Read more about the investigation into the ferry terminal at Clifford Bay, the Ministry's involvement and where to from here

Introduction
What was the rationale for further investigation?
The business case
Freight demand
Why not stay at Picton?
What happens to Picton if a ferry terminal goes ahead at Clifford Bay?
What are the next steps?
Timeline of events

Introduction

The idea of using Clifford Bay as a base for ferry operations has been looked at on several occasions since the 1920s. Picton has been the South island base for ferry operations since 1962. Clifford Bay sits approximately 55kms south of the current ferry terminal in Picton and it is this physical location, which on paper, offers several advantages over the Picton location.

KiwiRail (and its predecessor organisations) had investigated Clifford Bay as a base for their own road and rail ferry operations. In early 2011 the government asked the Ministry to independently review KiwiRail’s findings but also to think about the Clifford Bay option from a national transport perspective.

The report that the Ministry commissioned showed that further investigation was justified. Therefore, in September 2011 the Minister of Transport requested the Ministry to lead further investigation into the viability of using Clifford Bay as a base for ferry operations in the South island. The objective of the further investigation was to provide the government with a report that enabled them to have an informed opinion on Clifford Bay.

The Ministry worked with the Treasury (National Infrastructure Unit) and the NZ Transport Agency assisted with the likely construction and engineering costs. The Ministry commissioned expert assistance to help complete the business case and to investigate the potential economic impacts on the Marlborough region.

The key stakeholders involved in the investigation were Strait Shipping, KiwiRail / Interislander, and Port Marlborough. These stakeholders have been generous with their time and information provided for the business case — much of it commercially sensitive.

Another important part of the investigation was a separate assessment of the economic impacts on the Marlborough region. Many individual businesses as well as representative business organisations gave their time and information for the investigation.
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What was the rationale for further investigation?

Reasons for the further investigation include the expected doubling of freight by 2040 and the potential to cut the journey time by 80 minutes for road/ferry trips between Wellington and Christchurch and by 110 minutes for the same rail/ferry trip.

Improvement in the road and rail connections between the North and South Islands would make the transport network more efficient and therefore enhance economic growth.

It was considered that Clifford Bay would be better placed to accommodate future freight demand as Port Marlborough is physically constrained by Picton township and the ferry operators face speed restrictions through the Marlborough Sounds.

The business case

The purpose of the business case was to determine the viability of a new ferry terminal at Clifford Bay using the Treasury’s Better Business Case guidelines incorporating strategic, economic, financial, commercial, and management cases. Further information on the Treasury’s guidelines(external link).

The business case prepared by the Ministry takes a ‘best for New Zealand’ perspective and examines Clifford Bay against the option of remaining at Picton.

The option of a ferry service operating directly to Christchurch from Wellington was considered but discarded because the combined ferry/road journey would take nearly three hours longer than the current Wellington/Picton/Christchurch route. Furthermore, this would mean only one return sailing per ferry each day.

Inherent in the business case is the government’s commitment to ensuring that the national transport network supports economic growth across the country rather than merely responds to growth in demand.

With improvements to the national transport network through the Roads of National Significance programme and investment in the rail network, it is critical that the Cook Strait ferry service acts as effectively as possible, and is capable of accommodating future demand in an efficient and timely manner.
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Freight demand

The Cook Strait ferry service carries a large proportion of time-sensitive inter-island freight. For both freight companies and private individuals there are significant advantages in using the ferries to move cargo over alternative transport modes such as coastal shipping, particularly time savings as well as reliability and convenience.

The National Freight Demands Study concluded that, in the absence of any significant government pricing or policy intervention, it is unlikely that there will be a significant market shift to coastal shipping. The Cook Strait ferries will therefore remain as a critical component in the national freight network.

An efficient transport network is integral to New Zealand’s economic growth and is a vital component in our import, export and domestic supply chains. It is also integral to New Zealand’s continued economic recovery and supports several key drivers identified in the government’s economic growth agenda, including investing in productive infrastructure and improving performance across science, innovation and trade.

If freight demand increases as predicted over the next 30 years it will place great pressure on the existing transport infrastructure. It is expected that freight demand on the Cook Strait link will increase broadly in line with national freight demand growth and this will place increasing pressure on the existing ferry capacity and port infrastructure.
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Why not stay at Picton?

That may still happen and no decisions have been made yet. However there are several constraints involved with ferry operations at Picton that must be compared with the opportunities at Clifford Bay.

Road and rail access in to, and particularly out of, Picton have a particular set of challenges. The southbound road and rail routes are quite steep and this impedes efficient and timely transport of freight. In particular, rail presents the challenges of high fuel consumption and the need for tandem locomotives on heavy trains to exit Picton.

Port Marlborough has limited land space which suggests there will be congestion if freight growth continues as predicted.

In comparison, the access to and from Clifford Bay is flatter and presents an opportunity to future-proof main trunk rail and State highway access to the proposed ferry terminal.

