Updated November 21 2019

What was the ACCC told, and when?

 

The Hon Gladys Berejiklian MP confirmed on September 27 2016 that the government advised the ACCC of the content of the “Port Commitment Deeds” for Port Botany and Port Kembla before the lease agreements were signed on May 30 2013. The government’s policy for developing a container terminal at the Port of Newcastle is that the lessee of Port Botany and Port Kembla will be paid for container volumes exceeding a threshold level at the Port of Newcastle. Was the ACCC made aware of the government’s policy for developing a container terminal at the Port of Newcastle, as stated by Ms Berejiklian?

Updated November 20 2019

 

Questions for the NSW government and ACCC

 

This question was asked in the Legislative Council on October 17 2013:

 

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 answer to the question in 2019 is $1.85 billion assuming-

 

  • container volumes average 500,000 a year between 2023-2063
  • container wharfage at Port Botany is unchanged at $150 per TEU between 2019-2063
  • payment rises to $4.1 billion if Newcastle container volumes increase to one million a year between 2033-2063

 

Does the government accept that its policy for immediate development of a container terminal at the Port of Newcastle is implemented by means of the lease agreements for Port Botany and Port Kembla?

 

Does the government accept that it has a policy for immediate development of a container terminal at the Port of Newcastle and a policy that “the development of a dedicated container terminal at the Port of Newcastle will be considered when both Ports Botany and Kembla become fully developed”?

 

Does the ACCC accept that NSW government policy for immediate development of a container terminal at the Port of Newcastle is implemented by means of the lease agreements for Port Botany and Port Kembla?

 

Does the ACCC accept that the NSW government has a policy for immediate development of a container terminal at the Port of Newcastle and a policy that “the development of a dedicated container terminal at the Port of Newcastle will be considered when both Ports Botany and Kembla become fully developed”?

 

If yes, does the ACCC accept that one of these policies is untrue?

 

In respect of which NSW government policy is the ACCC taking legal action in the Federal Court against NSW Ports Pty Ltd?

 

Updated November 19 2019

 

Container terminal policy is false 

 

The NSW government did not anticipate the ACCC taking legal action against NSW Ports Pty Ltd over government policy for immediate development of a container terminal at the Port of Newcastle, as implemented under confidential Port Botany and Port Kembla lease arrangements dated May 2013. Unlike the government, NSW Ports is required to comply with the “Competition and Consumer Act 2010”.

 

The government is contractually committed to paying NSW Ports $1.85 billion if a container terminal is built at the Port of Newcastle and

 

  • container volumes average 500,000 a year between 2023-2063
  • container wharfage at Port Botany is unchanged at $150 per TEU between 2019-2063

 

The government’s contractual commitment rises to $4.1 billion if Newcastle container volumes increase to one million a year between 2033-2063. However, the “Ports Assets (Authorised Transactions) Act 2012” does not authorise the government to pay NSW Ports billions of dollars due to container traffic at the Port of Newcastle.

 

The government’s official container terminal policy, announced on July 27 2012, is that “the development of a dedicated container terminal at the Port of Newcastle will be considered when both Ports Botany and Kembla become fully developed”. The government is obliged to acknowledge that its official policy is untrue.

 

Updated November 14 2019

 

NSW government’s misleading container terminal policy

 

A container terminal can be developed immediately at the Port of Newcastle.

 

In July 2012, the NSW government announced that once Port Botany reaches capacity, Port Kembla will be developed as the next long-term container facility. The development of a dedicated container terminal at the Port of Newcastle will be considered when both Port  Botany and Port Kembla become fully developed.

 

This government announcement misled the public, parliament and ACCC.

 

The ACCC administers the “Competition and Consumer Act 2010” (CCA). What the government planned to do was likely to contravene the CCA.

 

The government planned to lease Port Botany and Port Kembla to the private sector for 99 years. The lessee would be paid for containers shipped through the Port of Newcastle above a minimal specified number. The government committed to billions of dollars in payments. The developer of a container terminal at the Port of Newcastle would be required to pay the government for any payment paid to the lessee of Port Botany and Port Kembla.

