Updated August 21 2017

ECONOMIC OPPORTUNITY FOR NEW SOUTH WALES

 

The NSW government breached the “Ports Assets (Authorised Transactions) Act 2012” (the Act) in 2012 by committing to pay a future lessee of Port Botany and Port Kembla for containers shipped through the Port of Newcastle.

The NSW government committed to paying the lessee from the lessee’s own lease payments. The Act was breached because paying the lessee lowered the return from the leases to less than the retention values of the ports. Since the object of the Act was to lease the ports for more than their respective retention values, the government breached the Act. The government concealed its decision to pay the Port Botany/Port Kembla lessee for containers shipped through the Port of Newcastle.

In August 2013, the NSW government covered-up its breach of the Act when Newcastle Port Corporation (the Corporation) required Newcastle Stevedores Consortium (the Consortium) to pay the NSW government for containers handled by the Consortium at the Port of Newcastle. At that time, the Corporation had been negotiating with the Consortium since 2010 to lease the Mayfield Site on condition the Consortium developed a new cargo terminal, including a container terminal, on terms acceptable to the NSW government. These negotiations were conducted under contract and the Corporation was required by the NSW government to comply with the “NSW Public Private Partnerships Guidelines”. These PPP Guidelines are administered by NSW Treasury, which engaged in direct negotiations with the Consortium, thereby creating a conflict of interest with national implications.

On August 30 2012 and July 26 2013, the NSW government directed the Consortium not to develop the container terminal component of the contract. The Consortium did not withdraw its proposal and the Corporation terminated the contract in November 2013. It is likely the Corporation breached the “Commonwealth Competition and Consumer Act 2010” (the Competition Act) by requiring the Consortium, under contract, to pay the NSW government, for containers handled by the Consortium. As disclosed by the (former) Minister for Roads and Ports, The Hon Duncan Gay MLC, on October 17 2013, the government did not anticipate that the Consortium would exceed the government’s now infamous “cap on numbers”. However, the “cap on numbers” was unlawful, and continues to be unlawful, if the government breached the Competition Act.

The NSW government decided to lease the Port of Newcastle to cover-up its breach of the “Ports Assets (Authorised Transactions) Act 2012” and its likely breach of the Competition Act. The lessee, Port of Newcastle Investments, is required to pay the NSW government for containers shipped through the port.

The Australian Competition and Consumer Commission (ACCC) is responsible for enforcing the Competition Act. The ACCC refuses to acknowledge that a contract existed between the Corporation and the Consortium from 2010 to November 2013. The ACCC claims there was an event in 2012 which removed the Corporation from the operation of the Competition Act, but refuses to identify any such event.

The ACCC is obliged to provide its reason for claiming it was unlikely the Corporation was carrying on a business for the purposes of the Competition Act in 2012.

 

CONTAINER TERMINAL PLANNING APPROVAL

 

In 2010, the Corporation sought formal planning approval from the Labor government for its “Concept Plan” for developing the Mayfield Site. On July 16 2012, the Minister for Planning and Infrastructure approved the “Concept Plan” under the “Environmental Planning and Assessment Act 1979”. Since 2009, the policy of each successive NSW government has been for the private sector to develop a container terminal at the Port of Newcastle without reference to Port Botany or Port Kembla.

For example, The Hon Gladys Berejiklian MP (former) Treasurer, answered this Question On Notice on September 29 2015 at a Budget Estimates hearing:

Question 29: Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer: I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

As confirmed on June 29 2017, Coalition government policy is that Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity. This policy is consistent with NSW government policy to develop a container terminal at the Port of Newcastle under the terms of the approved “Concept Plan”.

 

THE ECONOMIC OPPORTUNITY

 

The opportunity exists to privately fund the construction and operation of a rail freight bypass of Sydney, between Glenfield in the south and Newcastle in the north. If they wish, NSW Ports and Port of Newcastle Investments can mutually agree on relocating container terminal operations from Port Botany to Newcastle. This will enable the rail freight bypass line to be built and paid for by railing containers to intermodal terminals in outer western Sydney.

The economic advantages for all regional areas of NSW are compelling. A rail freight bypass of Sydney will enable all regional areas in northern and southern NSW to have vital rail access to a container port for the first time. Worldwide, 90 per cent of traded goods between countries are transported in containers. Regional NSW firms cannot develop export markets without rail access to a container port, nor can they value-add to imported goods for domestic consumption or re-export. New firms will not locate their activities into regional areas of NSW, without rail access to a container port.

It is irrational not to have a container terminal at the Port of Newcastle.

It is unlikely a container terminal will ever be built at Port Kembla under current arrangements. However, a rail freight bypass of Sydney will justify building the Maldon-Dombarton rail freight line to enable the South Coast economy to be connected by rail to a container port at Newcastle. Port Kembla would provide alternative container terminal capacity when high seas closed the Port of Newcastle.

A report by Deloitte Access Economics for the Moorebank Intermodal Terminal Project confirms the compelling benefits of using rail to transport containers compared with road. A rail freight bypass of Sydney carrying containers to intermodal terminals in outer western Sydney, will generate twice the economic benefits of the Moorebank intermodal terminal in 2030 and four times the economic benefits in 2040. This is accomplished by eliminating container truck movements through Port Botany (see Moorebank report, Table 3-7).

Containers railed between Newcastle and intermodal terminals in outer western Sydney would be unpacked at the intermodal terminals and the goods transported to their end destinations in Sydney.

Export goods manufactured in Sydney would be packed into containers at the intermodal terminals and the containers then railed to Newcastle for export.

Empty containers would be railed from Sydney to all regional areas of NSW to be filled with export goods and the containers then railed to Newcastle for export.

All container trucks would be removed from Sydney’s roads.

There would be no need to build stages 2 and 3 of the Northern Sydney Freight Corridor to provide the equivalent of a dedicated rail freight line between Newcastle and Strathfield. The cost saving is $5 billion.

There would be no need to build the Western Sydney Freight Line, between Chullora and Eastern Creek, to enable containers to be railed between Port Botany and outer western Sydney. The cost saving is $1 billion.

Freight would be removed from the Wollongong-Sydney rail line.

All of Sydney’s current rail freight capacity would be used for passenger services to provide a higher economic return than freight (See Deloitte Access Economics, “The True Value of Rail”, June 3 2011).

The Southern Sydney Freight Line would be used for express passenger services from southwestern Sydney growth areas, including Badgery’s Creek Airport.

All of the current rail capacity between Newcastle and Sydney would be used for passengers.

A second rail bridge would be built over the Hawkesbury River as part of the rail freight bypass.

NSW Ports and Port of Newcastle Investments are able to increase their net returns by participating in the rail freight bypass to achieve an orderly transfer of container operations from Port Botany to Newcastle when the new line to Newcastle is completed.

The section of the bypass line between Eastern Creek, Badgery’s Creek and Glenfield would be built first. This would enable containers to be railed between Port Botany and Eastern Creek using existing rail freight capacity. The Moorebank Intermodal Terminal Project would be cancelled.

The short parallel runway at Sydney airport could be extended from 2600 metres to 4000 metres by reducing container operations at Port Botany.

Port Botany is the only container port in NSW. Eighty-five per cent of containers shipped into Port Botany have destinations within 50 km. This is because 87 per cent of containers are trucked. Trucking is the least efficient method of moving containers. Rail is the most efficient method.

A rail freight bypass would enable Sydney firms to relocate to regional areas. In western Sydney, 5,000 hectares of land are used for industrial purposes. Many of these firms could profitably relocate to regional areas if they were able to use rail to freight goods to Sydney and ship containers through the Port of Newcastle.

….

July 20 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Dear Mr Morrison,

Further to my email dated July 13 2017, may I respectfully point out that the ACCC makes two incorrect claims about the Port of Newcastle, which prevent the “Commonwealth Competition and Consumer Act 2010” (CCA) from being enforced?

First, the ACCC claims that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Second, the ACCC claims “it was unlikely that the NSW government was carrying on a business [for the purposes of the CCA] when it decided not to develop a container terminal at the Port of Newcastle”. The ACCC made these claims to me on June 7 2013 and February 23 2017.

The public record disproves both claims. It is likely that Newcastle Port Corporation (NPC) breached the CCA by contractually requiring Newcastle Stevedores Consortium (NSC) in 2013 to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment). To be clear, this is the Port Commitment published by “The Newcastle Herald” on July 28 2016, as authenticated by the NSW government on August 10 2016 and September 13 2016.

The NSW government did not make a decision in 2012 not to develop a container terminal at the Port of Newcastle. The decision the NSW government made in 2012 was that Port Kembla will be the state’s next major container terminal after Port Botany has reached capacity. NSW government policy that a container terminal may be developed at the Port of Newcastle is confirmed in the NSW Parliamentary Hansard. NPC’s “Concept Plan” for a new cargo terminal, which includes a container terminal, was approved by the NSW Minister for Planning and Infrastructure on July 16 2012. This “Concept Plan” remains NSW government policy.

The ACCC’s second claim is disproven by the fact that NPC was negotiating under contract with NSC from 2010 until November 2013 to develop a cargo terminal including a container terminal. There can be no doubt that NPC was carrying on a business for the purposes of the CCA in 2009, when it issued an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) to a number of private companies. This ITSDP set out NPC’s terms and conditions for leasing the Mayfield Site at the Port of Newcastle. NPC’s primary requirement was development of a new cargo terminal, which included a container terminal. NPC was obliged to comply with the NSW government’s guidelines for conducting “Public Private Partnerships” in respect of these contractual negotiations (Source: NSW Independent Commission Against Corruption, “Investigation into NSW Liberal Party electoral funding for the 2011 State election campaign and other matters”, August 30 2016, page 48).

NPC selected the proposal from NSC in 2010. Term Sheets were agreed. In February 2011, the NSW Treasurer withheld approval to proceed to contract until the outcome of the community consultation for the “Concept Plan” had been considered by Cabinet (Source: ICAC, page 51). When the “Concept Plan” was approved on July 16 2012, the NSW government met the conditions for allowing NPC to proceed to contract with NSC.

In early 2012, the NSW government decided to pay compensation to a future lessee of Port Botany/Port Kembla if a container terminal operator at the Port of Newcastle exceeded a designated number of container movements per year, for 50 years. In late 2012, the NSW parliament passed the “Ports Assets (Authorised Transactions) Act 2012” (the Act). The purpose of the Act was to raise revenue. However, in 2012, the NSW government’s source of funds for paying compensation was consolidated revenue, which likely breached the Act.

To remedy this likely breach of the Act, the NSW government, in 2013, instructed NPC to require NSC to comply with the Port Commitment. NPC duly amended the contract with NSC by adding the Port Commitment to the Term Sheets. The Port Commitment required NSC to pay the NSW government for exceeding the prescribed number of container movements per year.

The Port Commitment provided the lessee of Port Botany/Port Kembla with compensation until June 30 2063 in respect of any container terminal developed at the Port of Newcastle, while replacing consolidated revenue as the source of funds for paying any compensation.

The NSW government announced its decision to lease the Port of Newcastle in November 2013 when NPC terminated the contract with NSC.

NSC did not withdraw its proposal.

The ACCC states that it “had access to relevant information about the prior negotiations between NPC and NSC, which ultimately did not proceed”. This statement is not credible because the ACCC does not acknowledge that NPC was negotiating under contract with NSC from 2010 until November 2013 to develop a cargo terminal including a container terminal.

Accordingly, will you ask the ACCC to acknowledge that NPC was negotiating under contract with NSC from 2010 to November 2013 to develop a cargo terminal including a container terminal?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman, ACCC; NSW MPs; Media

 

July 13 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Dear Mr Morrison,

I refer to the ACCC’s claim that Newcastle Port Corporation (NPC) was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) by negotiating with Newcastle Stevedores Consortium (NSC) between 2010 and November 2013, to lease land known as the “Mayfield Site” at the Port of Newcastle, for developing a new cargo terminal.

By refusing to provide evidence in support of this claim, the ACCC is not serving the public interest. The ACCC refuses to acknowledge that NPC and NSC were negotiating under contract. NPC contractually requiring NSC to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment) is prima facie evidence that NPC contravened the CCA.

NSW government officials supplied the ACCC with information about the negotiations between NPC and NSC on the basis that the ACCC would keep that information confidential. The ACCC failed to act impartially if it did not refer such commercial-in-confidence information to NSC.