The environmental impact of regular ferry services on coastal regions within the Marlborough Sounds has been a concern for some time. There are restrictions on the speed of ferry services operating within the Sounds and as a consequence a ‘fast ferry’ no longer operates.

The constrained nature of Picton Harbour and current restrictions on vessel wake and wave energy, and consequently speed, will impose limits on the size of the vessels able to operate efficiently in the Marlborough Sounds. The trend internationally is to use larger ships which means potentially limiting ferry operators’ options when considering replacing existing vessels.

Speed restrictions through the Marlborough Sounds limit the number of return sailings that ferries can make each day. Two of the ferries have ‘grandfathered’ speeds (meaning they do not have speed restrictions) and can complete three return trips a day. The other ferries have speed restrictions, and future replacement ferries are also likely to be speed restricted. These restrictions affect operating efficiency and cost, and any potential tightening of the speed restrictions will further constrain ferry services.

For the operator of the speed-restricted ferries it means less return trips per day. Longer term it means having to consider replacing ferries with larger vessels (note these vessels may have to be purpose built to accommodate wake restrictions in the Sounds), or purchasing more, smaller vessels to meet current and future freight demand.

Furthermore, there is no ‘do nothing’ option. If the ferry terminal remains at Picton, Port Marlborough will require significant investment in ferry berths and landside infrastructure. The reasons for the investment include the need to meet the future freight demand by improving the layout of the port and potentially to accommodate larger ferries.

The business case looked at Picton providing the same long term efficiencies as the green-fields opportunity as Clifford Bay. Although the cost of upgrading Picton is less than building a new ferry terminal at Clifford Bay it still involves a significant sum of money. It is also important to note that upgrading Picton is unlikely to provide all the long term advantages of Clifford Bay.
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What happens to Picton if a ferry terminal goes ahead at Clifford Bay?

Tourism is an important part of the Northern Marlborough economy. A significant change in visitor expenditure could have a direct and material effect on the local economy.

However, the long term implications for Northern Marlborough depend critically on how the region would respond to the loss of some or all of its Cook Strait ferry services. There would be an opportunity to rebrand Picton and the Marlborough Sounds as a destination rather than a transit point.

The majority of ferry passengers stay in Picton for less than 24 hours (meaning Picton is effectively a transit point for most passengers) and therefore the average amount of money spent by all passengers is very low. The challenge for Northern Marlborough would be to attract more visitors who stay overnight, or longer, and therefore spend more on average.

If a ferry terminal is built at Clifford Bay then Picton and Port Marlborough are likely to have a lead in period of several years to consider opportunities such as significant changes in the waterfront environment as part of a long-term strategic plan to enhance the Picton tourism experience.

What are the next steps?

The Minister of Transport announced in November 2012 that the government considers the business case to be strong enough to engage in further consideration of the project’s potential feasibility. The further consideration will involve testing assumptions around the commercial parameters in the business case with key stakeholders. The Ministry is expected to report back to the Minister later this year.

Timeline of events — past, present and future

This timeline begins in 2011 with the Ministry commissioning a high level evaluation of the economic, environmental and social benefits and costs of using Clifford Bay as base for ferry terminal operations. What has happened since then and what was involved has been briefly documented above.

A decision to build the ferry terminal at Clifford Bay has yet to be made. However, the timeline below assumes the successful build and commissioning into operation of the ferry terminal to give indicative information about where the investigation is now at compared with where it may go in the future.

As the timeline indicates, there would be several years of ferries continuing to operate to Picton before the changeover.

The resource consent process including preparation of the application and the process for obtaining consents could take over two and a half years to complete. Resource consents would need to be received before the construction phase could begin.

Prior to any application for resource consents, the necessary investigative work on the environmental, economic and social effects would be undertaken to support the resource consent applications. Input from, and consultation with, local communities would also be part of that process.

ActionTiming
Independent review of KiwiRail investigation (Deloitte Report) and advice delivered to Minister July 2011
Further investigation called for including Detailed Business Case (DBC) September 2011
Draft DBC and advice given to Minister
(DBC includes economic, construction and engineering, strategic, financial, commercial, and management cases)
June 2012
Final DBC and advice given to Minister August 2012
Minister announces next steps – testing assumptions in the business case October 2012
Ministry sets up specialist team October-November 2012
Discussions with key stakeholders around commercial parameters of a ferry terminal at Clifford Bay Late 2012/early 2013
Ministry reports to Minister/Cabinet Mid/late 2013
Expressions of Interest called for in financing, building and operating the ferry terminal Early 2014
Request for Proposal to short-listed parties Mid/late 2014
Evaluation of proposals Early 2015
Negotiation with preferred party Mid 2015
Construction of ferry terminal begins 2016
Construction complete and Clifford Bay ferry terminal begins operation 2020


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