 

Requiring payment was likely to contravene the CCA by preventing or hindering the development of a container terminal at the Port of Newcastle. It would cost double to ship a container through the Port of Newcastle compared with Port Botany.

 

The ACCC took no action when Port Botany and Port Kembla were leased to NSW Ports in May 2013. Again no action was taken in August 2013 when the government required Newcastle Stevedores Consortium (NSC) to pay the government for any payment paid to NSW Ports. The ACCC simply did not know what the government was doing.

 

NSW Ports did not question the government over its source of funds. It didn’t know that the government’s intended source of funds was NSC.

 

NSC did not withdraw its proposal to the government. The government knew that it could not pay NSW Ports if a contract was signed with NSC that later proved to contravene the CCA. The government knew the ACCC would ask why it had not been informed.

 

Signing a contract with NSC also exposed the government to explaining to the public and the parliament why it contractually committed to pay NSW Ports payments of billions of dollars if NSC developed a container terminal at the Port of Newcastle.

 

When the government terminated the negotiation in November 2013, it needed an alternative method of preventing or hindering development of a container terminal at the Port of Newcastle.

 

When a government makes a “decision” about an asset, it no longer has to comply with the CCA in respect of that asset. The government made a “decision” in November 2013 to lease the Port of Newcastle.

 

The government was not authorised under the “Ports Assets (Authorised Transactions) Act 2012” to lease the Port of Newcastle to pay NSW Ports. NSW Ports may not be paid from consolidated revenue.

 

The government decided to lease the Port of Newcastle so that it could require the lessee to pay the government outside the operation of the CCA.

 

The government did not anticipate that the ACCC would take legal action against NSW Ports. Unlike the government, NSW Ports must comply with the CCA.

 

The ACCC is alleging that NSW Ports contravened the CCA because the ports’ lease arrangements prevent or hinder development of a container terminal at the Port of Newcastle.

 

NSW Ports’ defence is that the government’s Port of Newcastle arrangements have nothing to do with NSW Ports.

 

To this day, the government conceals its actual container terminal policy because the “Ports Assets (Authorised Transactions) Act 2012” did not authorise the government to lease Port Botany and Port Kembla with a contractual commitment to pay the lessee amounts in the billions of dollars.

 

The owners of the ports leases can improve their returns if they will agree to rail all containers in NSW.

 

Currently, most containers in NSW are trucked.

 

An orderly transfer of the state’s container terminal operations to the Port of Newcastle with back-up from Port Kembla, will enable a dedicated rail freight line to be built between the Port of Newcastle, Badgery’s Creek and Port Kembla. The line will be paid for by replacing all container trucking with trains.

 

Everyone in NSW will benefit.

 

Updated November 13 2019

 

ACCC makes false claim about government container terminal policy

 

The ACCC falsely claims it is NSW government policy not to develop a container terminal at the Port of Newcastle. The ACCC is misleading the public by claiming that the “Competition and Consumer Act 2010” (CCA) does not apply to the government due to its container terminal policy.

 

The confidential lease arrangements for Port Botany, Port Kembla and the Port of Newcastle are called “Port Commitment Deeds” (PCDs). The PCDs are confidential because they specify government policy for developing a container terminal at the Port of Newcastle.

 

Under the PCDs for Port Botany and Port Kembla, government financial support, in the form of foregone wharfage, is payable to the lessee of Port Botany and Port Kembla, NSW Ports Pty Ltd, if all of the following conditions are met:

 

(a) Container volumes through the Port of Newcastle exceed a threshold level of 30,000 TEUs as at June 2013 escalated at the higher of 6% pa or the growth rate of container throughput at Port Botany (“excess”).

(b) The threshold has to be exceeded for two years.

(c) NSW Ports demonstrates to the reasonable satisfaction of the government that Port Botany or Port Kembla is not at full capacity.

(d) NSW Ports demonstrates to the reasonable satisfaction of the government that container throughput is less than it would have been if the Port of Newcastle did not exceed the threshold and that there is a reasonable, material, causal connection between the “excess” at Newcastle and the reduction in trade at Port Botany and Port Kembla.

