Report, para 10. 4 Ibid. Para 18. 2 3

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The SH3 route north places other constraints on Taranaki’s economic development through features of its existing configuration. These include the hill climb over Mt Messenger, and the continual threat of slips through Awakino Gorge. To fully relax these constraints would require substantial capital expenditure.

Grouping of constraints and value for money – the remedies The groups of improvements that would make significant improvements to the most binding constraints listed above are described below, together with broad estimates of their value for money:

1. General safety improvements: − multiple passing opportunities (lanes and slow vehicle bays) on the long stretches of highway that currently have none: • The NZTA’s ‘Mokau to SH3A Passing Lanes Study’ (January 2012) finds that these passing lanes have healthy BCRs between about 2 to 3.8. • Given the route has a relatively high proportion of trucks that use it, more passing opportunities would help address the concerns of light vehicle drivers regarding the conflicts between trucks and cars. − At a minimum the route should be specifically evaluated to determine what broad safety upgrades are required to keep the hazard potential from increased levels of freighting O&G products at an acceptable level. − General safety improvements would also reduce the incidence of route closures (refer to section 2.3.2): • This would give tangible transport benefits. Such benefits are of particular importance to SH3 but are not included in the BCRs of the passing lanes because the social cost of crashes used by the NZTA excludes the cost of road disruption. • Reduced closures would also affect perceptions of the vulnerability of Taranaki’s lifeline north, which could affect firms’ and households’ longer-term location decisions.

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2. Widen the narrowest links: − Widen/daylight the tunnels and address the remaining constraints (such as tight corners and weak bridges) that prevent the majority of the oversized loads from using the routes. − Beca Infrastructure have estimated a total cost of just under $5 million for tunnel widening/day-lighting and some corner straightening along the route that are workable and probably able to be consented. (Appendix D). − Industry stakeholders told us that the cost to transport oversized loads to/from the upper North Island will reduce from about $9,000 to $4,000 for some 75 trips currently occurring annually.6 Initial indications are that the standard BCR would be between 1–1.7 for a 30-year appraisal depending on the ‘discount rate’ used (a parameter that represents how much the future matters). If a long-term view is taken, and if the improvement causes the heavy engineering industry’s oversized output to increase by an additional 2% per year, then the BCR could be up to 5 or 6 — which is high. (Section 5.4.) − Improving the tightest of corners may also reduce the general risk of heavy truck crashes and incidents that threaten route security, providing additional benefits. An example here is a ‘medium-level’ accident when a heavy crane partially slipped off the road near the summit of Mt Messenger during the Maui gas pipeline outage. 3. Addressing the SH3 bottleneck to the east of New Plymouth: − Initial NZTA estimates are that the Vickers to City SH3 improvements project: • will cost between $8.2–$14.5 million • has a BCR between 2–4; and • aligns with government policy (to the extent that a capacity enhancing regional project could do so). − The project would (in part) address the number one issue raised in Venture Taranaki’s 2011 perceptions survey.

Further details can be found in the 2011 Maui Pipeline Failure Investigation Report at mauipipeline.co.nz. This includes RUC (road user costs), on the assumption that it approximates the marginal damage done to the roads.

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Jointly undertake improvements, wait and monitor, and then continue investing if long-term uptake occurs

Complement the broader funding allocation framework and asset maintenance strategies

By making step-change improvements to SH3 (namely to address safety, the perceived conflicts between cars and trucks, the transport constraints on Taranaki’s heavy engineering industry, and the urban bottlenecks to the east of New Plymouth), the region will likely grow faster and contribute more to New Zealand’s wellbeing as a whole.

R funds: At present the ‘R funds’ facility guarantees a minimum level of new investment in each region. R funds are due to expire from 2015 and it is unclear whether this funding source will be extended or will cease at that point. Maintaining minimum regional spending levels is a way of continuing to support those projects that are nationally beneficial because they address constraints that suppress the attraction of activities to a region. As discussed above, projects such as SH3 are not well catered for in the prevailing decision making frameworks, even though they may be particularly important for regional growth.

However, uncertainty exists with any investment. The use of SH3 by various kinds of travellers should be specifically monitored and steps taken to attribute, to the best extent possible, any increased use of the route to the suite of improvements. If the investments are a success they will lead to more people living, working and playing in Taranaki. Such changes are structural in nature, and would compound over many years. Any increased use of SH3 attributable to the improvements would constitute as a ‘good news’ event (Grimes 2011). This would make further step-change improvements in future more compelling for decision makers. In this case the next set of constraints on the route can be identified and new investment opportunities learned.

Remedies in summary We summarise our remedies as follows:

Table 1 Summary of SH3 Remedies

SH 3 Remedies

Description

Timeline

Estimate

Value for $

Route maintenance

Ensure pavement quality, bridge abutments etc. to a minimum standard

Ongoing

More info needed

Set standard to obtain VfM. Account for damage to trucks

Make the route safer

Passing opportunities and other route improvements such as road shoulders

Short – medium term

$3.4m+

BCRs ≈ 2–4. Conservative as they omit benefits from less route closures

Relieve specific constraints Widen existing tunnels, open tight corners

Medium term

≈$5m

BCR ≈ 1; up to 5–6

Fix Vickers bottleneck

Eastern access to New Plymouth

Short term

≈$8 - $14m

BCR ≈ 2–4 and complements other remedies

The next constraint

Identify and quantify the next constraint with SH3

Long term

Opportunity to be established

To be demonstrated

There is a reasonable case to investigate whether economic growth can be improved by making modest sized investments in SH3. Specific constraints on the route can be resolved in a manageable, prudent, and incremental manner. Step-change improvements in accessibility between New Plymouth and the upper North Island has the potential to attract activities to the region. This relocation of activities is of national net-benefit when households and firms are given a wider range of viable and attractive possibilities on where they can choose to live, work and play.

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Analysis Sections

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1. Background 1.1 Overview

1.3 Study approach and aims

State Highway 3 (SH3) plays a role in supporting both Taranki region’s and the nation’s economic development. Venture Taranaki Trust (Venture Taranaki) — the Regional Development Agency — commissioned NZIER to undertake a broad economic review of SH3.

This study is written in two parts.

The ultimate and longer-term aim of Venture Taranaki is to develop a robust business case of the strategic and wider benefits of State Highway 3, that would provide justification for increased investment in the highway.

1.2 Context State Highway 3 is of strategic importance to Taranaki linking the region with main population centres, markets and import/export facilities to the north and south. It is the only inter-regional highway that directly connects Taranaki to the regions’ north. The route helps ensure agricultural, oil and gas and other products important to the regional and national economy, get to processing and manufacturing sites and from there to national and international markets. The route is a key component in future growth plans to grow the amount of freight through Port Taranaki (PTL) and beyond to markets in Australia and Asia (the PTL’s ‘Blue Highway’ proposal, and Venture Taranaki’s ‘East-West corridor’ concept). Success in these endeavours could contribute significantly to New Zealand’s economic growth and productivity.

1. An initial evaluation of the issues, considering the existing SH3 corridor strategy, initial stakeholder engagement, the transport investment policy framework, and the relative performance of the route — in a sense, this is a ‘situation analysis’.

2. An analysis of the various factors that could strengthen the economic case for investment, building on a critique of what current economic appraisal methods do and don’t capture. This would consider factors such as wider economic benefits and broader economic development. NZIER’s focus in this report is on long-term economic development, rather than short-term. The troublesome present world economic climate and the 3-year transport programme currently under development are not of principle concern. This study is intended to outline an ‘Indicative Business Case’ akin to an ‘investment prospectus’ for more detailed discussion with central government to think ‘differently’ and more receptively towards the importance of SH3 in the national transport network.

Despite its importance SH3 is perceived by some people in the region as a relatively low quality route that is subject to closures, which suppresses its use. The Taranaki region has been unable to gain funding that would make a significant difference to the overall quality of SH3. This is a result of limited funding availability, low traffic volumes on the route relative to other inter-regional state highways, and the difficult terrain and thus high development costs. The belief is that there is more to the relationship between SH3 and the Taranaki economy than is revealed through traffic volumes and safety performance.

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2. The SH3 corridor 2.1 Description of the corridor The corridor of primary interest in this study is SH3 north which is the direct northern link between New Plymouth and the Waikato, as outlined in Figure 1. There are other indirect routes north to Auckland and Hamilton, and north-east to Tauranga using roads that are either narrower, and not suitable for a range of users, or involve longer distances. The southern aspect of SH3 relates not just to New Plymouthâ&#x20AC;&#x2122;s connectivity to Waikato, but also further south and south east in Taranaki.

SH3 [north] follows the coast from New Plymouth north to Mokau where it crosses the river and winds inland eventually meeting SH4 and SH 30 near Te Kuiti. While the whole route is windy, narrow and is widely regarded as inadequate, there are two major constraints for SH3 users at Mt Messenger and also in the Awakino Gorge. We describe these constraints and possible remedies in more detail in this report.

Figure 1 SH3 corridor New Plymouth to Waikato

Awakino Gorge

Mt Messenger

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SH3 has the following characteristics: • it is the only arterial inter-regional route that directly connects Taranaki to the north • a high proportion of vehicles that use the route are heavy commercial vehicles (HCVs) relative to other inter-regional routes (up to 20% on some sections) • although the route is scenic, it passes through high risk terrain, with slips common in the Awakino Gorge

2.2 The region’s views about the corridor The standard of SH3 north is seen by residents as one of the biggest problems Taranaki faces.

2.2.1 Venture Taranaki’s 2011 perceptions study In 2011 Venture Taranaki undertook a survey to gather the

• there is a conflict between cars and HCVs, with minimal opportunities for safe overtaking, particularly between Mt Messenger and the north of Awakino Gorge

perceptions of 400 Taranaki people and 200 non-residents

• trucking company stakeholders and other industry representatives that deal with large industrial equipment inform us that the route is difficult for HCVs:

Taranaki’ the main response was for better roading and travel

concerning the region. The survey considered all aspects of regional amenity. When prompted for ‘one wish for infrastructure — “sort out the roads”, especially SH3 North and the Waiwhakaiho bridge bottleneck.

− significant sections of the route are steep and/ or windy (particularly Mt Messenger and Awakino Gorge)

2.2.2 Initial stakeholder survey undertaken for this study

− the two narrow tunnels on the route prevent moderately oversized loads from using the route, which substantially hinders the ability to supply inputs to the heavy-industry firms in Taranaki and for them to compete with other firms in the upper North Island and in Australia as well

A further survey of businesses and households in Taranaki and

− there are issues with the quality of the road pavement, including claims that the surfaces are wavy and inconsistent; there are long stretches without shoulders, which reduces any room for error; and the run-ups to some bridges (‘bridge abutments’) are bone-jarring for drivers, their trucks and their cargo. • there is less network resilience to an event (such as a slip or crash) for several reasons, including:

− there are few or no convenient alternative routes to deviate around an incident for much of the distance − the distance to emergency services is significant causing slow response times (the closest are based in Urenui, about 25km north of New Plymouth) − cellphone and radio coverage is limited on those sections of the route most prone to events, hampering emergency services’ effectiveness. In recent years a suite of improvements has been made to SH3 on the Waikato side, including corner straightening, passing lanes added, the Awakino tunnel widened, and better signage. The view of Taranaki people is that this was beneficial, but that more is needed, particularly on the Taranaki side of the regional border.

neighbouring regions was undertaken to establish: • how SH3 affects Taranaki’s overall attractiveness • the industries thought to be most affected by SH3 • how firms think SH3 matters to them • what improvements people want to SH3 • whether SH3 is limiting Taranaki’s growth now and in the future • how quickly the region would benefit from a marked improvement to SH3 • whether the quality of SH3 affects recreational/leisure travel. There were 321 responses and detailed results can be found in Appendix A. The key findings are that respondents believe that: • SH3 affects Taranaki’s overall attractiveness. A substantial improvement to SH3 would, it is believed, better link Taranaki to the rest of the New Zealand. It is also thought it would make it easier for visitors to travel between regions • the transport and tourism industries will experience the most significant gains • businesses, on average, would experience a low to medium impact on growth of their operations from a marked improvement to SH3. Such benefits may come about via improved access to upstream markets (suppliers/inwards goods) and to new and existing markets for the goods and services they produce

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• the improvements that would achieve the most were: reducing the risk of closure due to slips, better maintenance of the road surface, and increasing the number of passing lanes • the current state of SH3 holds back the region’s current and future economic development, and that Taranaki would immediately benefit from a marked improvement to SH3 • SH3 suppresses recreational/ leisure travel north. These respondents are more inclined to visit areas south instead of to the north due to the condition of the road and the slower average speeds.

2.2.3 Survey of effects following 1997 Awakino Gorge slip On March 12–19 1997 a slip just north of Awakino township

There are a range of studies and projects that relate to the SH3 corridor, including: possible improvements to stretches of the route (such passing lanes, and realignments over Mt Messenger); new uses of the corridor (the Blue Highway, and more indirectly, the ‘East-West’ corridor concept); and the 2009 Waikato Inter-Regional Transportation Study. This section summarises each of those studies.

2.3.1 State Highway Classification

closed the SH3 route. Taranaki Regional Council (TRC)

a) What the classification system is and what it does

estimated some of the economic costs of the slip at more than

In May 2011 the NZTA released its State Highway Classifications to prioritise the national state highway network based on their function. The categories are national strategic (with a high volume subset), regional strategic, regional connector and regional distributor.

$235,000 per day (in 2010 dollars) , plus intangible costs.7 TRC (1997, p16) said that many comments were made that the slip would have negative effects by strengthening the perception that Taranaki is isolated and inaccessible: It was noted that Taranaki is already seen as being a difficult place to get to and that that perception is reinforced by events such as the slip… Others noted that the disruption caused by road closures weakens business confidence and undermines the efforts of those seeking to attract businesses and enterprise to Taranaki. The section that was affected by the slip in 1997 has since been realigned to a higher speed section away from the threatening hill.

2.3 Is there a current SH3 corridor investment strategy? NZIER sought to establish whether a SH3 corridor improvement strategy existed, and if so, what its key features were. In 2000 Transit NZ undertook a corridor strategy study for the Mokau to New Plymouth section of SH3. The study preceded the 2002 Mt Messenger study summarised in section 2.3.3 below. The need for passing lanes was noted, as well as a bypass of Bell Block that has since occurred. A range of route alignment options was identified, and remain as options.

The NZTA’s current State Highway Classification process will, in time, outline expectations for the level of service for this route. We understand that when that process is complete the NZTA is planning to undertake a study of the entire SH3 (Hamilton – New Plymouth – Woodville (in the Wairarapa)) to determine what upgrades are possible.

TRC (2011) and TRC (1997).