As you may be aware, NPC issued its “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contract to a number of companies in 2009, selecting a proposal from NSC in 2010. This contract contained NPC’s terms and conditions for leasing the “Mayfield Site”. NPC’s objective was to expand its commercial operations by adding container shipping. NPC’s requirement was for NSC to develop a new cargo terminal, which included a container terminal with minimum capacity for 1 million TEUs per year.

As disclosed by the “NSW Independent Commission Against Corruption” in August 2016, NPC reached agreement with NSC in December 2010 in respect of “Term Sheets”. State Cabinet approval for this agreement was withheld pending the outcome of community consultation in relation to NPC’s development application for the “Mayfield Site”. This development application was approved by the NSW government in March 2012.

In the first-half of 2012, the NSW government decided to pay compensation to a future lessee of Port Botany/Port Kembla in respect of future container capacity development at the Port of Newcastle. The amount of compensation payable was the amount charged for a TEU container at Port Botany multiplied by the number of container movements at the Port of Newcastle in excess of the NSW government’s “cap on numbers”.

“Cap on numbers” means the number of container movements at the Port of Newcastle for which compensation is not payable to the lessee of Port Botany/Port Kembla. The “cap on numbers” is 30,000 containers per year as from July 1 2013, increasing by six per cent per year until 2063. The term “container” means “any moveable device, designed for continuous use in loading and unloading cargoes on and from Ships, including boxes, crates, cylinders, tanks, TEUs, other stackable units and any similar cargo-carrying device which is designated as a container by international stevedoring standards from time to time”. The “cap on numbers”, obviously, is exceeded every year, but only TEU containers are counted.

The NSW parliament was not informed about the NSW government’s decision to pay compensation to the Port Botany/Port Kembla lessee when the parliament passed the “Ports Assets (Authorised Transactions) Act 2012” in the final months of 2012. The object of this Act was to enable Port Botany/Port Kembla to be leased for the purpose of raising revenue for investment in public infrastructure. The NSW government’s source of funds for paying compensation was consolidated revenue. The NSW government does not set aside funds for paying compensation because of its view that the “cap on numbers” at the Port of Newcastle will not be exceeded.

The “cap on numbers” was not legislated. The NSW government denies making a decision in 2012 to recover the cost of paying compensation by charging the operator of a container terminal at the Port of Newcastle. The NSW government’s decision to use consolidated revenue for paying compensation is prima facie evidence of a breach of the “Ports Assets (Authorised Transactions) Act 2012”.

Port Botany/Port Kembla were leased to NSW Ports in April 2013. The NSW government decided that NPC would charge NSC to recover any compensation cost the NSW government incurred to NSW Ports in the event of NSC developing a container terminal. Accordingly, NPC amended the “Term Sheets” with NSC by requiring NSC to comply with the Port Commitment. NSC’s options were to comply with this requirement or to withdraw its proposal. NSC did not withdraw its proposal.

The ACCC points out that NPC terminated negotiations with NSC in November 2013 without concluding an agreement. NPC, obviously, could not conclude an agreement with NSC which contained a breach of the CCA. NPC contractually requiring NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA.

In the public interest, will you satisfy yourself that the ITSDP contract between NPC and NSC was signed in 2010; that this contract was terminated by NPC in November 2013; and, will you ascertain the reason why NPC terminated the ITSDP contract?

In the event that the ACCC does not provide you with this information, it may, obviously, be furnished by The Hon Dominic Perrottet MP, Treasurer of NSW.

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr Rod Sims, Chairman ACCC; The Hon Dominic Perrottet MP; NSW MPs; Media

 

 

July 9 2017 

Mr Rod Sims
Chairman
Australian Competition and Consumer Commission

Dear Mr Sims,

I refer to the ACCC’s refusal to acknowledge the existence of a contract between Newcastle Port Corporation (NPC) and Newcastle Stevedores Consortium (NSC) from 2010 to November 2013. The ACCC could not have investigated negotiations that took place between NPC and NSC over this period without reference to the contract governing these negotiations. Therefore, the ACCC’s advice in respect of its investigations is of no consequence.

NPC issued its “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) in 2009, selecting NSC’s proposal in 2010. This ITSDP was a legally binding contract between NPC and NSC which set out NPC’s requirements for leasing the Mayfield Site to NSC. NPC’s main requirement was for NSC to develop a new cargo terminal, which included a container terminal with minimum capacity for 1 million TEUs per year.

NPC amended its requirements on several occasions, as it was able to do under the ITSDP contract. In the period to November 2013, NPC required NSC to comply with the “Port Commitment – Port Botany and Port Kembla” (Port Commitment). This Port Commitment set out the conditions by which NSC was to be charged when the NSW government paid compensation to NSW Ports, the lessee of Port Botany/Port Kembla, in respect of a container terminal developed by NSC at the Port of Newcastle.

The ACCC claims that NSC was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (CCA) by negotiating with NSC. The ACCC also claims that the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. Both of these claims are disproven by NPC amending the ITSDP contract by requiring NSC to comply with the Port Commitment.

The ACCC also claims that NPC could not have contravened the CCA because no contract was made with NSC to lease the Mayfield site. This claim is disproven by NSC amending the ITSDP contract to require NSC to comply with the Port Commitment. NPC’s requirement for NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA. Under these circumstances, a contract could never have been approved by the NSW Cabinet, as required by the NSW Public Private Partnership’s Guidelines, 2012.

It may assist the ACCC to consider the responses provided by The Hon Dominic Perrottet MP, NSW Treasurer, to Question On Notice 5764 asked by Mr Tim Crakanthorp MP, Member for Newcastle. Answers were provided on June 29 2017.

Mr Perrottet’s answers should be viewed in the context of answers to previous questions by The Hon Gladys Berejiklian MP, in her (former) capacity as NSW Treasurer. At the NSW Budget Estimates hearing on September 1 2016 , Ms Berejiklian was queried about answers given to previous questions about the NSW government’s “cap on numbers” at the Port of Newcastle. Ms Berejiklian responded to questions about the “cap on numbers” at the Budget Estimates hearing on September 3 2015 and, in response to supplementary questions on September 29 2015.

“Cap on numbers” was a term employed by The Hon Duncan Gay MLC, (former) Minister for Roads and Ports, on October 17 2013 to describe the number of container movements at the Port of Newcastle for which no compensation is payable by the NSW government to the lessee of Port Botany/Port Kembla. When the “cap on numbers” is exceeded, the NSW government charges the operator of a container terminal at the Port of Newcastle to recover the cost of paying compensation to NSW Ports.

The charge makes it uneconomic to develop a container terminal at Newcastle, however, Ms Berejiklian considers there is no impediment to developing a container terminal.

Until August 10 2016, the NSW government denied charging any container terminal operator at the Port of Newcastle for exceeding the government’s “cap on numbers”.

Mr Crakanthorp’s QON 5764 contained six questions.

  1. Did the government decide in 2009 to develop a container terminal at the Port of Newcastle?

A: This government was not in office in 2009.

Comment: The current government proceeded to implement its predecessor’s decision to develop a container terminal at the Port of Newcastle, until NPC terminated the ITSDP contract in November 2013.

The NSW “Independent Commission Against Corruption” revealed in August 2016 (“Operation Spicer Report”) that the NSW government required NPC in 2009 to comply with the NSW government’s “Working With Government Guidelines” for conducting “public private partnerships” (PPP) in respect of its plans for developing a new cargo terminal at the Port of Newcastle. The ICAC disclosed that Term Sheets were agreed in December 2010 between NPC and NSC. These Term Sheets, agreed pursuant to the Cabinet-approved ITSDP contract, are further proof of the NSW government’s decision in 2009 to develop a container terminal at the Port of Newcastle. NPC added the requirement to comply with the Port Commitment to these Term Sheets in the period to November 2013. Under the PPP guidelines, NPC was required to obtain formal Cabinet approval to amend the ITSDP contract.

  1. Was a decision made in 2012 to require any future operator of a container terminal at the Port of Newcastle to make the government whole for any cost the government incurred from paying the operator of Port Botany in respect of future container capacity development at the Port of Newcastle?

A: No.

Comment: In December 2011, the NSW government engaged Morgan Stanley to conduct a scoping study into leasing Port Botany. As confirmed by The Hon Duncan Gay on October 17 2013, the government instructed Morgan Stanley to include a “cap on numbers” at the Port of Newcastle.

The NSW government concealed the “cap on numbers” from the parliament when passing the “Ports Assets (Authorised Transactions) Act 2012” in late 2012. This information was concealed because the government’s source of funds for paying compensation was consolidated revenue. Using consolidated revenue to fund compensation is prima facie evidence of a breach of the Act.

  1. Was Newcastle Stevedores Consortium required in 2013 to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: Newcastle Ports [sic] Corporation did not conclude a contract to build a container terminal with Newcastle Stevedores Consortium in 2013.

Comment: NPC was negotiating with NSC in the period to November 2013 to build a container terminal at the Port of Newcastle. NPC’s requirement for NSC to comply with the Port Commitment is prima facie evidence of a breach of the CCA. The NSW government’s PPP guidelines required NPC to obtain Cabinet approval to amend the ITSDP contract’s terms and conditions. Under these circumstances, Cabinet could not have approved a contract.

In March 2012, the NSW government approved NPC’s planning application for development of a container terminal with capacity of 1 million TEUs per year. In April 2013, the NSW government contractually committed to pay NSW Ports when container movements at the Port of Newcastle exceeded the “cap on numbers”.

The Port Commitment allowed NSC to develop a container terminal providing payment was made for exceeding the “cap on numbers”. NSC was able to develop a container terminal with capacity of 1 million TEUs per year in accordance with NPC’s March 2012 planning approval.

  1. Was a decision made in 2013 to require any future lessee of the Port of Newcastle to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: Any decision regarding NSW ports is consistent with the government’s policy that Port Kembla will be the State’s next major container terminal after Port Botany has reached capacity.

Comment: The answer to the question is “yes” as confirmed by The Hon Duncan Gay on August 10 2016. As confirmed by the NSW government on multiple occasions, including by Ms Berejiklian on September 29 2015, a container terminal may be developed at the Port of Newcastle at any time without reference to Port Botany or Port Kembla.

Mr Perrottet’s answer refers to the state’s next “major” container terminal. This answer reflects the Port Commitment, which permits development of a container terminal at the Port of Newcastle with capacity in excess of the “cap on numbers” in line with planning approval for a 1 million TEUs per year-capacity container terminal.

  1. Was the lessee of the Port of Newcastle required in 2014 to make the government whole for any cost the government incurred from paying NSW Ports in respect of future container capacity development at the Port of Newcastle?

A: No compensation payments to NSW Ports were incurred in 2014.

Comment: The answer to this question is “yes” as confirmed by The Hon Duncan Gay on August 10 2016. No compensation is payable unless and until the “cap on numbers” is exceeded. Under the Port Commitment, the “cap on numbers” is 30,000 containers per year as from July 1 2013, increasing by six per cent per year until 2063. The term “container” means “any moveable device, designed for continuous use in loading and unloading cargoes on and from Ships, including boxes, crates, cylinders, tanks, TEUs, other stackable units and any similar cargo-carrying device which is designated as a container by international stevedoring standards from time to time”. The “cap on numbers”, obviously, is exceeded every year, but only TEU containers are counted.

  1. Did the government inform the Australian Competition and Consumer Commission in 2012 that the government decided not to develop a container terminal at the Port of Newcastle?

A: The government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework supporting the port transactions.

Comment: According to the ACCC, the government’s decision to develop a container terminal at Port Kembla after Port Botany reaches capacity is evidence of a decision not to develop a container terminal at the Port of Newcastle. This claim is incorrect. Mr Perrottet’s answer is consistent with government policy that a container terminal may be developed at the Port of Newcastle, at any time, without reference to Port Botany or Port Kembla.

Will the ACCC please acknowledge the ITSDP contract between NPC and NSC between 2010 and November 2013?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: NSW MPs; Media

July 9 2017

 

Statement to NSW MPs, Media
June 22 2017

The ACCC claims the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. According to the ACCC, this alleged decision placed container terminal policy in NSW outside the operation of the “Commonwealth Competition and Consumer Act 2010” (CCA).

The ACCC is incorrect, because it was impossible for the NSW government to take a policy decision in 2012 not to develop a container terminal at the Port of Newcastle.

In 2012, the NSW government decided to pay compensation to the future lessee of Port Botany/Port Kembla (PB/PK) for losing container business to the Port of Newcastle. Paying this compensation was permitted under Section 30 of the “Ports Assets (Authorised Transactions) Act 2012” (PAA).