 

Under the PCD for the Port of Newcastle, the financial obligations of the government under this arrangement are passed to the Port of Newcastle lessee, Port of Newcastle Investments Pty Ltd.

 

The ACCC alleges that NSW Ports contravened the CCA due to the PCDs for all three ports. However, the ACCC is not alleging that the government contravened the CCA.

 

The ACCC falsely claims it is government policy that Port Botany must reach capacity before a container terminal is developed at Port Kembla or the Port of Newcastle; and, Port Kembla must reach capacity before a container terminal is considered for development at the Port of Newcastle.

 

The PCDs prove it is government policy that at any time a container terminal can be developed at the Port of Newcastle.

 

The ACCC is acting contrary to the public interest by making its false claim about government policy.

 

Even though the PCDs are confidential, the information that the government has disclosed proves that the government’s announced container terminal policy is false.

 

Updated November 12 2019

 

ACCC claim is false

 

Does the ACCC claim that on October 28 2013 the NSW government had made a decision to lease the Port of Newcastle?

 

On October 28 2013, the government announced that a decision had not been made to lease the Port of Newcastle. A decision to lease the port was announced on November 5 2013.

 

Newcastle Port Corporation (NPC), a statutory state-owned corporation, stopped carrying on a business for the purposes of the “Competition and Consumer Act 2010” (CCA) from the day the government made a decision to lease the Port of Newcastle.

 

As at October 28 2013, Newcastle Stevedores Consortium (NSC) had been negotiating since 2010 under contract with NPC to develop new port facilities at the Port of Newcastle, including a dedicated container terminal for TEU container ships and a new container terminal for general cargo ships. A condition of this negotiation was that Mayfield Development Corporation Pty Ltd (Mayfield) was required to “make the State whole for any cost the State incurs to [the lessee of Port Botany and Port Kembla] NSW Ports … due to the activities of MDC [Mayfield] in the Port of Newcastle”. A subsidiary of NSC, Mayfield was established in December 2011 to build and operate the facilities.

 

Mayfield was required to pay the government on the same terms as Port of Newcastle Investments Pty Ltd is required to pay the government. The ACCC is alleging in the Federal Court that NSW Ports, but not the government, contravened the CCA due to the lease arrangements for Port Botany, Port Kembla and the Port of Newcastle. The ACCC is taking no action against the government because the government stopped carrying on a business for the purposes of the CCA from the day it made a decision to lease the Port of Newcastle.

 

NPC’s requirement that Mayfield “make the State whole” was likely to contravene the CCA. State Cabinet could not approve a contract between NPC and NSC which contained a likely contravention of the CCA. Terminating NPC’s negotiation with NSC in November 2013 left the government without a source of funds to pay NSW Ports. The government made its decision to lease the Port of Newcastle for the purpose of securing a source of funds, outside the operation of the CCA, to pay NSW Ports.

 

Under the “Ports Assets (Authorised Transactions) Act 2012”, the government was not authorised to lease the Port of Newcastle for the purpose of funding the government’s contractual commitment to pay NSW Ports. Neither was the government authorised to lease Port Botany and Port Kembla with a contractual commitment to pay the lessee support payments for any container traffic at the Port of Newcastle, let alone committing the government to payments costing some billions of dollars.

 

The ACCC falsely claims that NPC was unlikely to be carrying on a business for the purposes of the CCA while negotiating with NSC. The ACCC is obliged to withdraw this claim.

 

Updated November 10 2019

 

ACCC claim disproven by public record

 

Why does the ACCC claim it is NSW government policy not to develop a container terminal at the Port of Newcastle?

 

In a letter dated March 4 2014, the (former) NSW Treasurer, The Hon Mike Baird, said:

 

Once Port Botany reaches capacity, Port Kembla will be developed as the next long-term container facility. The development of a dedicated container terminal at the Port of Newcastle will be considered when both Ports Botany and Kembla become fully developed. However, existing container facilities at the Port of Newcastle which serve shipping lines carrying containers may continue to grow at an organic rate.

