Senator JOYCE—I noticed in your submission at point 4.0 you say:
There are a number of bio-diesel plants planned for development in Australia over the next three years.
In light of the passage of the legislation last week, which basically took away the advantage of biodiesel, is that still the case? Have you done any research on that? Can you advise where these biodiesel plants are going to go?

Mr Green—We would not be in the business of putting the biodiesel plants in position. I am not familiar with something that has happened as recently as last week on those issues. So far as locations of biodiesel plants, logically, they would be in higher volume usage locations. But that is for someone else to determine for their business case.

Senator JOYCE—It is in your business case here; that is why I asked the question. Pacific National is proposing a research project to determine the suitability of using biodiesel. What is the time frame and how do you envisage doing that?

Mr Green—We envisage utilising a 3,000 horsepower test engine which is in Melbourne at one of the cooperative centres. We have put a business case for that to determine the cost structure and the actual parameters for that testing. That is for within the next 12 to 18 months.

Senator JOYCE—So you have the cash flow already and the costing for it is already in your budgets. It is a definite for the next 12 to 18 months.

Mr Green—I am not privy to whether it is definite. I would have to come back to you on that.
 

Senator JOYCE—Obviously you have a major cost advantage, as you say, over road transport. That is something I want to follow up on. You must have done a sensitivity analysis of basically where the price of oil has to go before road transport is unviable. You have such an immense cost advantage over road transport. At what price will a barrel of oil be whereby road transport basically becomes unviable?

Mr Green—I do not have information on that. I guess it would depend on the various pricing regimes of the day, excise et cetera, so it would be a very difficult one to predict.

Senator JOYCE—Do you do a sensitivity matrix or anything like that to make a comparison between the price of a barrel of oil and your advantage in structure, your advantage in cost? I want rail to work more. The way the market is going at the moment will make you become more viable, won’t it? The higher the price of oil, the more viable you should become every day.

Mr Green—The logic would hold, yes.
 

Senator JOYCE—What is inhibiting that? I still see 1,600 trucks a day going up and down the Newell Highway and tearing through Moree right next to a railway line. What is going on there?

Mr Green—I cannot say what is in the heads of our customer base, but discussion points within our company certainly are around the degree of confidence that customers have about moving their freight on road and their confidence about on-time delivery.

Senator JOYCE—Can you explain on-time delivery?
Mr Green—It is mentioned in our submission. Over the last several years, 1½ to three hours have been added to our transit times on north-south and east-west due to track conditions. That affects our crewing operation and the maximum number of hours that our drivers are allowed to be in the cab. All of those factors come into it and increase our costs and delay our arrival times. One of the key elements of on-time arrival is arriving on the correct day, at the correct time, so that the freight can be distributed immediately from the train to the customer.

Senator JOYCE—It is not an issue with Pacific National, but certainly with Queensland Rail the correct time and, at times, the correct place become big issues. Do you have any problems doing short hauls? Everyone is talking about long hauls. I have just returned from Windorah, where $50 million worth of cattle a year head off towards Dinmore, but they want to get most of them to the Roma saleyards. People have no problems taking them from Quilpie. But, to keep the railway line viable, we have to get the trucks off the road and use the railway line; otherwise, the railway line will be closed down. The issue is that they have no problems taking them to Dinmore, but they have a big problem getting to Roma, which is halfway along the track. Do you have any such problems in your organisation, or can you throw some light on issues with short haul, that on-time arrival and actually getting things off the train to where they are supposed to be? Is that a logistical nightmare for rail? Is there any reason why it is more complicated with rail than with anything else?

Mr Green—You would have to talk with Queensland Rail. Our business is primarily interstate type work; we go across state borders.

Senator JOYCE—I will turn the question around.
Senator HEFFERNAN—I will answer it for you. The difficulty before the saleyards is the curfew. If you muck around yarding cattle and trucking them to a train, your cattle are too light by the time you get them to the saleyards, you have lost more than 10 per cent of your weight in curfew. It is all right after you have sold them, because you are being paid on the weight at the weighbridge, they go off to the abattoirs and it is the dead weight. The problem is the live weight at the saleyards, old mate.

Senator JOYCE—Thank you for that, Senator Heffernan. Mr Green, you said you do primarily interstate work, but would an intrastate haul under a certain distance make your work unviable? Do you say in your analysis, ‘We’re only interested in hauls that go so many kilometres or longer?’

Mr Green—I am not privy to that information; I do not work within that part of our company. If you wish to put that as a question, I can put it to the appropriate people and have a response prepared.

Senator JOYCE—You buy a million litres of diesel a day.
Mr Green—Yes.
Senator JOYCE—Do you buy it at the terminal gate price?
Mr Green—We have a commercial contract in place with our major supplier which is not reflective of terminal gate price.
Senator JOYCE—I imagine it would not be. No doubt you would secure your position on that with Singapore based swaps and options? I would, if I were dealing with a million litres a day.

Mr Green—We certainly have an escalation process which is based on a Singapore marker.
Senator JOYCE—You might not want to answer this question, and I can understand completely if you do not. What sort of discount on the terminal gate price do you generally get? Do you ever look at the terminal gate price and find that you have a 10 or 15 per cent advantage?

Mr Green—I do not track the terminal gate price. I have no need to track it.
Senator JOYCE—There have been some statements that the terminal gate price is the be-all and end-all. But is not even that; it is a line in the sand, and if you buy it at that price you will go broke.

Mr Green—It is a good reference point.