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NZTA intend to use the classifications to guide investment decisions. The NZTA’s challenge is to achieve the government’s aim for land transport to boost New Zealand’s economy by moving people and freight more safely and efficiently within existing budgets. The classification system is a programme of work intended to result in prescribed levels of service or road user experience that each class of highway should offer (in Figure 2 below, stage 2 is currently underway). In turn these [target] service levels will inform the design, maintenance and operations needed (stage 3 in Figure 2 below). b) SH3’s classification State Highway 3 has been designated as a ‘regionally strategic’ highway (which is third tier if the ‘high volume’ National Strategic class is counted as a separate category).

Figure 2 Three stage process for the SH Classification system

1. Function

2. Road user experience or level of service

3. Design

Source: NZTA, www.nzta.govt.nz/planning/process/state-highway.html#planning

State Highway 3 has been designated as a ‘regionally strategic’ highway (which is third tier if the ‘high volume’ National Strategic class is counted as a separate category).

Figure 3 NZTA’s State Highway Classification (North Island)

Source: NZTA THE ROAD AHEAD

What this means in terms of the expected quality of the road is yet to be determined. How the trade-offs between the service standards for ‘regional strategic’ roads nationally and the need for value for money from each investment will be judged is unclear.

2.3.2 Passing lanes The NZTA have studied the possibility of passing lanes for SH3 between Mokau and south of Mt Messenger (Mokau to SH3A Passing Lanes Study, January 2012). This underpinned a funding request in the current Regional Land Transport Programme (RLTP) funding round. There is an extended stretch (79 km northbound and some 65 km southbound) with no passing lanes between Mt Messenger and Awakino Gorge (Figure 4 below) and only limited lengths of safe passing distance. The passing lanes study found that the various alternatives, which are illustrated in Figure 4 below, have healthy BCRs of between about 2 to 3.8.

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We note that these BCRs are likely to be conservative because they omit the benefits of reducing accident-induced traffic delays. The value of a crash saved included relates only to the people who would have been involved, property damage and the cost to emergency and health services. It does not include the cost of congestion and delays to other travellers. This is a particularly important issue in the context of SH3 because, as shown in section c) below, crashes are the leading cause of SH3 closures. These route closures disrupt existing traffic, and undermine the people’s perceptions about transport security to Taranaki as a whole. Accident-induced traffic delays are excluded from the cost of crashes, not because in principle they should be, but because of the lack of a workable standardised methodology to do so. NZIER (1999) found that there is a lack of comprehensive estimates for the average delay per incident, by road and by time of day. Although it is difficult to standardise a nation-wide methodology for including the cost of route closures from crashes, this does not rule out considering the effect on specific routes like SH3 where it is a particularly important issue.

Figure 4 Mokau to SH3A passing lane study sites

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Figure 5 Corridors considered in 2002 for alternative Mt Messenger route

Source: Beca (2002)

2.3.3 2002 Mount Messenger study

2.3.4 The ‘Blue Highway’ strategy

In 2002 Beca undertook a preliminary investigation to identify a route corridor that may be worthy of detailed investigation to provide a ‘safe, efficient and secure alternative to the present route of Mt Messenger’.

Port Taranaki Ltd are in the latter stages of planning and appraising their ‘Blue Highway’ strategy. The proposition is to provide a regular shipping service between Nelson and New Plymouth to cater primarily for long distance north-south freight journeys (e.g. between Auckland/Waikato/Bay of Plenty and Christchurch).

Three alternative alignments were considered relative to the current route. The ‘Western Route’ was considered the best of the alternatives — an alignment that simply goes right up the middle of Mt Messenger. It had the least environmental detriment and the most route security, and it had the highest benefit-cost ratio, of 0.8. However benefits were less than costs. This is because of the high capital costs relative to the volume of vehicles using the route. Beca advise that an updated BCR would likely be lower, given that the cost to construct will have increased since 2002 more than the benefits would have grown (because of the low rate of traffic growth). As a consequence of this study no major capital works improvements have been, or are proposed for Mt Messenger.

The Blue Highway concept does not hinge on whether public investment is forthcoming to upgrade any related infrastructure links8. PTL are currently working to secure a partnership with a shipping operator (possibly an existing New Zealand-based firm) and with existing trucking operators. If this idea proceeded and performed as planned, it would likely increase the average trucks daily on SH3 from 50 to 80. There is a possibility of the ‘empty container industry’9 using the route, which could triple these figures in the high-season. PTL are not banking on this latter possibility, however, because the relevant industry will not commit in advance. The capacity of SH3 is not viewed as a constraint on the viability of the Blue Highway proposal. However, any strategy to improve freight accessibility on SH3 north will complement the proposal, improving its prospects.

A previous study (WWC 2010) indicated that $15 million of national funding was required to upgrade a state highway link beside the port, but PTL inform us this is not strictly necessary for the proposal to be commercially viable. 9 This is an industry that relocates empty containers to where they are next needed. 8

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2.3.5 The ‘East-West’ corridor concept Venture Taranaki commissioned BERL to consider the indicative economic viability of an ‘East-West corridor’ to connect freight from Hawke’s Bay/Manawatu/Taranaki to Melbourne/Sydney via a frequent, quality shipping service to/ from New Plymouth. BERL (2009) found that such a service would provide substantial economic benefits from reduced freight costs and new trade opportunities. The proposition is premised on reasonably high-capacity state highways running east to west across the middle North Island, and a frequent and reliable shipping service. Any improved SH3 links to the upper North Island may relate to the East-West corridor concept indirectly in two ways: • the direct effect of SH3 upgrades may be to increase the attractiveness of trans-Tasman freight movements via Port of Taranaki to the upper North Island, contributing to the viability of the East-West concept • improvements to SH3 will complement the BlueHighway, which if undertaken would increase service standards at the Port. There would be investment in infrastructure (e.g. ‘Roll on roll off’ (RORO) facilities and possibly empty container storage), and possibly an increase in attractiveness to international services.

2.3.6 The Waikato Inter-Regional Transportation Study (IRTS) Hyder Consulting (2009) undertook the Waikato IRTS for Environment Waikato. This was an extensive study that developed a plan for inter-regional transportation network into and through the Waikato region. It proposed an evaluation framework that could be used to prioritise development of the inter-regional corridors including SH3. The Waikato IRTS scored various corridors against the evaluation criteria in each of the 2008 and 200910 Government Policy Statements (for the medium term) and the New Zealand Transport Strategy (for the longer term) to establish a priority schedule of routes. The SH3 corridor connecting Taranaki to Waikato and beyond scored a little below average in that evaluation. This finding related to the low traffic volumes on SH3 relative to the major routes connecting Hamilton to Auckland (the Waikato Expressway) and connecting these two cities to Tauranga. The study recommended that the focus for SH3 be on safety improvements and passing lanes.

Issued under Labour-led and National-led governments respectively. SH3 Vickers to City Investigation and Reporting Scoping Report, para 10. 12 Ibid. Para 18 13 Section 3.2.4 explains these terms.

2.3.7 The SH3 Vickers Road to New Plymouth City project The ‘Vickers to City’ project is outlined on page 28 of the draft Regional Land Transport Programme (draft RLTP). The ‘Vickers to City’ SH3 project is a package of initiatives to address bottlenecks between the city centre and the eastern suburbs where most of the industrial and residential growth is expected to occur11. An additional lane to the Waiwhakaiho bridge to make it four lanes is a key aspect of the project, given the result of Venture Taranaki’s 2011 Perceptions Study about that specific bottleneck (section 2.2.1 above). The preliminary findings of scheme investigations12 are that the project is economically viable and is significantly effective at providing enduring: (a) congestion relief in a main urban area, (b) reliability improvements, and (c) making freight supply chains more efficient. Aside from its smaller scale (both in terms of the effects and its costs), this project has many similarities with the urban RoNS, such as ‘Wellington to Levin’. Given the forecast growth in the area, undertaking the scheme would likely avoid suppressing the speed of economic development in the region to the extent that is of consequence. Work is underway to plan and appraise the project. Indicative estimations of cost lies between $8.2–$14.5 million. Given it is scored ‘medium’ for both strategic fit and for ‘efficiency’13 it means the project aligns with government policy and that its BCR is expected to be between 2–4. We would make the following observations about this project as it relates to the broad connection to the upper North Island: • improving Taranaki’s road transport link to the upper North Island depends not only on the inter-regional parts of SH3 but on the ability of the route to penetrate the region’s major city. Thus any strategy to improve SH3 overall is complementary to the Vickers to City project, in that doing any one aspect of a package of works increases the need for the others to be done. • it is important that urban arterial improvements are not done on a piece-meal basis. The land use changes induced can cause more traffic, and if the rest of the neighbouring transport network is not up to scratch this can worsen congestion14. This longer-term impact on congestion can make the partial initiatives implemented net-detrimental. That is, it is possible that it would be better to not do anything at all than to do such a corridor upgrade half-heartedly.

10 11

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2.4 Transport use 2.4.1 Introduction and summary

2.4.2 General use of SH3 compared to similar routes elsewhere

Is the use of SH3 particularly volatile? Does SH3 serve as a default north-south route when the central plateau routes (SH1 and SH4) are closed? Are there quite different patterns between cars and trucks using the road? Answering these questions can help understand how SH3 is used and if there are any unique issues that possibly need addressing.

Figure 6 and Figure 7 illustrate the use of sections of the SH3 route between New Plymouth and Hamilton. Traffic between Urenui and Piopio is most likely to be longer distance inter-regional travel. The data shows that the annual average daily traffic (AADT) for this section of SH3 has relatively low traffic volumes, with between 15% and 20% of the traffic being heavy, and has not grown significantly over the last five years.

NZTA provided daily traffic counts from the Tongaporutu telemetry site located on SH3 north of Mt Messenger to help us consider the questions above. These are split by cars and heavy vehicles for the five calendar years 2007 to 2011. (Data going back further than this is unavailable.) NZTA also provided us data on closures on routes in the region, their causes and durations.

A share of up to 20% for HCVs is high relative to the bulk of the state highway network. Data is available on the NZTA website16. This shows that 20% HCV share is near the upper limit of what the network normally experiences. In the central North Island the share of HCVs gets up to 22.3% on the Desert Road, but on the majority of sites on the state highway network is less than 15%.

In summary this data shows that:

The sections of the road that are closer to Hamilton or New Plymouth exhibit higher daily traffic volumes, and increased levels of heavy traffic (although the HCV share of traffic is lower).

• growth in the use of SH3 for inter-regional travel has stagnated over the past five years for cars15 and for trucks • SH3 is used as an alternative north-south arterial for trucks when State Highways 1 and 4 in the central North Island are at risk of closure from snow and ice • the use of SH3 is volatile, particularly for cars, and a leading cause seems to be nationally-significant tourism events in Taranaki • truck use had a slight dip at about the time of economic downturns but has since recovered • since 2008 SH3 closures have largely related to crashes.

14 This dynamic is not well understood in the transport planning literature. Induced land use changes currently have a very limited role in transport modelling, and essentially no role in the formal economic appraisals of transport schemes. 15 Or more generally all non-truck traffic. 16 Statistics on this can be found here: www.nzta.govt.nz/resources/state-highway-traffic-volumes

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Figure 6 Waikato SH3 road use

AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

2,874

3,107

3,025

3,160

3,240

16.6

AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

2,127

2,182

2,106

2,162

2,139

20.6

AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

6,904

6,843

6,764

6,865

6,846

15.3

Figure 7 Taranaki SH3 road use AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

2,095

2,093

2,047

2,207

2,077

17.3

AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

2,930

3,101

3,100

3,113

3,192

13.5

AADT 2006 -‐ 2010 2006

2007

2008

2009

2010

% Heavy

12,067

12,868

13,168

13,584

13,482

7.2

Source: NZTA THE ROAD AHEAD

Figure 8 below shows that SH3’s traffic volumes are low relative to other ‘regional strategic’ roads (Figure 3 on page 12). The 5-year average annual daily travel (AADT) on the mid-section of SH3 between Taranaki and Waikato is about 2,150 vehicles, whereas most other routes of the same class have 3,000–10,000 AADT. 2.4.3 Daily traffic analysis

Figure 8 Annual average daily traffic – vehicle flows

Source: NZTA, www.nzta.govt.nz/consultation/classification-system

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2.4.3 Daily traffic analysis a) All traffic Average use over the past five years was approximately 2,100 daily vehicles, and varied between 1,088 and 6,283. As shown in Figure 9, the bulk of the counts hovered around the average, with regular spikes in traffic flows, and a flat long-term trend in use. The causes of most of the spikes are unknown, but the two largest spikes (20 December 2009, and 24 March 2008) coincide with music concerts from international artists (Fleetwood Mac and Jack Johnson, respectively).

Figure 9 Daily SH3 traffic counts 2007-2011 Annual daily traffic (cars & trucks)

7,000 6,000 5,000 4,000 3,000 2,000

1,000

Daily

Sep-11

Nov-11

Jul-11

May-11

Jan-11

Mar-11

Nov-10

Jul-10

Sep-10

May-10

Jan-10

Mar-10

Sep-09

Nov-09

Jul-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

May-08

Jan-08

Mar-08

Sep-07

Nov-07

Jul-07

May-07

Jan-07

Mar-07

Moving annual average

Figure 10 provides an indication of the distribution of the traffic counts. It shows that for 75% of the days had traffic counts of approximately 2,400 or less17. The spikes in traffic flow could see, at times, three times the average number of vehicles on the road.

Figure 10 Box and whisker chart for all traffic 7,000 6,000 5,000 4,000 3,000

2,000 1,000 0 2011

2010

2009

2008

2007

Total

Data for the box and whisker charts are presented in Appendix B

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2008 and September 2009 before increasing to the end of 201218. The same information is presented in a â&#x20AC;&#x2DC;box and whiskerâ&#x20AC;&#x2122; format in Figure 12. Half of all working days had between 425 and 511 heavy vehicles use SH3, and the spikes in use are much less pronounced than for general traffic.

b) Heavy traffic The count of heavy traffic varied between 296 and 775 on working days between 2007 and 2011, with a daily average of 469. As shown in Figure 11 there are fewer spikes in heavy traffic than in total traffic counts. The moving average shows a declining trend between January

Figure 11 Daily SH3 heavy traffic counts 2007-2011 Annual daily traffic (cars & trucks)

900

800 700 600 500 400 300 200

100

Daily

Note: Source:

Nov-11

Jul-11

Sep-11

May-11

Jan-11

Mar-11

Nov-10

Jul-10

Sep-10

May-10

Jan-10

Mar-10

Nov-09

Jul-09

Sep-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

May-08

Jan-08

Mar-08

Nov-07

Jul-07

Sep-07

May-07

Jan-07

Mar-07

Moving annual average

(1) data excludes weekends and public holidays. (2) the circled spikes relate to closures on SH4 in the central North Island due to snow and ice, as outlined in section 2.4.5 below NZIER, using data supplied by NZTA

Figure 12 Box and whisker chart for heavy traffic 900 800 700 600 500 400

300 200 100 0 2011

2010

2009

2008

2007

Total

Note: data excludes weekends and public holidays Source: NZTA

18 This trend is also similar to the national growth in heavy traffic volumes as reported in NZTA (2012). At the national level, heavy traffic growth fell between 2008 and 2009 before responding in 2010.