 

The ACCC is alleging in the Federal Court that NSW Ports contravened the “Competition and Consumer Act 2010” (CCA) due to the government’s lease arrangements for Port Botany and Port Kembla in May 2013, and the Port of Newcastle in May 2014, which are:

 

At the Port of Newcastle, a dedicated container terminal for TEU container ships, and a new multi-purpose container terminal for general cargo ships, may be developed immediately. A development condition is that the developer must pay the government for TEU container volumes exceeding 30,000 a year as at July 1 2013, increasing by six per cent per year until 2063. The developer is the government’s source of funds for paying financial support to the lessee of Port Botany and Port Kembla for container volumes exceeding the annual threshold level at the Port of Newcastle. The amount of payment for every TEU exceeding the threshold is the average wharfage charged for a TEU at Port Botany.

 

When the government announced its container terminal policy on July 27 2012, Mayfield Development Corporation Pty Ltd (Mayfield) was the government’s intended source of funds for paying financial support to a lessee of Port Botany and Port Kembla. In August 2013, Mayfield was required to pay the government as a condition of the ongoing negotiation to develop a dedicated container terminal for TEU container ships, and a new multi-purpose container terminal for general cargo ships, at the Port of Newcastle.

 

The government was not authorised by the “Ports Assets (Authorised Transactions) Act 2012” to lease Port Botany and Port Kembla in May 2013 with a contractual obligation to pay NSW Ports for container traffic at the Port of Newcastle exposing the government to some billions of dollars in payments.

 

The government’s unauthorised contractual obligation to pay NSW Ports was unfunded when the government terminated its negotiation with Mayfield in November 2013. The government had not made a decision to lease the Port of Newcastle while it was conducting its negotiation with Mayfield. Consequently, the government had not stopped carrying on a business for the purposes of the CCA before a decision to lease the port was announced on November 5 2013. However, the ACCC claims the government likely stopped carrying on a business for the purposes of the CCA due to its policy announced on July 27 2012 not to develop a container terminal at the Port of Newcastle. This claim is disproven by the public record.

 

The ACCC’s letters dated June 7 2013 and February 23 2017 refer.

 

Updated November 9 2019

 

Public, parliament misled over container terminal plans

 

The public and the parliament were told in 2012 that it was NSW government policy not to develop a container terminal at the Port of Newcastle, when the government intended that the developer of a container terminal at the Port of Newcastle would pay the government for container volumes exceeding a threshold level.

 

The government concealed the fact that a container terminal at the Port of Newcastle may be developed immediately.

 

The lessee of Port Botany and Port Kembla, NSW Ports, claims it did not know how the government was funding its contractual obligation to pay financial support for container volumes exceeding the threshold level at the Port of Newcastle.

 

In 2012, the government had been negotiating since 2010 with Newcastle Stevedores Consortium (NSC) to develop a dedicated TEU container terminal at the Port of Newcastle, with minimum capacity for one million TEUs a year. In August 2013, the government amended the Term Sheets with NSC to require payment from Mayfield Development Corporation (Mayfield) for container volumes exceeding a threshold level, due to Mayfield’s activities in the Port of Newcastle. As a subsidiary of NSC, Mayfield was established to develop a container terminal.

 

The ACCC also claims it had no knowledge that the government was negotiating with NSC to develop a container terminal. The ACCC claims it is government policy not to develop a container terminal at the Port of Newcastle. This is despite the fact that the ACCC is currently taking legal action in the Federal Court against NSW Ports due to the government’s policy for developing a container terminal at the Port of Newcastle.

 

Parliament was informed on October17 2013 that “we [the government] do not envisage that any compensation will need to be put in place [to pay NSW Ports]”. Parliament was so informed because the government had required Mayfield to provide the funds. However, requiring Mayfield to provide the funds was likely to contravene the “Competition and Consumer Act 2010” (CCA). By terminating its negotiation with NSC in November 2013, the government avoided informing the public, parliament, NSW Ports and ACCC that it had been negotiating with NSC, with terms that were likely to contravene the CCA.

