(Image: Mitchell Squire/Private Media)

The Morrison government is steadily ramping up its funding of and subsidies for thermal coal exports from the Hunter Valley and has more than doubled its investment in coal rail infrastructure since Morrison became prime minister and former Nationals leader Warren Truss took over as chairman.

The Australian Rail Track Corporation, established by the Howard government, operates the interstate rail network and essentially comprises three elements: a relatively small-scale interstate rail freight market, the $18 billion inland rail coal subsidy scheme, and the New South Wales Hunter Valley coal lines, which, according to the most recent ARTC annual report, is “the world’s largest thermal coal export operation”.

It is also the cash cow for the ARTC, as it was for the NSW rail freight system before the NSW government leased the lines to the new rail body in 2004.

The ARTC has a Hunter Valley investment strategy aimed at lowering costs and improving efficiency on the coal network. However, it aims to increase capacity on the network to cater for what it believes is expanded coal exports over the next decade. Its “most likely” scenario for export volumes through Newcastle shows an increase in thermal coal volumes through to 2026 and only modest declines thereafter, with export volumes expected to be higher than now beyond 2030. It expects a similar scenario at Muswellbrook and a 25% increase in coal volumes on the Gunnedah line.

These forecasts are down on 2020’s, but still reflect substantial increases in coal export volumes beyond carried by the ARTC. To cater for that, it has dramatically increased its investment in the Hunter Valley network: from just $76 million in 2018, last year it pumped more than $160 million into the coal lines in infrastructure and train control investments.

Investment in the coal lines peaked at $377 million in 2011-12, followed by $318 million in 2012-13, which followed the signing of the Hunter Valley access undertaking that led to a round of new contracts between the ARTC and coalminers and an expected surge in coal through the 2010s.

The current doubling of investment and forecasts of increased export volumes is being undertaken despite the ARTC formally acknowledging that “given the increased recognition of the need for action on climate change all participants in the coal supply chain are forecasting future demand reductions”.

The investment in the coal network is subsidised by taxpayers: ARTC is a persistent loss-maker for the Commonwealth, losing nearly $700 million after writedowns and depreciation last year — a slightly better figure than its 2020 result of a loss of more than $760 million after depreciation.

The coal network investment by the ARTC allows the government to in effect subsidise coal exports out of sight, with the figures hidden in the accounts of an obscure government entity controlled by a former National Party leader.

ARTC is also the vehicle for the government’s $15 billion investment in the inland rail line to Acacia Ridge outside Brisbane, and its $3 billion extension to Gladstone, both of which will expand and subsidise increased rail capacity for coal exports. The ARTC allows the government to keep that $18 billion subsidy off the budget, under the pretence that the project will eventually generate a profit for taxpayers.

In fact, as the Hunter Valley investments demonstrate, the line will be a permanent drain on taxpayers. The inland rail project will — even under the business case put together by another former Nationals leader, John Anderson — never recoup its construction costs. Moreover, it will need continuing investment even after construction is completed and operations commence.

The tens of billions being spent on the inland rail project and the hundreds of millions being invested in the Hunter Valley constitute a colossal fossil fuel subsidy, one of the largest in the developed world, with decades to come of handouts to coal exporters.