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than the rest of the country, with the post-2007 gap closing.

Figure 13 compares the traffic growth on SH3 with the growth across the national road network. Traffic across the country fell after 2007. SH3 traffic fell by a greater percentage than the rest of the country. Since 2008, total traffic volumes on SH3 have grown at slightly higher rates

Heavy traffic on SH3 fell more dramatically than the national average. SH3 has also rebounded more sharply with higher traffic volumes in 2011 than in 2007.

Figure 13 Traffic growth indexes

Indexed traffic volumes (2007=100)

120 100 80 60 40

20 0 2003

2005

National total

2007

National heavy

2009

SH3 total

2011

SH3 heavy

Note: Total annual traffic volumes. Data for SH3 is only available from 2007. Source: NZIER, using data supplied by NZTA

2.4.4 Closures on SH3 SH3 closure data provided by NZTA suggests that the entire route to the upper North Island was closed 29 times between 2008 and 201119. Figure 14 shows that the number of closures overall has been trending upwards in the past four years, against a trend of broadly steady traffic levels overall (as per the section above). Figure 14 shows that the number of crash related closures has been growing steadily since 2008, while other causes are more unique. Figure 15 shows closure data for the Waikato section of SH3 between 2001 and 201120. It contrasts with the total SH3 data by suggesting that closures on the northern section of SH3 have become less frequent over the last ten years. Crashes remain the leading cause of SH3 closure.

Figure 14 SH3 closure causes 2008-2011 (Taranaki & Waikato)

Source: NZIER, with NZTA data 19 20

This data was merged from two sets provided by NZTA. The two sets were closure data for SH3 within the Taranaki region and the Waikato region. Closure data for the Taranaki region is available 2008-2011. THE ROAD AHEAD

Figure 15 Waikato only section of SH3 closure causes 2001-2011

Source: NZIER, with NZTA data

2.4.5 Other highways closures as a cause for volume spikes

• a closure on SH4 resulted in a spike in heavy traffic flows on SH3. Heavy traffic flows on SH3 were typically:

Evidence shows that SH3 is used by trucks as a lifeline between the north and south of the North Island when the normal routes in the central North Island are closed. We established this by making statistical comparisons of daily use data of SH3 against data on closures of SH1 and SH4 in the central North Island. SH4 (to the east of the Central Plateau) is the natural alternative route to SH1 only being closed.

• 22% above the historical monthly average on the day of a SH4 closure

Our methodology is described in Appendix C and the key results are: • the relationship between SH3 use and closures on SH1 and SH4 is limited to trucks. We did not find any statistical relationship between SH1/SH4 closures and total traffic volumes on SH3

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• 8% above that average the following day • 13% above the average two days following a SH4 closure. • SH1 closures in isolation did not have a statistically significant impact on SH3 traffic flows, however the four traffic spikes illustrated in Figure 11 correspond to joint closures on SH1 and SH4 • the closures on SH1 and SH4 account for approximately 10% of the variation in SH3 traffic flows.

2.5 Safety performance

2.5.1 Safety rating

The KiwiRap reports reveal the overall safety standard of the SH3 corridor. These reports are a joint venture between New Zealand transport agencies and the Automobile Association.

The 2010 KiwiRap report provides safety ratings for every 5 kilometre block of New Zealand’s State Highway network. The ratings range from 1 to 5 stars and are based on a range of safety factors for each piece of road21. A 5-star rating represents the safest road infrastructure design for the prevailing speed environment. A 1-star rating represents a road with poor infrastructure design for the prevailing speed environment. The report found that 39% of New Zealand’s roads were 2-star, 56% were 3-star and 5% were 4-star.

They indicate that SH3 is relatively unsafe, with 47% of SH3 receiving a poor 2-star rating, and the remaining 53% a 3-star rating. SH39 (to the west of Hamilton), which is one of the main routes connecting SH3 to Auckland, was assessed to be a completely 2-star road. The 145km stretch from Te Kuiti to New Plymouth was assessed as medium-high risk for any given vehicle, but ‘medium’ risk overall accounting for the aggregate trip volumes. Three measures of safety for the SH3 route between New Plymouth and Hamilton follow: • the safety ‘star’ rating for the route, as presented in the 2010 KiwiRap report • the level of personal risk for the route, as presented in the 2008 KiwiRap report • the level of collective risk for the route, as presented in the 2008 KiwiRap report.

SH3 between New Plymouth and Hamilton is split between the Taranaki and Waikato regions. 130 kilometres of SH3 was assessed in the Waikato region. 26% of this road was rated 2-star for safety, and the remaining 74% 3-stars. Figure 16 shows the distribution of these ratings across the roads in Waikato. KiwiRap assessed 201 kilometres of SH3 in the Taranaki region22 . 61% of this road received a 2-star rating, and the remaining 39% of the road received a 3-star rating. Combining these assessments tells us that approximately 47% of SH3 received a 2-star rating, and the remaining 53% received a 3-star rating.

Figure 16 Waikato SH3 safety ratings

21 These factors include: median divided, good horizontal alignment, safe roadside, wide lanes, good sealed shoulder width, good/excellent delineation, and intersections. 22 Note that this assessment includes the SH3 route between Wanganui and New Plymouth.

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Figure 17 Taranaki SH3 safety ratings

Source: NZIER, with NZTA data

2.5.2 Risk

a) Personal risk

The 2008 KiwiRap report presented assessments of the personal and collective risk for each section of New Zealand’s State Highway network. The two measures of risk reflect how safe a route is for a given vehicle to use (the personal measure of risk) compared with how safe the route is relative to how much it is used in aggregate (collective risk).

The personal risk was measured as the annual average number of fatal and serious injury crashes per 100 million vehicle-kilometres travelled.

The assessments take into account the length of each piece of road, the frequency with which the road is used, and the average number of serious injury and fatal crashes that occurred on that stretch between 2002 and 2006. The ratings include a range of five risk outcomes from ‘low’ to ‘high’ risk.

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The 2008 KiwiRap report presents the SH3 route between New Plymouth in three stages: • Hamilton to Te Awamutu • Te Awamutu to Te Kuiti • Te Kuiti to New Plymouth.

Table 2 Personal risk on SH3 Route

Length (kms)

Personal risk rank

Hamilton to Te Awamutu

33.8

Low-medium

Te Awamutu to Te Kuiti

30.2

Medium

Te Kuiti to New Plymouth

145.8

Medium-high

Source: KiwiRap (2008)

Table 2 presents the results from KiwiRap 2008. It shows that the majority of the SH3 route from New Plymouth to Hamilton presents a medium-high personal risk for road users. In addition to this direct route, SH39 to the east of Hamilton is an alternative route for travellers between Auckland and Hamilton. This approximately 70km stretch of SH39 presents a ‘medium-high’ personal risk.

b) Collective risk The collective risk was measured in the 2008 KiwiRap report as the annual average number of fatal and serious injury crashes per kilometre of road. Table 3 presents the results for the collective risk for each of the sections of SH3. It shows that the collective risk is lower than the personal risk for the Te Kuiti to New Plymouth section, but is higher for the other two sections (that are more highly trafficked).

Table 3 Collective risk on SH3 Route

Length (kms)

Collective risk rank

Hamilton to Te Awamutu

33.8

Medium-high

Te Awamutu to Te Kuiti

30.2

Medium-high

Te Kuiti to New Plymouth

145.8

Medium

Source: KiwiRap (2008) The 70 kilometres of SH39 to the east of Hamilton presents a ‘medium’ collective risk.

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3. Policies relating to the SH3 corridor This chapter summarises the aspects of policies and strategies that relate to the SH3 Taranaki–Waikato corridor. This provides the context for consideration of improvements to the corridor, and identifies some of the high-level policy outcomes.

3.1 Economic development strategy

The strategy proposes a vision and a set of strategic goals to realise the vision: • leadership of, and commitment to, the vision – Team Taranaki

Venture Taranaki recently reviewed and renewed the development strategy for the region through to 2035. Venture Taranaki is charged with development and implementation of a plan to further the strategy.

• removal of the “isolation issue” and build on the region’s proximity – Gateway Taranaki

The Economic Development Strategy (EDS) identifies and builds on the region’s strengths and opportunities and fosters transformational change in a number of areas. Despite a strong local economy based on agriculture, oil and gas (O&G) and engineering, and strong growth in the New Plymouth region, regional Taranaki growth has lagged New Zealand performance. This is the result of a range of factors, as discussed below, which the EDS seeks to remedy. • Growth in the regional population and in employment has been affected by the region being seen as isolated and from a perception that career opportunities are limited. Somewhat ironically the region suffers from skill shortages that hamper growth. This is potentially a vicious circle. • The regional economy is small (2 to 3% of national GDP) but a number of growth opportunities identified in the strategy review process build on the region’s strategic advantages. One of these is a west-facing location with a deep water port, with the shortest sea route to east coast Australia. • The Taranaki economy needs to diversify from its foundation industries and build economic growth from investment in what they term “frontier assets” to reverse the trend of decline and to keep the region competitive. For this review of SH3 the regional strategy is unanimous that a key element is significant improvement in the transport infrastructure. Improved transport links within the region will facilitate strategic success but improvements to inter-regional transport infrastructure are essential to success. Improvements to SH3 north are core to the region’s development aspirations.

• add value to existing industries and build the region – Foundation Taranaki • pursue new horizons – Frontier Taranaki • promote innovation, talent and learning – Talented Taranaki • grow the population by 35% by 2035 – Desirable Taranaki. Venture Taranaki include a time-bound action plan for the next three years in the strategic plan.

3.2 Transport strategies and funding policies National transport policy is a series of government policy documents which link the national and regional land transport programmes within a legal structure. The current policy documents follow.

3.2.1 GPS on Land Transport Funding The Government Policy Statement (GPS) on Land Transport Funding23 is a statutory document that sets out the government’s outcomes and priorities for the land transport sector. The current GPS was released in July 2011 and describes the government’s expectations for its investment; the areas (activity classes) of investment; how much funding will be provided; and the funding sources.

http://www.transport.govt.nz/ourwork/KeyStrategiesandPlans/ Documents/GPS-July-2011.pdf.

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The government has three focus areas that are the priorities of the GPS (p7), which are also expanded on in Connecting New Zealand24. • economic growth and productivity: − transport has an important role to play in enabling the government’s overall goal to grow the New Zealand economy to deliver greater prosperity, security and opportunities for all New Zealanders. The transport system provides connections — both domestically and internationally — for our communities and businesses, and meets the travel needs of international tourists • value for money: − the government needs to be confident that the transport sector (central and local government in particular) is delivering the right infrastructure and services, to the right level, and for the best possible price − achieving this requires a greater focus — not only on what infrastructure and services are provided — but also on how activities and projects are delivered, how assets are managed and the extent to which costs are minimised over time • road safety: − implementing the Safer Journeys road safety strategy and its new ‘Safe System’ approach, so New Zealand has a sustained reduction in deaths and serious injuries on our roads over time. The GPS (section B12) describes seven goals for the transport sector: • A long term strategic approach to transport planning which maximises the potential synergies between regional planning and central government strategies. • A flexible and resilient transport system that offers greater accessibility and can respond to changing patterns in demand by maintaining and developing the capacity of the network. Improved operational management practice and the use of demand management tools especially in urban areas experiencing significant growth.

• A network of priority roads that will improve journey time and reliability, and ease severe congestion, boosting the growth potential of key economic areas and improving transport efficiency, road safety and access to markets. • A continued reduction in deaths and serious injuries that occur on the network. • A public transport system that is robust and effective and offers a range of user options that will attract a greater percentage of long term users. • A rail system that enables the efficient movement of freight and complements other modes of passenger transport and freight movement. • Sea and air ports that are linked to the overall transport network to support efficient nationwide movement of passengers, domestic goods and exports and imports and are able to respond to technological changes and changing international safety and security standards.

3.2.2 Connecting New Zealand Connecting New Zealand is a document released in September 2011 that summarises policy directions for transport. It sets out the Government’s strategic plan for the New Zealand transport sector including road, rail, air and sea and describes the broad direction that these transport modes will take over the next ten years. It also provides details of strategy and priorities as input to stakeholders’ transport decisions. The relationship between central and local government regarding transport investments is described, including the likely funding for local roads over the next ten years. This is quantified as 21% of a total spend of $60b [2011 estimate, excluding Government direct investments]. This publication makes it clear that the Government places considerable weight on transport as an enabler generating better economic growth and productivity. This function is the dominant criteria in the strategic evaluation of transport projects.

24 Connecting new Zealand is a summary document of the government’s policy direction for transport and is targeted at informing stakeholder decisions on these matters. http://www.transport.govt.nz/ourwork/KeyStrategiesandPlans/Documents/ConnectingNZ_online_version_9_September.pdf

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• the “Strategic Fit” of the transport issue, problem or opportunity addressed to the NZTA’s strategic investment direction (a measure of the potential for significant improvements)

The Government therefore has a twofold approach to road transport: Identify Roads of National Significance and invest to improve the performance of the routes [currently there are seven RoNS] as major freight and traffic corridors. No criteria exist for what should be classified as a RoNS, but the broad criteria appear to relate to traffic volumes, bottlenecks, safety, linking the state highway system to ports, and making freight movements more efficient. When the seven RoNS projects are completed new ones may be added at the Minister of Transport’s discretion.

• the “Effectiveness” of the proposed solution in dealing with the issue, problem or opportunity (a measure of the contribution the proposed solution makes to achieving the potential identified in the strategic fit assessment) • the economic “Efficiency” of the proposed activity or combination of activities.

Invest in partnership with local government in regional roading projects on the same basis as for national roading investments — enhance regional economic growth, remove bottlenecks and improve route security and safety. Again, projects are selected on the basis of being enablers to improvements in local economic growth, providing value for money and contributing to improved road safety.

A score of high (H), medium (M) or low (L) is assigned to each factor: • new road spending scores H for strategic fit if it is a Road of National Significance (RoNS); if it is on a ‘national strategic’ state highway that makes nationally significant improvements to capacity, journey time reliability, transport costs, and/or transport network resilience; or if it has potential to significantly reduce crash risk on any high to medium-high risk roads

The government also directly provides funding for specific transport projects that are not funded from the National Land Transport Fund with a number of large investments in rail improvements underway.