 

The parliament did not authorise the government’s plans for leasing Port Botany, Port Kembla and the Port of Newcastle because the government had advised that a container terminal may not be developed at the Port of Newcastle, when a container terminal may be developed. The lease arrangements for all three ports are unlawful because the government’s actions are the opposite of what it informed the parliament when the “Ports Assets (Authorised Transactions) Act 2012” was being legislated in November 2012.

 

A Federal Court order restraining NSW Ports from claiming payment from the government is not required because the lease arrangements, which are the basis for NSW Ports claiming payment, are unlawful.

 

The government’s actual container terminal development policy was exposed by “The Newcastle Herald” in July 2016.

 

Updated November 8 2019

 

Ports’ lease arrangements are unlawful, unenforceable

 

The NSW government concealed its actual container terminal policy when the “Ports Assets (Authorised Transactions) Act 2012” was being legislated in November 2012. The government’s announced policy was the direct opposite of its actual policy.

 

Consequently, the “Ports Assets (Authorised Transactions) Act 2012” did not authorise the government to undertake actions that were the direct opposite of its announced actions. The public and parliament were misled about the government’s intentions for leasing Port Botany and Port Kembla in May 2013, followed by the Port of Newcastle in May 2014.

 

The ports’ leasing arrangements are unlawful and unenforceable.

 

Actual policy is:

 

At the Port of Newcastle, a dedicated container terminal for TEU container ships, and a new multi-purpose container terminal for general cargo ships, may be developed immediately. A development condition is that the developer must pay the government for TEU container volumes exceeding 30,000 a year as at July 1 2013, increasing by six per cent per year until 2063. The developer is the government’s source of funds for paying financial support to the lessee of Port Botany and Port Kembla for container volumes exceeding the annual threshold level at the Port of Newcastle. The amount of payment for every TEU exceeding the threshold is the average wharfage charged for a TEU at Port Botany.

 

Announced policy is:

 

Once Port Botany reaches capacity, Port Kembla will be developed as the next long-term container facility. The development of a dedicated container terminal at the Port of Newcastle will be considered when both Ports Botany and Kembla become fully developed. However, existing container facilities at the Port of Newcastle which serve shipping lines carrying containers may continue to grow at an organic rate.

 

Between 2010 and August 2012, Newcastle Port Corporation (NPC) was negotiating with Newcastle Stevedores Consortium (NSC) to develop a dedicated container terminal for TEU container ships, with annual capacity for one million TEUs, and, a new multi-purpose container terminal for general cargo ships.

 

In August 2012, the government removed the dedicated container terminal for TEU container ships component. However, negotiations continued for developing a new multi-purpose container terminal for general cargo ships.

 

In August 2013, the government re-included the dedicated container terminal for TEU container ships component. Mayfield Development Corporation (Mayfield), a subsidiary of NSC, was required to “make the government whole” for any government payment paid to the lessee of Port Botany and Port Kembla, NSW Ports, “due to the activities of Mayfield in the Port of Newcastle”. Mayfield was established by NSC to build and operate the new facilities.

 

In August 2019, Mayfield commenced proceedings in the Federal Court against NSW Ports. Mayfield alleges that its negotiation with NPC was terminated by the government due to the lease arrangements between NSW Ports and the government for Port Botany and Port Kembla.

 

The negotiation between NPC and NSC could not proceed because the lease arrangements for Port Botany and Port Kembla were unlawful.

 

In December 2018, the ACCC instituted proceedings in the Federal Court against NSW Ports for making agreements with the NSW government that the ACCC alleges had an anti-competitive purpose and effect. The ACCC is currently not alleging that the government contravened the “Competition and Consumer Act 2010” ( CCA) because a legal loophole enabled the government to lease the port outside the operation of the CCA.

 

Regardless of the CCA, the ACCC’s action against NSW Ports is not possible because the lease arrangements are unlawful and unenforceable.

 

When the Port of Newcastle was leased, the agreement required the lessee, Port of Newcastle Investments, to reimburse the government for payment paid to NSW Ports. The ACCC considers that the reimbursement requirement makes the development of a new container terminal at Newcastle uneconomic, undermining the potential for competition.