The PB/PK lessee is compensated when container movements at Newcastle exceed a “cap on numbers”. A “cap on numbers” was disclosed to the NSW Parliament on October 17 2013 by The Hon Duncan Gay MLC, (former) Minister for Roads and Ports. “Cap on numbers” means the number of container movements at the Port of Newcastle for which there is no compensation payable to the PB/PK lessee. The NSW government decided in 2012 not to extend this “cap on numbers” before container capacity was reached at PB/PK.

Paying compensation to the PB/PK lessee using consolidated revenue was not authorised by the PAA. It defeated the purpose of leasing PB/PK, which was to release funds. For this reason, the NSW government decided in 2012 to charge the developer of container capacity at Newcastle, after the developer exceeded the “cap on numbers”. The subsequent decision to lease the Port of Newcastle includes the NSW government’s charge for exceeding the “cap on numbers”, if the lessee exercises their contractual right to develop a container terminal.

In 2009, the NSW government decided to invite a private developer to develop a new cargo terminal at the Port of Newcastle. Acting as Newcastle Port Corporation (NPC), the NSW government issued an “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contract, selecting Newcastle Stevedores Consortium (NSC) in 2010 as “preferred developer”.

A condition of this ITSDP contract was that the cargo terminal included a container terminal with minimum capacity for 1 million TEUs per year. In December 2010, Term Sheets were agreed between NPC and NSC pursuant to this ITSDP contract.

In August 2012, the NSW government changed these Term Sheets by requiring NSC not to develop the container terminal component. In August 2013, the NSW government again changed the Term Sheets by requiring NSC to pay the NSW government’s charge in respect of developing additional container capacity, above the “cap on numbers”, which allowed for developing a container terminal.

The NSW government’s decisions in 2012 were not disclosed to the NSW Parliament. However, the NSW government claimed on June 15 2017 its decisions were disclosed to the ACCC. There should be no secret about the date on which this disclosure occurred.

Failing to disclose these decisions to the Parliament, obviously, prevented them from being debated when the PAA was before the Parliament in 2012. Regardless, the proper place to discuss them now remains the NSW Parliament. But the NSW government is unwilling to disclose its reason for charging the developer of a Newcastle container terminal for exceeding the “cap on numbers”, as conclusively demonstrated by the extensive record of Parliamentary “Questions On Notice”.

Negotiations between the NSW government and NSC were confidential. The ACCC was given some information by the NSW government but the NSW Parliament received none. The ACCC declines to reveal the information it received. It is unfortunate if the ACCC acts on unverified information as appears to be the case

However, the ACCC does even not acknowledge the ITSDP contract. This disqualifies the ACCC from taking decisions in respect of negotiations conducted pursuant to the ITSDP contract.

The ACCC claims the NSW government could not have contravened the CCA in respect of its negotiations with NSC because no agreement was concluded. This claim is of no consequence because the NSW government was required to observe Commonwealth laws while conducting negotiations pursuant to the ITSDP contract.

In 2012, the NSW government’s decision to charge the developer of container capacity at the Port of Newcastle was a prima facie contravention of the CCA. The decision had the effect of substantially lessening competition between NSW ports in the NSW container port market.

If the CCA was contravened by this decision, it left the government without a source of funds for paying compensation to the lessee of PB/PK, other than consolidated revenue. This in turn would be a prima facie contravention of the PAA.

As disclosed by Mr Gay on October 17 2013, no provision is being made in NSW state budgets for paying compensation because the government considers compensation will not become payable. On August 22 2014, the NSW Treasury told a NSW Budget Estimates Committee: “Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review.”

These Treasury claims are incorrect. By charging NSC, the NSW government’s objective was to make a container terminal commercially unviable. The other claims were rejected by NSC.

A Newcastle container terminal will take business away from Port Botany initially by servicing the northern NSW market.

Servicing northern NSW from Port Botany is irrational.

The ACCC has been asked to answer the following question.

Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

The ACCC declines to answer.

…..

Statement to NSW MPs, Media
May 27 2017

Australia’s competition watchdog claims the NSW government made a policy decision in 2012 not to develop a container terminal at the Port of Newcastle with the effect of removing container terminal policy in NSW from the operation of the “Commonwealth Competition and Consumer Act 2010” (CCA), which the ACCC administers.

 There was no such policy decision by the NSW government.

Formal NSW government policy since 2009 is to develop a container terminal at the Port of Newcastle on condition the developer is a private company. In 2012, this policy was expanded by requiring any such developer to pay the NSW government whatever it costs the NSW government for paying compensation to the operator of Port Botany and Port Kembla, in respect of future container capacity development at the Port of Newcastle.

In 2012, the NSW Treasury promised to pay compensation to bidders for long-term leases to Port Botany and Port Kembla, as an inducement. NSW Treasury was able to make this promise because of NSW government policy to recover any cost from the developer of a container terminal at the Port of Newcastle. Without this additional source of revenue in place, the NSW Treasury had no authority to make the promise to bidders.

The NSW government’s 2012 policy decision was confirmed by The Hon Gladys Berejiklian MP, then Treasurer, on September 29 2015.

NSW Budget Estimates, Supplementary Questions, September 29 2015

Question 29-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer-

I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

Question 30-

Has the NSW Government entered into any agreements that create a disincentive or obstacle to increase the number of containers that pass through Newcastle?

 Answer

There is no legislated cap on the number of containers that can travel through the Port of Newcastle.

In 2010, the NSW government, acting as Newcastle Port Corporation (NPC), invited Newcastle Stevedores Consortium (NSC) to be the developer of a container terminal at the Port of Newcastle. NPC’s “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP) contained the NSW government’s requirements, in the form of a contract. The NSW Cabinet approved the ITSDP contract in compliance with the NSW government’s guidelines for conducting “Public Private Partnerships”.

The ITSDP contract was not amended in 2012 to include the 2012 policy decision (requiring the developer of a container terminal to pay the NSW government whatever it costs the NSW government for paying compensation to the operator of Port Botany and Port Kembla, in respect of future container capacity development at the Port of Newcastle).

Instead, on August 30 2012, the NSW Treasury instructed NSC not to develop a container terminal and repeated this instruction on July 26 2013. These instructions by NSW Treasury were contrary to NSW government policy.

Term Sheets had been agreed between NPC and NSC in 2010. These Term Sheets were expanded by NPC after July 26 2013 to include the NSW government’s 2012 policy decision. NSC was free to develop a container terminal until the ITSDP contract was terminated on November 1 2013.

If NPC was carrying on a business for the purposes of the CCA during the ITSDP contract negotiations with NSC, this means the 2012 policy decision potentially contravened the CCA. Only a Court can ultimately determine a contravention of the CCA.

The Minister responsible for the CCA is The Hon Scott Morrison MP, Commonwealth Treasurer.

Mr Morrison is being asked to answer this question, because the ACCC refuses to answer it: “Does the ACCC claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?”

There is no doubt that a container terminal will be built at the Port of Newcastle if the NSW government’s charge is shown to be unlawful or unenforceable.

Greg Cameron

www.containerterminalpolicyinnsw.com.au

May 27 2017

May 20 2017

The Hon Scott Morrison MP
Treasurer of the Commonwealth of Australia

Dear Mr Morrison,

Further to your letter dated January 27 2017, does the Australian Competition and Consumer Commission claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

A policy decision was taken by the NSW government in 2009 to develop a container terminal at the Port of Newcastle with capacity for at least one million TEU-containers per year.

Newcastle Port Corporation (NPC), a statutory state-owned corporation, received NSW government approval to invite proposals from the private sector for developing this new terminal, including capacity for non-TEU containers, and roll-on/roll-off cargo.

Construction and operating costs were to be paid by the private developer under a long-term lease. In 2010, Newcastle Stevedores Consortium (NSC) was selected to be the developer. NSC signed a contract with NPC called “Invitation To Submit Detailed Proposal, Mayfield Site” (ITSDP), which set out NPC’s terms and conditions for the negotiation. The NSW government required NPC to comply with the NSW government’s guidelines for conducting “Public Private Partnerships” (PPP).

Negotiations were undertaken, Term Sheets were agreed, and in December 2010, NPC requested approval from then-NSW Treasurer, Mr E Roozendaal, to proceed to negotiate a final contract, as required by the PPP guidelines. NPC received formal approval from Mr Roozendaal on February 7 2011, but this approval was withdrawn eight days later. Negotiations continued.

In 2012, Morgan Stanley, the NSW government’s financial advisor, was conducting a scoping study for the NSW government into leasing Port Botany. Port Kembla was added to this scoping study after bidder interest was shown. The NSW government instructed Morgan Stanley, for the purposes of the scoping study, that the NSW government would pay compensation to a future leaseholder of Port Botany/Port Kembla for the number of TEU containers shipped through the Port of Newcastle above a prescribed number of containers per year. The NSW government called this prescribed number a “cap”. In other words, the NSW government “capped” the number of containers handled at the Port of Newcastle for which compensation would not be paid.

This “cap” subsequently was set at 30,000 containers per year as from July 1 2013 increasing annually by six per cent, for 50 years. For every TEU container above this “cap”, the NSW government would pay the Port Botany/Port Kembla leaseholder the average amount per TEU container being charged at Port Botany for that particular year.

The NSW government defined “container” to mean anything designated as a container by international stevedoring standards. General cargo ships probably carry 30,000 “containers” every year through the Port of Newcastle. There were 9,000 TEU containers in 2015.

The NSW government instructed Morgan Stanley that the Port of Newcastle “cap” would not be increased until Port Botany and Port Kembla reached their respective capacities. This decision committed the NSW government to potentially major cost in view of its decision to develop a container terminal at the Port of Newcastle, with minimum capacity of one million TEUs per year.

The NSW government instructed Morgan Stanley that NPC would require NSC to make the NSW government whole for any cost the NSW government incurred to a leaseholder of Port Botany/Port Kembla in respect of NSC developing a container terminal. Since this was a major change to the ITSDP contract, NPC was required by the “PPP” guidelines to secure approval from the NSW Treasurer in the first instance.

Requiring NSC to pay the NSW government potentially contravened the “Commonwealth Competition and Consumer Act 2010” (CCA) because NPC was carrying on a business for the purposes of the CCA. If the requirement contravened the CCA, it follows that the “cap” and the related decision to compensate the Port Botany/Port Kembla leaseholder for container movements above the “cap”, were unlawful.

After Morgan Stanley completed the scoping study into leasing Port Botany and Port Kembla, the NSW government announced its decision to lease both ports on July 27 2012.

According to NSC, The Hon Mike Baird MP, then-NSW Treasurer, by decisions of August 30 2012 and July 26 2013, “dictated that a container port not proceed at Newcastle”. NSC made this disclosure on February 10 2015 on the NSW parliament web site.

These “decisions” were a major change to the ITSDP contract, which required approval of the NSW Treasurer in accordance with the PPP guidelines. However, the ITSDP contract was amended after July 26 2013. NSC was required to “make the NSW government whole”, for any cost the NSW government incurred for paying compensation to NSW Ports, in respect of NSC developing a container terminal. This major change to the ITSDP contract also required the approval of the NSW Treasurer in accordance with the PPP guidelines.

NPC terminated the ITSDP contract on November 1 2013. Therefore, between 2009 and November 1 2013, it was NSW government policy to develop a container terminal at the Port of Newcastle. It remained NSW government policy to develop a container terminal when the NSW government announced its decision, on November 5 2013, to lease the Port of Newcastle. The Hon Gladys Berejiklian MP, then-NSW Treasurer, confirmed on September 29 2015 the NSW government policy that “the [Port of Newcastle] lessee could develop a container terminal at the Port of Newcastle if it wished to do so”.

The ACCC claims the NSW government decided in 2012 not to develop a container terminal at the Port of Newcastle. The ACCC also claims NPC was not carrying on a business for the purposes of the CCA by negotiating with NSC until November 2013.

In view of these claims, will you answer the fundamental question: Does the Australian Competition and Consumer Commission claim Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” by negotiating with Newcastle Stevedores Consortium between 2010 and November 1 2013 pursuant to the “Invitation To Submit Detailed Proposal, Mayfield Site” contract?

Yours faithfully,

Greg Cameron

www.containerterminalpolicyinnsw.com.au

Copy: Mr R Sims, Chairman, ACCC; MPs; Media

 

NSW GOVERNMENT ADMITS TO CHARGING $100 COMPENSATION FEE

 

More than three years after leasing Port Botany and Port Kembla to NSW Ports Pty Ltd in April 2013, the NSW government admitted in state Parliament on August 10 2016 to charging a fee at the Port of Newcastle to recover any cost the government incurs in paying NSW Ports in respect of container movements at the Port of Newcastle.