• maintenance, operation and renewal spending scores H for strategic fit if there is “significant potential to optimise whole of life cost” of existing networks appropriate to the State Highway Classification System (or similar). It scores M if there is “potential for timely intervention to meet agreed levels of service” appropriate to the relevant classification system

3.2.3 Safer Journeys — New Zealand’s road safety strategy 2010–2020 The Ministry of Transport published this document in 2010, setting out the Government’s strategy to improve safety on New Zealand roads through to 2020. The strategy sets out a comprehensive approach to reduce death and injury on New Zealand roads by focusing on:

• effectiveness scores are based on how a package or a single project realises the potential identified in the strategic fit appraisal

• increasing the safety of young drivers

• efficiency scores are based on: H for BCRs of 4 or more; M for BCRs of 2 or more; L for BCRs of 1 or more, and L for BCRs less than 1 if it is reasonably believed that the inclusion of non monetised benefits would have lifted the BCR above 1.

• reducing alcohol impaired driving • improving road and roadside safety • improving motorcycling safety. The document includes a staged action plan.

Sections A2.4 and D3.5 of the NZTA’s Planning, Programming and Funding Manual describe the role of ‘R funds’ (regionally distributed funds). These funds set lower bounds on levels of investment in each region. R funds are due to expire at about April 2015 (but some funding can be carried over if contracting is done before the cut-off day). The future of R funding is yet to be fully determined.

3.2.4 The NZ Transport Agency’s funding allocation framework Since the release of the 2009 GPS, the NZTA has developed its ‘Investment and Revenue Strategy’ (IRS)25 to assess activities and combinations of activities for funding against the following three factors (but may consider additional factors in exceptional circumstances):

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www.nzta.govt.nz/planning/programming/docs/nltp-2012-15-irs.pdf

Figure 18 National strategic criteria The requirement is to meet at least three criteria

Source: NZTA SH3 meets the following regional strategic criteria but the step up in the core metrics to meet the needs of a national strategic route is significant.

Figure 19 Regional strategic criteria The requirement is to meet at least two criteria

The expectation of the stakeholders we engaged with is that once R funds have expired or are spent a region will no longer be guaranteed a minimum level of investment from national funding sources for improvement projects. That is, it is possible for some regions to have no more spending for new and improved roads etc. Given that the projects in the current draft RLTP generally do not have high scores for Strategic Fit and Effectiveness there is a reasonable chance Taranaki will not get any new funding from national sources for improving its transport network after 2015.

3.2.5 State highway classification project The NZTA road classification system is the basis for prioritising road network improvements as a key element of the road transport strategy. State highway reclassification was completed in mid-2011, resulting in four categories of highway based on their function — the main purpose of the road. The earlier map (Figure 3) shows the North Island classifications with SH3 as a regional strategic road, one level below ‘national strategic’ (or two levels below taking account of the two tiers of ‘national strategic’).

3.2.6 Maintenance of SH3 NZTA maintains the state highway network by identifying and treating problem locations based on given generalised road quality standards. Expenditure is targeted at the needs of the network as is presented at the time it is inspected. Each year the NZTA uses vehicles with specialist sensors to inspect the quality of the network, checking for surface texture, the ‘ride quality’, and rutting. These features are combined and compared against ‘levels of service’ standards26, which are the same across the national network (i.e. they do not differ by region).

The criteria and thresholds for both national strategic and regional strategic routes are listed below to highlight the differences in the thresholds between the two categories of national strategic and regional strategic.

26 NZTA advise that the appropriate level of service is achieved if the following technical parameters are met: texture > 0.7mm; rutting <10mm; ride quality <4mm2 (using the “3m variance method”).

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Figure 20 State highway road condition index 2012/13

Figure 20 illustrates the results of the most recent pavement inspection review, whereby the sections that are ‘really quite bad’ are located in red, ‘condition deteriorating, and needs investigating soon’ are in amber, and the remainder of the network is ok. The sections that are red are scheduled for upgrading in the current RLTP processes.

In summary, Taranaki’s state highways are judged against the same standards nationally, and where the road is below those standards they are programmed for improvement. The standards applied are subject to revision following the state highway classification project. As a part of that review, there is an opportunity for the region to seek further understanding and assurances that the standards will be set appropriately, and to take account of any perceived issues relating to the pavement standards for heavy trucks.

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4. The relationship between SH3 and Taranaki development Stakeholders surveyed for this study looked beyond the present traffic situation. They saw SH3 as a vital link for the region and say that the link is falling short of being an enabler of economic growth and productivity improvements in Taranaki. Respondents believe that improvements to SH3 would quickly provide real economic gains to the region and overcome the reputational handicap of the region being seen as isolated with poor access.

4.1 The Taranaki economy This review of the Taranaki economy draws on the June 2011 report to Venture Taranaki by BERL Economics (2011). It provides a detailed analysis of the performance of the Taranaki economy over recent years, a focused analysis at industry level and a comparison of the Taranaki economy with the New Zealand economy. Relevant to this study are the following points: 1. Taranaki has experienced an extended period of what appears to be poor relative economic performance (below the rest of New Zealand) but has shown improvements more recently. These figures, however, disguise an important shift within the region that is placing increasing pressure on SH3. New Plymouth has, and is expected to continue to, outperformed both the Taranaki region and the national economy with moderate population growth but very strong economic performance. The 10 year performance figures also show the population shift from south to north Taranaki reflecting an increasing urbanisation of the region driven, in part, by northern Taranaki increasingly becoming an O&G hub.

2. Taranakiâ&#x20AC;&#x2122;s overall economic performance is stable, founded in agriculture forestry and fishing, manufacturing and mining. Output GDP per FTE employed is the highest in New Zealand reflecting the scale of the value add from O&G and dairy farming. While population growth has been low over the last 10 years but picking up recently, employment growth has been close to the national level. The Taranaki Development Strategy targets a population of 135,000 by 2035, by a population growth target of 1% per annum mainly from migration. 3. Up to 57% of the Taranaki economy is estimated to be export orientated compared to 28% for the national economy. 4. The Taranaki economy is expected to show strong GDP growth [from $5.5b in 2011 to $11b in 2026] in the period to 2026 and thus significantly out-perform the rest of the New Zealand economy. The growth in Taranaki is projected to be driven by employment growth and productivity improvements. Nominal GDP per capita in Taranaki is second highest in New Zealand and is well ahead of the national average. 5. BERL forecasts significant growth in Taranakiâ&#x20AC;&#x2122;s core industries â&#x20AC;&#x201C; O&G will account for 30% of regional GDP by 2026 compared to 17% in 2010 with engineering/manufacturing the other big contributor to the doubling of regional GDP.

Figure 21 Taranaki Performance 2000-2010

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Figure 7 Taranaki GDP per capita 2010

4.2 Oil and gas sector and energy network resilience While the Taranaki economy is small relative to the total New Zealand economy aspects matter for New Zealand â&#x20AC;&#x201C; dairy, O&G, forestry, heavy engineering â&#x20AC;&#x201C; because 57% is export orientated (twice the New Zealand level). A significant portion of the Taranaki economy is directly or indirectly driven by the O&G industry with BERL estimating the direct contribution of O&G to be 17% ($2.5b) of the regional economy in 2010 and forecast it rising to 30% by 2026. O&G industry output is distributed to market via a variety of transport methods which directly and indirectly involve SH3. O&G is, however, more than a strategic and growth story for Taranaki, it is an essential element of the national economic agenda. While oil is generally exported, gas

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exploration and production is important as an energy source for all sectors of the country as well as being a key input to the generation of electricity. Taranaki is the current O&G hub for New Zealand and appears likely to remain the centre of a nationally important industry sector in the foreseeable future. Gas and [LPG] products are moved to markets north of Taranaki by the Maui pipeline and SH3, while road transport is used to move product south and east. There is considerable O&G exploration underway at present with the expectation that the road transport task in this sector will continue to grow with SH3 north needing to play a greater role than it currently does.

Figure 22 National gas pipeline network

SH3 also supports access to the Maui pipeline north. While the pipeline is 30 years old and is regarded as being â&#x20AC;&#x153;ruggedâ&#x20AC;? it requires maintenance and is subject to failures such as occurred in 2011. In that instance SH3 was the key access route for the pipeline restoration effort. O&G industry participants report their existing and future use of SH3 north as follows: 1. Origin Energy are owners of LPG production from the Kupe field which is the largest of the existing fields. Origin sell their production to Contact Energy who wholesale the gas in New Zealand. Origin export directly to Australia and the Pacific out of Port Taranaki. The LPG is transported north via the gas pipeline and south using road transport. Other North Island distribution is by road and is customer specific. Origin anticipate increasing output from Kupe beyond the 80,000 tonnes pa currently produced but were unable to size the role that SH3 would play in the growth.

2. Hooker Pacific move large quantities of LPG by road throughout Taranaki and are involved in road transportation in other industrial sectors as well. They too are expecting that road transport distribution of LPG to market will increase with more successful exploration. They expect SH3 to play a greater role than present as the LPG product needs to be trucked north to market. While they too were unable to quantify the potential, they did express concerns that the combination of a greater use of road transport for distributing LPG, the volatility and time-sensitive nature of LPG and the below average condition of SH3 could result in an increasing safety risk to their own operations and to the general public. Despite their concerns regarding the potential for SH3 to be a constraint on O&G growth it was not especially a restriction now other than for larger loads which require a very long alternative journey if they could not get through the SH3 tunnels. They do however experience greater running costs and increased maintenance on those trucks that use SH3 north.

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3. TAG Oil have made a number of discoveries in Taranaki and are actively exploring the east coast of the North Island. Their investments in an extended exploration programme should result in an increase in SH3 usage by their trucking companies Symons Transport [crude oil to New Plymouth] and Ulenberg Haulage [LPG north]. Feedback from these trucking firms was similar to others — they are expecting to increase their use of SH3 north; their running costs using SH3 were on average a third higher than elsewhere; and the negative impact on productivity of their people and their trucks was significant and measureable. 4. NZ Energy Corporation are another O&G exploration firm in Taranaki who use road transport to move product through to their main distribution channels via Port Taranaki. They do not use SH3 north as a major route but they do, however, have concerns regarding the security of SH3 as a route for their inputs, which are trucked in from the north over SH3 which they regard as being “at risk”. They expect that any gas finds will be taken to market via the pipelines as appropriate. 5. Todd Energy are probably the largest energy investor in Taranaki though they tend to keep a low profile. Recent major Todd developments include the LPG development on the McKee site [from where product is trucked to Todd’s retailer Nova Energy] and a commercial gas supply arrangement with an expanded Methanex plant in northern Taranaki. Todd are very Taranaki-centric with their developments and use local resources and business wherever possible. The messages from both O&G operators and their transport and supply side trucking companies echoed the messages that were received from the stakeholder surveys reported earlier. That is, SH3 does not represent a significant constraint on O&G exploration and development now but aspects of the route add to costs, place operations at risk and will likely become a significant constraint to growth in the near future. As with surveyed stakeholders, localised demand for improvement to SH3 comes from a significant level of trucking operators frustration with the route as much as from economic gains.

4.3 The heavy engineering sector, and oversized loads Taranaki’s heavy engineering sector is nationally significant and hampered by size restrictions on SH3 north. Taranaki’s heavy engineering industry has evolved from supporting the oil and gas sector to become an active competitor with the rest of New Zealand, with eastern Australia and in the Pacific. Heavy engineering companies in Taranaki include Fitzroy Engineering, Tenix, Taranaki Engineering, Warner Construction, Pace Engineering, and Whitaker Civil Engineering. Examples of competitiveness include Fitzroy Engineering who provide services for the Australian oil and gas sector, and Taranaki Engineering who provided steel structures for the recent SH20 Manukau Harbour bridge improvement in Auckland. We consulted these heavy engineering firms and various stakeholders in the heavy transport sector. One of the issues identified was the restrictions on over-dimension vehicles using SH3. This significantly increases the cost for doing business, reduces Taranaki firms’ competitive edge, and also likely affects net exports. The bulk of this sector’s exports are via Auckland or Tauranga ports. The sizes of the tunnels and some corner alignments are the problem. The problem is that the Mt Messenger tunnel (and its tight alignment) and the Awakino tunnel (particularly its height) are not large enough to allow typical oversized loads through. Global Transport, Hooker Pacific, and JD Hickman indicate that what would normally be about a 368 km trip between New Plymouth and Auckland on SH3 at a cost of about $4,000 becomes a 780 km trip on SH1 via Bulls or Marton that costs about $9,000. These costs include 2–3 light pilot vehicles in support, accommodation costs for staff that would otherwise be avoided (because a return trip could be made in one day), and the road user charges27. Trucking specialists say that the shorter trip on SH4 via Wanganui is not a suitable route for over-dimension loads. Competing firms (e.g. those in Auckland) incur only a fraction of these costs. Specialists in the movement of oversized loads say that tunnels at least 5.5 metres high and 6 metres wide (and not narrow at its peak) would make the route generally fit for oversized loads. Provided that other aspects of the route (such as weight restrictions on bridges, and tight corners) accommodate such oversized traffic, the improvements should lead to a marked increase in the use of the road for that purpose (with corresponding economic benefits).

27 Heavier vehicles pay higher road user charges (RUC), with the broad intention of recouping the additional pavement damage costs. To the extent these charges are set efficiently they represent marginal social resource costs and are not a mere transfer tax.

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About 50–100 oversized movements annually occur at present, and more are likely if the constraints were removed.

of two trips per week in total. Between 50–100 oversized loads per year on SH1 is probably reasonable, and a central estimate of 75 was advised.

No specific data was available on how many oversized loads north occur annually. One New Plymouth-based trucking firm said that it is a weekly to fortnightly occurrence for them to have oversized loads to Auckland and Tauranga. In the period February to April 2012 it has been weekly for this one firm, with most of the loads being inbound product to support the production of onshore and offshore drilling rigs. The transport firms JD Hickman and Hooker Pacific advised that it would be a stretch to assume an average

Not all of the heavy engineering firms spoken to are currently hampered by the inability to carry oversized loads on SH3. The focus on some of them is to the Port Taranaki and south, and they only depend on SH3 north in the same way that general firms would. Although if the opportunity to carry oversized loads on SH3 was unlocked they may create new client relationships north and start shipping large-sized loads north and south.