 

In July 2019, NSW Ports commenced proceedings against Port of Newcastle Investments and the NSW government, alleging that the Port of Newcastle agreement is anti-competitive. As a consequence, Port of Newcastle Investments and the government have become respondents to the ACCC’s proceedings.

 

Regardless of the CCA, NSW Ports’ action against Port of Newcastle Investments and the NSW government is not possible, because the lease arrangements are unlawful and unenforceable.

 

Existing container terminal facilities

 

General cargo ships carry containers using existing facilities at the Port of Newcastle, where container is defined 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

 

Actual container terminal policy concealed from NSW Ports

 

The government concealed its actual container terminal policy from NSW Ports. The consequence of disclosing the policy was that NSW Ports would find out that the government’s announced policy was not its actual policy.

 

By terminating NPC’s negotiation with NSC in November 2013, the government avoided the need to tell NSW Ports that NSC was the intended source of funds to pay NSW Ports, in likely contravention of the CCA.

 

NSW Ports says it did not know about the penalty before “The Newcastle Herald’s” disclosure in July 2016.

 

Government did not “envisage” paying NSW Ports

 

The Hon Duncan Gay’s statement to parliament on October 17 2013, was unequivocal: “We do not envisage that any compensation will need to be put in place.” Mr Gay had been asked, in his then capacity of 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?”

 

Mr Gay omitted any reference to the negotiation between NPC and NSC.

 

Mr Gay disclosed that the government had instructed Morgan Stanley in 2012 to include a “cap on numbers” at the Port of Newcastle. Morgan Stanley was conducting a scoping study for the government into leasing Port Botany and Port Kembla. “Cap on numbers” was a reference to the threshold level of container volumes at the Port of Newcastle before payment was required from the operator of an existing or new container terminal at the Port of Newcastle.

 

In October 2013, the Board and management of NPC would have been aware that the payment requirement in the Term Sheets with NSC was likely to contravene CCA. At that time, the ACCC believed that the CCA did not apply to NPC in respect of developing a new container terminal.

 

Eleven days after Minister Gay’s disclosure, the government announced, on October 28, that no decision had been made to lease the Port of Newcastle. This removed any doubt that the CCA applied to the decision to include the payment requirement in the Term Sheets. As soon as the government made the decision to lease the port, which it announced on November 5, it became exempt from the CCA. The government terminated NPC’s negotiation with NSC to prevent the public, parliament and ACCC from discovering that the payment requirement had been included in the Term Sheets.

 

The ACCC still claims it is government policy not to develop a container terminal at the Port of Newcastle. The difference between the government’s actual container terminal policy and its announced policy continues to  escape the ACCC.

 

Treasurer denies “container cap”

 

Member for Newcastle, Mr Tim Crakanthorp, asked the Treasurer, The Hon Dominic Perrottet Question On Notice 1201 on September 17: “When the Government signed lease agreements for Port Botany and Port Kembla on 30 May 2013, what was the Government’s source of funds to meet its contractual commitment to pay the lessee for container traffic at the Port of Newcastle above the Government’s minimal specified cap?”

 

Mr Perrottet answered on October 22: “There is no minimal specified cap and no compensation payments to NSW Ports have been incurred under the respective Port Commitment Deeds for Port Botany and Port Kembla. The matter is otherwise subject to the sub judice convention.”

 

ACCC was consulted says Hon Gladys Berejiklian

 

The Hon Gladys Berejiklian MP assured parliament on September 27 2016 that “the Government’s transaction team engaged extensively with the ACCC from the early stages of all the port transactions regarding the competition and regulatory framework supporting the transactions”.

 

The government concealed its actual container terminal policy until it was revealed in July 2016 by “The Newcastle Herald”. NSW Ports says it did not know that the government’s source of funds was the operator of a container terminal at the Port of Newcastle before “The Newcastle Herald’s” disclosure.

 

Federal Court order

 

The Federal Court made an order on October 11 2019 in the ACCC’s action against NSW Ports, which included the following:

 

“52.3

… at all relevant times prior to 31 May 2013 …

(E) …. any prospect that the operator of Port Kembla and/or the operator of the Port of Newcastle could materially increase supply of Container Services including by development and use of a Container Terminal at Port Kembla and/or the Port of Newcastle was so slight or hypothetical as not to be a relevant competitive constraint on the operator of Port Botany.