Despite several years’ questioning in the Parliament and by the media (latest news, government Ministers had refused to confirm, or deny, the fee.

Minister for Roads, Maritime and Freight, The Hon Duncan Gay, told parliament:

“The port transaction deeds do not trigger any cross-payments until a threshold container throughput is reached. That threshold is based on 30,000 containers each year, plus an extra 6 per cent growth in volume each year—and that 6 per cent compounds. Based on current growth rates, it is highly unlikely current container trade in Newcastle will reach the applicable threshold before such time as Newcastle is required to establish high-intensity container terminals to meet the forecast population and business needs of the Hunter.”

“Yearly trade at Newcastle is currently at a steady 9,000 containers. In other words, it would take a massive 230 per cent increase in container trade volume just to reach the 30,000 TEU threshold.”

“Transaction deeds” for the ports leases are confidential. Leaked details were published by “The Newcastle Herald” on 28 July 2016, leading to Mr Gay’s sensational admission.

The “Port Commitment” document published by “The Newcastle Herald” summarises the ports leasing arrangements in respect of compensation payable to NSW Ports. Compensation per container is the weighted average fee charged for import and export containers at Port Botany. Currently, the average is $100 per container.

For a typical container ship of 5,000 TEU capacity, this amounts to $1 million per visit when fully loaded with import and export containers.

In his answer to Parliament, Mr Gay made no mention of there being no container terminal at the Port of Newcastle. Without a container terminal, container ships cannot use the port. The low number of container movements – 9,000 per year – is because containers are incidental cargo on general cargo ships. World trade in containers is not conducted using general cargo ships.

Without access to a container terminal, the northern NSW regional economy is severely constrained because about 90 per cent of world trade in non-bulk commodities is conducted using containers carried on container ships between countries.

Mr Gay said:

“About 85 per cent of the imported containers landing at Port Botany are distributed within 40 or 50 kilometres of the terminal gates, to warehouses, distribution centres and freight hubs in western and south-western Sydney. This is key. We are not running a cargo cult in New South Wales. If the stuff is intended to go into Sydney, it should come to Sydney. We are not going to pay people to clog up the M1 and the rail infrastructure between Newcastle and Sydney. We are not going to pay them, as some sort of inverse cargo cult, to send things up to Newcastle just for them to come back again.”

The reason that 100 per cent of container ships visiting NSW use Port Botany is because it is the state’s only container port. The reason that 85 per cent of containers are trucked within 50 kilometres of Port Botany is access. Sydney’s inadequate rail infrastructure requires most containers to be trucked, which is the most costly method of container transportation.

Intermediate goods comprise 50 per cent of imported containers into Port Botany. This is primarily why manufacturing firms are located close to Port Botany. Manufacturing firms are not locating in regional areas of NSW because they need access to a container port.

A container terminal at the Port of Newcastle would serve the northern NSW economy.

Additionally, containers would provide the base-load cargo for building a rail freight bypass of Sydney – between the Port of Newcastle and Glenfield, in southwest Sydney – that would enable containers for the Sydney market to be railed to intermodal terminals in outer western Sydney. This would enable removing container trucks from Sydney’s roads and encourage industry to relocate into regional areas of NSW, including into southern NSW.

Mr Gay said:

“As the Government has consistently said, the leasing terms of Botany and Port Kembla do not prohibit the development of a container terminal at the Port of Newcastle. In fact, there is ample opportunity for increased container trade at the port.”

As now revealed, the leasing terms for the Port of Newcastle include charging a fee of $1 million for a typical container ship visit. It is nonsense to suggest this fee does not prevent development of a container terminal, on commercial grounds.

Mr Gay said:

“The New South Wales Government engaged closely with the Australian Competition and Consumer Commission and other regulatory bodies as part of these transactions. Port Botany remains the key container facility for New South Wales for a range of logistical and commercial reasons.”

 

IS NSW PORTS VIABLE WITHOUT COMPENSATION?

 

There is a reason for the NSW government paying compensation to NSW Ports for loss of container shipping business to the Port of Newcastle. If this reason is because NSW Ports is financially unviable without protection from competition, the government and the company have done the state a disservice.

The NSW government has now confirmed that its source of funds for paying compensation to NSW Ports is to charge a fee for container movements at the Port of Newcastle. The government kept this fee a secret until 10 August 2016, when the Parliament was informed by The Hon Duncan Gay MLC, Minister for Roads, Maritime and Freight.

The government does not provide a reason for charging the fee and paying the compensation.

However, a previous NSW Treasurer, The Hon Andrew Constance MP, informed the Legislative Council’s “General Purpose Standing Committee No.1” on 22 August 2014 that a container terminal at the Port of Newcastle would be “an uneconomic enterprise contrary to market demand”.

Mr Constance omitted to inform the Committee about the government charging a fee for container movements and paying this fee to NSW Ports. Had Mr Constance informed the Committee about the fee and compensation payment, he may have divulged their purpose.

Mr Constance had been asked by Committee Member, the late Hon Dr John Kaye MLC: “Given that there has been significant allegations of at least influence peddling and political interference under Labor surrounding proposals to develop a container facility in Newcastle, will Treasury be reviewing that decision?”

The “significant allegations” to which Dr Kaye referred were included in the “Independent Commission Against Corruption’s” examination “Operation Spicer”, which reported on 30 August 2016 (page 49): “The Commission is satisfied that Mr Tripodi used his position as a member of Parliament to influence Mr Roozendaal to prevent the deal between the NPC [Newcastle Port Corporation] and the NSC [Newcastle Stevedores Consortium] for construction of a container terminal from progressing by stopping the NPC from entering into commercial negotiations with the NSC.”

Following Mr Constance’s answer to Dr Kaye’s question, a statement by Anglo Ports Pty Ltd was published on the NSW Parliament web site, dated 10 February 2015. It said: “Anglo Ports was the lead consortium partner in Newcastle Stevedores Consortium which proposed a container terminal at the Port of Newcastle in the period 2009 to 2012, pursuant to a tender conducted by Newcastle Port Corporation.”

In 2009, it was NSW government policy to develop a multi-purpose terminal, including a container terminal with a minimum capacity of 1-million TEU per year, at the Port of Newcastle. Newcastle Port Corporation issued a public tender in 2010 for this development and selected the Anglo Ports consortium’s proposal.

Anglo Ports disclosed an instruction from then Treasurer, The Hon Mike Baird MP, on 30 August 2012, not to develop the container terminal component of the multi-purpose terminal development.

The government also amended the terms of the tender by requiring Anglo Ports to pay a fee for container movements. The “Australian Competition and Consumer Commission” has been asked to confirm that the government was not immune from the “Commonwealth Competition and Consumer Act 2010” (CCA) when Anglo Ports was charged this fee. The CCA replaced the “Trade Practices Act 1974” (TPA) on 1 January 2011.

In 2009, the government did not indicate it was immune from the TPA in respect of its policy of developing a multi-purpose terminal, including a container terminal. Although negotiations between Newcastle Port Corporation and Anglo Ports were “concluded” in November 2013, the company said in its statement its proposal had not been withdrawn. However, terminating the negotiation did not confer retrospective immunity from the CCA.

Charging Anglo Ports a fee potentially breached Section 45 of the CCA. Due to confidentiality, the ACCC does not disclose whether the government claimed immunity from the CCA in respect of charging Anglo Ports a fee.

If NSW Ports is a viable commercial enterprise, why is it compensated for loss of business to the Port of Newcastle?

 

TIMELINE

 

 In 2010, Newcastle Port Corporation (NPC) conducted a public tender for a private consortium to develop a multi-purpose terminal, including a container terminal with minimum capacity of 1 million TEU per year, at the Port of Newcastle. NPC chose a proposal from a consortium led by Anglo Ports Pty Ltd.

On 14 December 2011, the State announced the appointment of Morgan Stanley as its financial adviser to conduct a scoping study into leasing Port Botany. One of the State’s instructions was a cap on the number of imported and exported containers by the Port of Newcastle for which the future Port Botany Lessee would not be permitted to claim payment from the State.

On 31 January 2012,“The Newcastle Herald” reported:

“A $600 million proposal to redevelop the BHP steelworks site for port uses, including a container terminal, will be considered as part of the case being mounted for plans to lease Sydney’s Port Botany.

“A spokesman for NSW Ports Minister Duncan Gay said yesterday that an announcement on a Newcastle container terminal would be made after the scoping study for the Port Botany transaction, due to the government early this year, is completed.”

On 27 July 2012, the State “confirmed it would proceed with the long-term lease of State-owned assets Port Botany and Port Kembla to fund priority infrastructure projects across NSW”. There was no disclosure of compensation payable to the future Lessee or that the Port of Newcastle operator would be charged for any such payment.

On 30 August 2012, the State wrote to Anglo Ports to advise that a container terminal would not proceed at the Port of Newcastle. Anglo Ports released this information in a statement published on the NSW Parliament web site dated 10 February 2015. A container terminal can be developed at the Port of Newcastle any time the Lessee wishes to do so, The Hon Gladys Berejiklian disclosed to a Budget Estimates Committee on 29 September 2015.

On 12 April 2013, the State accepted NSW Ports’ bid of $5.07 billion for 99-year leases to Port Botany and Port Kembla. However, bidders were not told about the State charging the operator of the Port of Newcastle.

On 18 June 2013, the State announced it would commence a scoping study for a possible lease of the Port of Newcastle.

On 26 July 2013, the State, for the second time, wrote to Anglo Ports to advise that a container terminal would not proceed at the Port of Newcastle.

On 17 October 2013, the State disclosed a “cap on numbers” of containers imported and exported by the Port of Newcastle for which NSW Ports could not claim payment. The disclosure was made by The Hon Duncan Gay MLC to State Parliament in response to a Question Without Notice. Mr Gay said:

“The Government has been clear on this all the way through the process, even before it indicated it would lease the port at the stage when Newcastle Port Corporation was in place.”

On an undisclosed date in November 2013, the State concluded its negotiations with Anglo Ports. Anglo Ports, in its 10 February 2015 statement, said it did not withdraw its proposal. In a media statement released on 4 March 2015, the State said:

“Newcastle Port Corporation concluded its negotiations with Anglo Ports in November 2013 after it was unable to reach a suitable outcome for the redevelopment of the Mayfield site.”

On 5 November 2013, the State announced that it had received and considered the recommendations of the scoping study, and would proceed with the lease.

On 30 April 2014, the State announced agreement with Port of Newcastle Investments Pty Ltd for a 98-year lease to the port for $1.75 billion.

On 1 May 2014, NSW Treasury said:

“The [Port of Newcastle] lease has been drawn up in accordance with the current NSW Government freight policy of Port Botany being the first container facility priority, with Port Kembla designated to take the overflow once Port Botany is full. Newcastle will be further developed once Port Kembla is full. Newcastle container throughput is, in the meantime, fully able to grow organically.”

On 11 May 2014 “The Newcastle Herald” reported “restrictions” in the ports leases.

On 30 May 2014, Newcastle Port Corporation ceased being the operator of Port of Newcastle. Port of Newcastle Investments Pty Ltd became the port operator.

On 25 June 2014 the ACCC said:

“… the ACCC remains concerned over arrangements designed to maximise proceeds received by a government by reducing the prospect of competitive provision of port services. Another example relates to Port Botany and the Port of Newcastle. An article in the Newcastle Herald on 11 May 2014 stated:

“The government has confirmed it leased Botany with a clause that prevented Newcastle from competing against it with a container terminal.

And the Newcastle lease is believed to contain a similar undertaking”.

(“Reinvigorating Australia’s Competition Policy”, ACCC, Submission to the Competition Policy Review, 25 June 2014, p.38)

On 22 August 2014, (former) NSW Treasurer, The Hon Andrew Constance MP, was asked a question in a Budget Estimates Hearing:

“The Hon. Dr John Kaye:

Question:

  1. Given that there has been significant allegations of at least influence peddling and political interference under Labor surrounding proposals to the [sic] develop a container facility in Newcastle, will Treasury be reviewing that decision?

(a) If so please provide details

(b) If not why not”

Mr Constance answered:

“Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review.”

On 30 October 2014 the ACCC said:

“The ACCC encourages early engagement from State governments on any competition issues that may arise in relation to the proposed sale structures or sale conditions for any monopoly or near monopoly assets, including any restrictions on competition proposed in the arrangements. Such restrictions may be unlawful and could be unenforceable.”