Engineering Case study: Fitzroy Engineering, with 580 employees, is the largest heavy engineering company in New Zealand. Based in New Plymouth it services markets in New Zealand and to a smaller extent Australia for steel pipe, pressure vessels and module fabrication, and primarily for oil and gas industry. Since container traffic at Port Taranaki ceased the loads are being moved to Tauranga and Auckland. Heavy transport specialists estimate the cost of each trip for oversized loads on SH1 via Bulls/Marton is $9,000 versus about $4,000 had they been able to take SH3. Fitzroy is currently heavily involved in the development of a large oil refinery in eastern Australia28. Fitzroy could potentially supply the majority of the requirements. However, transport costs are leading to Fitzroy considering outsourcing some aspects of the job to other countries. Much of the output would fit in containers or be of medium oversized dimensions. What can be fitted in containers would travel on SH3, but the rest would need to travel on SH1 via Bulls/Marton. If SH3’s tunnels were widened then most, and potentially all, of the remaining output could travel on SH3. This would increase (although not necessarily guarantee) the viability of producing all components domestically, and increase New Zealand’s exports. Australia is experiencing an ‘energy revolution’ driven by its abundant natural gas reserves, the rapid expansion of its liquefied natural gas (LNG) production capacity as well as a range of other energy and infrastructural projects. Committed capital expenditure is currently in excess of $A260 billion – comprising a range of minerals, energy and infrastructure projects. Over 60 percent of this investment is accounted for by seven LNG projects. When these projects are complete and operating at full capacity, in the second half of this decade, Australia will be one of the world’s leading exporters of LNG. Major LNG developments include the Gorgon LNG project, Gladstone, Pluto, Wheatstone as well as Shell’s Prelude project which is expected to be the world’s first floating LNG development. To support this extensive new development the pressure on engineering capacity is high with significant skill shortages and increasing supply side pressures. This lends itself to opportunities for New Zealand (particularly Taranaki companies, given their experience in O&G and energy projects) to export products and services, and tender for major engineering opportunities. Under CER New Zealand firms count as ‘local content’ and the major Australian major projects must consider ‘local content’ in their assessment process. To maximize the possibility of success (building on New Zealand exports aspirations and Government targets) ensuring good infrastructure will enable Taranaki firms to compete in terms of costs, and timeliness of delivery thus contributing to New Zealand’s export growth.

This involves 35 exchanges, 17 vessels, 11 columns, 63 storage tanks, and associated piping and fabrication works.

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Examples have been provided of how SH3 reduces the competitive edge of Taranaki firms. Firms have described specific instances of how the limitations for oversized loads on SH3 materially reduces their ability to compete against firms in the upper North Island and internationally. An example relates to opportunities to support the development of various future wind farm sites. The prices quoted by the Taranaki firm involved barging wind farm components north, whereas they could be trucked if SH3’s specific issues were resolved and made more costcompetitive with similar Auckland-based firms29. The example below shows how SH3 is affecting significant commercial decisions now, and affecting New Zealand’s net exports.

4.4 Dairy Taranaki’s dairy production is 12.8% of the region’s total output, and 10.6% of national dairy production30. Fonterra are heavily reliant on rail, and are the main users of rail. However, they also use SH3 to truck milk north. Fonterra advise us that the number of movements from the period 1/08/2011 up to the 20/04/2012 was 4,098 (102,448,166 litres of milk)31. This is approximately 22–23 trips per working day. Fonterra expect to continue using SH3 in this way for the foreseeable future.

We asked Fonterra what the implications of a major rail outage would be. They advised that this season to date they have transferred 20 million litres on rail so if that fails then it would all switch to road — up to an extra 20 loads per 24 hours. SH3 has the capacity to absorb this increase in trucks. However, more passing lanes to manage the heightened conflict between cars and trucks would be useful.

4.5 Forestry Forestry product is now freighted to Port Taranaki from the west, and SH3 north does not carry many logs. Port Taranaki Ltd advise us that the longer-term strategy with respect to forestry is to develop scale economies at the port so as to reduce the per unit cost charged to the industry. As this develops, the ability to compete for the product generated in south Waikato will increase over time. At present product generated in south Waikato is generally freighted to the Port of Tauranga, although Port Taranaki has already begun to acquire some market share.

29 Some extremely high, wide or long loads may still be unable to use SH3, depending on the extent to which corners are straightened and whether the Awakino tunnel’s size is increased or ‘daylighted’. 30 Source: Fonterra’s submission to the draft Taranaki Regional Land Transport Programme 2012/15. 31 The illustration shows the configuration of the trucks:

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5. A framework for economic development 5.1 Introduction

5.2 Role of project appraisal

How does transport promote economic development? How can various kinds of improvements to SH3 improve New Zealand’s economic prosperity?

Economic cost-benefit analysis estimates how much society is better off in dollar-terms by taking an initiative. Expressing results in terms of benefit-cost ratios helps to rank projects and maximise value for money from each dollar available.

On 24 April 2012 the Prime Minister had the following to say on how Taranaki can build a case for more investment in its transport network32. It’s important to understand the wider regional benefits of these projects and not confine it to just the benefits for Taranaki. We see Taranaki as an important part of New Zealand’s economic story and it produces a lot of what New Zealand is exporting. Good infrastructure is an important part of that and whether it’s shipping or new roading networks it needs to be considered carefully. What officers are doing is looking at the wider economic benefits of the situation and making sure we have our roading priorities right. This chapter canvasses the various economic ideas and issues with a view to focusing on the net-national welfare gains from transport improvements. Many of the features identified here are novel, but are grounded in cost-benefit analysis. Where we think deviations from ‘how things are done now’ are needed, we discuss them.

Generalised cost of travel

Figure 23 Benefit from a travel cost reduction

As described in section 3.2.4, BCRs have only a modest influence in investment decisions at present. They are less influential than “strategic criteria”, of which high scores are reserved for projects in major centres and/or with very high traffic volumes.

5.3 Prevailing economic appraisal methods The following clarifies what the existing rules are for considering the economic development effects of transport. This provides the basis for asking whether those rules provide a good picture of the economic development opportunities for Taranaki.

5.3.1 Measuring ‘user benefits’ User benefits are measured by reduced travel costs to those travelling. Appraisals focus on ‘economic welfare’ — a measure of peoples’ utility (satisfaction) by doing the project. Benefits are typically estimated as reductions in the ‘generalised cost of travel’, which are primarily reductions in travel time and vehicle operating costs33. Figure 23 below uses ‘demand and supply’ curves34 to illustrate the effect of a transport improvement that makes it quicker and/or cheaper to travel between places. This reduces what could be considered the ‘price’ of travel from P0 to P1. The cost reduction multiplied by the quantity of existing travellers Q0 equals the benefit to them, as shown by area ‘a’ in Figure 23 (left). The more that are travelling, the larger the benefits.

P0 P1

Demand Q0

Quantity of travel

Moir, Jo, Bridge off the agenda, Fairfax NZ News. 25/04/2012 www.stuff.co.nz/taranaki-daily-news/news/6802694/Bridge-off-the-agenda. The effects on crash costs (and other negative externalities such as pollution) are included if the project materially affects them. 34 The figure illustrates a congestion-free route, where costs are not rising with more traffic. If congestion occurs, the ‘cost curve’ would be steeper the larger the traffic volume. For SH3 this could happen if more trucks use the route and slow down travel for cars if there are infrequent opportunities to overtake safely. To the extent congestion occurs, travel costs for cars are not reduced by as much by the improvement, and thus net-benefits will be lower. 32 33

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Inducing more demand. For inter-regional route improvements appraisals usually stop at measuring area ‘a’. Routine individual improvements to long stretches of rural highway will usually not induce more travel. However, if the improvement is relatively large it could induce more use of the route from Q0 to Q1. Each induced traveller is assumed to get half of the benefits on average35, equal to area ‘b’.

5.3.2 Prevailing appraisal methods alleged ‘good enough’ Proponents of major transport improvements often envisage the benefits being dispersed widely and manifesting in a multitude of ways such as more employment, growth, and better living standards. Could a traditional transport appraisal capture the overall economic benefits of improving Taranaki’s links to the north? The prevailing view of transport economists is that provided the demand forecasts are about right, the benefits measured in the transport network are usually correct36. BTRE (1999) argue that in principle if a transport scheme causes an increase in production in the broader economy, then this increase in production depends on the increased use of the transport scheme (because if it did not, then it would be occurring already). The willingness to pay for the extra transport represents the indirect benefits that accrue further down the supply chain, and this willingness to pay is represented by the demand schedule used for the costbenefit appraisal. Thus to the extent there is more economic activity, this is allegedly captured by area ‘b’ in the figure above. If there is no induced travel, then area ‘b’ is negligible and it is often asserted there are generally are no benefits from more economic activity.

a) increasing returns to scale (e.g. productivity increases when certain industries agglomerate, particularly knowledge-intensive sectors) b) imperfect competition in the wider economy (e.g. when prices exceed marginal cost, such as monopolies) c) taxes on labour income. a) Agglomeration benefits The NZTA now recognises additional benefits from transport projects that increase the effective density of certain types of industries. The productivity gains that accrue are in excess of the transport user benefits (captured under a demand curve such as Figure 23). However, NZTA’s guidance (EEM page A10-3) rules out applying their given procedure to long-distance interregional routes such as SH3, as it should only apply to major improvements within large urban areas: The required spatial concentration of economic activity for realising agglomeration benefits is only likely to occur in the major industrial and urban centres of New Zealand. It is only the large and complex urban transport activities that will provide the relevant conditions that justify an analysis of agglomeration benefits. This is certainly not to say that agglomeration economies are irrelevant to Taranaki. The ‘Vickers to City’ component of SH3 could possibly fall within this definition. The scale of Taranaki’s oil and gas sector, for instance, has developed a nationally significant heavy engineering industry that can serve wider markets within New Zealand. NZTA-funded research (Graham and Mare 2009) established that the manufacturing sector benefits from agglomeration at about the same as all industries. If a transport improvement were to induce higher growth in industries38 that benefit from proximity then there will likely be additional gains.

5.3.3 The case for ‘wider economic benefits’ (WEBs)

b) Imperfect competition

The idea of ‘wider economic benefits’ has been a hot topic in the last several years. However, how community leaders (politicians etc) use this term is quite different from how experts use it. In this section we outline the ideas and consider their applicability in a strict sense to SH3’s impact on Taranaki.

When industries price their goods and services at more than it costs them at the margin, then there is said to be a ‘price-cost margin’ (Kernohan and Rognlien 2011). There are benefits from cost reductions that accrue to the owners of firms that are not reflected in transport demand, and hence are additional to transport user benefits.

The real world wider economy has many characteristics that differ from the ‘perfect competition’ model37, which complicates appraisals. The work done over the 2000s and 2010s on ‘wider economic benefits’ (WEBs) led by work in the United Kingdom attempt to address the following complications:

NZTA research estimates that this wider benefit is equal to an additional 10% over and above benefits to businesses (i.e. relating to work-based travel purposes). This means if business benefits make up 25% of the total user benefits (the rest being to non-work travel), then total benefits would be higher by 2.5%. This source of benefit alone is not likely to make a material difference to appraisal results.

These travellers do not gain as much as existing travellers, or else they would have been travelling already. Examples in the literature are BTRE 1999, Boardman et al 2006, and Rouwendal 2001. 37 Where there are no barriers to competition in the wider marketplace and all prices equal marginal social cost. 38 Manufacturing has an ‘agglomeration elasticity’ of 0.061, which is slightly smaller than the ‘all industry’ value of 0.065. This means, say, a doubling of effective employment density (by inducing more similar firms into the area) increases productivity (output per employee) by about 4.3%. (Step E in the EEM results in 2^0.061-1=4.3%.) (Note that any reductions in employment density elsewhere need to be netted off.) THE ROAD AHEAD 35 36

Unlike agglomeration benefits these benefits can apply to any project (i.e. not just to large urban centres). It has not yet been ratified by the NZTA Board and included in NZTA’s Economic Evaluation Manual, and can presently only be considered as a sensitivity assessment. c) Increased competition Another type of possible benefit is when transport improvements increase the level of competition. This leads to cheaper and more goods and services available to consumers. The NZTA research, like the United Kingdom’s Department for Transport work, is of the view that this should not be routinely quantified in appraisals because of unavailable direct empirical evidence and the lack of a standardised methodology to appraise the effects. Kernohan and Rognlien (p53) note there is scope for some relatively remote New Zealand regions (perhaps such as Taranaki) to mount a case for increased competition from transport improvements. They suggest scheme promoters may want to develop their own evidence that: • a scheme generates a major improvement in accessibility for the study area • there is evidence of a lack of competition in some or all sectors of the local economy • the impact of the scheme on levels of competition and the price cost margin can be fully quantified • the economic value of the transport improvement reducing the price cost margin can be measured. In our view it is not apparent that these steps need to be taken to support a case to improve SH3. What would constitute as a ‘major improvement in accessibility’ sufficient to cause these sorts of effects is entirely unclear. We have seen no concerns raised by regional stakeholders, nor any evidence, of relatively high levels of market power in Taranaki. The initial stakeholder survey undertaken for this study indicated that outcome “more businesses, more competition and more choice” was ‘important’, but was not as much as most of the other kinds of outcomes expected.

d) Labour supply effects This class of benefit relates more to improvements to commuters. It is of limited relevance to improving Taranaki’s inter-regional connectedness to the north, but of more relevance to the Vickers to City section of SH3. The concept is that an urban transport improvement may make it more attractive for people not in the workforce to seek employment, and for people to travel further to get higher paying jobs. The benefits to these people are allegedly captured in benefits area ‘b’ in Figure 2339 (page 45). Not captured in transport user benefits are the tax gains to government from the additional work, and methodologies have been proposed to appraise these. How applicable this source of benefit is to the eastern urban arterial section of SH3 is a possibly important, but difficult to answer question. A primary effect of improving the urban SH3 bottleneck to the east of New Plymouth would be to induce further land use development to the east. People could continue to work in high paying jobs but travel further to cheaper and/or better homes further out. The state of transport planning and appraisal is too primitive to be able to account for these relatively significant and long-lasting effects of major urban capacity expansion projects.

e) In summary The term ‘wider economic benefits’ is often used to reflect the full spectrum of economic benefits of projects. However, the term has come to relate to highly specific concepts (or aspects of concepts) that have relevance primarily only for urban centres. They may relate to the urban arterial component of SH3 only, and have little or no relevance to inter-regional component of SH3 north. Other broader considerations are needed in order to support an economic case for more investment in SH3 as a corridor overall, and these are described in the next section.

In section 5.4 below we describe an indicative cost-benefit appraisal of the option of making SH3 suitable for oversized loads. As well as improving the ability for Taranaki’s heavy engineering sector to compete in the upper North Island and overseas, it could increase the ability for upper North Island firms to contest the Taranaki market. To the extent this is possible, there could be gains to the O&G sector from more competitive pricing. It is not possible, however, to quantify or verify the extent to which this would occur at present.

39 This claim is technically false because changing employment in each location is a “land use change”, and land use changes are not permitted in prevailing appraisals. This is an example of various inconsistencies in the ‘wider economic benefits’ field that still need to be ironed out.