(F) the policy position of the State of New South Wales was that any new Container Terminal at Port Kembla or the Port of Newcastle would not be built until Port Botany reached full capacity.”

 

At all relevant times prior to May 31 2013, the developer of a container terminal at the Port of Newcastle was Mayfield Development Corporation Pty Ltd (Mayfield). Mayfield was the government’s source of funds to pay NSW Ports for container volumes exceeding the threshold level due to the activities of Mayfield in the Port of Newcastle. There was no other source of funds.

 

From the date of its announcement on July 27 2012, the government’s announced container terminal policy was not its actual container terminal policy. 

 

Updated September 26 2019 

Government supports massive increase in container trucks

 

The NSW government does not support removing container trucks from Sydney’s roads.

 

The government thinks it is not appropriate to rail all freight currently entering Sydney by road, and, to rail all Port Botany container freight.

 

The government says that rail access to a container terminal is not a key consideration for regional economic growth.

 

The government is unfazed by the Moorebank Intermodal Terminal Company Ltd estimation that by 2040, there will be six million container trucks movements a year through Port Botany, which will reduce to five million container trucks, if the Moorebank Intermodal Terminal operates at full capacity. Current container truck movements through Port Botany are one million a year.

 

The government can’t say how much it will cost to upgrade the local Moorebank road network to service the intermodal terminal. The government claims that the intermodal terminal is still at the planning stage, which means that “the final cost for road improvements is not yet known”.

 

“The government has started early planning for a future upgrade and extension of Cambridge Avenue, Glenfield. This upgrade will improve access to the Moorebank Intermodal Terminal and address the long term population and employment growth in the Liverpool Moorebank sub region,” the government says.

 

However, the government can’t say how much Moorebank Intermodal Company is required to contribute to road improvements.

 

The government is unable to identify the capacity of the rail freight network serving the Moorebank Intermodal Terminal.

 

The government accepts that removing freight from Sydney’s existing rail network will enable the capacity to be used for passenger services “subject to rolling stock, crew availability and demand”.

 

Stage one of the Northern Sydney Freight Corridor will reach capacity by 2026, but stages 2 and 3 to create the equivalent of a dedicated rail freight line between Newcastle and Strathfield are yet to be confirmed. “The scope of future stages of the Northern Sydney Freight Corridor will be subject to demand projections and business cases,” the government says.

 

The government is unable to identify how the $800 million cost of the Maldon-Dombarton rail freight line will be funded.

 

The government confirms that the Australian government announced a funding commitment of $400 million for upgrading the rail freight line into Port Botany, including the Cabramatta Loop Project on the Southern Sydney Freight Line.

 

The government “has committed to investigate” a new rail bridge over the Hawkesbury River.

 

The government is yet to acknowledge that the “Ports Assets (Authorised Transactions) Act 2012” did not authorise the government to:

 

(a) lease Port Botany and Port Kembla in May 2013 with a 50-year unfunded contractual obligation to pay financial support to the lessee for any container traffic at the Port of Newcastle;

 

and,

 

(b) lease the Port of Newcastle in May 2014 for the purpose of passing the lessee the government’s contractual obligation to pay financial support to the lessee of Port Botany and Port Kembla for any container traffic at the Port of Newcastle.

 

A rail freight bypass of Sydney – between Newcastle, Badgery’s Creek and Port Kembla – could be paid for by developing a container terminal at the Port of Newcastle and railing all containers for the entire NSW market.

 

 A better way

 

Industry super funds own 80 percent of NSW Ports and 50 percent of Port of Newcastle Investments. These funds represent more than six million Australian workers and retired workers. Their responsibility to their members obliges then to act in the best interests of the Australian economy. It is in the best interests of the economy to transfer container terminal operations from Port Botany to the Port of Newcastle and Port Kembla, enabled by building a rail freight line between the Port of Newcastle, Badgery’s Creek and Port Kembla.

