Updated April 13 2019

 

ACCC action against NSW Ports

 

On what date did the ACCC become aware of the NSW State Government’s policy in 2012 for developing a container terminal at the Port of Newcastle?

 

Unless the ACCC can prove that NSW Ports knew about the policy before entering into the Port Commitment Deeds (PCDs) for Port Botany and Port Kembla on May 30 2013, how can the ACCC sustain its allegation that NSW Ports contravened the “Commonwealth Competition and Consumer Act 2010” (Competition Act) when the policy was incorporated into the PCD for the Port of Newcastle on May 30 2014?

 

NSW Ports declared that it became aware of the policy after reading a report published by “The Newcastle Herald” on July 28 2016.

 

Under the policy, the developer of a container terminal at the Port of Newcastle is required to reimburse the State for any cost the State incurs in paying compensation to the lessee of Port Botany and Port Kembla, for container traffic at the Port of Newcastle above a minimal specified cap.

 

As confirmed by the (former) Minister for Roads and Ports, The Hon Duncan Gay MLC, on October 17 2013, the State instructed Morgan Stanley in 2012 to incorporate the policy in a scoping study being conducted for leasing Port Botany and Port Kembla.

 

The ACCC did not acknowledge the policy when it wrote to the (former) Federal  Member for Lyne, Mr Rob Oakeshott MP, on June 7 2013. The ACCC must have been unaware of the policy.

 

Mr Oakeshott requested the ACCC’s response to the advice I gave him on April 22 2013 that “the New South Wales government’s decision that there will be no container terminal at the Port of Newcastle is anti-competitive and warrants examination by the Australian Competition and Consumer Commission”.

 

The ACCC failed to uncover the State’s policy for developing a container terminal at the Port of Newcastle, even though it had already been incorporated in the PCDs for Port Botany and Port Kembla. The ACCC’s position is not credible.

 

The ACCC also refuses to admit that the State incorporated its policy in the Term Sheets with Newcastle Stevedores Consortium (NSC). NSC had been negotiating with the State since 2010 to develop a container terminal at the Port of Newcastle. Presumably, the ACCC has not seen the Term Sheets.

 

The State terminated its negotiation with NSC in November 2013 because the NSW Treasury Department could not advise State Cabinet that the Term Sheets included a provision that was likely to contravene the Competition Act.

 

It is undeniable that the PCDs for Port Botany, Port Kembla and the Port of Newcastle, are all consequences of the State’s policy for developing a container terminal at the Port of Newcastle.

 

Now that the ACCC is taking legal action against NSW Ports because the State implemented its policy, is the ACCC alleging that NSW Ports colluded with the State to contravene the Competition Act?

….

Updated April 10 2019

 

There is a simple explanation why Newcastle does not have a container terminal.

 

Australia’s competition watchdog, the ACCC, believed the State Government when it disclosed a new policy for not developing a container terminal at the Port of Newcastle in 2012.

 

In July 2012, the State announced that the next container terminal in NSW would be developed at Port Kembla, after Port Botany reached capacity.

 

The ACCC said that the Competition Act stopped applying to the development of a container terminal at the Port of Newcastle in July 2012, because the State had decided not to develop a container terminal.

 

According to the ACCC, the Competition Act did not apply to an activity the State decided it would not undertake.

 

At that time, the ACCC did not know that the State had an undisclosed policy for developing a container terminal at the Port of Newcastle.

 

The undisclosed policy was that the developer of a container terminal would be required to reimburse the State for the cost of any compensation payment made by the State to a lessee of Port Botany and Port Kembla, for container traffic at the Port of Newcastle above a minimal specified cap.

 

The State’s policy was an instruction which the State gave its financial adviser, Morgan Stanley, in 2012 for conducting a scoping study into leasing Port Botany and Port Kembla.

 

The ALP opposition got wind of the undisclosed policy in late 2013.

 

Labor’s Adam Searle asked the then Minister for Roads and Ports, Duncan Gay, in the Legislative Council on October 17 2013: “How much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?”

 

Minister Gay answered that a “cap on numbers” at the Port of Newcastle was an instruction the State gave Morgan Stanley in 2012. Mr Gay was referring to the State’s undisclosed policy for a container terminal at the Port of Newcastle.

 

Morgan Stanley completed its study by mid-2012. The decision to lease Port Botany and Port Kembla was announced on the same date, July 27 2012, that the policy for not developing a container terminal at the Port of Newcastle was announced.

 

In 2012, the State was negotiating with Newcastle Stevedores Consortium (NSC) to develop a container terminal at the Port of Newcastle.

 

The negotiation commenced in 2010. The previous ALP State Government had approved Newcastle Port Corporation’s request to develop a container terminal. A tender was conducted by Newcastle Port Corporation.

 

NSC’s tender was accepted and contract negotiations commenced in 2010.

 

Once Port Botany and Port Kembla were leased to NSW Ports in May 2013, the State implemented its container terminal development policy by changing its Term Sheets with NSC.

 

However, the State did not disclose to NSW Ports its policy for developing a container terminal at the Port of Newcastle.

 

So far as NSW Ports was concerned, the State’s policy was for not developing a container terminal, whereby the Competition Act did not apply.

 

Requiring NSC to comply with the State’s policy for developing a container terminal could not be disclosed to the ACCC, without revealing the policy.

 

If the ACCC knew about the State’s policy for developing a container terminal, it would have advised the State that the policy was likely to be within the operation of the Competition Act.

 

The ACCC would have advised the State that the policy was likely to contravene the Competition Act.

 

The State terminated its confidential negotiation with NSC in November 2013, without the ACCC being any the wiser.

 

The State again implemented its policy for developing a container terminal at the Port of Newcastle, when the port was leased to Port of Newcastle Investments Pty Ltd (PoN) in May 2014.

 

The ACCC still had not been informed.

 

The ACCC waited more than four years before taking legal action against NSW Ports in the Federal Court.

 

In December 2018, the ACCC alleged that NSW Ports contravened the Competition Act because the State’s policy for developing a container terminal was included in the lease agreement with PoN.

 

NSW Ports was quick to point out that it had no knowledge of the State’s policy for developing a container terminal until it was revealed by “The Newcastle Herald” in July 2016.

 

NSW Ports said that the State’s leasing agreement for the Port of Newcastle did not involve NSW Ports.

 

NSW Ports cannot be held responsible for the State concealing its actual policy from NSW Ports, the ACCC, the Parliament and the public.

 

The State is responsible.

….

Updated April 8 2019

 

Evidence on public record shows ports lease agreements likely to contravene Competition Act

 

NSW Parliament was told by the Minister for Roads and Ports, on October 17 2013, that a “cap on numbers” at the Port of Newcastle was an instruction the State Government (State) gave Morgan Stanley in 2012 for conducting a scoping study into leasing Port Botany and Port Kembla. The Hon Duncan Gay MLC was answering a question without notice: “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 was referring to the State’s undisclosed policy decision in 2012 that the developer of a container terminal at the Port of Newcastle was required to reimburse the State for the cost of any compensation payment made to a lessee of Port Botany and Port Kembla, for container traffic at the Port of Newcastle above a minimal specified cap.

 

The State did not disclose its policy to the public or the Parliament. NSW Ports says it knew nothing about the policy until it was revealed by “The Newcastle Herald” on July 28 2016.

 

The State announced a policy for not developing a container terminal at the Port of Newcastle on July 27 2012. The State therefore had two policies in 2012: an undisclosed policy for developing a container terminal, and a disclosed policy for not developing a container terminal.

 

The ACCC said on, June 7 2013, that the State was unlikely to be carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) because of its disclosed policy for not developing a container terminal. The ACCC had no knowledge of the State’s undisclosed policy for developing a container terminal.

 

When Port Botany and Port Kembla were leased to NSW Ports on May 30 2013, the State implemented its undisclosed policy for developing a container terminal at the Port of Newcastle. The State included its undisclosed policy for developing a container terminal in its Term Sheets with Newcastle Stevedores Consortium (NSC). NSC had been conducting a negotiation with the State since 2010 for developing a container terminal.

 

The State terminated its negotiation with NSC in November 2013.

 

The State did not stop carrying on a business for the purposes of the Competition Act in 2012 because its undisclosed policy for developing a container terminal at the Port of Newcastle was its actual policy, as proven by the Term Sheets with NSC.

 

The State’s lease agreements with NSW Ports for Port Botany and Port Kembla are anti-competitive consequences of the State’s undisclosed policy for developing a container terminal at the Port of Newcastle.

 

The State’s undisclosed policy for developing a container terminal at the Port of Newcastle was included in the State’s lease agreement with Port of Newcastle Investments Pty Ltd in May 2014.

 

The Port of Newcastle lease agreement is an anti-competitive consequence of the State’s undisclosed policy for developing a container terminal at the Port of Newcastle.

 

Based on the evidence on the public record, the lease agreements for all three ports are likely to contravene the Competition Act.

….

 

Updated April 7 2019

State Government had no funds to pay NSW Ports

 

The State of NSW (State) leased Port Botany and Port Kembla to NSW Ports on May 30 2013 without publicly disclosing a contractual commitment to pay compensation for container traffic at the Port of Newcastle above a minimal specified cap.

 

The State was not authorised to use consolidated revenue to pay NSW Ports, nor was it authorised to use the proceeds of the ports’ leases.

 

The State concealed its decision that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for the cost of paying compensation, because it had announced, on July 27 2012, a policy for not developing a container terminal at the Port of Newcastle.

 

The State’s decision to require reimbursement from the developer of a container terminal at the Port of Newcastle, was given as an instruction to Morgan Stanley in 2012, for conducting a scoping study into leasing Port Botany and Port Kembla.

 

The NSW Treasurer announced on June 18 2013: “Today I can announce the Government intends to proceed to a long-term lease of the Port of Newcastle, the largest coal port in the world, subject to a scoping study. The success of Port Botany and Port Kembla dictates that we act now.”

 

After the Port of Newcastle announcement, the State amended its Term Sheets with Newcastle Stevedores Consortium (NSC), the State’s preferred developer of a container terminal at the Port of Newcastle, to require NSC to reimburse the State for the cost of any compensation payment made to NSW Ports, due to NSC’s activities in the Port of Newcastle.

 

The State decided to lease the Port of Newcastle so that NSC could be required to reimburse the State outside the operation of the “Commonwealth Competition and Consumer Act 2010” (Competition Act). The Federal Court has ruled that a government that is leasing a public asset is no longer carrying on a business for the purposes of the Competition Act in respect of that asset.

 

The State did not disclose to the ACCC its policy for developing a container terminal at the Port of Newcastle, because the ACCC had decided the State was unlikely to be carrying on a business for the purposes of the Competition Act, due to the State’s announcement, on July 27 2012, of a policy for not developing a container terminal at the Port of Newcastle.

 

The ACCC has not disclosed its reason for still claiming that the State’s policy is for not developing a container terminal at the Port of Newcastle.

 

The ACCC’s current legal action against NSW Ports relies on the ACCC being able to prove that NSW Ports was aware of the State’s policy for developing a container terminal at the Port of Newcastle, as at May 30 2013. NSW Ports denies being aware until the State’s policy was revealed by “The Newcastle Herald” in July 2016.

 

The State terminated its negotiation with NSC in November 2013.

 

The State may not pay compensation to NSW Ports without having a lawful source of funds.

 

It was a likely contravention of the Competition Act for the developer of a container terminal at the Port of Newcastle to be the State’s source of funds as at May 30 2013.

 

….

 

Updated April 4 2019

Questions for ACCC over anti-competitive ports leases

 

Will the ACCC acknowledge that in 2012 the State Government of NSW (State) had been negotiating with Newcastle Stevedores Consortium (NSC) since 2010 over terms for the development of a container terminal at the Port of Newcastle?

 

Will the ACCC acknowledge that the State instructed Morgan Stanley in 2012 that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for the cost of any compensation payment made by the State to a future lessee of Port Botany and Port Kembla, for a container traffic at the Port of Newcastle above a minimal specified cap?

 

Did the ACCC know on May 30 2013 that the State had decided to require the developer of a container terminal at the Port of Newcastle to reimburse the State for the cost of any compensation payment made by the State to NSW Ports, for container traffic at the Port of Newcastle above a minimal specified cap?

 

If yes, did the ACCC advise the State and NSW Ports that the compensation provisions in the 2013 Port Commitment Deeds for Port Botany and Port Kembla were likely to contravene the “Commonwealth Competition and Consumer Act 2010” (Competition Act)?

 

Why does the ACCC claim that the State was unlikely to be carrying on a business for the purposes of the Competition Act from at least the date of its announcement, on July 27 2012, of a decision not to develop a container terminal at the Port of Newcastle?

 

Why does the ACCC claim that the Competition Act does not apply to the State in respect of the development of a container terminal at the Port of Newcastle, when the ACCC is taking legal action against NSW Ports in respect of the development of a container terminal at the Port of Newcastle?

 

Does it encourage competition in the supply of port services in NSW for the State to have an official policy not to develop a container terminal at the Port of Newcastle, when the State has a contract setting out the State’s terms to develop a container terminal at the Port of Newcastle?

 

Is it the State’s policy not to develop a container terminal at the Port of Newcastle or to develop a container terminal at the Port of Newcastle?

 

Does the Competition Act apply to the State in respect of the State’s decision in 2012 that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for the cost of any compensation payment made by the State to a future lessee of Port Botany and Port Kembla, for a container traffic at the Port of Newcastle above a minimal specified cap?

 

If not, why not?

….

Updated April 4 2019

 

ACCC action against NSW Ports is unfounded

 

The ACCC is incorrect to allege that the reimbursement provision in the 2014 Port Commitment Deed for the Port of Newcastle is a consequence of the 2013 Port Commitment Deeds for Port Botany and Port Kembla.

 

The Port Commitment Deed for the Port of Newcastle is a consequence of the NSW State Government (State) not having a source of funds to pay compensation to a lessee of Port Botany and Port Kembla before the State decided to privatise the Port of Newcastle and before Port Botany and Port Kembla were leased to NSW Ports in May 2013.

 

The State decided in 2012 to amend its legally binding Term Sheets with Newcastle Stevedores Consortium (NSC) to require NSC to reimburse the State for any payment of compensation made by the State to a future lessee of Port Botany and Port Kembla, due to the activities of NSC in the Port of Newcastle.

 

The lessee of Port Botany and Port Kembla would be paid compensation by the State for container traffic at the Port of Newcastle above a minimal specified cap.

 

The State instructed its financial adviser, Morgan Stanley, to take the requirement into consideration for the scoping study it was conducting into leasing Port Botany and Port Kembla.

 

In 2012, the State was negotiating exclusively, under contract, with NSC to develop a container terminal at the Port of Newcastle.

 

NSC had won the State’s tender in 2010 to be the State’s “preferred proponent” of a container terminal at the Port of Newcastle.

 

The State’s decision in 2012 to change its Term Sheets with NSC to require reimbursement, was likely to be illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

The State did not disclose this decision to the public, the Parliament, or the ACCC.

 

The State dealt with a likely breach of the Competition Act by publicly announcing, on July 27 2012, that the next container terminal to be developed in NSW would be at Port Kembla, not the Port of Newcastle. 

 

As a result of the ACCC not being informed, the ACCC still claims that the State is unlikely to have been carrying on a business for the purposes of the Competition Act from at least July 27 2012, because of the State’s decision not to develop a container terminal at the Port of Newcastle.

 

The State cannot have a policy not to develop a container terminal at the Port of Newcastle, because the amended Term sheets with NSC provided the State’s condition for developing a container terminal at the Port of Newcastle.