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5.3.4 The NZTA’s ‘National Strategic Factors’ The NZTA in its Economic Evaluation Manual (page A1010) recognises that there can be additional benefits not captured in routine transport appraisals. NZTA classifies these as ‘National Strategic Factors’. Any kind of benefit can be argued for provided the analysis is rigorous and that the benefits meet the following criteria that benefits: • reflect willingness to pay • make a difference to the appraisal • are additional to the core benefits already measured to the nation as a whole. The two kinds of benefits the Economic Evaluation Manual suggests that could be additional are ‘security of access’ and ‘investment option values’, as described below. a) Security of access Section A10.6 of the NZTA’s Economic Evaluation Manual describes that: There are benefits in providing a greater assurance to road users and communities that they will be able to depend on a particular route (such benefits can be expressed in a survey of road users’ willingness to pay). The manual lists the following examples of this factor: • earthquake strengthening of a vulnerable bridge on an important route • slip prevention work on a busy inter-regional highway • improvement of alternatives to a busy route that is prone to closure. These benefits would be over and above the direct disruption costs from an event40. As described in section 2.2.3 on page 9 TRC (1997) estimated the direct disruption costs of the Awakino Gorge slip in 1997. The $235,000 cost per day for the seven day event represented the user disruption costs only. The ‘willingness to pay’ by affected parties to reduce the perceived risk was not estimated, although widespread concern was raised by stakeholders. b) Investment option values Transport investments are often characterised by uncertainty in the amount of usage they will have in the longer-term.

The NZTA’s Economic Evaluation Manual notes there may be an ‘option value’ that warrants spending more initially in order to better capitalise on future scenarios that support more investment. An example is doing earthworks preparation for a 4-lane road when only a 2-lane road will be built initially. This may make sense when there is a good enough chance of needing the expansion in the future and it is sufficiently cheaper to do the earthworks works just the once. The NZTA’s manual is not prescriptive on what sort of methodology should be used, but urges that advice from NZTA should be sought before making any significant effort. Dr Arthur Grimes (2011) stresses a slightly different take on option values that is of relevance to any possible SH3 strategy. Grimes described the need to consider major infrastructure strategies in terms of the real options that early stage investments provide. It is not the case that every initiative in long-term infrastructure strategies need to be committed to up front. Circumstances could change over time that give cause for decision makers to reconsider continuing with a strategy (such as people not sufficiently using the initial infrastructure improvements). Incorporating option values into a major transport appraisal differs from a traditional CBA by expressing the choices decision makers have as being staged over time (perhaps by using a ‘tree-diagram’), rather than needing to commit to the strategy on an ‘all or nothing’ basis from the outset. Grimes shows that real options analysis can lead to a higher BCR than that found using the traditional method. What drives this is that the options analysis accounts for decision makers not following through with subsequent stages if unfavourable conditions arise, because it is not credible. By discarding these irrelevant low value decision scenarios, the average benefit is lifted relative to the traditional analysis. Grimes argues that a CBA should take account of the fact that competent decision makers will not willingly follow through with a course of action when circumstances demonstrate this to be inefficient. Thus doing an initial investment provides an option, but not the obligation, to decision makers as to whether to proceed with subsequent phases. There is a social value from providing decision makers such future flexibility. Grimes describes that this option has a value, and that in theory it could be large enough to tip the scales in favour of doing a large initial investment when otherwise it is uneconomic. This notion is built upon in further in this report.

40 These costs would be estimated as areas ‘a’ and ‘b’ in Figure 23 on page 45, where in this case the closure raises the cost of travel.

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5.4 Additional factors to consider in a general SH3 appraisal Traditional transport cost-benefit appraisals are heavily determined by the current level and the future growth of travel volumes. Relative to other state highways, SH3 is not strong on both accounts. There are three ways that the broader economic benefits of SH3 are under-represented in normal project appraisals: 1. The effect it has on growing the amount of employment and economic activity in Taranaki. 2. The merits of staging investment strategies in order to ‘learn from doing’. 3. The additional benefit that arises from supporting exporting firms, which resonates in the National Infrastructure Plan.

5.4.1 Growing the economy by making a stepchange improvement to SH3 As discussed in section 4.3 (starting page 42) the two tunnels (and some isolated bends) cause a relatively large increase in the transportation cost of one of Taranaki’s leading industries. Over time this situation will likely suppress the growth of Taranaki industries, in terms of employment, output, buildings and equipment, and the markets that are served by Taranaki businesses.

NZIER has established that although these sorts of effects are important to decision makers, prevailing economic appraisal methodologies fail to take them into account. This is because appraisals are not allowed to consider a project changing anything that affects transport demand, such as the amount and location of employment. NZIER has developed a methodology that can account for such changes, to the extent such changes can be forecasted.

a) The feasibility and rough cost estimate of improving the SH3 route to allow oversized vehicles to use it. As part of this study Beca Infrastructure Ltd (Beca) undertook a high-level desktop study to look at the potential to widen or ‘daylight’ the tunnels to allow larger loads to be transported via this route (e.g. ensuring the tunnels are at least 5.5 metres high and 6 metres wide). Beca also considered whether other constraints (tight corners, weak bridges etc.) would require improvement, and they estimated rough orders of costs associated with the necessary works. Beca’s report is attached in Appendix D and the key results are as follows:

Table 4 Summary of options and rough order cost estimates Restriction

Solution

Estimated minimum cost

Estimated maximum cost

Estimated mean cost

Awakino tunnel

Bypass, widen, or daylight the tunnel

$2.16m

$4.84m

$3.08m to $3.72m

Curve north of Awakino tunnel

Benching to the inside to 4m

$123k

$228k

$176k

Curve south of Awakino tunnel

Benching to the inside to 4m

$350k

$650k

$500k

Mt Messenger tunnel and southern curve

Daylight the tunnel. Benching southern curve to the inside to 4m

$322k

$598k

$460k

$2.96m

$6.32m

$4.22m to $4.86m

Total Note: values expressed in 2011 dollars Source: Beca

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The large cost for the Awakino tunnel relative to the Mt Messenger tunnel arises because of the need to build a temporary bypass alignment of the highway around the limestone outcrop and into the Awakino River to ensure traffic flows can continue for the three month period required. The options are illustrated in the figures below:

Figure 24 Awakino Tunnel and easing of corners north and south Curve 1

Source: Beca

Figure 25 Mt Messenger tunnel daylighting and easing of corner south

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are about $5 million44 the BCR is 1.0, and it would score a ‘low’ in the NZTA’s reckoning45. However, if we step outside of the standard framework and consider that the heavy engineering industry is able to grow an additional 2% per annum (compounding) by growing their markets, investing in their businesses, and by increasing the number of such firms in Taranaki, then the economic benefits picture is quite different. Initially there would not be much change, but progressively over time there would be a more profound effect on transport usage. A growth of 2% compounding over 10 years would increase the number of trips from 81 and 108 to 95 and 127 respectively. Measured by the increase in willingness to pay (i.e. the light grey striped area in Figure 26)46 this growth implies an additional benefit of $185,000, which sums to $2.5 million when it is discounted at the NZTA’s discount rate of 8% over 30 years. This raises the BCR to 1.5.

b) Indicative cost-benefit appraisal Figure 26 illustrates the key assumptions. As described in section 4.3, there are currently about 75 oversized movements between New Plymouth and points north, annually with increased costs of $5,00041. If we assume there would be a 1% growth in traffic volumes over time regardless of whether the route is improved, then in ten years’ time we would expect there to be 81 such movements. Expanding the capacity of SH3 to allow oversized trucks would reduce transport costs by about 56%. Reducing costs substantially will likely increase such transport movements as the heavy engineering industry will become more cost-competitive domestically and internationally. As an approximation we could assume that for each 1% reduction in price there will be a 0.6% increase in trips42. Thus the movements would increase from 81 to 108.

Some would also argue that under current policy settings the future is discounted far too heavily. If an alternative 4% discount rate was used, the BCR increases to 2.6. If, in addition, a longer 60-year view is considered, with benefits continuing to accrue over time, then the BCR increases even further to 5.2.

A normal transport appraisal would value these benefits at about $472,500 in ten years’ time43. Assuming these benefits occur over 30 years and grow at 1%, the present value of these benefits is $4.93 million. Given that the rough costs estimated for the improvements to the route

Figure 26 Standard benefits + economic growth benefits

Generalised cost of travel

This is an indicative illustration of possible benefits

$9,000 $4,000

D0 81 95 108 127

D1 Quantity of oversized loads 10 years from now

41 All dollar values and discount rates discussed in this section are ‘real’, in that they are net of general price inflation. 42 An economy-wide elasticity of 0.6 is the assumption made in the NZTA’s research on wider economic benefits. Kernohan and Rognlien (2011 p45). 43 The rule of a half would apply. The difference in cost, $5k, multiplied by the average usage of 94.5 trips. 44 The upper limit of the estimated mean costs of $4.86 million is rounded up to $5 million to help account for uncertainty with any other road (structures and pavement) reinforcements possibly needed. 45 It would be 1.1 if we included a 10% premium for the WEB of ‘Increased output from imperfectly competitive firms’, as described in section 5.3.3. 46 Assuming that the vertical difference in between the two demand schedules — the willingness to pay — is linear. We need not assume that a given demand schedule in itself is a straight line.

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A further potential benefit is that the improvements may qualify the route for permitting HPMVs for routine travel (re section 2.3.8). Any detailed investigation of the proposal outlined here would likely consider this possibility also. We have summarised this approach in Table 5 below.

Table 5 Summary of indicative cost-benefit appraisal for over-dimension loads Appraisal period length

Discount rate

Std benefits

ED benefits (a degree of uncertainty exists)

Benefits, total

$4.9m

1.0

$6.2m

1.2

$8.0m

1.6

$4.9m

$2.5m

$7.4m

1.5

$6.2m

$3.5m

$9.7m

1.9

$8.0m

$5.1m

$13.1m

2.6

$5.6m

$4.3m

$9.9m

2.0

$7.6m

$15.3m

3.1

$11.2m

$14.8m

$26.0m

5.2

BCR

Source: NZIER On the cost side, if we also expect that heavy vehicle operating costs will escalate at 0.5% per annum(net of vehicles fuel efficiency improvements)., then the BCRs are slightly higher still. As well as this, including a 10% mark-up for the â&#x20AC;&#x2DC;increased output from imperfectly competitive firmsâ&#x20AC;&#x2122; increases the BCR to 6.3 if the induced growth actually occurs. The benefits (prior to discounting) are illustrated below in Figure 27, and discounted benefits using a low 4% discount rate is illustrated in Figure 28.

Figure 27 Undiscounted benefits over 30+30 years

Source: NZIER

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Figure 28 Discounted benefits over 30+30 years at 4%

Source: NZIER This indicative appraisal is simplistic, in that it does not factor in the net effects on congestion. Allocating the oversized loads to SH3, with its poor overtaking provisions, may disproportionally worsen trip times for everyone else overall, reducing net-benefits. However, the duration of the trips are less than half of what they would be going the long way, and fewer travellers overall will encounter the oversized vehicle and its entourage of supporting vehicles. Provided that passing lanes are provided on the long stretches that are currently without, then the net effect on congestion should be manageable. This highlights the need to consider this set of initiatives in conjunction with a passing lanes as an integrated strategy.

5.4.2 Supporting exporters As described in section 4.1, the Taranaki economy is highly export oriented. Moreover, section 4.2 describes the very high levels of growth in the Australian O&G sector, which Taranaki’s heavy engineering sector can service. Supporting exporters by reducing their costs to compete is of additional benefit to the nation, and this benefit is excluded from routine transport appraisals. As described in NZIER (2011), Grimes (2009 and 2010), small open economies like New Zealand import their capital goods (e.g. machinery), and pay for this with export receipts. So improving the productivity of exporting firms indirectly leads to more capital accumulation because of more trade. More capital equipment further increases productivity, and thus net wellbeing in the longer-run. Grimes (2010 p41) argues that cost-benefit analysis needs to be supplemented by a national infrastructure strategy that, among other things, concentrates on supporting infrastructure investments that service the internationally traded productive sector.

Improving SH3, with its inter-regional connections to Port Taranaki and supporting Taranaki’s internationally competitive heavy engineering industry, can improve export competitiveness. NZIER (2011) sketched a methodology to potentially capture this, which would scale up the benefits accruing to exporting firms. How much higher the benefits would be is still the subject of further research, but it could well be significant in present value terms.

5.4.3 Addressing the circularity of transport and economic development By making step-change improvements to SH3 (to address safety, the perceived conflicts between cars and trucks, the transport constraints on Taranaki’s heavy engineering industry, and the urban bottlenecks to the east of New Plymouth), the region may grow faster and contribute more to New Zealand’s wellbeing as a whole. If a region were to grow faster because of improved provision of network services, then one would reasonably expect the growth to lead to more use of the infrastructure. That would be true whether the improvement be road, telecommunications, or energy etc. Thus there can be a circular relationship between transport and development: high levels of transport demand can drive transport investment, transport investment can drive economic investment, which can generate future transport demand. If a core part of a transport network does not support growth, then the growth needed to support the infrastructure upgrade will not be real and evident. It could be the case that improving the road unlocks the development; however, the only way to be sure of this is to test the proposition first-hand.

This point has been taken up in the 2011 National Infrastructure Plan, where in the Ministers’ Foreword states that the government has prioritised work in the next three years on five areas, including ‘focusing land transport investment on supporting exporters (e.g. completing RoNS and improved rail services to ports)’.

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Figure 29 Potential circularity of transport investment Economic development

Transport investment

Transport demand

Using the framework of ‘real options’ outlined in section 5.3.4b) one can consider investing sufficiently to cause broader development to occur, and to learn if it is indeed the standard of the transport network that is holding back growth. If it is, then the investments will lead to more people living, working and playing in Taranaki, and further investment can be supported. If it is not, then investors may learn that it is not transport that is restraining wider regional growth and development. In this sense coordinating a modest-sized investment at well-defined pinch-points across the whole section of the network can amount to ‘buying an option’ to induce more economic development through further investment. In that case the next set of constraints on the route can be identified and new investment opportunities learned.

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Changing where activities locate is a process that would occur over many years, and would compound relatively slowly. The use of SH3 by various kinds of travellers should be closely monitored with steps taken to attribute to the best extent possible any increased use of the route from the package of improvements. The need for attribution is important to separate out the underlying growth in SH3 use that would have happened anyway from that caused by the improvements. The NZTA are developing such performance monitoring frameworks for its RoNS implementation, and ideally these can be adapted here. This process provides a staged ‘learn by doing’ approach to investment and decisions on improvements can be made on an incremental step-by-step basis.