 

A bi-partisan approach between the government and the opposition in the Parliament is required. Collaboration between NSW Ports and Port of Newcastle Investments is required. Development of a commercial arrangement to enhance all investors’ commercial returns by properly engaging the ACCC, is required. The objective is to develop an economic development strategy that is demonstrably better for the NSW economy than current arrangements.

 

This is what an investigation will involve:

 

Funding

 

Railing containers, rather than trucking them, will pay for privately funding, building and operating a rail freight bypass of Sydney, between the Port of Newcastle, Badgery’s Creek and Port Kembla. The compelling benefits of a rail-based freight transport strategy were provided in the “Deloitte Access Economics” report “The True Value of Rail, in June 2011.

 

Intermodal terminals

 

Intermodal terminals would be established along the rail freight line to maximise logistics efficiency. Intermodal terminals established in regional areas would enable long term planning of the state’s future development based on rail transportation of containerised goods.

 

Regional economic development

 

Rail-based access to a container port is a prerequisite for regional economic development because 95% of world trade in goods is conducted using containers. Linked container terminals at the Port of Newcastle and Port Kembla would enable Sydney firms to profitably relocate to regional areas to take advantage of under-utilised regional infrastructure.

 

WestConnex

 

Around 85% of Port Botany’s containers are trucked. Currently, there are one million container truck movements a year through Port Botany. By 2040, there will be six million container truck movements a year. Even if the Moorebank Intermodal Terminal operates at full capacity, it will reduce the total by a mere one million a year.

 

A container truck carrying a full container in the M5 East west-bound tunnel is the equivalent of six passenger cars. A container truck in the east-bound M5 East tunnel is the equivalent of three passenger cars. Without WestConnex, there is no road capacity to handle the predicted increase in container truck movements through Port Botany.

 

However, it is necessary to connect WestConnex to Port Botany. This significant cost can be avoided if all containers are railed from the Port of Newcastle, with back-up from Port Kembla.

 

Port Botany

 

Port Botany would be closed as a container port after capacity was developed at Newcastle and Port Kembla, and the rail freight bypass was completed. While this work was underway, Botany freight would be railed via Glenfield to intermodal terminals at Badgery’s Creek or Eastern Creek, once built.

 

Increased rail passenger capacity

 

Removing freight from Sydney’s existing rail network would enable the capacity to be used for passenger services. Likewise removing freight from the existing rail lines between Newcastle and Sydney, and Port Kembla and Sydney, would allow the capacity to be used for passenger services. The economic value of converting rail freight capacity to passenger capacity is examined in “The True Value of Rail”.

 

Moorebank Intermodal Terminal

 

There would be no intermodal terminal at Moorebank because the existing rail freight capacity would be used for passenger services.

 

Northern Sydney Freight Corridor

 

The $1 billion “Northern Sydney Freight Corridor Stage One” will reach capacity by 2026. Stages 2 and 3 – to create the equivalent of a dedicated freight line between Newcastle and Strathfield – will cost at least $5 billion. This cost would be saved by building a rail freight bypass that would also have capacity to carry freight that would otherwise be trucked into Sydney, not only from the north but also from the south and west.

 

Maldon-Dombarton freight line

 

The $800 million cost of the Maldon-Dombarton freight line – connecting Port Kembla to the main southern line, extending to Badgery’s Creek and the Port of Newcastle – would be met by railing containers after Port Botany was closed.

 

Western Sydney Freight Line

 

There would be no need to build the $1 billion Western Sydney Freight Line, between Chullora and Eastern Creek.

 

Port Botany Rail Freight Line

 

There would be no need to spend $400 million upgrading the Port Botany rail freight line.

 

Hawkesbury River bridge

 

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

 

Sydney Airport

 

Removing container ships from Port Botany would enable the short parallel runway at Sydney airport to be extended from 2600 metres to 4000 metres.

 

……………………………………………

Container terminal “Concept Plan” approval

In 2010, Newcastle Port 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.

 

Timeline

 In 2009, 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 in 2010.

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. 

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”.

Developing container terminal policy

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.

News Now