 

The ACCC is obliged to acknowledge that the State was likely to be carrying on a business for the purposes of the Competition Act when the State decided in 2012 to amend the Term Sheets with NSC to require reimbursement.

 

The State leased Port Botany and Port Kembla to NSW Ports on May 30 2013.

 

The Port Commitment Deeds did not disclose the State’s source of funds to make the compensation payment.

 

The State represented to NSW Ports that the State had the capacity to provide the funds to meet the compensation payment commitment.

 

When the ACCC made no objection to the Port Commitment Deeds, NSW Ports was entitled to believe that the ACCC approved the Port Commitment Deeds and that the State had a legal source of funds to meet its commitment.

 

The ACCC cannot take action against NSW Ports for conduct by the State which NSW Ports knew nothing about.

 

NSW Treasury was responsible for the decision to include the reimbursement requirement in the State’s Term Sheets with NSC.

 

The Term Sheets proved the State had a policy for the development of a container terminal at the Port of Newcastle.

 

Treasury could not recommend to State Cabinet a contract that included the State’s condition for developing a container terminal at the Port of Newcastle when the State had announced a policy not to develop a container terminal at the Port of Newcastle.

 

Treasury could not advise State Cabinet that the Term Sheets were approved by the ACCC because the ACCC knew nothing about them.

 

The Term Sheets proved that the State’s container terminal policy announced on July 27 2012 was not the State’s true policy.

 

When the State terminated its negotiation with NSC in November 2013, it left the State without a source of funds to meet its contractual commitment to NSW Ports.

 

The State had no authority under the “Ports Assets (Authorised Transactions) Act 2012” to pay NSW Ports from consolidated revenue.

 

The State was not authorised by the “Ports Assets (Authorised Transactions) Amendment Act 2013” to privatise the Port of Newcastle for the purpose of providing a source of funds with which to pay NSW Ports compensation.

….

Updated March 30 2019

 

Federal Court vacates order for NSW Ports to provide defence

 

NSW Ports is no longer required to file a defence against the ACCC’s claim of acting illegally under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

A Federal Court order requiring the defence to be filed by March 28 was vacated.

 

NSW Ports said in January that it did not know until 2016 that the NSW State Government (State) required the lessee of the Port of Newcastle to reimburse the State for any compensation the State paid to NSW Ports for container traffic at the Port of Newcastle, above a minimal specified cap.

 

NSW Ports learned about the requirement from a report in “The Newcastle Herald” on July 28 2016.

 

The ACCC said on June 7 2013 that the Competition Act was unlikely to apply to the development of a container terminal at the Port of Newcastle from at least July 2012. It said that the State was unlikely to be carrying on a business for the purposes of the Competition Act because it had decided that the next container terminal to be developed in NSW would be at Port Kembla, after Port Botany reached capacity.

 

According to the ACCC, the State decided not to develop a container terminal at the Port of Newcastle.

 

The ACCC declines to explain why it is taking action against NSW Ports in respect of a container terminal development at the Port of Newcastle, while claiming that the State has a policy not to develop a container terminal at the Port of Newcastle.

 

The fact that the ACCC is taking action against NSW Ports in respect of a container terminal development at the Port of Newcastle, means that the ACCC accepts it is not State policy not to develop a container terminal at the Port of Newcastle.

 

The State instructed Morgan Stanley in 2012 that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for any payment of compensation the State made to a future lessee of Port Botany and Port Kembla, if container traffic at the Port of Newcastle was above a minimal specified cap.

 

The NSW Parliament did not authorise Port Botany and Port Kembla to be leased with a condition that was illegal under the Competition Act.

 

The ACCC cannot take action against NSW Ports under the Competition Act if the lease condition is illegal under the “Ports Assets (Authorised Transactions) Act 2012”.

 

The Port of Newcastle was leased to provide the State with a source of funds to pay NSW Ports for container traffic at the Port of Newcastle.

 

The NSW Parliament did not authorise the port to be leased for this purpose.

 

The State did not disclose the Port of Newcastle container terminal development condition to the public, the Parliament or, presumably, the ACCC.

 

March 30 2019

….

Updated March 28 2019

 

ACCC action against NSW Ports based on public facts

 

The ACCC’s legal action against NSW Ports in the Federal Court is based on facts on the public record.

 

The key legal fact is that the primary leasing arrangement for Port Botany and Port Kembla is not authorised by the ”Ports Assets (Authorised Transactions) Act 2012”.

 

Section 30, “Compensation not payable”, does not authorise the State Government of NSW (State) to use consolidated revenue to pay compensation to the lessee of Port Botany and Port Kembla, for any container traffic at the Port of Newcastle.

 

When Port Botany and Port Kembla were leased to NSW Ports in May 2013, the State had no source of funds to meet its contractual commitment to pay compensation, in respect of container traffic at the Port of Newcastle.

 

In 2012, the State was negotiating with Newcastle Stevedores Consortium (NSC) to develop a container terminal at the Port of Newcastle.

 

The negotiation had been underway since 2010.

 

Also in 2012, the State’s financial adviser, Morgan Stanley, had been engaged to conduct a scoping study into privatising Port Botany and Port Kembla, by offering 99-year leases to the highest bidder.

 

The State’s negotiation with NSC involved the development of a multi-purpose terminal, including a requirement for a container terminal with minimum capacity of one million TEUs a year.

 

In 2012, the State wanted to prevent the Port of Newcastle competing with Port Botany in the container port market.

 

The State‘s objective was to maintain Port Botany’s monopoly position.

 

The decision the State took in 2012 was to make a condition for developing a container terminal at the Port of Newcastle that would render a container terminal uncompetitive with Port Botany.

 

The condition was that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for any payment of compensation the State made to a lessee of Port Botany and Port Kembla, if container traffic was above a minimal specified cap.

 

The State instructed Morgan Stanley to include the condition in the scoping study.

 

After Port Botany and Port Kembla were leased to NSW Ports in May 2013, the State required NSC to comply with the condition for developing a container terminal at the Port of Newcastle.

 

When the State decided on the Newcastle container terminal condition in 2012, it did not inform the public, the Parliament, or the ACCC.

 

The ACCC would have advised the State in 2012 that the condition was likely to be anti-competitive and illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

In December 2018, the ACCC commenced proceedings against NSW Ports in the Federal Court, alleging that the Newcastle container terminal condition is anti-competitive and illegal under section 45 of the Competition Act.

 

The State would not have leased Port Botany and Port Kembla in 2013 had the ACCC advised over the condition for developing a container terminal at Newcastle.

 

The fact that the ACCC was not informed does not change the legality of the State’s leasing arrangements with NSW Ports.

 

The State’s announcement, on July 27 2012, that the next container terminal in NSW would be developed at Port Kembla, was worthless to NSW Ports.

 

The State’s commitment to pay compensation to NSW Ports for losing business to a Newcastle container terminal, proved that the State’s announced container terminal policy was not its true policy.

 

The announced container terminal policy is of no legal consequence.

 

In 2013, NSW Ports had no knowledge that the developer of a container terminal at the Port of Newcastle was to be the State’s source of funds to pay the compensation.

 

NSW Ports only became aware when “The Newcastle Herald” published a document on July 28 2016 that revealed NSC as the State’s source of funds.

 

State Cabinet was required to approve any contract between the State and NSC.

 

Before a contract was submitted to State Cabinet, NSW Treasury was required to vet and approve the contract.

 

NSW Treasury was the government department responsible for requiring NSC to comply with the condition for developing a container terminal at the Port of Newcastle.

 

NSW Treasury could not recommend to Cabinet a contract that contained a likely breach of the Competition Act.

 

NSW Treasury was obliged to consult the ACCC over the Newcastle container terminal decision but did not do so because the ACCC’s advice would have been that the compensation provision in the lease agreements was likely to be anti-competitive and illegal.

 

The State terminated its negotiation with NSC because the container terminal development condition would have been opposed by the ACCC.

 

The ACCC still did not know about the Newcastle condition when the Port of Newcastle was leased in May 2014.

 

The Port of Newcastle was leased because the State required a source of funds to pay compensation to NSW Ports.

 

The State was not authorised to lease the Port of Newcastle for the purpose of securing a source of funds to meet an unauthorised contractual commitment to NSW Ports.

 

March 28 2019

 

….

Updated March 26 2013

 

ACCC not informed about Newcastle container fee

 

The ACCC was not informed when the NSW State Government secretly made a condition in 2012 for developing a container terminal at the Port of Newcastle.

 

It was decided that the developer would be required to reimburse the State for any compensation payment made by the State to a future lessee of Port Botany and Port Kembla, if container traffic at the Port of Newcastle was above a minimal specified cap.

 

Had the ACCC been informed, it would have told the State that the condition was likely to be anti-competitive and illegal under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

The State did not disclose the condition to the public or the Parliament.

 

Rather, the State’s financial adviser, Morgan Stanley, was privately instructed to include the condition in scoping studies for privatising Port Botany and Port Kembla, by selling 99-year leases.

 

The State announced, on July 27 2012, that the next container terminal in NSW after Port Botany reached capacity, would be developed at Port Kembla.

 

The ACCC believed this announcement meant it was State policy not to develop a container terminal at the Port of Newcastle.

 

When the “Ports Assets (Authorised Transactions) Act 2012” became law on November 26 2012, it did not authorise the State to pay compensation to a future lessee of Port Botany and Port Kembla, from consolidated revenue.

 

When NSW Ports won the bidding to lease Port Botany and Port Kembla from the State in May 2013, it was unaware that the State’s source of funds to pay compensation would be the developer of a container terminal at the Port of Newcastle.

 

NSW Ports was aware that the State, acting as Newcastle Port Corporation, was negotiating to develop a container terminal at the Port of Newcastle with a private company, Newcastle Stevedores Consortium.

 

The Port of Newcastle was leased in May 2014.

 

The ACCC still had not been informed about the condition for developing a container terminal at the Port of Newcastle.

 

Had the ACCC been informed, it would have advised the State that the reimbursement provision in the Port of Newcastle agreement was an anti-competitive consequence of the Port Botany and Port Kembla agreements, and that it would make the development of a container terminal at Newcastle uneconomic.

 

The ACCC would have advised the State that making agreements with NSW Ports containing provisions which would effectively compensate Port Kembla and Port Botany if the Port of Newcastle developed a container terminal, was anti-competitive and illegal under the Competition Act.

 

“The Newcastle Herald” publicly revealed the Port of Newcastle development condition on July 28 2016.

 

The date that the ACCC was informed has not been disclosed.

 

But in December 2018, the ACCC instituted proceedings in the Federal Court against NSW Ports.

 

If the Federal Court finds in favour of the ACCC, all three ports lease agreements are unlawful because the “Ports Assets (Authorised Transactions) Act 2012” did not authorise the State to make illegal agreements.

 

NSW Ports has until March 28 to file its defence to the ACCC’s statement of claim.

 

A case management hearing is set for April 29.

 

Greg Cameron

 

March 26 2019

 

….

Updated March 20 2019

State kept ACCC in dark over port’s fee

 

The ACCC is taking legal action against NSW Ports under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) because of the State Government’s decision in 2012 that the developer of a Newcastle container terminal would be required to reimburse the State for any compensation the State paid to a lessee of Port Botany and Port Kembla, if container traffic at the Port of Newcastle was above a minimal specified cap.

 

The ACCC alleges that the reimbursement provision in the Port of Newcastle lease agreement is an anti-competitive consequence of the Port Botany and Port Kembla lease agreements, and that it makes the development of a container terminal at Newcastle uneconomic.

 

But NSW Ports says it had no knowledge of the State’s decision that the developer of a Newcastle container terminal would be the State’s source of funds, until this was revealed by “The Newcastle Herald” in July 2016.

 

NSW Ports was aware of the State’s announcement in July 2012 of a decision not to develop a container terminal at the Port of Newcastle. When NSW Ports signed its lease agreements with the State in May 2013, this remained the State’s official policy.

 

The ACCC said on June 7 2013 that the Competition Act did not apply to the development of a container terminal at the Port of Newcastle because of the State’s decision in July 2012 not to develop a container terminal.

 

At that time, the State had not informed the ACCC of its decision that the developer of a Newcastle container terminal would be the State’s source of funds for paying compensation to NSW Ports.

 

Had the State informed the ACCC, the ACCC would have advised the State that the requirement was likely to be illegal under the Competition Act.

 

The Port Botany and Port Kembla lease agreements pre-dated the State’s decision to privatise the Port of Newcastle.

 

The State announced on June 18 2013 “the Government intends to proceed to a long-term lease of the Port of Newcastle … subject to a scoping study”.

 

The State decided to privatise the Port of Newcastle because it had no authority under the “Ports Assets (Authorised Transactions) Act 2012”, to pay compensation to NSW Ports using consolidated revenue.

 

A government that is privatising an asset is exempt from the Competition Act in respect of that asset.

 

The State made its decision to privatise the Port of Newcastle after October 28 2013.

 

The ACCC said its “hands were tied” by the State’s decision to privatise the port.

 

It is clear that the ACCC was not informed about the State’s decision to require reimbursement from the developer of a Newcastle container terminal in the period between June 7 2013 and October 28 2013.

 

Had the ACCC been informed, it would have advised the State that the requirement would be an anti-competitive consequence of the Port Botany and Port Kembla lease agreements.

 

If the ACCC’s action against NSW Ports succeeds, the State will need to pass legislation in order to pay compensation to NSW Ports using consolidated revenue, thereby defeating the purpose of leasing the ports.

 

The State Treasurer said in October 2012 that Port Botany and Port Kembla would not be leased unless the proceeds exceeded the retention values set for the ports.

 

Greg Cameron

 

March 20 2019

 

….

 

Updated March 19 2019

NSW Ports knew nothing about Newcastle container terminal condition

 

NSW Ports knew nothing about the NSW State Government’s condition for developing a container terminal at the Port of Newcastle, until 2016.

 

NSW Ports learned about the State’s condition from media reports, CEO, Ms Marika Calfas, told a Legislative Council Committee hearing on January 31.

 

“The Newcastle Herald” revealed the condition on July 28 2016 and “The Australian Financial Review” reported it on August 1 2016 and October 10 2018.

 

Early in 2012, the State instructed its financial adviser, Morgan Stanley, that the developer of a container terminal at the Port of Newcastle would be required to reimburse the State for any compensation payment the State made to a lessee of Port Botany and Port Kembla, if container traffic at the Port of Newcastle was above a minimal specified cap.

 

The State did not disclose the condition to the public or the Parliament.

 

In December 2018, the ACCC alleged in the Federal Court that the condition was an anti-competitive consequence of the lease agreements for Port Botany and Port Kembla under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

The ACCC lodged a statement of claim in the Federal Court on March 1 2019. NSW Ports is required to respond by March 28. A case management hearing is listed for April 29.

 

The lease agreements for Port Botany, Port Kembla and the Port of Newcastle – called “Port Commitment Deeds” (PCDs) – may be unlawful and could be unenforceable.

 

The ACCC stated on October 30 2014: “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.”

 

The State claims the ACCC was informed about all lease arrangements, meaning the ACCC was informed about the condition for developing a container terminal at the Port of Newcastle.

 

The State announced, on July 27 2012, a policy not to develop a container terminal at the Port of Newcastle. The State made this announcement despite already having made a condition for developing a container terminal at the Port of Newcastle.

 

Morgan Stanley recommended including Port Kembla with the privatisation of Port Botany.

 

The announcement of July 27 2012 could not have been made had the State disclosed to the public and the Parliament its condition for developing a container terminal at the Port of Newcastle.

 

The ACCC advised a sitting member of the Australian Parliament, the independent member for Lyne, Mr Rob Oakeshott, on June 7 2013, that the Competition Act stopped applying to the development of a container terminal at the Port of Newcastle, because of the State’s policy not to develop a container terminal announced on July 27 2012.