6. In summary This study was undertaken to consider the case for improving New Zealand’s longterm economic development by upgrading aspects of SH3 between Taranaki and the upper North Island. The analysis has considered a broader range of issues than is typical for an inter-regional transport corridor study. Under prevailing appraisal and investment frameworks the case for substantial corridor upgrades to SH3 is not strong. However, there are a wide range of issues that are either not fully accounted for in routine approaches, and this study aims to address those shortcomings. The focus has been on identifying realistic options for investment; obtaining an evidence basis for them wherever possible; and on describing how each possible intervention would cause specific outcomes to result. A number of the major issues are risks that have a high level of uncertainty associated with them. Examples here include the costs to the nation of SH3 being closed when another major outage occurs on the Maui gas pipeline. Another could be the cost to the country of delays in emergency response to O&G events elsewhere in the country. The likelihood, consequences, and monetary impacts are unclear, and we would hope they remain unclear because they are avoided. The study has considered the regional views on SH3, and describes the real and perceived problems people have with feeling relatively isolated from the neighbouring upper North Island. There have been a range of partial studies done that relate to SH3, but there are currently no unified visions on what can be done to make realistic stepchange improvements to the route.

The analysis of the demand for SH3 shows that use is relatively low compared to other inter-regional routes. However, the question is whether this is a symptom of underinvestment rather than a reason not to invest. We find that SH3 plays an important role in ensuring national freight security, by being the default north-south lifeline when the central plateau is snowed out. We also find that the route performs badly in safety terms, and that in recent years crashes have been the number one reason for SH3 to be closed. Such outages sever Taranaki’s connections with its major neighbours immediately to the north. The key ambitions to grow the region in the Economic Development Strategy relate to improving the scale of Taranaki’s core industries and removing the ‘isolation issue’ regarding its connectivity to the upper North Island. Our review of the government’s transport funding policies highlights a potential imbalance of priorities away from regional investment. At present the policy of R funds provides a minimum level of funding for regions that can help offset any potential imbalance, but it is possible that these will not exist past 2015. Prevailing methods to prioritise investments are geared to only address certain kinds of transport problems. They do not routinely deal well with addressing transport problems that stifle development. Without minimum regional funding levels some regional projects may be forgone at the expense of inferior value for money projects in the major centres. The nationally significant O&G sector is expected to expand both in Taranaki and across the country. Home base will likely remain in Taranaki. Although the O&G sector is not highly dependent upon SH3 in the first instance, it does indirectly depend on it for the supply of inputs and outputs, for pipeline access and for the option of supporting O&G exploration in other regions to the east. Being able to bank on SH3 being open is important to any emergency responses that need to be launched from Taranaki if an O&G-related accident or emergency happens elsewhere in New Zealand. Moreover, the risk of safety conflicts with LPG tankers on a relatively slow route with so few passing opportunities is of significant concern. The case for safety improvements such as passing lanes has probably been understated in previous analysis.

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We have engaged the trucking and heavy engineering industries and have identified that the size and dimension constraints on SH3 are particularly binding for them, and disadvantage Taranaki’s competitiveness in a disproportionate manner. We propose that a strategy of improvements to widen the route to accommodate oversized trucks be implemented. In a downside scenario the benefits from these particular improvements would be about breakeven, but in an upside scenario the gains could be large for the whole nation. The impending bottlenecks to the east of New Plymouth City on SH3 are of concern also. The broader long-term economic gains from improving SH3 are unlikely to occur and be sustained if SH3’s ability to penetrate New Plymouth city fringe is poor. New Plymouth area is the growing hub for the O&G sector and has become the economic heart for the region. The ‘Vickers to City’ project is economically viable and aligns with government policy objectives. This project should be undertaken without undue delay, and staging should be viewed with concern given the risk of inducing land use development that creates undue congestion in the longer-term.

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The improvements identified in this study are complementary, and should be viewed as part of a broader integrated SH3 corridor strategy. They are intended to address immediate and specific binding constraints, such that relieving them can put in place conditions for further growth. However, there remains a question of ‘Build it and will they come?’ One will never know unless they purchase the option to learn if that is the case. The upside scenarios feature well in our analysis. The downside scenario is not particularly bad; the projects in isolation (i.e. without causing further growth and development) remain modestly economically viable. We have identified a set of options that could resolve the issues identified in a manageable, prudent, and incremental manner and allow the potential upside from an improved SH3 to be observed in a step-by-step fashion. This buys an option to further invest in SH3 in the longerrun to further grow Taranaki’s contribution to the New Zealand economy.

7. References Beca Carter Hollings & Ferner Ltd (2002) SH3 Mt Messenger Investigation Stage 1. Summary Report. Prepared for Transit NZ. BERL (2009) Taranaki East-West Corridor Concept Business Case. Draft report to Venture Taranaki. BERL (2011) Economic profile of the Taranaki Region in 2010. Report to Venture Taranaki, June 2011. Boardman, A, D. Greenberg, A. Vining and D. Weimer (2006) Cost-benefit analysis: concepts and practice. L. Jewell (Ed). New Jersey: Prentice-Hall. 560pp. Bureau of Transport and Regional Economics (BTRE) (1999). Report 100: Facts and furphies in benefit-cost analysis: transport. Accessed 10 April 2012. www.bitre.gov.au/publications/1999/ report_100.aspx Graham DJ and Mare DC (2009) Agglomeration elasticities in New Zealand. NZ Transport Agency research report 376

Kernohan, D and Rognlien, R (2011) Wider economic impacts of transport investments in New Zealand. NZ Transport Agency research report 448 KiwiRap (2008) How safe are our roads? Rating New Zealand’s State Highways for risk. KiwiRap (2010) How safe are our roads? Star rating New Zealand’s State Highways. NZIER (1999) The social cost of accident-induced traffic delays — Review of literature and options for estimation. Interim report to Land Transport Safety Authority NZIER (2011) Valuing the future appropriately — Case for using the shadow price of capital in social discount rate policy. Report for Auckland Council. Refer to October Minutes www. aucklandcouncil.govt.nz/EN/AboutCouncil/meetings_agendas/ committees/Pages/economicdevelopmentforum.aspx

Grimes, A (2009) Capital Intensity and Welfare: Traded and Non-Traded Sector Determinants. New Zealand Economic Papers 43(1), 21-39

Rouwendal, J (2001) Indirect welfare effects of price changes and cost-benefit analysis. Tinbergen Institute Discussion Paper, TI 2002-011/3. Accessed 10 April 2012. http://www.tinbergen.nl/ discussionpapers/02011.pdf

Grimes, A (2010) The economics of infrastructure investment: beyond simple cost benefit analysis. Motu Working Paper 10-05. Motu Economic and Public Policy Research

Taranaki Regional Council (1997) The costs of the slip and closure of SH3 at Awakino: 12 – 19 March 1997.

Grimes, A (2011) Building bridges: Treating a new transport link as a real option. Motu Working Paper 11-12. Motu Economic and Public Policy Research Hyder Consulting (2009) Waikato Inter-Regional Transportation Study. Report to Environment Waikato.

Taranaki Regional Council (2011) Submission on Draft State Highway Classification, 28 March 2011, Document 870888. Warwick Walbran Consulting Ltd (2010) Western Blue Highway Transport Study. Report for Port Taranaki Ltd and NZ Transport Agency.

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Appendices

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Appendix A Initial stakeholder survey responses This section summaries the results of the survey carried out to inform this study. SH3 affects Taranaki’s overall attractiveness Please rate the importance of each of the following enhancements to your region that may result from significant improvements to SH3 Respondents were asked to rate the importance of seven specific enhancements, and then provided the opportunity to suggest further enhancements. Each enhancement was considered to be important to the region, as shown in Figure 30. On average, all enhancements were between ‘important’ and ‘very important’. The two most important enhancements, based on average responses, are that it will allow Taranaki to be better linked to the rest of the New Zealand, and that it will be easier for visitors to travel between regions.

Other benefits

more businesses, more competition and more choice

easier for visitors to travel between regions

easier for locals to travel between regions

offer improved employment opportunities

more attractive place for businesses to locate

better linked to the rest of New Zealand

4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4 3.9 3.8 more attractive place to live

Average of responses

Figure 30 Average responses to importance of enhancement

Note: Not important at all =1, Not very important =2, neither important nor unimportant =3, important =4, very important =5 Source: NZIER

Figure 31 and Figure 32 show the distribution of responses for the importance of improved linkages to other regions and the improved ease with which visitors can travel between regions, respectively. It is clear from these figures that the bulk of the respondents saw these enhancements as being very important.

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Figure 31 The region will be better linked to the rest of New Zealand Distribution of results

Number of responses

300 250 200

150 100 50 0 Not important Not very at all important

Neither Important important nor unimportant

Very important

N=318 Source: NZIER

Figure 32 It will be easier for visitors to travel between regions Distribution of results

Number of responses

250 200

150 100 50

0 Not important Not very at all important

Neither Important important nor unimportant

Very important

The most prominent other enhancement suggested by respondents was improved road safety, leading to fewer accidents, injuries and deaths. Other common suggestions included greater reliability, reduced travel times (including for emergency services).

The industries thought to be most affected by SH3 What impact do you see significant improvements to SH3 having on the following industries? Respondents were asked to consider the impact of improving SH3 on five specific industries, and then provided the opportunity to suggest other industries that could be impacted. Figure 33 shows that all the industries covered are expected to experience major benefits from improvements to SH3. The transport and tourism industries are expected to experience the most significant gains.

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5 4.9 4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4 3.9

Not many other industries were commonly reported as being impacted. Some of the suggested industries included: • emergency services • fishing Other

Oil and gas/petrochemical

Agriculture

Transport

Manufacturing

• racing Tourism

Average of responses

Figure 33 Average responses to impacted industries

• health • educational professional development • postal delivery.

Note: Major disadvantage =1, Some disadvantage =2, Neither disadvantage or advantage =3, some benefit =4, major benefit=5 Source: NZIER

How firms think SH3 matters to them? to business respondents: What expected impact would significant improvements to SH3 have on the size and scope of your business and the following aspects of its operations?

Suppliers/inward goods

New market access

Existing market access

Investment in plant and equipment

Staff numbers

Sales/turnover

4 3.5 3 2.5 2 1.5 1 0.5 0 Overall business size

Average of responses

Figure 33 Average responses to impacted industries

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What people want to have happen to SH3 Please rate the importance of various improvement options for SH3 Respondents were asked to rate the importance of different improvements that could be made to SH3. Respondents, on average, rated all of the improvements between important and very important, as shown in Figure 36. The improvements that were rated the very important most consistently were reducing the risk of closure due to slips, better maintenance of the road surface, and increasing the number of passing lanes. While still rated, on average, as more than important, improvements related to tunnels and better communication of roading issues were considered the least important to survey participants.

4.8 4.7 4.6 4.5 4.4 4.3 4.2 4.1 4 3.9 3.8

• more rest stops and public toilet facilities (fatigue management)

Other

Improved safety features

Wider/higher tunnels

A faster route through winding or slow sections

Better quality alternative routes

Faster recovery from closures

Improved mobile phone coverage

Better communication of road issues

Reduced risk of road closures due to slips

More passing lanes

A number of the ‘other’ suggested improvements repeated suggestions previously included. Some of the unique suggestions included:

Road surface smoother and better maintained

Average of responses

Figure 36 Average responses to importance of improvement options

• fewer corners • more alternative routes around population centres

Note: Not important at all =1, Not very important =2, neither important nor unimportant =3, important =4, very important =5 Source: NZIER

People feel SH3 is limiting Taranaki’s growth right now

As shown in Figure 37, the vast majority of respondents consider the current state of SH3 to be a main issue hindering the region’s economic development.

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Figure 37 SH3 as a barrier to economic development Distribution of results 300 Number of responses

Do you consider SH3 in its current state (without any significant improvements) to be a main issue impacting on the economic development of your region?

• reduction in the number of trucks and support in alternative transport methods such as rail.

250 200 150 100 50 0 No

Unsure

Yes

Figure 38 SH3 as a barrier to future economic development

SH3 felt to be an on-going problem for Taranaki Will retaining SH3 in its current state (without any significant improvements) constrain your region’s economic development in the future?

300

Number of responses

250

As shown in Figure 38, the overwhelming majority of respondents consider the state of SH3 to be a barrier to the region’s future economic development.

200 150 100

50 0 No

Unsure

Yes

N=301 Source: NZIER

Taranaki thought to immediately benefit from a marked improvement to SH3 Following a substantial upgrade to SH3, how long do you expect it would take for the full economic benefits to be felt by businesses? The majority of the respondents considered that the impacts of any improvements would be felt within in a relatively short space of time. This view is larger than the figure suggests as many of the people who expected a longer term impact included the construction time in their assessment.

Figure 39 Time to feel benefits of upgrade Distribution of results 250

Number of responses

200 150 100

N=299 Source: NZIER

0 Less than 5 years

The short time frame for the benefits seems to be based on a view that Taranaki has all the required ‘infrastructure’ except the transport links. Removing this binding constraint will therefore deliver benefits quicker.

5 to 10 years

More than 10 years

Alternatively, reasons given for the longer time frames are due to a view that perceptions of the road will take time to change, and the current recession is also impacting on this view.

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Non-work travel is suppressed Does the condition of SH3 affect your decision to travel the route for recreational/leisure purposes? As shown in Figure 40, SH3 can impact on the location of where recreational activities take place. A number of respondents noted that they are more inclined to travel south instead of north due to the condition of the road, and the length of time it takes to travel north. A number of people are not impacted by the current state of SH3 because they may own holiday houses towards the north, or may have family which they would visit regardless of the condition of the road.

Figure 40 Impact of SH3 on recreation 180

Number of responses

160 140

120 100 80 60 40 20 0 No

Unsure

Yes

N=303 Source: NZIER

Most respondents indicated the region/district that they were located in as follows:

Table 6 The regions/districts that respondents were located in Information on those that responded to Venture Taranakiâ&#x20AC;&#x2122; survey

Taranaki

Waikato

Manawatu

Wanganui

Wellington

Total

280

304

92%

They were distributed across business, households and others as follows:

Table 7 The distribution of respondents across business, households and others Information on those that responded to Venture Taranakiâ&#x20AC;&#x2122; survey

Business/commercial

Household/private

Other

Total

140

146

304

46%

48%

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Of the business sector respondents, they represented the following industries:

Table 8 The industry sectors of business respondents Industry sector

Count

Restaurant or accommodation

Transport, storage and communications

Retail and wholesale trade

Manufacturing

Health, education, community services, recreation, personal or other services

Agriculture, horticulture, fishing & forestry

Oil/gas exploration and/or support services

Business, property, financial & other professional/technical services

Building and construction

Electricity, gas or water supply

Total

149

Source: NZIER

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Appendix B Box and Whisker data Table 9 Box and Whisker chart data for total traffic counts 2011

2010

2009

2008

2007

Total

Average

2,077

2,076

2,147

2,086

2,143

2,106

Maximum

4,305

4,319

6,283

5,045

4,532

6,283

3rd quartile

2,367

2,372

2,440

2,382

2,469

2,411

Median

1,942

1,949

1,923

1,980

1,943

1st quartile

1,662

1,620

1,673

1,668

1,697

1,671

Minimum

1,341

1,304

1,088

1,160

1,320

1,088

Table 10 Box and Whisker chart data for heavy traffic counts 2011

2010

2009

2008

2007

Total

Average

489

458

441

471

484

469

Maximum

775

736

717

686

612

775

3rd quartile

561

501

494

516

529

511

Median

512

455

474

501

472

1st quartile

475

413

409

433

475

426

Minimum

334

309

296

314

343

296

Note: Data does not include weekends or public holidays Source: NZTA, NZIER

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Appendix C Comparison of closures on other state highways Our assessment is based on an OLS regression that measures the impact on daily traffic counts (expressed as a percentage of monthly average traffic flows ) from: • a same day SH1 closure

These results explain approximately 10 percent of the variation in daily heavy traffic counts against the monthly average. This suggests that other factors will explain the remaining 90 percent of the variation.