(“Container Stevedoring Monitoring Report No.16”, ACCC, October 2014, p.21)

On 26 November 2014 the ACCC said:

“… since the 1990s, Australian governments have increasingly been participating in markets in ways that may not amount to “carrying on a business” for the purpose of competition law. Market-based mechanisms are used by governments to finance, manage and provide government goods and services (described as “contractualised governance” for the delivery of public services). Such mechanisms have the potential to significantly improve efficiency but also have the potential to harm competition – for example, by incorporating, in the contract, provisions that are likely to have the purpose or effect of restricting competition. The ACCC’s Initial Submission (section 3.3.1) includes the examples of:

  • Sydney airport – where the Commonwealth government leased Sydney Airport with the right of first refusal to operate a second Sydney airport at Badgery’s Creek.
  • Ports Botany and Kembla and the Port of Newcastle – where the NSW government leased the ports with clauses that may restrict Newcastle from competing against Botany and Kembla for container trade.”

(“Submission to the Competition Policy Review – Response to the Draft Report 26 November 2014”, ACCC, p.32)

On 12 December 2014, (former) NSW Treasurer, The Hon. Andrew Constance MP, was asked by Member for Newcastle, Mr Tim Crakanthorp MP:

“Did the Government advise the Australian Competition and Consumer Commission of a cap on container numbers at the Port of Newcastle prior to leasing the Port of Newcastle and Port Botany?”

Mr Constance answered (on 16 January 2015):

“The Government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework, including the container arrangements.”

On 10 February 2015, a statement by Anglo Ports was published on the NSW Parliament’s web site.

On 4 March 2015, Treasury said in a media statement:

Newcastle Port Corporation concluded its negotiations with Anglo Ports in November 2013 after it was unable to reach a suitable outcome for the redevelopment of the Mayfield site.

On 29 September 2015, The Hon Gladys Berejiklian answered a supplementary question in Budget Estimates:

Question 29: Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?

Answer: I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.

On 29 October 2015, Mr Crakanthorp asked The Hon Duncan Gay MLC:

“When did the Competition and Consumer Act 2010 stop applying to the Government in respect to the operation of the Port of Newcastle?

Do the Port Commitment Deeds include a fee on container throughput at Newcastle Port under certain specified conditions?”

Mr Gay’s answer on 4 December 2015 was:

“This is a matter for the Treasurer.”

On 16 February 2016, Mr Crakanthorp directed these questions to Treasurer, The Hon Gladys Berejiklian, who answered on 22 March 2016:

  1. The operation of the Port of Newcastle is the responsibility of the private sector lessee, Port of Newcastle Investments.
  2. Please refer to my response to questions 24 & 25 at Budget Estimates 2015, Answers to Supplementary Questions, General Purpose Standing Committee 1, 9 am, Thursday 3 September 2015.

The answer Ms Berejiklian gave to questions 24 and 25 was the same for both: “There is no legislated cap on the number of containers that can travel through the Port of Newcastle.”

On 18 February 2016, Mr Crakanthorp asked Ms Berejiklian:

“What is the cap on numbers at the Port of Newcastle?”

Ms Berejiklian’s answer on 23 March 2016:

“Please see my answer to this question in Budget Estimates 2015: Answers to Supplementary Questions General Purpose Standing Committee 1, dated 3 September and available on the NSW Parliament website.”

This answer was: “There is no legislated cap on the number of containers that can travel through the Port of Newcastle.”

 

COMPETITION BETWEEN PORTS

 

A charge proving unlawful, or unenforceable, would benefit the northern NSW economy by removing the impediment to developing a container terminal at the Port of Newcastle.

A container terminal would attract container ship visits for the northern NSW market but would also justify building a rail freight bypass of Sydney for the Sydney market. This bypass line would run from the Port of Newcastle to Glenfield, in south western Sydney, where it would connect with the main southern line. Paying for a bypass line by railing containers for the Sydney market would replace building stages 2 and 3 of the Northern Sydney Freight Corridor. The cost, $5 billion, is unfunded.

Port Botany’s dominant market position relies exclusively on its monopoly status as the state’s only container port. Most containers are trucked within 40 km of Port Botany to minimise cost.

It is more economical, obviously, to supply northern NSW by rail from Newcastle than it is by truck from Port Botany.

Presently, import containers are trucked between Port Botany and western Sydney and goods are trucked between western Sydney and Newcastle for distribution throughout northern NSW. Likewise, trucking export goods between regional areas and Port Botany is prohibitively costly and logistically challenging, and rail freight is inadequate.

Substantial costs incurred by northern NSW residents and businesses would be removed by developing a container terminal at the Port of Newcastle.

However, direct access to a container terminal is also essential for participating in international trade. Because of the Port Botany monopoly, there is little opportunity for decentralizing economic activity into regional areas of NSW. Regional areas are economically disadvantaged and needless pressure is placed on Sydney’s already stressed infrastructure.

Around 25 per cent of the NSW population lives north of Sydney. They would account for around 25 per cent of Port Botany container throughput when a proportionate number of Sydney-based manufacturing firms reliant on Port Botany relocated to northern NSW to take advantage of a container terminal at the Port of Newcastle. According to NSW Ports, intermediate goods (used in the eventual production of a finished product) make-up 50 per cent of the content of all containers imported through Port Botany.

The Port of Newcastle enjoys a natural competitive advantage over Port Botany because 100 per cent of containers for the Sydney market can be railed to new intermodal terminals in outer western Sydney, via a bypass line. This enables removing container trucks from Sydney’s roads.

However, government policy supports an increase in Port Botany container transportation by truck from 2 million per year in 2014 to 5.4 million per year by 2045.

Government policy supports railing 3 million Port Botany containers in 2045 up from 0.3 million in 2014. But achieving this 10-fold increase in rail transportation requires building a new rail freight line, the “Western Sydney Freight Line”, between Chullora and Eastern Creek. The cost, $1 billion, is unfunded.

The optimum use of Sydney’s existing rail network is people, not freight, as demonstrated in a report by Deloitte Access Economics, “The True Value of Rail”.

 

MOOREBANK INTERMODAL TERMINAL 

 

The best assessment of the proposed Moorebank Intermodal Terminal is provided in this non-government report.

The government’s container rail strategy relies on building an intermodal terminal at Moorebank, followed by an intermodal terminal at Eastern Creek, which requires the Western Sydney Freight Line to be built

Liverpool City Council opposes an intermodal terminal at Moorebank because local roads are already hyper-congested and additional road freight would worsen conditions. In a November 2015 submission to the NSW “Planning Assessment Commission”, the Council said:

The long term suitability of the Moorebank precinct for an intermodal terminal relies on the intersection of rail and road freight capacity. Parsons Brinckerhoff has conducted longer term modelling of the local road network for the MIC proposal. They identified capacity shortfalls and hyper-congested conditions at almost all intersections and roads in the precinct. Under such conditions the SIMTA Stage 1 IMT would not be able to operate and should not proceed. Given these findings, it is prudent to delay any SIMTA Stage 1 project determination until the RMS can complete the LMARI sub-regional road network modelling. This modelling will establish whether Moorebank is a suitable location for an intermodal terminal and the magnitude of the road upgrades required to facilitate it. The viability of any road upgrades in the region is questionable given that air quality and other environmental constraints place limits on the total volume of road traffic which could safely be accommodated.

Consequently, SIMTA’s RtS [Response to Submissions] has not resolved the major traffic issues raised in the previous Council submission

The “NSW Department of Planning and Environment” released a draft approval in December 2015.

The Commonwealth government’s “Detailed Business Case” for the Moorebank Intermodal Terminal project was so heavily redacted by the government as to be of little relevance. The proposed economic benefit of the Moorebank Intermodal Terminal is not demonstrated.

A rail freight bypass of Sydney makes an intermodal terminal at Moorebank redundant. One of the main reasons the government supports an intermodal terminal at Moorebank is to reduce the number of container truck movements between Port Botany and western Sydney destinations. With containers moved by truck estimated to increase from 2 million in 2014 to 5.4 million in 2045 – assuming an intermodal terminal at Moorebank – the government’s strategy, obviously, fails to reduce container truck activity.

 

RAIL FREIGHT INFRASTRUCTURE

 

The landside infrastructure costs to support a major container facility at the Port of Newcastle would be paid for by railing containers and general freight using a new rail freight bypass line. Road freight between Sydney-Brisbane and Sydney-Melbourne would be able to use this new bypass line.

A rail freight bypass removes the need to build stages 2 and 3 of the Northern Sydney Corridor (NSFC). Stages 2 and 3 would create the equivalent of a dedicated rail freight line between Newcastle and Strathfield within the existing passenger rail corridor.

Stage 1 was completed in 2015 at a cost of $1 billion. Stages 2 and 3 are required by 2028 to meet estimated growth. These stages will cost $5 billion. They are unfunded with little prospect of becoming funded. More likely, the government will increase freight services between Newcastle and Sydney by reducing passenger services.

A rail freight bypass removes the need to build the Western Sydney Freight Line costing $1 billion. This line is required to transport containers between Chullora and Eastern Creek, after the Moorebank intermodal terminal reaches capacity. A rail freight bypass line would also remove the need to build a new freight line between Port Botany and Mascot. Funds for building these projects have not been disclosed. Without funds these new lines, obviously, will not be built and container transportation by truck will be more than estimated.

Building the southern section of the bypass line first, between Glenfield and Eastern Creek, would allow containers to be railed between Port Botany and Eastern Creek using existing rail capacity while the remainder of the bypass line was being built.

A rail freight bypass of Sydney requires an “Outer Sydney Orbital corridor”. The “NSW Freight and Ports Strategy” recognises that “identifying a corridor and protecting it from incompatible development is an increasingly urgent priority, particularly as the corridor is of key strategic significance to both the road and the rail task (November 2013)”. A rail freight bypass would provide a second, vital, rail crossing of the Hawkesbury River in Sydney’s north (Pearlman).

Unfortunately, the “NSW Freight and Ports Strategy” does not associate a container terminal at the Port of Newcastle with an “Outer Sydney Orbital corridor”. There is no mention of an unlegislated “cap on numbers” at the Port of Newcastle, or a fee for exceeding it, in the “NSW Freight and Ports Strategy” dated November 2013; the “Draft Strategy” dated November 2012; and, the “Discussion Paper” dated February 2012.

On 5 May 2015, Ms Berejiklian was asked:

1.

(a) Is compensation payable to the Port Botany leaseholder if container movements exceed an annual threshold at the Port of Newcastle?

(b) If so, what is the annual threshold?

(c) What is the amount of compensation per twenty-foot equivalent unit (TEU)?

Answer 9 June 2015:

(a) The terms of the Port Botany transaction are consistent with the NSW Freight and Ports Strategy which was released in 2013. The Port Botany lease is a public document.

(b) The details of the container arrangements in the Port Commitment Deeds are commercial in confidence.

(c) Please see the answer to question 1 (b).

REGIONAL ECONOMIC DEVELOPMENT 

 

In terms of decentralisation and regional economic development, a rail freight bypass of Sydney between the Port of Newcastle and Glenfield, would enable an orderly relocation of industry from inner western Sydney to outer western Sydney, northern NSW and southern NSW. The cost of firms’ relocation would be met by capitalising on valuable capital city real estate. For example, in inner western Sydney, 5518 hectares of land are used for industrial purposes and the owners of this land may profit from making this land available for a higher commercial use.

Regional economic development enables better utilisation of existing regional infrastructure with a corresponding reduction in demand placed on capital city infrastructure. The economic benefit is measurable. This benefit can be paid to firms in the form of a grant as an incentive to relocate out of Sydney (and Melbourne). One approach is for payment to be equal to income tax paid on profits earned until the full grant amount was reached. The grant would be self-funding because the source of funds is the measured increase in efficient use of installed infrastructure.

HOW CONTAINER TERMINAL POLICY DEVELOPED IN NSW

In 1997, BHP (now BHP Billiton) proposed developing a container terminal on the site of its Newcastle Steelworks, scheduled to be closed in September, 1999. BHP recognised that regional firms required access to a container terminal in order to participate in world trade. A development application was lodged for a container terminal on the “Mayfield” site of the former steelworks on 21 August 2000.

The NSW government assumed ownership of the “Mayfield” site in June 2002 and BHP’s plans were abandoned. The government’s purpose in taking ownership was disclosed one year later when it was announced that a container terminal would not be built at the Port of Newcastle.

It took another 10 years for confidential details of the transaction to be disclosed, as reported by the “Newcastle Herald” on 1 September 2012:

BHP steelworks site: pollution time bomb 

AN environmental deed that BHP Billiton and the state government refused to release under freedom of information shows taxpayers will pay the costs of any problems at the Newcastle steelworks site once BHP’s initial payment of $100million is gone.