 

The ACCC must have been unaware on June 7 2013 of the State’s condition for developing a container terminal at the Port of Newcastle.

 

On August 30 2012, the State directed Newcastle Stevedores Consortium (NSC) not to develop a container terminal at the Port of Newcastle.

 

But the State continued to negotiate with NSC over the development of other facilities on the Newcastle container terminal site.

 

Newcastle Port Corporation (NPC), a State body, had selected NSC in 2010 as its preferred tenderer to develop a multi-purpose terminal, including a container terminal with minimum capacity of one million TEUs a year.

 

The State announced on June 18 2013 “the Government intends to proceed to a long-term lease of the Port of Newcastle … subject to a scoping study”.

 

As reported by the “Australian Financial Review”, this announcement kept the ACCC’s hand’s tied in relation to the July 27 2012 policy “not to develop a container terminal”.

 

Under the Competition Act, a government that is privatising a public asset is not carrying on a business for the purposes of the Competition Act, in respect of that asset.

 

An “intention” to privatise an asset “subject to a scoping study” is not a decision to privatise an asset.

 

The State again directed NSC, on July 26 2013, not to develop a container terminal.

 

The State amended NPC’s Term Sheets with NSC by requiring NSC to comply with the condition for developing a container terminal.

 

However, the State could not require reimbursement from NSC if the requirement was unlawful.

 

NPC was required to receive approval from NSW Treasury under the State’s “Public Private Partnership Guidelines”, as disclosed by the NSW “Independent Commission Against Corruption” in August 2016.

 

Treasury could not approve the amended Term Sheets because they involved the development of a container terminal when it was government policy not to develop a container terminal.

 

Treasury was the government agency responsible for amending the Term Sheets.

 

The Board and management of NPC could not have supported amending the Term Sheets with NSC in a manner that was likely to be illegal under the Competition Act.

 

The Chairman of NPC until October 28 2013, was Mr Paul Jeans, a former BHP executive who had run the steelworks’ at both Newcastle and Port Kembla.

 

When The Hon Mike Baird MP announced Mr Jeans’ retirement on October 28 2013, he also announced, twice, that no decision had been made to lease the port.

 

A decision to privatise the port had not been made when NSC was required to comply with the condition for developing a container terminal.

 

The amended Term Sheets were likely to be illegal under the Competition Act. (Only a Court can determine a breach of the Competition Act.)

 

NPC’s negotiation with NSC was terminated in November 2013.

 

This left the State with no source of funds to meet its contractual commitment to NSW Ports.

 

The “Ports Assets (Authorised Transactions) Act 2012” (the Act) does not permit the State to use consolidated revenue to pay NSW Ports.

 

The State announced on November 5 2013 its decision to privatise the Port of Newcastle.

 

A future Newcastle lessee would be required to comply with the container terminal development condition, outside the operation of the Competition Act.

 

The State was forced to privatise the Port of Newcastle because of a commitment it had made to Parliament on October 17 2012 that Port Botany and Port Kembla would not be privatised unless the proceeds were more than the retention values.

 

Paying NSW Ports using any State funds would have reduced the lease return to less than the retention values.

 

Presuming the three Port Commitment Deeds are invalid, the State will need to pass new legislation in order to pay compensation to NSW Ports.

 

It may be a challenge for IFM Investors to justify this situation to fellow investors in NSW Ports.

 

Greg Cameron

 

Distribution: ACCC; MPs; Media

 

March 19 2019

….

Updated March 17 2019

State Government constrained by Labor decision on Newcastle container terminal

 

There is a reason why the State Government of NSW (State) made a secret condition early in 2012 for developing a container terminal at the Port of Newcastle.

 

The State announced on July 27 2012 a policy not to develop a container terminal at the Port of Newcastle.

 

In 2010 the State, under the former Labor administration, had approved Newcastle Port Corporation (NPC), a State body, developing a multi-purpose terminal, including a container terminal with minimum capacity of one million TEUs a year.

 

NPC selected a preferred proponent, Newcastle Stevedores Consortium (NSC) and in 2012 had been given Coalition government approval to continue negotiating.

 

With strategic foresight, NPC had linked State approval for its plan for a TEU container terminal with its multi-purpose terminal.

 

The State did not direct NPC to terminate the negotiation because that would have required a new tender to be issued for the multi-purpose terminal component.

 

Rather, the State directed NSC on August 30 2012 not to develop the TEU terminal component.

 

The ACCC considered that the State stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a Newcastle container terminal development, because of the announced decision not to develop a container terminal.

 

Neither the ACCC nor the State will disclose the date that the ACCC was informed of the State’s condition for developing a container terminal at the Port of Newcastle.

 

Presumably they disagree on the date.

 

The State’s condition for developing a container terminal at the Port of Newcastle was likely to be illegal under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

However, the Competition Act does not apply to a government when it is privatising a public asset. When an asset is being privatised, the government is not carrying on a business for the purposes of the Competition Act in respect of that asset.

 

The State announced on June 18 2013 that “the Government intends to proceed to a long-term lease of the Port of Newcastle, the largest coal port in the world, subject to a scoping study. The success of Port Botany and Port Kembla dictates that we act now.”

 

On October 28 2013, the State said:

 

Mr Baird reiterated that the scoping study for the proposed [Newcastle] port transaction remains on track, with the NSW Government expecting to make a decision by the end of the year.

“While we are awaiting the scoping study on the proposed long-term lease of Newcastle Port and no decision has been made, Mr Whitlam’s experience in steering the Port Kembla and Sydney Ports Boards through a successful transaction process will prove to be incredibly valuable, should we proceed.”

 

After leasing Port Botany and Port Kembla to NSW Ports on May 30 2013, the State needed to have a source of funds to meet its condition for developing a container at the Port of Newcastle.

 

The condition was that the State would pay compensation to the lessee of Port Botany and Port Kembla if container traffic at the Port of Newcastle was above a minimal specified cap.

 

NPC amended its Term Sheets with NSC to require NSC to meet the condition for developing a TEU container terminal, while re-confirming, on July 26 2013, its direction not to develop a TEU container terminal.

 

The State terminated NPC’s negotiation with NSC in November 2013.

 

The State had made no decision to privatise the Port of Newcastle before November 2013.

 

The lessee of the Port of Newcastle is able to develop a TEU container terminal by meeting the State’s condition made in 2012, despite official State policy to the contrary.

 

Greg Cameron

 

Distribution: ACCC; MPs; Media

 

March 17 2019

 

….

Updated March 16 2019

 

State did not disclose container terminal condition

 

The State Government of NSW (State) made a condition for developing a container terminal at the Port of Newcastle in 2012, which it did not disclose to the public or the Parliament.  

 

The State instructed Morgan Stanley to include this condition in a scoping study the consultant was conducting for the State into privatising Port Botany and Port Kembla.

 

The condition was that the developer would be required to reimburse the State for any payment of compensation the State made to any lessee of Port Botany and Port Kembla for container traffic at the Port of Newcastle above a minimal specified cap.

 

The ACCC is now taking legal action against the lessee of Port Botany and Port Kembla, NSW Ports, for making agreements with the State that the ACCC alleges had an anti-competitive purpose and effect under section 45 of the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

 

“The compensation and reimbursement provisions effectively mean that the Port of Newcastle would be financially punished for sending or receiving container cargo above a minimal level if Port Botany and Port Kembla have spare capacity. This makes development of a container terminal at the Port of Newcastle uneconomic,” the ACCC said.

 

NSW Ports says it had no knowledge about the condition for developing a container terminal at the Port of Newcastle until it was disclosed by “The Newcastle Herald” in 2016.

 

The date that the State informed the ACCC about the condition has not been disclosed by either the State or the ACCC.

 

The ACCC claims that the Competition Act does not apply to the State in relation to a container terminal development at the Port of Newcastle because of the State’s policy announced on July 27 2012 about the location of the next container terminal.

 

The State announced that the next container terminal in NSW would be developed at Port Kembla after Port Botany reached capacity. A container terminal would be developed at the Port of Newcastle only after Port Kembla reached capacity.

 

The State needed to have a source of funds because it could not use consolidated revenue without specific authority. The “Ports Assets (Authorised Transactions) Act 2012”, which was assented to in November 2012, did not authorise the State to pay compensation from consolidated revenue.

 

The State made its condition for developing a container terminal at the Port of Newcastle because in 2012 it was conducting a negotiation with a private company, Newcastle Stevedores Consortium (NSC), to develop a container terminal at the Port of Newcastle.

 

The State knew in 2012 that leasing the port’s container terminal site to NSC for development of a container terminal would create competition for Port Botany, which would lower the lease values of Port Botany and Port Kembla respectively.

 

After leasing Port Botany and Port Kembla to NSW Ports in May 2013, the State required NSC to comply with the condition for developing a container terminal but also ordered NSC not to develop a container terminal.

 

The State terminated its negotiation with NSC in November 2013.

 

The condition for developing a container terminal meant that the policy announced on July 27 2012 was not the State’s true policy. That in turn meant that the condition was likely to be illegal under the Competition Act.

 

Greg Cameron

 

Distribution: MPs; Media

 

March 16 2019

 

….

Updated March 13 2019

ACCC action against NSW Ports disproves government container terminal policy

 

The ACCC is taking legal action against NSW Ports over an agreement involving the development of a container terminal at the Port of Newcastle, while claiming it is NSW government policy not to develop a container terminal at the Port of Newcastle.

 

The ACCC is alleging in the Federal Court that NSW Ports entered into agreements with the government in May 2013 containing provisions involving the development of a container terminal at the Port of Newcastle, which are anti-competitive and illegal.

 

But the ACCC is taking no action against the NSW government.

 

The ACCC accepts it is NSW government policy, from at least July 27 2012, that a container terminal will not be developed at the Port of Newcastle before a container terminal is developed at Port Kembla, and reaches capacity, but only after Port Botany has reached capacity.

 

NSW Ports’ agreements with the government do not provide for payment of compensation after Port Kembla reaches capacity or after 2063, whichever occurs earlier.

 

By accepting declared government policy, the ACCC’s action against NSW Ports is invalid.

 

According to the ACCC, government policy from at least July 27 2012, removed the government from the operation of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a container terminal development at the Port of Newcastle.

 

The government signed an agreement on May 30 2014 to lease the Port of Newcastle. It contained a provision requiring the lessee to reimburse the government for any compensation paid to NSW Ports under the lease agreements for Port Botany and Port Kembla.

 

The ACCC alleges that the reimbursement provision in the Port of Newcastle agreement is an anti-competitive consequence of the Port Botany and Port Kembla agreements, and that it makes the development of a container terminal at Newcastle uneconomic.

 

NSW Ports first learned about the Port of Newcastle reimbursement requirement from a report published in “The Newcastle Herald” on July 28 2016.

 

NSW Ports had no knowledge that in 2012 the government made a condition for developing a container terminal at the Port of Newcastle.

 

The government did not inform the public or the Parliament that the developer of a container terminal at the Port of Newcastle would be required to reimburse the government for any payment of compensation made by the government to a lessee of Port Botany and Port Kembla, for container traffic at the Port of Newcastle above a minimal specified cap.

 

The ACCC does not disclose the date it became aware of the government’s condition for developing a container terminal at the Port of Newcastle.

 

But “The Newcastle Herald” revealed that the government amended its Term Sheets with Newcastle Stevedores Consortium in 2013 by including the condition for developing a container terminal.

 

Newcastle Stevedores Consortium had been negotiating since 2010 to lease the Port of Newcastle’s container terminal site for development.

 

The ACCC’s claim that the government’s container terminal policy is the policy it announced on July 27 2012, is disproven.

 

The ACCC may not claim that the government is removed from the operation of the Competition Act because of a disproven government policy.

 

Greg Cameron

Distribution: ACCC; MPs; Media

March 13 2019

 

….

Updated March 9 2019

ACCC does not disclose port advice

A NSW government condition for developing a container terminal at the Port of Newcastle is that the developer will reimburse the government for any payment of compensation the government makes to the lessee of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.

The government made this condition in 2012 but concealed it from the public and the Parliament.

The “Ports Assets (Authorised Transactions) Act 2012” was assented to on November 26 2012. This Act did not authorise the Port of Newcastle condition for developing a container terminal.

Neither did this Act authorise payment of compensation to the lessee of Port Botany and Port Kembla from the consolidated revenue fund if container traffic at the Port of Newcastle was above the minimal specified cap.

On July 27 2012, the government announced a policy that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity.

The ACCC claimed, on June 7 2013, that the legal effect of the government’s policy announcement, was that the government likely stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a container terminal development at the Port of Newcastle from at least the date of the announcement.

The ACCC claimed that the government had decided not to develop a container terminal at the Port of Newcastle.

It was impossible for the government to make a condition for developing a container terminal at the Port of Newcastle if it had a policy not to develop a container terminal at the Port of Newcastle.

The ACCC did not disclose on June 7 2013 whether it knew that the government had made a condition for developing a container terminal at the Port of Newcastle.

Knowing about the condition made it impossible for the ACCC to claim that the government had decided not to develop a container terminal.

The ACCC must have been unaware of the condition on June 7 2013.

As soon as the ACCC knew about the condition, it was obliged to inform the government that it was likely to be illegal for a lessee of Port Botany and Port Kembla to enter into a contract with the government involving the condition.

Until November 2013, the condition applied to Newcastle Stevedores Consortium, which had been negotiating with the government since 2010 to lease the Port of Newcastle’s container terminal site for development.

Newcastle Stevedores Consortium was able to develop a container terminal by accepting the government’s condition.

The government terminated the negotiation with Newcastle Stevedores Consortium because the condition was likely to be illegal under the Competition Act.

The government announced, on October 28 2013, that no decision had been taken to privatise the Port of Newcastle.

The significance of this announcement is that the decision to privatise a government asset removes that privatisation from the operation of the Competition Act.

The government announced its decision to privatise the Port of Newcastle on November 5 2013.

The ACCC does not disclose the date it was informed about the condition by the government.

If the ACCC knew about the condition before November 2013, it was obliged to advise the government that requiring Newcastle Stevedores Consortium to comply with the condition was likely to be illegal under the Competition Act.

Greg Cameron

Distribution: MPs; Media; ACCC

March 9 2019

….

Updated March 3 2019

Ports leases agreements were unfunded and unauthorised

The state government privatised Port Botany and Port Kembla in May 2013 with unauthorised and unfunded contractual commitments to pay compensation to NSW Ports if container traffic at the Port of Newcastle was above a minimal specified cap.

In her then capacity of Treasurer, The Hon Gladys Berejiklian MP, informed parliament on September 29 2015 that “there is no legislated cap on the number of containers that can travel through the Port of Newcastle”.

The “Ports Assets (Authorised Transactions) Act 2012” did not cap container numbers at the Port of Newcastle. Neither did the Act authorise the government using consolidated revenue to pay compensation if container traffic at the Port of Newcastle was above the government’s cap.

After privatising Port Botany and Port Kembla, the government amended Term Sheets with Newcastle Stevedores Consortium to require reimbursement for any compensation payment the government made to NSW Ports under the Port Botany and Port Kembla Port Commitment Deeds.

There would be no Port Commitment Deeds for Port Botany and Port Kembla unless it was government policy to develop a container terminal at the Port of Newcastle.

On June 7 2013, the ACCC said ”when the NSW government announced in 2012 its plans to privatise Port Botany and Port Kembla (which subsequently occurred earlier this year), it identified Port Kembla as the location for developing the second major container port … it was unlikely that the NSW government was carrying on a business when it decided not to develop a container terminal at the Port of Newcastle. As such, policy or planning decisions are likely to fall outside the operation of the [Competition] Act”.