• a SH1 closure the day before • a SH1 closure two days before • a SH1 closure three days before • a SH1 closure four days before • a SH1 closure five days before • a same day SH4 closure • a SH4 closure the day before

Table 11 Impact of SH1 and SH4 closures on SH3 heavy traffic count

• a SH4 closure two days before • a SH4 closure three days before • a SH4 closure four days before • a SH4 closure five days before. We followed this approach for both total traffic and heavy traffic counts. The total traffic regressions found no statistically significant impacts from these traffic closures. The heavy traffic regressions found statistically significant relationships between SH4 closures and SH3 heavy traffic counts. These results are reported in Table 11. They show that a closure on SH4 results in a spike in heavy traffic flows on SH3. The results showed that the heavy traffic flows on SH3 were: • 22 percent above the historical monthly average on the day of a SH4 closure • 8 percent above that average the following day • 13 percent above the average two days following a SH4 closure.

The results also have the unexpected impact of SH3 heavy traffic counts falling by 6 percent of the monthly average five days after a closure on SH1.

constant

1.00***

SH1day

0.03

SH1day1

0.04

SH1day2

-0.03

SH1day3

-0.02

SH1day4

0.02

SH1day5

-0.06**

SH4day

0.22***

SH4day1

0.08*

SH4day2

0.13***

SH4day3

0.03

SH4day4

0.02

SH4day5

-0.01

0.10

475

413

334

309

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Appendix D Indicative cost estimates to widen SH3 for oversized loads Staples Rodway House PO Box 264, New Plymouth 4340, New Zealand T: +64 6 758 8191 // F: +64 6 758 9785 E: info@beca.com // www.beca.com

New Zealand Institute of Economic Research Inc PO Box 3479 Wellington 6140 New Zealand

20 April 2012

Attention: Chris Parker Dear Chris Review of widening SH3 Awakino and Mt Messenger Tunnels As part of a study into the regional economic importance of State highway 3 to Taranaki being undertaken by the New Zealand Institute of Economic Research (NZIER) Beca Infrastructure Ltd (Beca) were engaged to investigate pinch points for over dimensional loads that could be preventing the growth of heavy industry in Taranaki.

Scope of the investigation

The issue with over dimensional loads is that there are no specific dimensions to consider and thus in assessing the route we determined that the majority of the route provided no more than the normal obstacles of bridge parapets and overhead power lines. There are however two areas where the route is considerably constrained being the Awakino Gorge and itsâ&#x20AC;&#x2122; tunnel and Mt Messenger and itsâ&#x20AC;&#x2122; tunnel. We therefore focused our investigations on these areas. The investigation took the form of a high level desktop study to look at the potential to widen the tunnels to allow larger loads to be transported via this route and the rough order of costs associated with the necessary works.

Awakino Tunnel Investigations

In 1996 Beca was engaged by Transfield Services NZ Ltd to undertake a geotechnical review of the Awakino Tunnel and consider widening the tunnel to provide two lanes of traffic. This study looked at a number of options from widening the tunnel, day lighting the tunnel and providing a single lane by pass around the tunnel thus offering two traffic lanes. All options would be beneficial from an over dimensional load perspective although a widened tunnel would still provide restrictions on the load size.

Given that work on the tunnel, whether to widen it or to day light it, would require the closure of the tunnel for a considerable period of time, probably a minimum of 3 months. It was considered THE ROAD AHEADconstruct a temporary bypass alignment of the highway around the limestone outcrop necessary and into the Awakino River. At this point the Awakino river is constrained on both river banks by

at number options from by widening the tunnel, day the tunnel aand providing areview single of lane In a 1996 Becaofwas engaged Transfield Services NZlighting Ltd to undertake geotechnical the by pass around the tunnel thus offering two traffic lanes. All options would be beneficial from an Awakino Tunnel and consider widening the tunnel to provide two lanes of traffic. This study looked over dimensional load perspective although a widened tunnelthe would stilland provide restrictions onlane the at a number of options from widening the tunnel, day lighting tunnel providing a single load size. by pass around the tunnel thus offering two traffic lanes. All options would be beneficial from an over dimensional load perspective although a widened tunnel would still provide restrictions on the Given that work on the tunnel, whether to widen it or to day light it, would require the closure of the load size. tunnel for a considerable period of time, probably a minimum of 3 months. It was considered necessary a temporary bypass aroundrequire the limestone outcrop Given that construct work on the tunnel, whether toalignment widen it oroftothe dayhighway light it, would the closure of the Page 2 and into the Awakino River. At this point the Awakino river is constrained on both river banks tunnel for a considerable period of time, probably a minimum of 3 months. It was considered by 20 April 2012 considerable geological features and thusalignment any diversion require significant river training necessary construct a temporary bypass of thewould highway around the limestone outcrop works in the order to protect the road embankment. It became apparent that ifon the bypass and into Awakino River. At this point the Awakino river is constrained both river were banks by constructed it formed a credible to the tunnel considerablethen geological features and alternative thus any diversion wouldoptions. require significant river training

works in order to protect the road embankment. It became apparent that if the bypass were The study concluded that both options were feasible with costs ranging between $2.4M and $2.9M, constructed then it formed a credible alternative to the tunnel options. using the NZTA economic evaluation manual cost estimate update factors those estimates would now be of the order of $3.08M and $3.72M. In 2006 a benefit cost ratio was calculated for the The study concluded that both based optionson were feasible with costs ranging Since between $2.4M and tunnel widening option at 0.45 an estimated cost of $2.75M. traffic flows on $2.9M, State using the NZTA economic evaluation manual cost estimate update factors those estimates would highway 3 at Awakino have only increased by a comparatively small percentage since 2006 compared to construction costs we can assume the BCR will have decreased. Our Ref: 3852407 NZ1-5780819-3 0.3

Our Ref: 3852407

Easing of corners north and south of the Awakino Tunnel. NZ1-5780819-3 0.3

The Awakino gorge has a tortuous alignment with many twists and turns as State highway 3 follows th the Awakino River. A site visit on the 26 April highlighted two corners that would prove difficult for over dimensional loads to negotiate. These are highlighted on the aerial photograph below and are identified as curve 1, and 2. Curve 1

Tunnel

Curve 2

Curve 1 Curve 1 is situated approximately 1km north of the tunnel and consists of a 30m radius bend that has significant super elevation and is combined with a vertical crest curve, it currently has a 45kph speed advisory in place. An aerial photograph of the curve is shown on the following page.

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Page 3 20 April 2012

Curve 1 The ground drops steeply to the Awakino River on the outside of the bend to the north of the curve, whilst to the south of the bend the ground falls steeply to flat paddocks. The curve itself cuts through a ridge and thus is bounded by cuttings. On the inside of the bend the ground typically rises and immediately to the south of the curve there is gulley which is crossed by an embankment. The following photographs show the form of the curve.

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 4 20 April 2012

View of curve 1 from the northern approach.

View of curve 1 from southern approach (with gully on right hand side).

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 5 20 April 2012

View of curve 1 In order to ease the passage of over dimensional loads the inside of the bend could be excavated to create a clear bench. Whilst this would have a benefit for over dimensional loads it is possible it would have a dis-benefit to the other road users in that the greater visibility may increase speeds into the corner which may in turn increase the crash rate. Currently the cutting on the inside follows the line of the highway providing drivers with an indication of the severity of the corner notwithstanding the warning signage. It is estimated that it would require the shifting of approximately 10,000m3 of material at an estimated cost of $175,000 Âą30%.

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 6 20 April 2012

Curve 2 Curve 2 is situated within the gorge itself approximately 8km south of the tunnel. The curve has a radius of approximately 35m and is almost a hairpin with a angle of approximately 155ยบ. This can be seen in the aerial photograph below:

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 7 20 April 2012

The southern approach has some benching but from the apex of the curve to north the inside cut face is very close to the seal edge this can be seen in the following photographs.

View from the south showing widening to the inside

View of the apex of the curve

Our Ref: 3852407 NZ1-5780819-3 0.3

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View of the northern approach and the cutting adjacent to the seal edge.

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 9 20 April 2012

It is estimated that 20,000m3 of rock would have to be removed. The rock from a visual inspection appears to be highly fractured limestone and whilst it will be relatively easy to dig disturbing it is likely to result in on going rock falls and landslides during inclement weather, for some considerable time. Additional remedial measures (and costs) may be required to overcome this possibility. Due to the proximity of the earthworks to the carriageway the highway would have to be restricted to single lane operation and consequently the costs for these works are estimated to be approximately $500,000 Âą30%.

Mt Messenger

SH 3 crosses over Mt Messenger via a series of sharp curves on a steep gradient. On the northern side of the crest is the Mt Messenger tunnel dug through mud stone (Papa). There are a number of very short radius bends on both sides that may restrict over dimensional loads. For this study we have looked at the Tunnel and the worst curve on the southern side as shown in the following aerial photograph.

Tunnel site

Southern curve

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 10 20 April 2012

The tunnel has two traffic lanes but no shoulders and a total width of 8m and a maximum height of 7.5m, the curve of the roof restricts the heights of loads to probably 6.5m, depending upon their width. Consideration was given to widening the tunnel but without a detailed investigation this was thought to be impractical, particularly given the height of the material over the top of the tunnel is in the order of only 10m and thus day lighting the tunnel was a considered the simpler and more cost effective solution. The following aerial photograph shows the tunnel alignment:

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 11 20 April 2012

View of the northern approach to the tunnel.

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Our Ref: 3852407 NZ1-5780819-3 0.3

Page 13 20 April 2012

There is no practical alternative route or temporary bypass available so the day lighting and easing of the bend to the north of tunnel would have to under taken with at least one lane open. Protection of the road users would be required at the tunnel portals as the material is lowered. We have assumed that once the overburden is reduced to 1.5 to 2m the remainder would need to be removed during a well-planned short term (night) closure of the road. The following shows sketches of the proposed widening.

Our Ref: 3852407 NZ1-5780819-3 0.3

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Page 15 20 April 2012

Summary

Having reviewed the section of State highway 3 north of New Plymouth through to the far side of the Awakino Gorge in terms of restrictions on over dimensional loads we have found that there are many but the most significant ones can be overcome albeit at some cost as shown in the table below: Restriction

Solution

Estimated cost

Estimated minimum cost

Estimated maximum cost

Awakino Tunnel

Bypass, widening and daylight options Benching to the inside to 4m

$3.08M to $3.72M $175k

$2.16M

$4.84M

$123k

$228k

Benching to the inside to 4m

$500k

$350k

$650k

Benching to the inside to 2m

$460k

$322k

$598k

Curve North of Awakino Tunnel Curve South of Awakino Tunnel Mt Messenger Tunnel and southern curve

It should be noted that these options and estimates are based on a site visits and aerial photography and detailed investigations are required in order to improve the confidence in the estimates produced..

Yours sincerely Andy Skerrett Manager - New Plymouth

on behalf of

Beca Infrastructure Ltd Direct Dial: +64-6-759 5753 Email: andy.skerrett@beca.com

Our Ref: 3852407 NZ1-5780819-3 0.3

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About the report About Venture Taranaki

About Beca

Venture Taranaki Trust is the Taranaki region’s development agency. We help grow the region.

Beca is one of the largest employee-owned engineering and related consultancy services groups in the Asia Pacific region. Technical and strategic advice was provided from their New Plymouth office, where BECA’s have been involved in many of Taranaki’s most significant infrastructural projects, including industrial civil, highway, railway and traffic engineering as well as the asset management of water and wastewater disciplines. They bring to the report not only engineering expertise, but first hand local knowledge of the SH3 route.

Incorporated as a charitable trust, Venture Taranaki is a dynamic organisation which has facilitated business success from enterprise inception through to sustainable growth based on international competitiveness. Venture Taranaki is an initiative founded by the New Plymouth District Council. In addition to the New Plymouth District Council, Venture Taranaki is supported by: South Taranaki District Council, Stratford District Council, Taranaki Electricity Trust, New Zealand Trade and Enterprise, Foundation for Research, Science and Technology, Business in the Community and numerous other private sector organisations. Venture Taranaki commissioned NZIER (with support from Beca) to undertake specialist independent analysis for this State Highway 3 report. Venture Taranaki State Highway 3 Project Director: Dr Anne Probert. anne@venture.org.nz

About NZIER NZIER is an independent specialist consulting firm that uses applied economic research and analysis to provide a wide range of strategic advice to clients in the public and private sectors, throughout New Zealand and Australia, and further afield.

Disclaimer: All work is done and services rendered at the request of, and for the purposes of the client only. Neither Venture Taranaki, its employees or stakeholders nor any of the contributing organisations or individuals accepts any responsibility on any grounds whatsoever, including negligence, to any other person. While every effort has been made to ensure that the information, opinions and forecasts provided are accurate and reliable, Venture Taranaki or any contributing organisations or individuals shall not be liable for any adverse consequences of decisions made in reliance of any report provided by these organisations. Nor shall Venture Taranaki be held to have given or implied any warranty as to whether any report provided will assist in the performance of the client’s business.

NZIER is also known for its long-established Quarterly Survey of Business Opinion and Quarterly Predictions. Our aim is to be the premier centre of applied economic research in New Zealand. We pride ourselves on our reputation for independence and delivering quality analysis in the right form, and at the right time, for our clients. We ensure quality through teamwork on individual projects, critical review at internal seminars, and by peer review at various stages through a project by a senior staff member otherwise not involved in the project. NZIER was established in 1958.

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Venture

TARANAKI Te Puna Umanga

Taranakiâ&#x20AC;&#x2122;s Regional Development Agency 9 Robe Street | PO Box 670 | New Plymouth P. (06) 759 5150 | F. (06) 759 5154 E. info@taranaki.info www.taranaki.info

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