Environmentalists believe the site is a ticking time bomb, with most of the hydrocarbons and other potential contaminants still in the ground because the decade-long clean-up has been based on containment rather than removal of toxic materials.

BHP handed the steelworks site and four other parcels of land to the state government in 2002, and while $13million of the $100million was reportedly paid back to the government as payment for the land, few details of the environmental responsibilities lumped on to the public have ever emerged.

Details of the deal, which the former Carr government instigated, are in a 55-page environmental deed obtained by the Newcastle Herald.

The extraordinary legal document reveals how BHP transferred its liability to the Crown for land-based contamination, including where it migrates off the site after the land was transferred.

On 5 October 2003, (former) Premier, The Hon. Bob Carr MP, announced the NSW government’s “NSW Ports Plan”:

The former BHP steelworks site at Newcastle Port will be secured for port use. When Port Botany reaches capacity Newcastle will be the state’s next major container facility.

Only weeks later, on 26 November 2003, Sydney Ports Corporation lodged a $1 billion development application to expand Port Botany container capacity.

The Hon Greg Pearce MLC told parliament on 24 October 2006:

Papers provided several years ago by the Government relating to the approval of the ports expansion strategy by Cabinet in 2003 show that Cabinet considered a report from Mr Chris Wilson who was then the Director, Major Development Assessment of the then Department of Infrastructure, Planning and Natural Resources. Mr Wilson noted, when considering concerns related to the development application and the environmental impact statement for Port Botany at that stage, that there was inadequate supporting information on the wider strategic issues, particularly transport. He also noted that any consent for the port’s expansion, regardless of whether a commission of inquiry was undertaken, would not address the significant off-site issues that exist.

Sydney Ports Corporation released a study supporting the proposed expansion, as reported by the “Newcastle Herald” on 28 August 2004:

Report Favours Botany For Port

SYDNEY Ports is determined to expand the Port Botany wharves, despite residents, business groups and politicians pushing for a new terminal in Newcastle or Port Kembla.

It has released a consultants’ report supporting its plans as originally announced, despite Planning Minister Craig Knowles ordering it to consider alternatives within Botany Bay, and an upper house committee urging the Government to look at Newcastle and Wollongong.

NSW Treasury argued that a new operator at a new container terminal at Port Botany “may be more viable” than a new operator at a new container terminal at the Port of Newcastle. The difference between the two locations was that BHP had proposed to build a container terminal at the Port of Newcastle as no cost to the state. In comparison, expanding Port Botany involved the state government borrowing $1 billion. Former NSW Treasurer, The Hon. Michael Egan MP, wrote to Commissioner Kevin Cleland, Commissioner of Inquiry for Environment and Planning, on 18 October 2014:

A new entrant at the same location [Port Botany] as its competitors may be more viable than a start up at a regional port [Newcastle], particularly in the short term. For example, a new entrant at Port Botany could directly pitch for existing Sydney based customers with local logistic infrastructure (transport, warehousing and distribution).

Disquiet by the state’s “top planners” was reported by the Sydney Morning Herald on 18 February 2005:

Expanded cargo terminal too big, say planners

By Darren Goodsir, Urban Affairs Editor
Sydney Morning Herald February 18, 2005

The state’s top planners have cast adrift an ambitious plan to massively expand cargo facilities at the Port Botany container terminal – arguing its size should be reduced by 25 per cent to avoid traffic gridlock.

The Sydney Ports Corporation is arguing at a commission of inquiry for a 63-hectare boost to the existing terminal, which it claims would allow 3.2 million container movements a year by 2025.

This would increase the size of the stretched cargo area by nearly 30 per cent – with a potential impact on air-traffic control radars.

But the Department of Infrastructure, Planning and Natural Resources has been spooked by predictions by the stevedores Patrick Corp and P&O that the expansion could lead to 8 million container movements a year. In a reversal, the department said yesterday it would only support a 47-hectare expansion, and that it should be built in stages.

In a last-minute submission to the commission of inquiry, the department said the foreshore area should also be reduced by 70 metres – widening the mouth of the nearby Penrhyn Estuary and improving tidal flows.

It said a smaller terminal expansion would still allow a third player to enter the freight market, and also allow planners enough time to gauge the impact of increased traffic.

Under the department’s plans, a proposed fifth berth would be put on hold, and only approved after another detailed environmental analysis. The submission, presented to Commissioner Kevin Cleland, argues that “any increase in container throughput over and above 3.2 million … must therefore be the subject of a further environmental assessment”. This was “to ensure that such throughput can be accommodated on the surrounding road and rail networks and beyond”.

Last year the Herald revealed leaked cabinet papers showing that, even if incentives were provided to increase rail freight, semitrailer movements would leap by 300 per cent by 2021, clogging all road arteries near Sydney airport.

In response, the Planning Minister, Craig Knowles, raised the prospect of a levy of up to $30 per container being placed on freight vehicle movements to encourage more rail freight. He set a target of doubling to 40 per cent the proportion of cargo carried by train within six years. Mr Knowles also created a new body, chaired by the former Labor politician Laurie Brereton, to look at ways to accommodate the increased traffic.

First opened in 1976, Port Botany currently has 1.2 million container movements a year, with movements rising by about 7 per cent a year.

In earlier evidence yesterday, Patrick’s managing director, Chris Corrigan, rubbished the Carr Government’s embryonic freight strategy. He said plans to establish a rail-truck interchange at Enfield, only 18 kilometres from the port, were questionable. It made more sense to create a facility further away, on the city’s outskirts, to improve costs and efficiencies.

Mr Corrigan has been frustrated in his attempts to build a large transfer station on Sydney’s south-western fringes, at Ingleburn, which is in Mr Knowles’s electorate. After a series of bitterly contested court battles, the matter has again gone to the Land and Environment Court for a decision.

However, Mr Corrigan said yesterday he supported the planned construction of a freight-only rail line from the port, saying it would be enough to tilt the balance more favourably to rail freight.

On 13 October 2005, the expansion was approved. A container throughput cap of 3.2 million per year was imposed under the “Port Botany Determination”:

A1.4 Port throughput capacity generated by operations in accordance with this consent shall be consistent with the limits specified in the EIS, that is, a maximum throughput capacity at the terminal of 1.6 million TEUs per annum and a total throughput at Port Botany of 3.2 million TEUs. These limits may not be exceeded by the development without further environmental assessment and approval. Sydney Ports Corporation shall prepare, or have prepared on its behalf, such further environmental assessment for the determination of the Minister.

“The Australian Financial Review” described on 3 January 2014 the Port Botany cap as “antiquated” in a feature article about the Port Botany leasing process:

There were two important reasons the [Port Botany leasing] process had attracted four seemingly serious offers.

…The second reason was Baird’s decision to scrap a cap limiting the number of containers that could be moved at the ports. The antiquated rule was even more silly, given the NSW government had just spent $1 billion expanding the port by a third. This meant bidders were offered a near monopoly on container shipping in NSW with increased capacity. Port Botany handles almost three-quarters of the two million containers that move through the state’s ports, transporting everything from furniture to heavy machinery.

[Note: 100 per cent of container ships visiting NSW use Port Botany because it is the only port with terminals for container ships. This leaves industry no alternative but to locate as close as possible to Port Botany because of reliance on trucks for transporting containers.]

In 2009, the government-owned business “Newcastle Port Corporation” conducted a public tender for developing a multi-purpose terminal on the “Mayfield” site, to include a container terminal with capacity of not less than one million containers per year.

In its “Statement of Corporate Intent” for 2010-11, Newcastle Port Corporation said:

6.2 Executing NPC’s Container Strategy

NPC’s strategy for establishing the next container terminal in New South Wales on the Mayfield site is:

  • to ensure the NSW Ports Plan confirms that the Mayfield site in the Port of Newcastle would be the site for the next major international container terminal in the State;
  • to ensure State and National reviews (such as the NSW Freight Strategy) are informed on the opportunities that the Mayfield site offers as a future container terminal site that is capable of being delivered at low cost to the State; and
  • to seek a suitable partner to establish a container facility on Mayfield ahead of the facilities at Port Botany reaching capacity.

Newcastle Port Corporation accepted a tender from an international consortium led by Anglo Ports Pty Ltd in 2010 and commenced negotiating under contract.

Questionable dealings by Treasury in 2010/2011 involving this negotiation were uncovered in the “Operation Spicer” investigation conducted by the NSW “Independent Commission Against Corruption” (ICAC) in 2014. On 30 August 2014, the “Newcastle Herald” reported:

Port boss kept vital meeting notes

TREASURER Eric Roozendaal pressed the boss of Newcastle Port Corporation to resign and blocked details of a container terminal proposal going to its board within days of Labor power-broker Joe Tripodi meeting Buildev about their rival coal-loader idea.

A 2010 file note tendered to the Independent Commission Against Corruption and prepared by then corporation chief executive Gary Webb records the gist of a meeting with Mr Roozendaal, who was then also ports minister.

Mr Roozendaal ordered him not to send details of the Anglo Ports consortium’s container terminal project for the Mayfield former steelworks site to the port corporation’s board for it to endorse the start of detailed negotiations.

‘‘The minister said that he found it very hard to accept that building a coal terminal on that site was anticompetitive and he felt uncomfortable and he said he was going to have Treasury review the process and then he told me not to send the paper to the board,’’ the note reads.

Newcastle Port Corporation was not to take any action until the review was done, Mr Webb was told.

‘‘The minister then asked me had I threatened one of his staff that I would resign. My answer was no,’’ the note continued.

The meeting took place on November 24, 2010, the day before the scheduled port corporation board meeting and just a few days after Mr Tripodi was flown aboard Buildev’s helicopter to Newcastle for a meeting with the company’s directors on November 19, when he was still a Sydney-based member of parliament.

A Buildev record of the meeting reads: ‘‘Joe- going to get Eric to stop Anglo deal going to board this Thursday’’.

Giving evidence to the inquiry yesterday, Mr Tripodi , a former ports minister, declared: ‘‘I wasn’t their mate.’’

But counsel assisting the inquiry Geoffrey Watson SC said ‘‘all of the evidence points one way’’ – that Mr Tripodi had agreed to lean on Mr Roozendaal who then blocked the container terminal proposal.

‘‘I have no recollection of speaking to Mr Roozendaal about this,’’ Mr Tripodi insisted.

‘‘. . . What we’re asking you to do is take this opportunity Mr Tripodi and grab it with both hands – explain why that inference should not be drawn,’’ Mr Watson said.

‘‘Because there’s a whole range of possible reasons why minister Roozendaal did what he did, a . . . massive gammit of possibilities,’’ Mr Tripodi said.

Mr Tripodi said he had agreed to meet with Buildev because he had a ‘‘policy interest’’ in ports and was ‘‘happy’’ to give advice to any company helping the state.

Extracts from a NSW Treasury report ”Review of Proposed Uses of Mayfield Intertrade Lands at Newcastle” dated 4 February 2011 were leaked to The Newcastle Herald and reported on 18 February 2011:

The 22-page document titled Review of Proposed Uses of Mayfield and Intertrade Lands at Newcastle Port was prepared for Mr Roozendaal on February 4.

It states that Treasury had not been provided with a rigorous analysis of the demand forecast for containers and bulk goods.

“A 2006 PWC [Port Waratah Coal] study for bulk goods berth on the [Mayfield] site was based on the Newcastle Port Corporation-generated demand forecasts that were not subjected to critical analysis,” the report says.

“A 2003 study [updated in 2009] into container demand to Newcastle identified a total current demand of 266,000 TEU [20 tonne equivalent units] pa, which is dwarfed by the current and potential capacity of Port Botany.”

Treasury alleged on 22 August 2014 that the Anglo Ports negotiation involved an attempt by sections of the government “to dictate uneconomic enterprises contrary to market demand [and was an example] of the kind of rent seeking activity likely to encourage influence peddling or corruption”. Presumably, this allegation was directed at the Board and Management of Newcastle Port Corporation.

Former Treasurer, the Hon Andrew Constance MP, made the allegation in answer to a Supplementary Question in Budget Estimates, asked by The Hon. Dr John Kaye MLC on 22 August 2014:

Given that there has been significant allegations of at least influence peddling and political interference under Labor surrounding proposals to the [sic] develop a container facility in Newcastle, will Treasury be reviewing that decision?