Contrary to the ACCC’s claim, the Port Commitment Deeds and the Term Sheets reflect government policy to develop a container terminal at the Port of Newcastle, despite government policy statements.

The Newcastle Herald reported on July 30 2016:

The chairman of the Australian Competition and Consumer Commission, Rod Sims, said he was deeply concerned about the cap on Newcastle. Mr Sims declined to say whether or not he was previously aware of the document revealed on Friday by the Herald. He confirmed the ACCC “did engage with the NSW government on this issue, however that engagement has to remain fairly confidential”.

We were given access to a fair bit of confidential information but it is fair to say that it’s examples like this that have influenced some of our recent statements on privatisation,” Mr Sims said.

NSW Parliament was told on October 17 2013 that there will not be an extension of the government’s cap on container numbers at the Port of Newcastle. “The only time an extension is allowed is when a specific number is reached and is tripped in Port Botany or Port Kembla,” said the (former) Minister for Roads and Ports, The Hon Duncan Gay MLC.

The Port of Newcastle was privatised in May 2014 for the unauthorised purpose of providing the government with a source of funds to pay compensation to NSW Ports.

March 3 2019

….

Updated March 2 2019

ACCC can’t take action over unauthorised ports agreements

Newcastle Port Corporation (NPC), a state government body, was given government approval in 2009 to develop a container terminal with minimum capacity of one million TEUs a year. It sought tenders and selected Newcastle Stevedores Consortium (NSC) in 2010 as its “preferred proponent”. A contract set out the terms and conditions for the negotiation that ensued.

NPC was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) by conducting its government-approved negotiation with NSC.

On July 27 2012, the government announced its decision that the state’s next container terminal would be developed at Port Kembla after Port Botany reached capacity.

On June 7 2013, the ACCC said ”when the NSW government announced in 2012 its plans to privatise Port Botany and Port Kembla (which subsequently occurred earlier this year), it identified Port Kembla as the location for developing the second major container port … it was unlikely that the NSW government was carrying on a business when it decided not to develop a container terminal at the Port of Newcastle. As such, policy or planning decisions are likely to fall outside the operation of the [Competition] Act”.

The ACCC’s own actions disprove this claim.

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 alleges that entering into each of the Botany and Kembla Port Commitment Deeds was likely to prevent or hinder the development of a container terminal at the Port of Newcastle, and had the purpose, or was likely to have the effect of, substantially lessening competition,” the ACCC said.

The ACCC said it is not taking action against the government because the Competition Act “applies to the conduct of state governments in certain limited circumstances”.

“The State of NSW is not currently a party to the ACCC’s proceedings and the ACCC is not seeking orders against the state,” the ACCC said.

The ACCC claims that NPC stopped carrying on a business for the purposes of the Competition Act in respect of its negotiation with NSC, from at least July 27 2012.

However, the Port Commitment Deeds contain the government’s requirement for developing a container terminal at the Port of Newcastle. They categorically prove it is government policy to develop a container terminal at the Port of Newcastle.

NPC amended Term Sheets with NSC to require NSC to reimburse the government for any payment the government made to NSW Ports under the Port Commitment Deeds. The Term Sheets reflect government policy to develop a container terminal at the Port of Newcastle.

As proven by subsequent actions, it was never the government’s intention to implement the policy it announced on July 27 2012. A government policy that is not implemented is not a policy.

The ACCC may not base decisions on a non-policy.

The Port Commitment Deeds commenced on May 30 2013. NPC terminated its negotiation with NSC in November 2013 because the requirement to reimburse the government for any payment the government made to NSW Ports under the Port Commitment Deeds was likely to fall within the operation of the Competition Act.

If the Term Sheets were within the operation of the Competition Act, it can be determined whether NSC could have been be legally required to reimburse the government for any payment made to NSW Ports under the Port Commitment Deeds.

If the requirement was illegal, it means the government was unable to meet its contractual obligations to NSW Ports. The “Ports Assets (Authorised Transactions) Act 2012” did not authorise the government to pay NSW Ports from consolidated revenue.

The government had concealed from the public and the Parliament its intention to enter into arrangements which later became the Port Commitment Deeds.

The decision to privatise the Port of Newcastle was taken so that the government would have a source of funds outside the operation of the Competition Act for paying NSW Ports.

The “Ports Assets (Authorised Transactions) Amendment Act 2013” did not authorise the Port of Newcastle to be privatised for the purpose of paying NSW Ports under the Port Commitment Deeds.

The ACCC is taking action against NSW Ports in respect of agreements that may not have been authorised by Parliament. As such, the ACCC must first establish whether the Port Commitment Deeds were authorised before proceeding.

The ACCC was required to file and serve a statement of claims on or before February 28 2019.

….

Updated February 28 2019

The Hon Gladys Berejiklian MP
Premier

The Hon Dominic Perrottet MP
Treasurer and Minister for Industrial Relations

The Hon Melinda Pavey MP
Minister for Roads, Maritime and Freight

Dear Ms Berejiklian, Mr Perrottet and Ms Pavey,

I refer to NSW government policy announced on July 27 2012 that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity.

On what date was the ACCC informed of government policy that the state’s next container terminal will be developed at either the Port of Newcastle or Port Kembla?

I note that the government refuses to disclose this date. The date a government policy decision is made is not confidential.

On June 7 2013, the ACCC stated that “it was unlikely that the NSW government was carrying on a business [for the purposes of the “Commonwealth Competition and Consumer Act 2010”] when it decided not to develop a container terminal at the Port of Newcastle”.

Until November 2013, the government required Newcastle Stevedores Consortium to make certain payments to the government in respect of developing a container terminal at the Port of Newcastle. The Term Sheets required Newcastle Stevedores Consortium to reimburse the government for any cost the government incurred to NSW Ports under the Port Commitment Deeds.

The Term Sheets and the Port Commitment Deeds reflect government policy that the state’s next container terminal will be developed at either the Port of Newcastle or Port Kembla. They prove the ACCC used wrong information in deciding the Competition Act stopped applying to the government from at least July 27 2012. This explains why both government and ACCC do not disclose the date the ACCC was informed of government policy that the state’s next container terminal will be developed at either the Port of Newcastle or Port Kembla.

The government did not disclose its policy to the public or the Parliament. It was revealed by “The Newcastle Herald” on July 28 2016.

Yours faithfully,

Greg Cameron

Copy: Mr Rod Sims, ACCC; MPs; Media

February 28 2019

….

Updated February 25 2019

What did the ACCC know … when did they know it?

The key finding by the Public Works Committee in its report released Monday February 25 (Impact of Port of Newcastle sale arrangements on public works expenditure in New South Wales) is that “the Port Commitment Deeds including the conditions of sale and the levy were not disclosed to the public or the Parliament”. The question, obviously, is why did the government conceal them?

But the government has not disclosed the date that the “conditions of sale and the levy” were disclosed to the ACCC. Did the ACCC learn about them before or after Port Botany and Port Kembla were leased to NSW Ports on May 30 2013?

The date is critical because the ACCC claims that the government stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) from at least July 27 2012, when it announced that the state’s next container terminal would be developed at Port Kembla, after Port Botany reached capacity.

The ACCC claims that the Competition Act stopped applying to the government in respect of a Newcastle container terminal because the government had decided, from at least July 27 2012, not to develop a Newcastle container terminal.

The ACCC claim, obviously, is wrong. What the government had actually decided was to develop a Newcastle container terminal on condition that the developer reimbursed the government for any payment the government made to the lessee of Port Botany/Port Kembla. That is why the government concealed the “conditions of sale and the levy” from the public and the Parliament.

But did the government provide the ACCC with this information while concealing it from the public and the Parliament?

Had the public and the Parliament been informed about the government’s intentions, before Botany and Kembla were leased, the ACCC had an obligation to inform the public and the Parliament that the government’s actions were likely to be illegal under the Competition Act. The ACCC also was obliged to inform the bidders for the Botany and Kembla leases that entering into the Port Commitment Deeds with the government was likely to be illegal under the Competition Act.

The ACCC has not disclosed the date it was informed about the “conditions of sale and the levy”.

Between May 2013 and November 2013, the government’s source of funds to pay NSW Ports was a private company, called Newcastle Stevedores Consortium (NSC). NSC had been negotiating with Newcastle Port Corporation (NPC) since 2010 to lease the Port of Newcastle container terminal site for development. The Term Sheets between NPC and NSC required NSC to reimburse the government for any payment the government made to NSW Ports under the Port Commitment Deeds.

On what date did the ACCC learn about the Term Sheets, which contained the government’s conditions allowing NSC to develop a container terminal? Did the ACCC advise the government that the Term Sheets were likely to be illegal under the Competition Act?

But terminating NPC’s negotiation with NSC left the government without a source of funds to pay NSW Ports under the Port Commitment Deeds: the government had no authority to pay NSW Ports from consolidated revenue.

So the government announced its decision to privatise the Port of Newcastle, on November 5 2013. Privatising the port put the government outside the operation of the Competition Act.

The government privatised the Port of Newcastle because keeping the port in government control denied the government the funds it required to meet its obligation to pay NSW Ports under the Port Commitment Deeds.

The government was not authorised to lease the Port of Newcastle for the purpose of providing the funds to pay NSW Ports for container traffic at the Port of Newcastle, above a minimal specified cap.

The “conditions of sale and the levy” were disclosed to the public and the Parliament by “The Newcastle Herald”, on July 28 2016.

….

Updated February 21 2019

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

NSW government container port policy is that that the lessee of the Port of Newcastle could develop a container terminal if it wished to do so (The Hon Gladys Berejiklian MP, September 29 2015).

It is also government container port policy that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity (The Hon Mike Baird MP, July 27 2012).

Does the ACCC agree with Ms Berejiklian it is government policy that the state’s next container terminal will be developed at the Port of Newcastle if the lessee wishes to do so?

It has been the lessee’s wish to develop a container terminal since leasing the port.

The May 2013 Port Botany and Port Kembla Port Commitment Deeds oblige the government to compensate the lessee of Port Botany and Port Kembla, NSW Ports, if container traffic at the Port of Newcastle exceeded a cap of 30,000 containers per year (adjusted by an annual growth rate), where container means:

Any moveable device, designed for continuous use in loading and unloading cargoes on and from Ships, including boxes, crates, cylinders, tanks, TEUs, other stackable units and any similar cargo-carrying device which is designated as a container by international stevedoring standards from time to time 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 compensation to be paid by the government to NSW Ports is equivalent to the wharfage fee NSW Ports would receive if they handled the TEU component, currently around $150 per TEU for imports. Container traffic at the Port of Newcastle easily exceeds 30,000 per year. Of this number, the TEU component has been approximately 10,000 per year since the port was privatised in May 2014.

The Port Commitment Deeds penalise all container traffic at the Port of Newcastle to the extent of the TEU component.

Section 30(2) of the “Ports Assets (Authorised Transactions) Act 2012” allows NSW Ports to be paid compensation “in connection with the performance of obligations under the transaction arrangement”. Compensation is payable because the Port of Newcastle lessee intends to take action in accordance with government policy.

Why does the ACCC still claim that the government stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” from at least July 27 2012 when the basis of the claim is disproven by the confidential May 2013 Port Commitment Deeds?

On what date did the government inform the ACCC of its policy decision to require the developer of a container terminal at the Port of Newcastle to reimburse the government for any compensation payment the government made to the lessee of Port Botany and Port Kembla in respect of a container terminal developed at the Port of Newcastle?

Why is this date deemed confidential?

Yours faithfully,

Greg Cameron

Copy: MPs; Media

February 21 2019

….

Updated February 7 2019

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

Newcastle Port Corporation’s (NPC) plan to develop a container terminal with minimum capacity of one million TEUs a year was formally approved by the NSW government in 2009.

NPC’s government-approved objectives* were contained in its 2009 tender document, “Invitation To Submit Detailed Proposal, Mayfield Site”.

A statutory state-owned corporation, NPC was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) when it selected its preferred tenderer for developing the former steelworks site, Newcastle Stevedores Consortium (NSC), in 2010.

However, the ACCC persists in wrongly claiming that NPC stopped carrying on a business for the purposes of the Competition Act in respect of a container terminal because of a decision announced by the government on July 27 2012. The ACCC claims the government decided not to develop a container terminal at the Port of Newcastle because the state’s next container terminal would be developed at Port Kembla.

The decision taken was to require the developer of a container terminal at the Port of Newcastle, which until November 2013 was NPC, to reimburse the government for any cost the government incurred in making “support payments”** to a future lessee of Port Botany and Port Kembla. The government concealed this decision from the ACCC, parliament and general public.

When Port Botany and Port Kembla were leased to NSW Ports on May 31 2013, it was with a contractual commitment by the government to make “support payments”.

The government had no authority to pay NSW Ports using the consolidated revenue fund. Additionally, the Act that allowed the government to privatise Port Botany and Port Kembla – the “Ports Assets (Authorised Transactions) Act 2012” – did not authorise the making of “support payments”.

After Port Botany and Port Kembla were privatised, the government – in keeping with government policy – changed the Term Sheets between NPC and NSC to require NSC to reimburse the government for any “support payments” the government made to NSW Ports, due to NSC’s activities in the Port of Newcastle. This provided the government with its source of funds to make the “support payments”.

Presumably, it was illegal under the Competition Act for NSC to be the government’s source of funds for making “support payments”, because NPC was still carrying on a business for the purposes of the Competition Act. For this reason, NPC terminated its negotiation with NSC in November 2013 when the government announced, on November 5, a decision to privatise the Port of Newcastle. Privatising the port removed the government from the Competition Act. (A government that is privatising a public asset is not bound by the Competition Act in respect of that asset.)

The government privatised the Port of Newcastle so that it would have a source of funds outside the operation of the Competition Act to meet its unauthorised contractual commitment to make “support payments” to NSW Ports.

The ACCC is taking legal action against NSW Ports in the Federal Court for allegedly engaging in “anti-competitive and illegal” behaviour by entering into “Port Commitment Deeds” with the government to receive “support payments”.

The ACCC’s action presumes that the government had authority to enter into the “Port Commitment Deeds” in May 2013. The government had no such authority because at that time NSC was the government’s source of funds for its unauthorised contractual commitment to make “support payments” to NSW Ports.

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

February 7 2019

*Newcastle Port Corporation’s objectives for development of the Site are to: 

(a) have cargo handling terminal activity for containers and other cargo which may include bulk, break bulk, roll on roll off, etc., consistent with the characteristics, assets and capabilities of the Site;

(b) include a best practice container operation capable of handling in excess of 1 million TEU per annum;

(c) select a Proponent that is committed and has the capacity, resources and expertise to successfully deliver and grow their development proposal;

(d) increase the proportion of northern NSW trade for NSW ports;

(e) generate employment opportunities in the Hunter region;

(f) provide environmental, safety and community amenity benefits through reduced road traffic congestion in Sydney, thereby reducing greenhouse gas, vehicle emissions and noise;

(g) optimise public value for money by maximising land use intensity and engaging the private sector in the development of the State’s port and transport infrastructure for handling container and general cargo trades;

(h) ensure investment and development is delivered in a timely manner;

(i) recognise relationships between parties who may use the existing facilities and access points to and from the Site; and

(j) secure an appropriate commercial return to Newcastle Port Corporation.

Source: Newcastle Port Corporation, “Invitation To Submit Detailed Proposal, Mayfield Site”, 2009, page 7

** “The Port Botany and Port Kembla Port Commitment Deeds contain provisions that allow NSW Ports to make submission to the NSW Government for “support payments” should the Port of Newcastle handle more than a specified volume of containers for two years (starting at 30,000 TEUs in June 2013 and increasing by the higher of 6% per annum or the container growth rate at Port Botany annually).”

Source: NSW Ports, Submission to Public Works Committee, January 21 2019, page 20

….

Updated January 2 2019

Lease agreements for Port Botany, Port Kembla and the Port of Newcastle are invalid.

The financial interests of NSW taxpayers, and the super funds which own 80 per cent of “NSW Ports” and 50 per cent of “Port of Newcastle Investments” (PONI), can be protected and enhanced by the two companies agreeing with the NSW government to build a rail freight bypass of Sydney – from the Port of Newcastle to Badgery’s Creek and Port Kembla – paid for by railing containers from the Port of Newcastle backed-up by Port Kembla.

Why the leases are invalid

In 2009, Newcastle Port Corporation (NPC), a statutory state-owned corporation, sought tenders for the development of a container terminal at the Port of Newcastle with minimum capacity of one million TEUs a year. Newcastle Stevedores Consortium (NSC) was selected in 2010 as “preferred proponent”. Term Sheets were agreed before the March 2011 state election. In 2012, NPC requested NSW government approval to enter into a contract to lease the port’s container terminal site to NSC for development of a container terminal.

The government decided in July 2012 to privatise Port Botany and Port Kembla by offering 99-year leases. The government gave a confidential commitment to bidders for the leases that payment would be made to the lessee if container traffic at the Port of Newcastle was above a minimal specified cap. The government committed to paying compensation for containers handled at the Port of Newcastle equivalent to the wharfage fee that the lessee would receive if the containers were handled at Port Botany.

“The Australian Financial Review” estimated the fee to be $150 – $200 per TEU in April 2018. The government is contractually committed to pay the fee to NSW Ports until 2063. A container terminal at the Port of Newcastle handling one million TEUs a year for 40 years will require the government to pay NSW Ports around $6 billion. The ports were privatised for $5.1 billion.

The government concealed its decision to make the payment when the legislation authorising the ports to be privatised – the “Ports Assets (Authorised Transactions) Act 2012” – was being debated in October and November 2012. The act did not enable the use of government consolidated revenue to make the promised payment. An explicit commitment was given by the government that Port Botany and Port Kembla would be privatised only if the sale price exceeded the retention value for the assets. Without the commitment to pay compensation, the sale proceeds may have been less than the retention value.

The government required a source of funds that would remain confidential. It decided to change the confidential Term Sheets with NSC by requiring reimbursement for any compensation paid to the winning bidder for Port Botany and Port Kembla, if NSC’s container traffic at the Port of Newcastle was above the minimal specified cap.

NSW Ports won the bidding to lease Port Botany and Port Kembla in May 2013. The government fulfilled its commitment to make payment in respect of container traffic at the Port of Newcastle, by entering into agreements with NSW Ports called “Port Commitment Deeds” (PCDs). The government changed the Term Sheets with NSC to provide the necessary funds, as it planned.

The government did not publicly disclose that a contractual commitment had been made to pay NSW Ports and that its source of funds was NSC.

The government maintained its negotiation with NSC because it needed to fix the long-term use of the container terminal site under a legally binding contract. If the government was not negotiating to lease the site to NSC, any future government could adopt a different policy. But by negotiating to lease the site to NSC, the government was able to demonstrate to NSW Ports that the future use of the site was being controlled, because the Term Sheets were a legally binding agreement with NSC while the parties were negotiating. 

The ACCC took no enforcement action because of government policy announced on July 27 2012.

NPC required Cabinet approval in order to be able to lease the container terminal site to NSC. The procedure required NPC to first obtain approval from NSW Treasury. NSW Treasury was also the Department responsible for privatising the ports. It was NSW Treasury which took the decision to require NSC to provide the funds to pay NSW Ports under the PCDs.

NSW Treasury could not recommend to Cabinet a contract based on the Term Sheets, because the requirement for NSC to reimburse the government was likely to be illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

When the government terminated the negotiation and the Term Sheets with NSC in November 2013, it immediately announced its decision to privatise the Port of Newcastle. The government did not disclose that the port would be privatised with a condition that the lessee reimbursed the government for any compensation the government paid to NSW Ports if container traffic at the port was above the minimal specified cap. By privatising the port, the government was able to charge the fee outside the operation of the Competition Act. The reason is that when a government is privatising an asset, it is exempt from the Competition Act in respect of that particular asset.

Cancelling the Term Sheets left the government without a source of funds to meet its contractual commitments to NSW Ports under the PCDs. It decided to privatise the Port of Newcastle for the purpose of providing the necessary funds. PONI won the bidding to lease the port in May 2014.

PONI was required to reimburse the government for any compensation the government paid to NSW Ports if container traffic at the port was above the minimal specified cap.

In December 2018, the “Australian Competition and Consumer Commission” (ACCC) announced it had commenced an action in the Federal Court against NSW Ports, alleging that NSW Ports had acted illegally in May 2013 by entering into the PCDs. The ACCC is also alleging that it is illegal under the Competition Act for PONI to be the government’s source of funds for paying NSW Ports under the PCDs.

The government privatised the Port of Newcastle because it required a source of funds outside the operation of the Competition Act to fulfil its contractual commitments to NSW Ports. The ACCC is taking no action against the government, because the port has been privatised.

If it was illegal under the Competition Act for NSC to be the government’s source of funds to meet its contractual commitments to pay NSW Ports under the PCDs in May 2013, this means the government had no authority to enter into the PCDs in the first instance. In any event, NSW Ports allowed the PCD provisions to exist, thus limiting competition.

The government privatised the Port of Newcastle because it was in breach of its contractual commitment to NSW Ports unless it had a source of funds to pay NSW Ports.

The Port of Newcastle privatisation agreement is invalid because the “Ports Assets (Authorised Transactions) Act 2012” and the “Ports Assets (Authorised Transactions) Amendment Act 2013” did not authorise the port to be privatised for the purpose of providing the government with funds to pay NSW Ports.

Lease agreements for Port Botany, Port Kembla and the Port of Newcastle are invalid.

Rail freight by-pass of Sydney

 The abject failure of public policy, including by the lessees and those who advised them, can be rectified. 

As a result of the flawed ports privatisation program, the parties failed to consider the costs and benefits to the state of railing 100 per cent of containers, which is accomplished by establishing a container terminal at the Port of Newcastle. Container freight would pay for privately funding, building and operating a rail freight bypass of Sydney, between 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.

A container terminal established at Port Kembla would be able to operate interchangeably with the Port of Newcastle. 

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.

NSW and Australia are strategically vulnerable to the Port Botany monopoly, should a catastrophic event close the approach channels. Establishment of the Port of Newcastle and Port Kembla as major container handling centres reduces the risk exposure.

WestConnex

Currently, around 85% of Port Botany’s containers are trucked. There are one million container truck movements a year through Port Botany. By 2040, there will be six million container truck movements a year  – five million if the Moorebank Intermodal Terminal operates at full capacity.

A container truck carrying a full container in the M5 East west-bound tunnel is the equivalent of six passenger cars. A container truck carrying an empty container in the east-bound M5 East tunnel is the equivalent of three passenger cars. Unless WestConnex is built, 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.

Moorebank Intermodal Terminal

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

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, Moorebank intermodal would be cancelled and 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”.

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 cost of the Maldon-Dombarton freight line – connecting Port Kembla to the main southern line and 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 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.

Regional economic development

Rail-based access to a container terminal 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.

The way forward

 The government, NSW Ports and PONI are able to collaborate in planning a rail freight bypass of Sydney. Their alternative is to undertake significant legal action over their collective mistake of making invalid lease agreements, to the detriment of the people of NSW.

….

Updated December 22 2018

Competition Act applied to government over ports leases

The “Commonwealth Competition and Consumer Act 2010” (Competition Act) applies to the conduct of state governments in certain limited circumstances.

In 2009, Newcastle Port Corporation (NPC), a statutory state-owned corporation, obtained formal NSW government approval to develop a container terminal at the Port of Newcastle. Tenders were called. A preferred tenderer, Newcastle Stevedores Consortium (NSC), was selected.

NPC’s negotiation with NSC was conducted under the Competition Act.

A contract between NPC and NSC was ready to be approved by the government in 2012.

But on July 27 2012, the government announced that Port Botany and Port Kembla would be jointly leased. It also announced that a further container terminal in NSW would be developed at Port Kembla, when this became required to supplement Port Botany.

The government decided, from at least July 27 2012, to lease Port Botany and Port Kembla with agreements that the lessee would be paid compensation if container traffic at the Port of Newcastle was above a minimal specified cap.

However, the ACCC considers that it was unlikely the government was carrying on a business for the purposes of the Competition Act, from at least July 27 2012, because the government had decided not to develop a container terminal at the Port of Newcastle.

The ACCC’s assessment is proven wrong because government policy provided for the development of a container terminal at the Port of Newcastle, with an agreement that the lessee of Port Botany and Port Kembla would be paid compensation, if Newcastle container traffic was above a minimal specified cap.

The government leased Port Botany and Port Kembla to NSW Ports on May 30 2013 and the lease agreements, known as Port Commitment Deeds (PCDs), were entered into as part of the leasing process, for a term of 50 years.

After the ports were leased, NPC’s Term Sheets with NSC required NSC to compensate the government for any compensation the government paid to NSW Ports, in respect of the PCDs, due to the activities of NSC in the Port of Newcastle.

On December 10 2018, the ACCC announced it was taking action in the Federal Court against NSW Ports, in respect of the PCDs. The ACCC alleges the PCDs had an anti-competitive purpose and effect under the Competition Act.

The ACCC is taking no action against the government because the ACCC considers the government stopped carrying on a business for the purposes of the Competition Act at the Port of Newcastle due to the government policy announced on July 27 2012.

The ACCC’s assessment is proven wrong by the PCDs and the Term Sheets, because it was impossible for the government to offer lease agreements (the PCDs) that were not government policy.

The ACCC refuses to acknowledge the Term Sheets between NPC and NSC because they prove that NSC was able to develop a container terminal.

On October 28 2013, the government announced that no decision had been taken to lease the Port of Newcastle. The government terminated its negotiation with NSC in November 2013.

The government announced its decision to lease the Port of Newcastle on November 5 2013. As the PCDs and the Term Sheets prove, the government did not stop carrying on a business for the purposes of the Competition Act at the Port of Newcastle, in any respect, until November 5 2013.

The PCDs and Term Sheets prove the government was required to comply with the Competition Act when Port Botany and Port Kembla were leased to NSW Ports on May 30 2013.

….

Updated December 21 2018

The Port of Newcastle was leased for an unauthorised purpose.

The port was leased to give the NSW government its source of funds to pay the lessee of Port Botany and Port Kembla, NSW Ports, for containers handled by a container terminal at the Port of Newcastle.

The Act authorising the leasing of the ports, the “Ports Assets (Authorised Transactions) Act 2012”, did not authorise the government to pay NSW Ports from consolidated revenue.

But it was likely to be illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act) for the government to keep the port in public ownership and require the developer of a container terminal to pay a container handling fee, just so this fee could be paid to NSW Ports.

Without a source of funds to pay, the government would be in breach of its May 2013 contract to pay NSW Ports for containers handled at the Port of Newcastle.

In 2012, the government devised a scheme. It would require the developer of a container terminal to pay the container handling fee, but outside the operation of the Competition Act.

The government announced a decision on July 27 2012 not to develop a container terminal at the Port of Newcastle. The ACCC said it was unlikely the government was carrying on a business for the purposes of the Competition Act in respect of a container terminal, from the time it made this decision.

Meanwhile, in August 2012, the government ordered its preferred developer of a container terminal at that time, Newcastle Stevedores Consortium (NSC), not to build a container terminal.

After the government signed its deal with NSW Ports in May 2013, NSC was required to pay the container handling fee as a condition of continuing to negotiate to lease the port’s container terminal site.

When NSC did not withdraw from the negotiation, the government realised that the ACCC would discover it was government policy to develop a container terminal at the port, with the fee for container handling as one of the conditions.

It was impossible for the government to have a policy not to develop a container terminal when a condition for negotiating to lease the container terminal site to NSC was payment of a fee in respect of NSC developing a container terminal.

The government knew the ACCC would realise that requiring NSC to pay the container handling fee meant the government was carrying on a business for the purposes of the Competition Act by negotiating with NSC.

The government’s only option was to terminate its negotiation, because requiring NSC to pay the fee was likely to be illegal under the Competition Act.

So the government announced, on November 5 2013, its decision to lease the Port of Newcastle. A government is not carrying on a business for the purposes of the Competition Act in respect of an asset it is leasing.

By leasing the entire port operation – including the container terminal site – the government was able to charge the container handling fee outside the operation of the Competition Act.

The Port of Newcastle was leased for the purpose of charging a container handling fee that was likely to have been illegal if the port was not leased. The government was not authorised to lease the port for that purpose.

The ACCC refuses to acknowledge that NSC was required by the government to pay the container handling fee as a condition of negotiating with the government.

As soon as it does, the ACCC will have to acknowledge that the government was required to comply with the Competition while negotiating with NSC, and that requiring NSC to pay the fee was likely to have been illegal.

….

Updated December 20 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

I refer to the ACCC’s letter dated February 23 2017.

The ACCC considers it was clear from at least July 27 2012 that the NSW government’s position was for a further container terminal to be developed at Port Kembla when this became required to supplement Port Botany. The ACCC considers that Newcastle Port Corporation’s negotiation with Newcastle Stevedores Consortium reflected the government’s position.

On the contrary, the government’s position is reflected in the 2013 Port Commitment Deeds (PCDs), which provide for the development of a container terminal at the Port of Newcastle. Will the ACCC please confirm that Newcastle Port Corporation’s Term Sheets with Newcastle Stevedores Consortium required payment to be made in respect of the PCDs? Has the ACCC even seen these Term Sheets?

The ACCC’s claim that Newcastle Port Corporation was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of the negotiation with Newcastle Stevedores Consortium from at least July 27 2012, is disproven by the Term Sheets.

The Term Sheets prove the government’s decision to lease the Port of Newcastle was for the purpose of securing a source of funds to pay NSW Ports outside the operation of the Competition Act.

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

December 20 2018

….

Updated December 19 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

The NSW “Ports Assets (Authorised Transactions) Act 2012” did not authorise Port Botany and Port Kembla to be leased under arrangements that were likely to be illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

Did the ACCC provide the NSW government with advice about the leasing arrangements before Port Botany and Port Kembla were leased on May 30 2013?

Port Botany and Port Kembla were illegally leased if the leasing arrangements are determined by the Federal Court to be illegal.

Until November 2013, Newcastle Stevedores Consortium was the government’s sole source of funds for making payment to NSW Ports under the leasing arrangements for Port Botany and Port Kembla.

Requiring Newcastle Stevedores Consortium to pay the government was illegal under the Competition Act if the Federal Court determines that the leasing arrangements are illegal under the Competition Act.

The government did not lease the Port of Newcastle’s container terminal site to Newcastle Stevedores Consortium because the requirement for payment in respect of the Port Botany and Port Kembla leasing arrangements was likely to be illegal under the Competition Act.

The Port of Newcastle was leased for the sole purpose of providing the government with its source of funds for making payment to NSW Ports under the leasing arrangements for Port Botany and Port Kembla.

The Port of Newcastle was illegally leased if it was illegal under the Competition Act for Newcastle Stevedores Consortium to be the government’s sole source of funds for making payment to NSW Ports.

The NSW government says that its “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”.

On what date did the government’s “transaction team” advise the ACCC of the leasing arrangements for Port Botany and Port Kembla, which the ACCC now alleges are illegal under the Competition Act?

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

December 19 2018

….