(a) If so please provide details

(b) If not why not

Answer:

Attempts by Government to dictate uneconomic enterprises contrary to market demand are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption. As the container port did not proceed, there is no decision to review.

Anglo Ports responded:

The answer conflates the proposal of Anglo Ports or its consortium with government dictation, with uneconomic enterprises, with the absence of market demand, with influence peddling and with corruption. Anglo Ports on behalf of the consortium categorically denies that its proposal or the tender under which it was conducted had any of these characteristics.

In a submission to Infrastructure Australia dated November 2011, the NSW government said (page 12):

Port Botany is the nation’s second largest container port and container volumes are expected to increase over 3.5 times or by 5.5 million containers a year by 2030-31, subject to an approved increase in the port’s current planning limit of 3.2 million containers a year.

The “Newcastle Herald” reported on 6 December 2011:

Container port bound for Botany 

THE state government is looking to ditch a long-standing promise to make Newcastle the next container port after Botany.

Changing Labor’s ‘‘three ports strategy’’ would make it easier for Nathan Tinkler to achieve his plans for a coal-loader on part of the former BHP site.

A state government submission lodged last month with federal agency Infrastructure Australia shows the government intends allowing as many as 7million containers a year through Botany, or more than three times the 2.02million containers shipped last year.

Botany’s existing approval is for 3.2 million containers a year and 7 million a year would kill Newcastle’s chances of building a successful terminal, despite its natural advantages and Botany’s already critical congestion.

…. A spokesman for Ports Minister Duncan Gay said the government was reviewing Labor’s 2003 ‘‘three ports’’ strategy along with plans to expand Botany.

The Hon. Mike Baird MP announced the appointment of Morgan Stanley as the government’s financial advisor for leasing Port Botany on 14 December 2011. An unlegislated “cap on numbers” was not disclosed.

The “Newcastle Herald” reported on 31 January 2012: “A spokesman for NSW Ports Minister Duncan Gay said yesterday that an announcement on a Newcastle container terminal would be made after the scoping study for the Port Botany transaction, due to the government early this year, is completed”:

Container terminal plan for BHP site 

A $600MILLION proposal to redevelop the BHP steelworks site for port uses, including a container terminal, will be considered as part of the case being mounted for plans to lease Sydney’s Port Botany.

A spokesman for NSW Ports Minister Duncan Gay said yesterday that an announcement on a Newcastle container terminal would be made after the scoping study for the Port Botany transaction, due to the government early this year, is completed.

But financial advisers are also expected to consider whether to lift a cap on container movements on Port Botany’s operator, Sydney Ports Corporation.

Last week, Premier Barry O’Farrell threw the spotlight back on a container terminal for Newcastle when a government panel led by his department rejected a proposal from the Nathan Tinkler-owned Hunter Ports for a $2.5billion coal-loader at the Mayfield site.

He said last week the government wanted to maintain the existing long-term strategy for diversifying Newcastle harbour.

In line with the former Labor government’s port strategy, the Newcastle Port Corporation has long earmarked the land for the state’s next container terminal once Port Botany reached capacity.

The Sydney Ports Corporation has an annual cap of 3.2million container movements. This will also be considered as part of the scoping study of a 99-year lease of Port Botany, through which the government hopes to raise about $2billion.

A consortium involving Newcastle Stevedores and Anglo Ports had submitted to the former Labor government a $600 million private-sector development proposal that would entail various uses for the Mayfield site, including container freight.

Mr Gay’s spokesman said the Minister considered Newcastle Port Corporation’s Mayfield concept plan, which is similar to the Anglo Ports proposal and includes a container terminal, to be the best use of the land.

This “Newcastle Herald” report made no reference to Anglo Ports’ contract with Newcastle Port Corporation pursuant to the 2009 tender.

The “NSW Long Term Transport Master Plan Discussion Paper, February 2012” said  (Page 85):

At the Port of Newcastle, various infrastructure projects to increase the port’s coal export capacity are underway and a concept plan is currently being considered to develop the former BHP site at Mayfield to support a range of cargo handling infrastructure for trades such as general cargo, bulk materials, bulk liquids and containers.

The “Discussion Paper” made no reference to Anglo Ports’ contract with Newcastle Port Corporation pursuant to the 2009 tender.

In March 2012, a container terminal at the Port of Newcastle became a permissible development.

On 9 May 2012, the (former) CEO of “Infrastructure NSW”, Mr Paul Broad, was reported by the “Sydney Morning Herald” as disclosing that the Port of Newcastle “would not be developed as a container port”.

On 10 May 2012, Mr Gay told parliament that “Transport for NSW” was reviewing “the freight and regional development sector … I do not know whether Mr Broad said what was attributed to him … people will be able to express their views”. Mr Gay made no reference to Anglo Ports’ contract with Newcastle Port Corporation pursuant to the 2009 tender:

The Hon. CATE FAEHRMANN: My question is directed to the Minister for Roads and Ports. Yesterday the Sydney Morning Herald reported that the chief executive officer of Infrastructure NSW, Paul Broad, said that Newcastle will not be developed as a container port. However, in January 2012 the Premier said that Mayfield “is more suited to handling multi-product, container, general cargo and dry bulk terminal freight”. Does the Minister agree with Infrastructure NSW or the Premier’s comments?

….. The Hon. DUNCAN GAY: I will answer if members opposite stop interjecting. Colonel Blimp sitting on the losers lounge keeps interjecting while I am trying to answer. The Government has established some new sections in Transport for NSW, including the Freight and Regional Development Section, which is headed by Rachel Johnson. She is a terrific deputy director general who has a private enterprise background. Her job is to review the sector and the roles of the various ports. That review is underway and people will be able to express their views, either publicly or not. I know that there was a newspaper report, but I do not know whether Mr Broad said what was attributed to him. A review is underway and members will have to wait until it is completed. It is a statewide review involving not only the Port of Newcastle but also Port Botany and Port Kembla, and it will examine freight movements from roads to the ports.

On 27 July 2012 Mr Baird announced the government’s decision to proceed with long-term leases of Port Botany and Port Kembla after considering Morgan Stanley’s  confidential scoping study recommendations:

The Government has received and considered the recommendations of the scoping study and based on this advice, we have decided to proceed with long-term leases on both assets.

The decision to develop the state’s next container at Port Kembla, rather than at Newcastle, reflected the scoping study recommendations and the government’s study instructions. Mr Baird said:

The development of intermodal terminals across South and West Sydney, [sic] the Government’s freight strategy to be released later in 2012 would seek to develop Port Kembla as the logical next long term tranche of container capacity after Port Botany.

Commenting on this announcement, Newcastle Port Corporation noted:

In July 2012 the NSW Government announced that Port Kembla will be the logical next long-term tranche of container capacity after Port Botany. In accordance with the government’s announcement, subject to any relevant government approvals, any future container terminal development at Newcastle will occur only once Port Botany and Port Kembla are fully developed and developable handling capacity is fully utilised at both Port Botany and Port Kembla. (Newcastle Port Corporation, Draft Strategic Development Plan for the Port of Newcastle, February 2013, page 23)

On 12 August 2012, Mr Gay informed the parliament about the “Newcastle Port Strategic Development Plan”:

The plan sets out how the port will grow and develop over time taking into account global shipping trends, expected growth in task and volumes of goods, safety, channel and marine access and landside transport needs.

The plan is consistent with the planning recommended under the National Ports Strategy and will complement the NSW Freight and Ports Strategy being developed and delivered by the Freight and Regional Development Division of Transport for NSW.

The NSW Freight and Ports Strategy will be delivered later this year.

The “Newcastle Herald” reported on 17 August 2012:

Port development dreams persist

Newcastle Port Corporation chief executive Gary Webb said this week Ports Minister Duncan Gay had explained the government’s decision to privatise Port Botany and Port Kembla, and the impact this would have on the container component of the Newcastle plan.

The concept plan predicted 600,00 containers a year by 2024 and 1million a year by 2034, but these targets would not be met and the corporation would look for other, short-term uses for the container land.

Mr Webb hosed down speculation the navy might want the steelworks site, although state Newcastle MP Tim Owen still believes the idea should be explored.

He said the next step for the corporation was to resolve the future of a ‘‘proposed contract’’ to develop 72 hectares of the site that was agreed in principle by the corporation with a consortium involving Hunter waterfront company Newcastle Stevedores [Anglo Ports consortium].

Mr Webb said the corporation was looking at whether the proposed contract needed to be renegotiated in light of the government’s policy change, but he was hoping the consortium was still interested in the site.

There was no mention in the “Newcastle Herald” report of a “cap on numbers”.

On 30 August 2012, Mr Baird advised Anglo Ports that a container terminal was withdrawn from the government’s requirements in relation to Anglo Ports’ contract with Newcastle Port Corporation pursuant to the 2009 tender. [Note: On 29 September 2015 NSW Treasurer, The Hon. Gladys Berejiklian MP, disclosed that the Port of Newcastle lessee could develop a container terminal at the Port of Newcastle “if it wished to do so”. See question 29.]

On 17 October 2012, Mr Baird introduced the Ports Assets Bill into the Legislative Assembly. Unlimited growth in container throughput at Port Botany was permitted by removing the Port Botany cap.

The “Draft NSW Freight and Ports Strategy” dated November 2012 stated that the Port of Newcastle faced “constraints” in attracting reliable container shipping movements. The Strategy did not discuss that container ships are unable to use the port because it does not have a container terminal and the constraint on building a container terminal was the government’s undisclosed, unlegislated, “cap on numbers”:

Developing the Port of Newcastle for future container shipping faces a range of constraints, such as attracting reliable container shipping movements. Containers accessing Sydney from the Port of Newcastle will also face increasing congestion on the F3 Freeway and capacity constraints on the Northern Sydney Freight Corridor.

Port Corporations and the new lessee(s) of Port Botany and Port Kembla therefore require access to up to date freight information and modelling to support their planning processes. Transport for NSW will, where required, provide this support, which together with ongoing technical input will help strengthen port corporation planning and the provision of freight and logistics infrastructure. (page 92)

The Strategy did not specifically acknowledge that freight accessing Sydney from Newcastle and northern NSW faced increasing congestion on the M1 Motorway (F3 Freeway) and capacity constraints on the Northern Sydney Freight Corridor.

A “marked increase” between indicative bids for the Port Botany and Port Kembla leases between December 2012 and April 2013 was reported by “The Australian” newspaper, in a report dated 21 June 2013:

What transpired was one of the closest races for a major asset seen in Australia. Research by the deal makes it clear that there was a marked increase between the indicative bids given to the government advisers in December [2012] and the final numbers submitted in April [2013]. In the end, according to sources, the top two contenders were separated by less than $20 million.

Port Botany and Port Kembla were leased to NSW Ports for 99 years on 12 April 2013 for $5.1 billion.

On 18 June 2013, Mr Baird announced a Scoping Study for leasing the Port of Newcastle:

The Government has announced in the 2013-14 Budget it will proceed immediately to a scoping study on offering a 99-year lease on the Port of Newcastle.

On 26 July 2013, Mr Baird wrote to Anglo Ports a second time advising that a container terminal was withdrawn from the government’s requirements in relation to Anglo Ports’ contract with Newcastle Port Corporation pursuant to the 2009 tender.

On 17 October 2013, Mr Gay disclosed, for the first and only time, an unlegislated “cap on numbers” at the Port of Newcastle and compensation payable to the Port Botany leaseholder if a container terminal was developed at the port.

Mr Baird announced on 5 November 2013 that the government would proceed with leasing the Port of Newcastle, after having received and considered Morgan Stanley’s Scoping Study recommendations:

The scoping study has revealed strong initial interest from investors for this transaction, that if successful, will drive economic growth and the renewal of Newcastle by fast-tracking critical infrastructure needs in the region.

This “strong initial interest from investors” was identified between 18 June 2013 and 5 November 2013.

The government ”concluded” its negotiation with Anglo Ports in November 2013, as disclosed in a Treasury media statement on 4 March 2015. Treasury said:

Newcastle Port Corporation concluded its negotiations with Anglo Ports in November 2013 after it was unable to reach a suitable outcome for the redevelopment of the Mayfield site.

As at February 2013, the government’s requirement for a “suitable outcome” included:

…. any future container terminal development at Newcastle will occur only once Port Botany and Port Kembla are fully developed and developable handling capacity is fully utilised at both Port Botany and Port Kembla. (Newcastle Port Corporation, Draft Strategic Development Plan for the Port of Newcastle, February 2013, page 23)

On 1 May 2014, the government’s position had not changed. In a media statement, NSW Treasury said:

The [Port of Newcastle] lease has been drawn up in accordance with the current NSW Government freight policy of Port Botany being the first container facility priority, with Port Kembla designated to take the overflow once Port Botany is full. Newcastle will be further developed once Port Kembla is full. Newcastle container throughput is, in the meantime, fully able to grow organically.