Updated December 18 2018

Every statement of NSW government container terminal policy since July 2012 is contradicted by the secret 2013 “Port Commitment Deeds” (PCDs) for Port Botany and Port Kembla.

Official government policy is that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity.

But the secret PCDs contain government requirements for developing a container terminal at the Port of Newcastle.

The ACCC has instituted proceedings in the Federal Court against NSW Ports for making agreements with the government that the ACCC alleges had an anti-competitive purpose and effect.

The ACCC is alleging that making these agreements containing provisions, which would effectively compensate Port Botany and Port Kembla if the Port of Newcastle developed a container terminal, is anti-competitive and illegal under the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

The Port of Newcastle was leased in 2014 for the sole purpose of providing the government with a secret source of funds to pay NSW Ports under the PCDs.

The “Ports Assets (Authorised Transactions) Act 2010”, which authorised the ports to be leased, did not allow the government to use consolidated revenue to pay NSW Ports.

And there was no other source of funds.

When a government is privatising an asset, it is no longer subject to the Competition Act in respect of that asset.

Privatising the port enabled the government to require payment from the lessee outside the operation of the Competition Act.

In 2012, Newcastle Port Corporation (NPC), a statutory state-owned corporation, was requesting approval from NSW Treasury to lease the port’s container terminal site to Newcastle Stevedores Consortium (NSC), for development of a container terminal, with a minimum capacity of one million TEUs a year.

It was well understood in the transport and shipping industry that a Newcastle terminal would take business away from Port Botany.

Bidders for Botany and Kembla, with the government, devised a scheme to eliminate the competitive threat from Newcastle and at the same time offer the government potential for a higher price for privatising Botany and Kembla.

The lessee of Botany and Kembla would be paid compensation for containers handled at the Port of Newcastle equivalent to the wharfage fee they would receive if the containers were handled at Port Botany.

The successful bidder for the Botany and Kembla leases in May 2013 was NSW Ports.

In 2013, NPC required NSC to pay the government for any cost the government incurred to NSW Ports under the PCDs, due to the activities of NSC in the Port of Newcastle.

Presumably, the ACCC had no knowledge of the PCDs, or the requirement that NSC pay the government, before the government announced its decision to lease the Port of Newcastle on November 5 2013.

The PCDs prove NPC was carrying on a business for the purposes of the Competition Act, while negotiating with NSC, between 2009 and November 2013.

But NPC leasing the container terminal site to NSC was impossible because the lease terms contained a condition that was likely to be illegal under the Competition Act.

NSW Treasury could not ask State Cabinet to approve a lease with a condition that was likely to be illegal.

NPC terminated its negotiation with NSC in November 2013.

The ACCC took no enforcement action in 2013, presumably because it had no knowledge of the PCDs or the requirement that NSC pay the government.

Member for Newcastle, Mr Tim Crakanthorp MP, asked the Treasurer, The Hon Dominic Perrottet MP, on October 25 2018: “On what date did the Government inform the Australian Competition and Consumer Commission of its decision to pay the lessee of Port Botany and Port Kembla for containers shipped through the Port of Newcastle?”

Mr Perrottet answered: “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.”

A reasonable person would conclude that “extensive engagement” included telling the ACCC about the PCDs and the requirement on NSC to pay the government.

Both the government and the ACCC must answer the question, so that their answers can be compared.

….

Updated December 17 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

Re: ACCC knowledge of Port Commitment Deeds

I refer to the ACCC’s letter dated February 23 2017. This letter did not mention the 2013 Port Commitment Deeds (PCDs) for Port Botany and Port Kembla. This letter also confirmed previous ACCC advice, dated June 7 2013, that the State of NSW (State) was unlikely to be carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a container terminal development at the Port of Newcastle, from at least July 27 2012. The ACCC’s advice was based on the State’s announcement of a policy on July 27 2012 that Port Kembla would be the location of the state’s next container terminal development, after Port Botany reached capacity.

By the ACCC’s own admission, it is the State’s policy to develop a container terminal at the Port of Newcastle. The ACCC is taking action against NSW Ports, as announced on December 10 2018, because the 2013 PCDs reflect the State’s policy to develop a container terminal at the Port of Newcastle.

The ACCC also failed to acknowledge on February 23 2017 that there were Contract Term Sheets between the State, acting as Newcastle Port Corporation, and Newcastle Stevedores Consortium (NSC) that required NSC to reimburse the State for any compensation paid to NSW Ports under the PCDs, due to the activities of NSC in the Port of Newcastle.

No decision had been made to lease the Port of Newcastle as of October 28 2013. But on November 5 2013, the State announced its decision to lease the port. Leasing the port enabled the State to require reimbursement from the lessee outside the operation of the Competition Act.

Did the ACCC know about the PCDs before October 28 2013?

If so, did the ACCC advise the State that requiring NSC to reimburse the State was likely to be illegal under the Competition Act?

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

December 17 2018

….

Updated December 16 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

As the ACCC acknowledges, Newcastle Port Corporation, a statutory state-owned corporation, was negotiating to lease its “Mayfield Site” to Newcastle Stevedores Consortium, until November 2013. This negotiation commenced in 2009 but concluded without the site being leased.

The ACCC said on December 10 2018:

The NSW Government privatised Port Botany and Port Kembla in May 2013 and the agreements, known as Port Commitment Deeds, were entered into as part of the privatisation process, for a term of 50 years.

The Botany and Kembla Port Commitment Deeds oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap.

The ACCC alleges that entering into each of the Botany and Kembla Port Commitment Deeds was likely to prevent or hinder the development of a container terminal at the Port of Newcastle, and had the purpose, or was likely to have the effect of, substantially lessening competition.

In 2013, the Term Sheets between Newcastle Port Corporation and Newcastle Stevedores Consortium required Newcastle Stevedores Consortium to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds, due to the activities of Newcastle Stevedores Consortium in the Port of Newcastle.

Does the ACCC agree that the reimbursement provision in the Term Sheets was an anti-competitive consequence of the Botany and Kembla Port Commitment Deeds, and that it made the development of a container terminal at Newcastle uneconomic?

If so, does the ACCC agree that it was likely the reimbursement provision in the Term Sheets was illegal under the “Commonwealth Competition and Consumer Act 2010”?

Yours faithfully,

Greg Cameron

Copy: NSW MPS; Media

December 16 2018

….

Updated December 15 2018

Contract Term Sheets between the NSW government and Newcastle Stevedores Consortium (NSC), in May 2013, prove that the government likely breached the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of the government’s “Port Commitment Deeds” (PCDs) with NSW Ports, for Port Botany and Port Kembla.

The PCDs contractually committed the government to pay NSW Ports for containers shipped through a container terminal developed at the Port of Newcastle.

The ACCC has instituted proceedings in the Federal Court against NSW Ports, alleging that the PCDs are anti-competitive and illegal.

The Term Sheets between the government and NSC – its preferred developer of a container terminal – required NSC to pay the government for any cost the government incurred to NSW Ports under the PCDs, due to the activities of NSC in the Port of Newcastle.

The Term Sheets prove the government was carrying on a business for the purposes of the Competition Act by negotiating to lease the port’s container terminal site to NSC, between 2009 and November 2013. Requiring payment from NSC in respect of the PCDs was likely to have been illegal under the Competition Act.

A container terminal was first proposed 21 years ago.

In 1997, it became NSW government policy to develop a container terminal at the Port of Newcastle. The government supported BHP’s decision to develop a container terminal.

In 2003, it became government policy to develop a container terminal at the Port of Newcastle, after Port Botany reached capacity. The government had taken ownership of BHP’s land at the Port of Newcastle in 2002, to prevent development of a container terminal.

In 2009, it again became government policy to develop a container terminal at the Port of Newcastle. Newcastle Port Corporation (NPC), a statutory state-owned corporation, received government approval to lease the port’s container terminal site to the private sector, for development of a container terminal. NSC was the chosen tenderer. NPC requested approval from NSW Treasury in 2012, to sign a contract with NSC. Approval was refused.

In July 2012, it became government policy that the state’s next container terminal would be developed at Port Kembla, after Port Botany reached capacity. It was government policy to privatise Port Botany and Port Kembla.

In May 2013, it again became government policy to develop a container terminal at the Port of Newcastle. A condition was that NSC complied with the Term Sheets. NSC was the government’s source of funds to pay NSW Ports. The government was not authorised by the “Ports Assets (Authorised Transactions) Act 2012” to pay NSW Ports from consolidated revenue.

In November 2013, it became government policy to lease the Port of Newcastle, with a condition that the lessee pay the government under the same terms as were stipulated in the Term Sheets between the government and NSC. The government terminated its negotiation with NSC.

The ACCC claimed on February 23 2017 that the government was not carrying on a business for the purposes of the Competition Act in respect of the negotiation between the government and NSC.

The Term Sheets, which the ACCC does not acknowledge, disprove this claim.

It should save taxpayers the cost of the ACCC’s Federal Court action, if the ACCC will acknowledge the Term Sheets. 

….

Updated December 13 2018

Soon after the O’Farrell government was elected in March 2011, Newcastle Port Corporation (NPC) requested approval from NSW Treasury to sign a contract with Newcastle Stevedores Consortium (NSC) to lease the port’s container terminal site for developing a one million TEU a year capacity container terminal. The request had been made before the election but approval was held-over for the new government.

Treasury stalled on approving the contract while hiring Morgan Stanley in December 2011 to conduct a scoping study into privatising Port Botany. Several months later, Treasury again delayed approving the Newcastle contract by instructing Morgan Stanley to include Port Kembla in the study. As widely reported in the media, a bidder for Port Botany had convinced Treasury that if Port Kembla was added to the Port Botany offer, the government would realise a higher price.

When Treasury announced, on July 27 2012, its decision to privatise Port Botany and Port Kembla together, it also announced its decision that the state’s next container terminal would be developed at Port Kembla, after Port Botany reached capacity.

Treasury rejected NPC’s request for approval to sign a contract with NSC, because it was now government policy not to develop a container terminal at the Port of Newcastle. Rather than terminate NPC’s negotiation with NSC, Treasury allowed NPC to continue negotiating to lease the container terminal site but only if it was used by general cargo ships.

At the end of 2012, the government removed the cap on container capacity at Port Botany, which reportedly resulted in a large increase in the price bidders offered for the combined Port Botany/Port Kembla leases. But Treasury and the bidders knew that future government policy could change.

The Port of Newcastle remained a competitive threat.

So the government and the bidders agreed that the government would pay the successful bidder if a container terminal was developed at the Port of Newcastle. The government would pay the Port Botany/Port Kembla lessee for any loss of business to the Port of Newcastle. “Port Commitment Deeds” (PCDs) were created to reflect this deal.

NSC became the government’s secret source of funds. The Term Sheets between NPC and NSC were changed to require NSC to pay the government for any cost the government incurred to the successful bidder, NSW Ports, under the PCDs, due to the activities of NSC in the Port of Newcastle.

The ACCC investigated the privatisation in May 2013. It said on June 7 2013 that the government stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act), in respect of a container terminal at the Port of Newcastle, because of the decision announced on July 27 2012 not to develop a container terminal at the Port of Newcastle. Because of this decision, the ACCC claims that the government is immune from the Competition Act in respect of the PCDs.

The ACCC makes its claim even though the PCDs set out the government’s condition for developing a container terminal at the Port of Newcastle. The ACCC refuses to acknowledge that NPC required NSC to pay the government under the terms stipulated in the PCDs, as a condition of leasing the container terminal site.

NSC could develop a container terminal by paying the government on the required terms.

On December 10 2018, the ACCC commenced legal proceedings against NSW Ports alleging that the PCDs breach the Competition Act. No action is being taken against the government because the ACCC claims the government is immune from the Competition Act.

NPC’s negotiation with NSC proves that the government is not immune from the Competition Act in respect of the PCD’s.

It was impossible for the container terminal site to be leased to NSC because the PCDs were a likely breach of the Competition Act.

If the government breached the Competition Act in respect of the PCDs in 2013, it means the PCDs were illegal when the government leased the Port of Newcastle in 2014.

….

Updated December 12 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

The confidential Port Commitment Deeds for Port Botany and Port Kembla apply to the development of a container terminal at the Port of Newcastle.

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

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

December 12 2018

….

Updated December 9 2018

NSW government policy is that a container terminal can be developed at the Port of Newcastle. A condition is that the developer must pay the government a fee for container shipments. This fee effectively doubles the cost of shipping containers through the Port of Newcastle compared with Port Botany. A container terminal has not been developed because the government charges its fee.

In July 2012, the government announced a policy that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity. The government was negotiating to lease the Port of Newcastle’s container terminal site to a private company, Newcastle Stevedores Consortium (NSC), for development of a container terminal, since 2009. In August 2012, the government told NSC not to develop a container terminal. The government required the container terminal site to be developed for use by general cargo ships only.

In May 2013, the government leased Port Botany and Port Kembla to NSW Ports. The government contractually committed to pay NSW Ports for containers shipped through a container terminal developed at the Port of Newcastle. The government required NSC to pay the Port of Newcastle container fee to recover the government’s cost of paying NSW Ports.

The ACCC said that the government was not carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a container terminal development at the Port of Newcastle, because of its decision in July 2012 not to develop a container terminal at the Port of Newcastle. The ACCC also said that there was no contract, arrangement or understanding between the government and NSC, as a result of their negotiation. This was because the government terminated the negotiation in November 2013 without leasing the container terminal site.

The ACCC refuses to acknowledge that the government required NSC to pay the fee. This is because the fee proves it is government policy that a container terminal can be developed at the Port of Newcastle. Requiring NSC to pay the fee proves that the government did not stop carrying on a business for the purposes of the Competition Act when conducting its negotiation with NSC. Consequently, it proves that the government was required to comply with the Competition Act in respect of requiring NSC to pay the fee. Requiring NSC to pay the fee meant that the government was unable to lease the container terminal site to NSC because the requirement to pay the fee could not be approved by State Cabinet. State Cabinet could not approve any contract, arrangement or understanding that was likely to breach the Competition Act. Since the government required a source of funds to pay NSW Ports – the government is not authorised to pay NSW Ports from consolidated revenue – the government privatised the Port of Newcastle because this enabled the lessee to be required to pay the fee outside the operation of the Competition Act. The Competition Act does not apply when a government is privatising a public asset.

It is an undisputed fact that NSC was required to pay the fee. By refusing to acknowledge a fact, the ACCC’s statements are wrong, and misleading.

Government container terminal policy as announced in July 2012, obviously, is wrong.

Currently, around 85% of Port Botany’s containers are trucked. There are one million container truck movements a year through Port Botany. By 2040, there will be six million container truck movements a year  – five million if the Moorebank Intermodal Terminal operates at full capacity.

A container truck carrying a full container in the M5 East west-bound tunnel is the equivalent of six passenger cars. A container truck carrying an empty container in the east-bound M5 East tunnel is the equivalent of three passenger cars. WestConnex is required just to handle the estimated increase in Port Botany container truck movements.

The government failed to consider the costs and benefits to the state of railing 100 per cent of containers, which is accomplished by establishing a container terminal at the Port of Newcastle. Container freight will pay for building and operating a rail freight bypass of Sydney, between Newcastle, Badgery’s Creek and Port Kembla.

A container terminal at Port Kembla will be able to operate interchangeably with the Port of Newcastle. Intermodal terminals will be established along this rail freight line to maximise logistics efficiency.

Freight will be removed from the Sydney rail network to allow all rail capacity to be used for passenger services. Likewise, freight will be removed from the Newcastle-Sydney line and the Port Kembla-Sydney line.

The $1 billion “Northern Sydney Freight Corridor Stage One” will reach capacity by 2026. Freight that is currently trucked into Sydney from regional areas and interstate can be railed to intermodal terminals by building the rail freight line from Newcastle to Port Kembla.

Since 95% of world trade is conducted using containers, rail access to a container terminal is critical for regional economic development in NSW. The Port of Newcastle strategy will enable Sydney firms to relocate to regional areas to take advantage of under-utilised regional infrastructure.

….

Updated December 5 2018

The Hon Josh Frydenberg MP
Treasurer of the Commonwealth of Australia

Dear Mr Frydenberg,

I refer to The Treasury’s letter to me concerning the Port of Newcastle dated January 27 2017. Permit me to point out that Newcastle Port Corporation (NPC), a statutory state-owned corporation, was negotiating to lease the Port of Newcastle’s container terminal site to a private company, Newcastle Stevedores Consortium (NSC), between 2009 and November 2013.

NPC was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of this negotiation, which included terms for the development of a container terminal. The Term Sheets between NPC and NSC required NSC to pay the NSW government for any cost the government incurred to NSW Ports under an agreement called the “Port Commitment”, due to the activities of NSC in the Port of Newcastle. The current lessee of the Port of Newcastle is required to pay the NSW government in respect of developing a container terminal on the same terms as NSC was required to pay the NSW government in respect of developing a container terminal.

Will you kindly ask the ACCC to confirm that NPC was legally required to comply with the Competition Act while conducting its negotiation with NSC?

Yours faithfully,

Greg Cameron

Copy: The Hon Michael McCormack MP; Mr Rod Sims, Chair, ACCC; The Hon Chris Bowen MP; Mr Tim Crakanthorp MP; NSW Legislative Council Public Works Committee; Prof. Roy Green, Chair, Port of Newcastle

December 5 2018

….

Updated December 4 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

ACCC repudiates own claim

I refer to the NSW government’s decision, as first announced on July 27 2012, that the state’s next container terminal will be developed at Port Kembla.

It is a fact that the lessee of the Port of Newcastle may develop a container terminal by paying the same fee as Newcastle Stevedores Consortium (NSC) was required to pay in 2013. In 2013, Newcastle Port Corporation (NPC), a statutory state-owned corporation, had been in negotiation to lease the port’s container terminal site to NSC, since 2009.

Term Sheets between NPC and NSC required NSC to pay the government for any cost the government incurred to NSW Ports under the Port Commitment, due to NSC developing a container terminal in the Port of Newcastle.

A government stops carrying on a business for the purposes of the “Commonwealth Competition and Consumer At 2010” (Competition Act) when it is privatising that business. On October 28 2013, the NSW government was not privatising NPC’s business. NSW Treasurer Mike Baird and Ports Minister Duncan Gay announced that the government was “awaiting the scoping study on the proposed long-term lease of Newcastle Port and no decision has been made”.

“Mr Baird reiterated that the scoping study for the proposed port transaction remains on track, with the NSW Government expecting to make a decision by the end of the year,” their media release said.

A decision to privatise the Port of Newcastle was announced on November 5 2013.

The ACCC is currently investigating whether the government may have breached the Competition Act in respect of a container terminal development at the Port of Newcastle.

The ACCC has not withdrawn its claim that the Competition Act stopped applying in respect of a container terminal development at the Port of Newcastle from at least July 27 2012.

How can the Competition Act be breached when it doesn’t apply?

Yours faithfully,

Greg Cameron

Copy: NSW MPs; media

December 4 2018

….

Updated December 3 2018

Why NSW container port policy is false

The NSW government announced a policy on July 27 2012 that the state’s next container terminal will be developed at Port Kembla, after Port Botany reaches capacity. A month later, the government changed the terms of Newcastle Port Corporation’s (NPC) confidential negotiation to lease the port’s container terminal site to “preferred proponent”, Newcastle Stevedores Consortium (NSC).

The government instructed NSC that a TEU-container terminal was not to be built. NPC continued negotiating for non-TEU-container terminal development.

NSW Ports became the lessee of Port Botany and Port Kembla on May 30 2013. The government contractually committed to pay NSW Ports for containers shipped through a future container terminal developed at the Port of Newcastle, for another 50 years. This contractual commitment was called the “Port Commitment”. The meaning of “container” was defined in the Port Commitment to be virtually any container carried on a ship.

On July 26 2013, the government again instructed NSC not to develop a TEU-container terminal as a condition of continuing to negotiate leasing the container terminal site from NPC. But the government required a source of funds to pay NSW Ports. The government had no authority to use consolidated revenue. NSC became the government’s source of funds. Term Sheets between NPC and NSC required NSC to pay the government for any cost the government incurred to NSW Ports under the Port Commitment, due to the activities of NSC in the Port of Newcastle.

The Term Sheets provided the government’s conditions for the state’s next container terminal to be developed at the Port of Newcastle. The Term Sheets proved that NPC was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) while it was negotiating to lease the container terminal site to NSC from 2009.

Because charging the fee was likely to breach the Competition Act, NPC “concluded” the negotiation without leasing the container terminal site to NSC. An announcement was made on November 5 2013 to lease the entire port. The port was eventually leased on May 30 2014.

The Term Sheets prove that every statement of government container port policy from July 27 2012, is false. A container terminal can be developed at the Port of Newcastle with the fee being a condition of development.

The ACCC claims that the Competition Act does not apply to the fee because of government policy announced on July 27 2012. At the same time, the ACCC is currently investigating whether the government may have breached the Competition Act. Go figure.

….

Updated December 2 2018 

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

ACCC port claim wrong and misleading

Does the ACCC dispute that Newcastle Port Corporation (NPC) was carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act), by negotiating to lease the Port of Newcastle’s container terminal site (the “Mayfield Site”) to Newcastle Stevedores Consortium (NSC), between 2009 and November 5 2013? The negotiation concluded without the site being leased.

The “NSW Independent Commission Against Corruption” reported in 2016:

“As a statutory state-owned corporation, the NPC was obliged to comply with the NSW Government’s “Working with Government Guidelines”. Mr Webb [NPC Chief Executive Officer] explained that, in accordance with the guidelines, the NPC had conducted “direct negotiations” with the NSC. By 2010, the direct negotiations had been completed and the process had moved to the point where the NSC had been identified as the preferred proponent. From this point, the NPC could enter “commercial negotiations” with the NSC with a view to concluding a final contract. This required ministerial approval and the NPC was seeking that permission from Mr Roozendaal [NSW Treasurer].”
Source: NSW ICAC, “Investigation into NSW Liberal Party electoral funding for the 2011 State election campaign and other matters”, August 30 2016, page 43

Port Botany and Port Kembla were leased to NSW Ports on May 30 2013. The government contractually committed to “make certain payments to NSW Ports in respect of future container capacity development at Port of Newcastle (Port Commitment)”. By “future container capacity development”, the government meant a container terminal. NPC’s Term Sheets with NSC required NSC to pay the government for any cost the government incurred to NSW Ports under the Port Commitment, due to the activities of NSC in the Port of Newcastle.

However, the ACCC claims that the government stopped carrying on a business for the purposes of the Competition Act at the Port of Newcastle because of a government policy announcement on July 27 2012. The government announced that the state’s next container terminal will be developed at Port Kembla after Port Botany reaches capacity.

NPC’s Term sheets with NSC prove that every statement of government policy from July 27 2012, has been false. The Terms Sheets prove that the ACCC’s claim is wrong and therefore misleading.

NPC was still negotiating with NSC on October 28 2013, when the Port of Newcastle was not being leased. The government announced its decision to lease the port on November 5 2013. Unless the government leased the port, it had no source of funds to pay NSW Ports, because requiring payment from NSC was likely to breach the Competition Act. The government did not want the Term Sheets to become public knowledge.

Did the ACCC investigate NPC’s Term Sheets with NSC? If so, on what date?

When the port was leased, on May 30 2014, the lessee was required to pay the same fee as was NSC. The ACCC is currently investigating whether the government may have breached the Competition Act.

Why does the ACCC claim that the government stopped carrying on a business for the purposes of the Competition Act from at least July 27 2012, when this claim is disproven by NPC’s Term Sheets with NSC?

Yours faithfully,

Greg Cameron

Copy: NSW MPs; media

December 2 2018

….

Updated November 24 2018

The Hon Dominic Perrottet MP
Treasurer, and Minister for Industrial Relations

The Hon Melinda Pavey MP
Minister for Roads, Maritime and Freight

Dear Mr Perrottet and Ms Pavey,

I refer to NSW government container port policy, as announced on July 27 2012, that the state’s next container terminal will be developed at Port Kembla.

It is impossible for the government to have a policy that the state’s next container terminal will be developed at Port Kembla.

Government policy is that the developer of a container terminal at the Port of Newcastle is required to pay the government for container shipments under the formula provided at sections 3.3 and 3.4 of the document headed “Port Commitment – Port Botany and Port Kembla”.

Any payment which the government receives for containers shipped through the Port of Newcastle is paid to the private lessee of Port Botany and Port Kembla, NSW Ports.

The government is permitted to pay compensation to NSW Ports under section 30 of the “Ports Assets (Authorised Transactions) Act 2012”. But the government is not permitted to use consolidated revenue to pay NSW Ports for container shipments through the Port of Newcastle. That source of funds is the developer of a container terminal at the Port of Newcastle.

The government’s policy was exposed on October 17 2013, when The Hon Adam Searle MLC asked The Hon Duncan Gay MLC “how much compensation will be paid to the private operator of Port Botany if a new container terminal is developed at Newcastle Port?”.

The government concealed the fact that Newcastle Stevedores Consortium was required to pay the fee as a condition of negotiating to lease the Port of Newcastle’s container terminal site from the government. That information became public knowledge only on July 28 2016, when “The Newcastle Herald” published the “Port Commitment – Port Botany and Port Kembla” document.

On the basis of confidential information supplied by NSW government officials, the ACCC informed me, on June 7 2013, that it was government policy not to develop a container terminal at the Port of Newcastle. The ACCC advised me that the government ceased carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act), in light of this government policy.

The ACCC does not acknowledge it is government policy that the developer of a container terminal at the Port of Newcastle will pay the government for container shipments under the conditions set out in the “Port Commitment – Port Botany and Port Kembla” document.

However, the ACCC is currently investigating whether confidential “arrangements” made when Port Botany, Port Kembla and the Port of Newcastle were “privatised”, may breach the Competition Act. The ACCC refuses to disclose the basis on which the Competition Act applies to these “arrangements”.

The ACCC also refuses to acknowledge that Newcastle Stevedores Consortium was required to pay the government for container shipments – as revealed by the “Port Commitment – Port Botany and Port Kembla” document – as a condition of negotiating to lease the Port of Newcastle’s container terminal site.

Will you disclose the date on which the government informed the ACCC that Newcastle Stevedores Consortium was required to pay the government in respect of container shipments as a condition of negotiating to lease the Port of Newcastle’s container terminal site?

Yours faithfully,

Greg Cameron

Copy: ACCC; NSW MPs; Media

November 24 2018

Updated November 21 2018

A NSW Parliamentary Inquiry into Port of Newcastle lease arrangements will lift years of secrecy.

The NSW government made a secret deal with NSW Ports on May 30 2013, covered under lease arrangements for Port Botany and Port Kembla.

They agreed on a formula for charging the developer of a container terminal at the Port of Newcastle for container shipments.

The purpose of their agreement is to limit or prevent the development of a container terminal at the Port of Newcastle.

So far, they have succeeded.

The Public Works Committee of the Legislative Council announced on November 20 it will “inquire into and report on the impact of Port of Newcastle sale arrangements on public works expenditure in New South Wales, including:

(i) the Westconnex Gateway project

(ii) the Port Botany Rail Line duplication

(iii) intermodal terminals and rail road connections in southwest and western Sydney

(iv) other additional public road infrastructure requirements due to the additional road freight movements in Sydney under the existing port strategy.”

Until November 2013, the NSW government required Newcastle Stevedores Consortium to pay the Newcastle container fee as a condition of negotiating leasing the Port of Newcastle’s container terminal site from the government.

On November 5 2013, the NSW government decided to lease the Port of Newcastle. A lease condition is that the lessee is required to pay the government’s fee in respect of developing a container terminal.

On October 30 2018, the ACCC disclosed that an investigation is being conducted into whether the NSW government may have breached the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of the development of a container terminal at the Port of Newcastle.

Since June 7 2013, the ACCC has claimed that the NSW government stopped carrying on a business for the purposes of the Competition Act in respect of a container terminal development at the Port of Newcastle, because the government announced a policy decision on July 27 2012 that the state’s next container terminal will be developed at Port Kembla.

The actual decision the NSW government took, but concealed, was to require the developer of a container terminal at the Port of Newcastle to pay the government a fee for container shipments, and to give this fee to a future lessee of Port Botany and Port Kembla.

It is impossible for the NSW government to have a policy not to develop a container terminal at the Port of Newcastle when it is government policy to contractually require the developer of a container terminal at the Port of Newcastle to pay the government’s fee.

The NSW government opposes a container terminal at the Port of Newcastle because it enables trucks to be replaced by trains for container transportation in NSW.

A container terminal at Newcastle would justify building a rail freight bypass of Sydney, from Newcastle to Badgery’s Creek and Port Kembla.

This bypass would be paid for with private funds by replacing Port Botany trucks with Newcastle trains.

Additionally, it would enable trains to replace trucks for transporting the bulk of Sydney’s regional and interstate freight.

More than one million container trucks travel through Port Botany each year.

By 2040, there will be five million container truck movements.

A rail freight bypass of Sydney will justify building the Maldon-Dombarton rail freight line to enable a container terminal at Port Kembla to operate interchangeably with Newcastle.

The South Coast of NSW will benefit from direct access to a container port.

By immediately building the section of the bypass line between Glenfield and Eastern Creek, containers can be railed between Port Botany and a new intermodal terminal in outer western Sydney, using the existing rail network.

There would be no intermodal terminal at Moorebank.

The remainder of the line – from Eastern Creek to Newcastle – will take about 10 years to build.

This allows ample time for an orderly transfer of operations from Port Botany to Newcastle and Port Kembla.

Upon line completion, containers would be railed between Newcastle and intermodal terminals in outer western Sydney, where they would be de-consolidated at the intermodal terminals and the goods transported to their end destinations in Sydney.

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

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

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

Freight currently entering Greater Sydney by road can be railed.

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

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

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

There would be no need to connect Port Botany to WestConnex for the purpose of trucking containers.

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

All of Sydney’s current rail freight capacity would be used for passenger services to provide a higher economic return than freight.

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

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

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

Direct rail access to a container terminal is a pre-condition for regional economic development because more than 90 per cent of world trade in goods is conducted using containers.

A rail freight bypass would enable Sydney firms to relocate to regional areas.

The Committee will report on February 28 2019.

….

Updated November 20 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

Since June 7 2013, the ACCC has claimed that the NSW government stopped carrying on a business for the purposes of the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in respect of a container terminal development at the Port of Newcastle, because the government announced a policy decision on July 27 2012 that the state’s next container terminal will be developed at Port Kembla.

The actual decision the NSW government took, but concealed, was to require the developer of a container terminal at the Port of Newcastle to pay the government a fee for container shipments, and to give this fee to a future lessee of Port Botany and Port Kembla.

It is impossible for the NSW government to have a policy not to develop a container terminal at the Port of Newcastle when it is government policy to contractually require the developer of a container terminal at the Port of Newcastle to pay the government’s fee.

The NSW government and NSW Ports reached agreement on May 30 2013 on a formula for charging the developer of a container terminal at the Port of Newcastle for container shipments.

The purpose of their agreement is to limit or prevent the development of a container terminal at the Port of Newcastle.