On 29 September 2015, The Hon. Gladys Berejiklian MP disclosed that the government had reversed its position when she told a Budget Estimates Committee that Port of Newcastle Investments could develop a container terminal “if it wished to do so”.

Anglo Ports disclosed that “it did not withdraw its proposal” when the government “concluded” the negotiation in November 2013.

It is presumed that the “suitable outcome” sought by the government was for Anglo Ports to withdraw from the negotiation. Since Anglo Ports did not withdraw, the government “concluded” the negotiation and later reversed its policy at a time between 1 May 2014 and 29 September 2015.

The Port of Newcastle was leased to Port of Newcastle Investments for 98 years on 30 April 2014 for $1.75 billion.

On 11 May 2014, the “Newcastle Herald” reported:

The government has confirmed it leased Botany with a clause that prevented Newcastle from competing against it with a container terminal. And the Newcastle lease is believed to contain a similar undertaking.

The government did not disclose details of these clauses in the lease arrangements.

The Australian Competition and Consumer Commission (ACCC) said, on 25 June 2014:

However, the ACCC remains concerned over arrangements designed to maximise proceeds received by a government by reducing the prospect of competitive provision of port services. Another example relates to Port Botany and the Port of Newcastle. An article in the Newcastle Herald on 11 May 2014 stated: “The government has confirmed it leased Botany with a clause that prevented Newcastle from competing against it with a container terminal. And the Newcastle lease is believed to contain a similar undertaking”. (p.38)

The ACCC does not disclose what information it possessed about the ports lease arrangements before 11 May 2014. Apart from Mr Gay’s disclosure on 17 October 2013, it is presumed the ACCC had no information about a “cap on numbers”. The ACCC does not confirm or deny having knowledge of a NSW government charge on containers at the Port of Newcastle.

On 12 December 2014, (former) Treasurer, Mr Andrew Constance MP, was asked by Member for Newcastle, Mr Tim Crakanthorp MP:

Did the Government advise the Australian Competition and Consumer Commission (ACCC) of a cap on container numbers at the Port of Newcastle prior to leasing the Port of Newcastle and Port Botany?

Answer (16 January 2015):

The Government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework, including the container arrangements.

The ACCC has not disclosed what it was advised, if anything, about an unlegislated “cap on numbers” at the Port of Newcastle after 11 May 2014.

On 30 October 2014, the ACCC warned about governments imposing “restrictions on competition” that “may be unlawful and could be unenforceable”:

The ACCC encourages early engagement from State governments on any competition issues that may arise in relation to the proposed sale structures or sale conditions for any monopoly or near monopoly assets, including any restrictions on competition proposed in the arrangements. Such restrictions may be unlawful and could be unenforceable. (p.21)

In a media statement on 30 October 2014, NSW Treasury said:

“As is the case with all Government asset sales and leases, all bidders for the Port of Newcastle had to seek regulatory approval from bodies such as the ACCC and, where relevant, the Foreign Investment Review Board (FIRB).

“As part of the transaction, the NSW Government entered into arrangements that reflect its Freight and Ports Strategy that Port Kembla will be the State’s next container terminal once Port Botany reaches capacity.

“This strategy recognises that Port Botany has significant capacity for container growth; most containers travel within a relatively short distance of Port Botany; future demand for containers is expected to occur in the South West of Sydney and thereby closer to Port Kembla than Botany; and the landside infrastructure costs to support a major container facility at Newcastle are higher than for Port Kembla.

“The arrangements do not inhibit the natural growth of container volumes through Newcastle servicing that region.

“The ACCC was made aware of provisions relating to container growth during the Newcastle Port transaction process.”

On 26 November 2014, the ACCC said the leasing arrangements “may restrict Newcastle from competing against Botany and Kembla for containers”:

However, since the 1990s, Australian governments have increasingly been participating in markets in ways that may not amount to “carrying on a business” for the purpose of competition law. Market-based mechanisms are used by governments to finance, manage and provide government goods and services (described as “contractualised governance” for the delivery of public services). Such mechanisms have the potential to significantly improve efficiency but also have the potential to harm competition – for example, by incorporating, in the contract, provisions that are likely to have the purpose or effect of restricting competition. The ACCC’s Initial Submission (section 3.3.1) includes the examples of:

  • Sydney airport – where the Commonwealth government leased Sydney Airport with the right of first refusal to operate a second Sydney airport at Badgery’s Creek.
  • Ports Botany and Kembla and the Port of Newcastle – where the NSW government leased the ports with clauses that may restrict Newcastle from competing against Botany and Kembla for container trade. (p.32)

The ACCC and the NSW government have not disclosed whether the government claimed immunity from the “Competition and Consumer Act 2010” when leasing Port Botany, Port Kembla and the Port of Newcastle. It is presumed that immunity was not claimed.

On 12 December 2014, (former) NSW Treasurer, The Hon. Andrew Constance MP, was asked by Member for Newcastle, Mr Tim Crakanthorp MP:

“Did the Government advise the Australian Competition and Consumer Commission of a cap on container numbers at the Port of Newcastle prior to leasing the Port of Newcastle and Port Botany?”

Mr Constance answered on 16 January 2015:

“The Government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework, including the container arrangements.”

More than 150 “Questions On Notice” were asked in parliament between October 2014 and May 2016 as reported in Hansard. Ministers Gay and Berejiklian said there was no legislated cap on container movements at the Port of Newcastle. The “cap on numbers” was not legislated.

On 29 October 2015, Mr Crakanthorp asked Mr Gay:

When did the Competition and Consumer Act 2010 stop applying to the Government in respect to the operation of the Port of Newcastle?

Do the Port Commitment Deeds include a fee on container throughput at Newcastle Port under certain specified conditions?

Answer (4 December 2015):

This is a matter for the Treasurer.

Presumably, the Competition and Consumer Act 2010” (CCA) applied to the government in respect of the three business being conducted by the government at Port Botany, Port Kembla and the Port of Newcastle. A government may claim immunity from the CCA in respect of a public asset while it is privatising that asset. The government and the ACCC have not disclosed that the government claimed immunity from the CCA while leasing the three ports. It is presumed that the government did not claim immunity.

On 19 November 2015 Mr Crakanthorp asked Ms Berejiklian:

Did the Treasury, or any entity of which the Treasurer is a shareholder, receive a request for information from the Australian Competition and Consumer Commission in 2015?

Did the Treasury, or any entity of which the Treasurer is a shareholder, receive a notice from the Australian Competition and Consumer Commission under section 155 of the Competition and Consumer Act 2010 in 2015?

Answer (18 December 2015):

As a normal part of my role as Treasurer I receive correspondence from a variety of organisations.

For information regarding correspondence to individual entities, you may wish to contact them directly.

Section 155 of the CCA gives the ACCC authority to require provision of information where a breach of the CCA may have occurred. The ACCC is able to clarify this matter.

Cap on Numbers

LEGISLATIVE COUNCIL 17 October 2013

PORT BOTANY CONTAINER TERMINAL

The Hon. ADAM SEARLE: My question is directed to the Minister for Roads and Ports. How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?

The Hon. DUNCAN GAY: The rules in the organisation that did the scoping study for Port Botany and Port Kembla and introduced guidelines there indicate that while general cargo is allowed there will not be an extension under the rules for the lease of Newcastle Port. So the short answer to the question is that we do not envisage that any compensation will need to be put in place. The Government has been clear on this all the way through the process, even before it indicated it would lease the port at the stage when Newcastle Port Corporation was in place. I have indicated in the House, as I have in Newcastle—indeed, I made a special visit to Newcastle to talk to the board, the chief executive officer and the local community—that part of the lease and the rationalisation was a cap on numbers there. I am not saying that there will be no containers into Newcastle. Certainly, a number of containers will come in under general cargo, but there will not be an extension. The only time an extension is allowed is when a specific number is reached and is tripped in Port Botany and Port Kembla.

In 2012, the NSW government decided to pay compensation to a future leaseholder of Port Botany and Port Kembla based on the number of containers handled at the Port of Newcastle. The government made this decision before announcing, on June 6 2012, the inclusion of Port Kembla in a scoping study for leasing Port Botany.

The government decided to set a limit, or “cap”, on the number of containers handled at the Port of Newcastle for which compensation would not be payable to the leaseholder of Port Botany and Port Kembla. Compensation became payable only when the “cap” was exceeded. For purposes of calculating this “cap” the government defined “container” to mean”:

Any moveable device, designed for continuous use in loading and unloading cargoes on and from Ships, including boxes, crates, cylinders, tanks, TEUs, other stackable units and any similar cargo-carrying device which is designated as a container by international stevedoring standards from time to time and Containerised has a corresponding meaning.

Container includes:

(a) overseas import containers;

(b) overseas export containers; and,

(c) local containers (coastal inwards or outwards); and

(d) empty containers and transhipped containers.

Source: Port Commitment – Port Botany and Port Kembla

The amount of payment is calculated by multiplying the weighted average charged per TEU container handled at Port Botany by the number of TEU containers handled at the Port of Newcastle above the “cap”.

The government decided that a future operator of a container terminal at the Port of Newcastle would be required to make the government whole for any cost the government incurred to a future leaseholder of Port Botany and Port Kembla in respect of the “cap” being exceeded. The government took this decision because a source of funds other than government consolidated revenue was required.

In 2009 the government decided to develop a container terminal at the Port of Newcastle and did not change this decision in 2012 because to do so would be to deny the government its source of funds. It is highly likely the “cap” is exceeded every year despite there being no specialised terminal for TEU containers. However, only TEU container movements are counted at the Port of Newcastle.

The government contractually committed to paying compensation to NSW Ports, which leased Port Botany and Port Kembla on April 12 2013, by setting the “cap” at the Port of Newcastle at 30,000 “containers” (as defined) per year, as at July 1 2013, increasing by six per cent per year, for 50 years.

Container ships are unable to use the Port of Newcastle because there is no container terminal. In 2014, general cargo ships carried 10,000 TEU containers through the port. General cargo ships carry their own cranes and do not require a dedicated terminal for TEU containers.

Mr Gay was reported by the “Newcastle Herald” on 15 September 2015 as saying that Port of Newcastle container freight was expected to “more than triple by 2031”:

Mr Gay said Newcastle container freight was expected to ‘‘more than triple’’ by 2031 but in an answer to a question about a Newcastle container terminal he said the current arrangements were working well.

A tripling in container movements from 10,000 per year is 30,000 per year.

In a media statement on 1 May 2014, NSW Treasury referred to “organic” growth of container throughput at the Port of Newcastle:

The lease has been drawn up in accordance with the current NSW Government freight policy of Port Botany being the first container facility priority, with Port Kembla designated to take the overflow once Port Botany is full. Newcastle will be further developed once Port Kembla is full. Newcastle container throughput is, in the meantime, fully able to grow organically.

The “Draft Strategic Development Plan for the Port of Newcastle, February 2013” referred to growth at the port “connected to population growth”.

page 18
Some import cargoes service the expanding population of the region, such as fuels and cement. In time the port will handle containerised cargoes to service the expanding population. Growth in these sectors will be connected to population growth. Some cargoes are necessary to supply industry in the Hunter Region, such as the aluminium industry, where the port handles both the input raw materials and the exported product.

References to “organic” growth and growth “connected to population growth” are references to the cap on numbers increasing at the rate of six per cent per year.

The weighted average charge at Port Botany is nearly $100 per container. For a typical container ship with capacity for 5,000 TEU, visiting the Port of Newcastle fully loaded, and leaving fully loaded, will cost $1 million more than visiting Port Botany.

Mr Gay informed Budget Estimates on 31 August 2015 that there is no “cap” at the Port of Newcastle but “within the general cargo that needs to go to Newcastle that is fine”:

The Hon. SOPHIE COTSIS: In terms of the cap on containers, are any fees paid if the number of containers through Newcastle exceeds a set amount?

The Hon. DUNCAN GAY: Not that I am aware of.

The Hon. SOPHIE COTSIS: You are not aware of that?

The Hon. DUNCAN GAY: You asked me whether there was a cap in Newcastle and I said there is not. Now you are asking me whether there is a fee paid if they go beyond a certain number. General cargo containers are part of what happens in Newcastle. My understanding is that within the general cargo that needs to go to Newcastle that is fine.

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