Until November 2013, the NSW government required Newcastle Stevedores Consortium to pay the fee as a condition of negotiating to lease the Port of Newcastle’s container terminal site from the government.

On November 5 2013, the NSW government decided to lease the Port of Newcastle. A lease condition is that the lessee is required to pay the government’s fee in respect of developing a container terminal.

On October 30 2018, the ACCC disclosed that an investigation is being conducted into whether the NSW government may have breached the Competition Act in respect of the development of a container terminal at the Port of Newcastle.

Does the ACCC withdraw its claim that the Competition Act stopped applying to the NSW government in respect of the development of a container terminal at the Port of Newcastle, from at least July 27 2012?

If not, why is the ACCC conducting an investigation into a possible breach of the Competition Act when the Competition Act is not applicable?

Yours faithfully,

Greg Cameron

Copy: NSW MPs; Media

November 20 2018

….

Updated November 18 2018

PORTS ARRANGEMENTS MAY BE ILLEGAL – ACCC INVESTIGATES

Confidential lease arrangements for Port Botany, Port Kembla and the Port of Newcastle may be illegal, casting doubt on the leases themselves.

The NSW government is contractually committed to compensate the leaseholder of Port Botany and Port Kembla, NSW Ports, for loss of business due to container shipments through the Port of Newcastle.

Section 30 of the “Ports Assets (Authorised Transactions) Act 2012” authorises compensation, but not when compensation is for container shipments through the Port of Newcastle.

The only source of funds available to the government to pay NSW Ports, is the Port of Newcastle.

NSW government policy is that the state’s next container terminal will be developed at Port Kembla unless a container terminal is developed at the Port of Newcastle.

A container terminal developed at the Port of Newcastle requires the developer to pay the government a fee for container shipments, but not at Port Kembla.

The formula for calculating the fee is included in a document headed “Port Commitment – Port Botany and Port Kembla” (section 3.4), which “The Newcastle Herald” published on July 28 2016.

The confidential document was leaked to the newspaper by a whistleblower.

The ACCC considers that the confidential arrangements may limit or prevent the development of a container terminal at the Port of Newcastle.

The ACCC is currently investigating whether these arrangements may breach the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

The government denies that charging a fee for containers shipped through the Port of Newcastle is for the purpose of limiting or preventing the development of a container terminal.

This denial is not credible.

A container terminal at the Port of Newcastle will provide the base-load cargo to privately fund the construction of a new rail freight line linking the port with Badgery’s Creek and Port Kembla.

The government wants to prevent this line being built because railing containers using the Port of Newcastle is better for the state’s economy than trucking containers using Port Botany.

NSW Ports is 80-per cent owned by industry super funds. The owners were aware in 2012 that the NSW government’s offer of payment for containers shipped through the Port of Newcastle may have breached the Competition Act.

The government’s container port policy is not in the state’s best interests.

The parliamentary Hansard record shows how hard the government tried to conceal the real purpose of the ports’ arrangements.

….

Updated November 16 2018

The Hon Dominic Perrottet MP
Treasurer, and Minister for Industrial Relations

The Hon Melinda Pavey MP
Minister for Roads, Maritime and Freight

Dear Mr Perrottet and Ms Pavey,

ACCC investigation of ports arrangements

Does the Port of Newcastle looking to proceed with developing a container terminal reflect the NSW government’s container port policy as announced on July 27 2012?

The government announced that the state’s next container terminal will be developed at Port Kembla, after Port Botany reaches capacity. The policy was jointly announced by the (former) Treasurer, The Hon Mike Baird MP and the (former) Minister for Roads and Ports, The Hon Duncan Gay MLC.

The government confirms that the 2013 leasing arrangements for Port Botany and Port Kembla, and the 2014 leasing arrangements for the Port of Newcastle, reflect the government’s container port policy.

At the 2015 Budget Estimates hearing, the (former) Treasurer, The Hon Gladys Berejiklian MP, was asked: “Has the NSW Government entered into any agreements that create a disincentive or obstacle to develop a container terminal at the Port of Newcastle?”

Ms Berejiklian answered: “I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.”

The ACCC now says, “it has been widely reported in the media that the ACCC has concerns about arrangements made when the NSW government privatised Port Botany, Port Kembla and the Port of Newcastle that may limit or prevent the development of a container terminal at the Port of Newcastle”.

“With the Port of Newcastle now looking to proceed with developing a container terminal, the ACCC is currently investigating whether these arrangements may breach the Competition and Consumer Act 2010,” the ACCC said, on October 30 2018.

May I respectfully request an answer to my question: Does the Port of Newcastle looking to proceed with developing a container terminal reflect the NSW government’s container port policy as announced on July 27 2012?

Yours faithfully,

Greg Cameron

Copy: ACCC; NSW MPs; Media

November 16 2018

…..

Updated November 15 2018

Mr Rod Sims
Chair
ACCC

Dear Mr Sims,

ACCC container port policy assessment

Why does the ACCC claim it is NSW government policy not to develop a container terminal at the Port of Newcastle when the ACCC is examining whether confidential arrangements enabling the development of a container terminal at the Port of Newcastle may breach the “Commonwealth Competition and Consumer Act 2010” (Competition Act)?

The ACCC decided in June 2013 that the development of a container terminal at the Port of Newcastle is unlikely to fall within the operation of the Competition Act. This decision was taken because the NSW government announced a policy in July 2012 not to develop a container terminal at the Port of Newcastle. NSW government officials provided the ACCC with confidential information in 2014, which the ACCC reviewed to confirm the 2013 decision, re-confirming that decision in February 2017.

In March 2018, the ACCC started a new investigation into whether the confidential 2013 leasing arrangements for Port Botany and Port Kembla, and the confidential 2014 leasing arrangements for the Port of Newcastle, may breach the Competition Act, in respect of the development of a container terminal at the Port of Newcastle.

For there to be a breach, the arrangements must be within the operation of the Competition Act.

Has the ACCC received new information indicating that your original June 2013 decision was wrong?

If so, what is that information? Was it provided by NSW government officials?

If the ACCC received no new information, which part of the previously supplied information indicates that the June 2013 decision was wrong?

Yours faithfully,

Greg Cameron

Distribution: The Hon Josh Frydenberg MP; NSW MPs; Media

November 15 2018

Updated November 13 2018

 

The Hon Josh Frydenberg MP
Treasurer of the Commonwealth of Australia

Dear Mr Frydenberg,

ACCC provided Treasury with wrong information

I refer to Treasury’s letter to me dated January 27 2017 in relation to a container terminal at the Port of Newcastle. Advice provided to the previous Treasurer by the ACCC was wrong in five key respects. Will you please request the ACCC to provide the correct information?

Firstly, the ACCC now acknowledges that arrangements made when the NSW government privatised Port Botany, Port Kembla and the Port of Newcastle may breach the “Commonwealth Competition and Consumer Act 2010” (Competition Act).

Secondly, in the period 2010 to November 5 2013, Newcastle Port Corporation (NPC) was conducting a standard commercial negotiation to lease the Port of Newcastle’s “Mayfield Site” to Newcastle Stevedores Consortium (NSC). The ACCC wrongly claims NPC was exempt from the Competition Act in respect of this negotiation.

Thirdly, the ACCC claims that NPC became exempt from the Competition Act in respect of a container terminal development at the Port of Newcastle because of a NSW government decision announced on July 27 2012 not to develop a container terminal at the Port of Newcastle. Contrary to the ACCC’s claim, Term Sheets between NPC and NSC in 2013 included a requirement that NPC pay the NSW government in respect of containers shipped through a container terminal developed by NSC. The Term Sheets prove the ACCC is wrong to claim that the Competition Act stopped applying to NPC because of the NSW government’s policy announcement on July 27 2012. The ACCC is currently investigating whether the same requirement may breach the Competition Act in respect of a container terminal development by the lessee of the Port of Newcastle.

Fourthly, the ACCC claims that NPC did not enter into a contract with NSC requiring NSC to pay the NSW government in respect of containers handled by NSC at the Port of Newcastle. The ACCC claim is wrong because NSC was contractually required to make the payment as a condition of negotiating with NPC.

Fifthly, the ACCC claims “there does not appear to have been a contract, arrangement or understanding in place during the relevant period which had the purpose, effect or likely effect of substantially lessening competition”. The Term Sheets between NPC and NSC in 2013 included the same arrangement to pay the NSW government as is currently being investigated by the ACCC. The ACCC stated on October 30 2018: “With the Port of Newcastle now looking to proceed with developing a container terminal, the ACCC is currently investigating whether these arrangements may breach the Competition and Consumer Act 2010.” If the arrangement is found to be illegal in 2018, the same arrangement was illegal in 2013. It was impossible for NPC to conclude a lease contract when the Term Sheets included an illegal requirement.

The ACCC investigated the negotiation between NPC and NSC using “relevant information” supplied confidentially by the NSW government. The ACCC conducted an invalid investigation unless it had access to all information about the negotiation between NPC and NSC, and corroborated that information with NSC. However, it appears that the previous Treasurer was provided with wrong information because the ACCC conducted an invalid investigation.

Yours faithfully,

Greg Cameron

Copy: ACCC; NSW MPs; Media

November 13 2018

……

Updated November 8 2018 

ACCC reverses position on Newcastle container terminal

The ACCC is investigating whether the NSW government may have breached the “Commonwealth Competition and Consumer Act 2010” (Competition Act) in relation to the proposed development of a container terminal at the Port of Newcastle.

The ACCC reversed its long-held position that the NSW government likely stopped carrying on a business for the purposes of the Competition Act in 2012.

On July 27 2012, the government announced that a container terminal would not be developed at the Port of Newcastle, before Port Botany reached capacity, followed by Port Kembla.

The ACCC said that the Competition Act likely did not apply to the development of a container terminal at the Port of Newcastle, because of government policy.

The ACCC now acknowledges a proposal to develop a container terminal at the Port of Newcastle.

“The Port of Newcastle has developed the concept for a container terminal development at its Mayfield site,” the ACCC said on October 30 2018, in its annual “Container stevedoring monitoring report” (page 30).

“The site has the capacity for a 2 million TEU per annum container terminal and a shipping channel that can accommodate vessels up to 10 000 TEU.

“As has been widely reported in the media, the ACCC has concerns about arrangements made when the NSW government privatised Port Botany, Port Kembla and the Port of Newcastle that may limit or prevent the development of a container terminal at the Port of Newcastle.

“With the Port of Newcastle now looking to proceed with developing a container terminal, the ACCC is currently investigating whether these arrangements may breach the Competition and Consumer Act 2010,” the ACCC said.

In 2017, the ACCC told the (former) federal Treasurer, The Hon Scott Morrison MP: “It is unlikely that a government engaging in a one-off sale or long-term lease of an asset would fall within the definition of “carrying on a business” for the purposes of the Competition Act.”

The decision to lease the Port of Newcastle was announced on November 5 2013. As of October 28 2013, the NSW government was not leasing the Port of Newcastle.

These dates are central to the “arrangements” the ACCC is now investigating.

The government secretly decided in 2012 to pay a future lessee of Port Botany and Port Kembla for any containers shipped through a container terminal developed at the Port of Newcastle, in excess of a small “cap”.

The “Ports Assets (Authorised Transactions) Act 2012” did not authorise the government to pay a future lessee from consolidated revenue.

The government secretly decided in 2012 to charge a future developer of a container terminal at the Port of Newcastle for any cost the government incurred to a future lessee of Port Botany and Port Kembla.

The government leased Port Botany and Port Kembla to NSW Ports on May 30 2013.

The government contractually required Newcastle Stevedores Consortium (NSC) to pay the government for any cost it incurred to NSW Ports, due to the activities of NSC in the Port of Newcastle.

As revealed by the NSW ICAC in August 2016 (Chapter 6), the government, acting as Newcastle Port Corporation (NPC), a statutory state-owned corporation, chose NSC in 2010 as its preferred developer of a container terminal at the Port of Newcastle.

The ACCC informed Mr Morrison that the negotiation between the government and NSC “does not appear to disclose any relevant conduct for the purposes of the Competition Act”.

“There does not appear to have been a contract, arrangement or understanding in place during the relevant period which had the purpose, effect or likely effect of substantially lessening competition,” the ACCC said.

The “relevant period” was July 27 2012 to October 28 2013.

The ACCC is obliged to acknowledge that NSC was the government’s exclusive source of funds to pay NSW Ports in respect of containers shipped through a container terminal developed at the Port of Newcastle, until at least October 28 2013.

It was impossible for State Cabinet to approve NPC’s contract condition with NSC, because it was likely to breach the Competition Act.

The government’s decision announced on November 5 2013 to lease the Port of Newcastle was for the purpose of replacing NSC as the source of funds to pay NSW Ports.

The ACCC’s investigation will establish whether government policy announced on July 27 2012, as re-confirmed on many occasions, was for the purpose of evading the Competition Act.

A container terminal at the Port of Newcastle, handling one million containers a year for 40 years, will require the NSW government to pay NSW Ports at least $6 billion, if the lease arrangements are valid.

Developing a major container terminal at the Port of Newcastle is viable if the fee is removed.

A container terminal at the Port of Newcastle is a pre-condition for future economic growth.

Over 90 per cent of world trade in goods is conducted using containers. Only bulk commodities, such as coal, are shipped without containers.

All of NSW outside greater Sydney has no direct access to a container port. It is the single biggest obstacle to regional economic development and decentralisation.

Firms wanting to invest in regional NSW are prevented from doing so because they do not have direct access to Port Botany, which is the only container port in NSW.

A container port serviced by trucks is high cost. Port Botany, which relies on trucks, exists because it operates as a monopoly.

A container terminal at Newcastle port is able to be serviced by rail.

Container trucking can be eliminated with a Newcastle container terminal.

The NSW government opposes a container terminal at the Port of Newcastle, because it enables trucks to be replaced by trains.

So concerned is the ACCC about the adverse economic impact that it is currently investigating whether the government may have breached the national Competition Act by requiring the Port of Newcastle to pay the government when containers shipped through the Port of Newcastle exceed a small “cap”.

The government decided to penalise Newcastle in 2012 when legislation authorising the ports to be leased was being debated in state parliament.

The government concealed its anti-competitive policy to prevent examination.

A container terminal at Newcastle would justify building a rail freight bypass of Sydney, from Newcastle to Badgery’s Creek and Port Kembla.

This bypass would be paid for with private funds by replacing Port Botany trucks with Newcastle trains.

Additionally, it would enable trains to replace trucks for transporting the bulk of Sydney’s regional and interstate freight.

More than one million container trucks currently travel through Port Botany each year. By 2040, there will be five million.

A rail freight bypass of Sydney will justify building the Maldon-Dombarton rail freight line to enable a container terminal at Port Kembla to operate interchangeably with Newcastle.

The South Coast of NSW will benefit from direct access to a container port.

By immediately building the section of the bypass line between Glenfield and Eastern Creek, containers can be railed between Port Botany and a new intermodal terminal in outer western Sydney. The remainder of the line to Newcastle will take about 10 years to build.

There would be no intermodal terminal at Moorebank.

This allows ample time for an orderly transfer of operations from Port Botany to Newcastle and Port Kembla.

Upon line completion, containers would be railed between Newcastle and intermodal terminals in outer western Sydney, where they would be de-consolidated at the intermodal terminals and the goods transported to their end destinations in Sydney.

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

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

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

Freight currently entering Greater Sydney by road can be railed.

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

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

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

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

All of Sydney’s current rail freight capacity would be used for passenger services to provide a higher economic return than freight.

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

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

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

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

A rail freight bypass would enable Sydney firms to relocate to regional areas.

A rail freight bypass of Sydney is in the interests of all the people of NSW.

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.

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

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”.

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

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

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

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

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

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

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

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

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