A $14 million study into a rail freight bypass of Newcastle – between Fassifern in the south and Hexham in the north – was disclosed by Treasurer Gladys Berejiklian in this week’s NSW state budget. As expected, the budget makes no provision for paying compensation to NSW Ports, the Port Botany leaseholder, if a container terminal is developed at the Port of Newcastle and NSW Ports loses business at Port Botany.
The NSW government still refuses to deny capping the number of container movements at the Port of Newcastle for which the government does not charge $100 per container to fund NSW Ports’ compensation. The government is covering-up this cap because it may be unlawful and could be unenforceable.
A container terminal at the Port would enable the private sector to build the Fassifern-Hexham rail freight bypass by railing containers. BHP proposed doing just this in 1997, when it planned to build a container terminal on the site of the Newcastle steelworks.
But what concerns the NSW government is that a rail freight bypass would not stop at Fassifern. A container terminal would justify building a rail freight bypass of Sydney – from the Port of Newcastle to Glenfield, in southwest Sydney. Paying for this line would be accomplished by railing containers for the Sydney market instead of trucking them from Port Botany.
A rail freight bypass of Sydney would also remove the need to spend $5 billion building stages 2 and 3 of the Northern Sydney Freight Corridor, for which no funds are available; building the $1 billion Western Sydney Freight Line to cater for expansion of Port Botany container terminal, for which no funds are available; and would enable using all of Sydney’s rail capacity for passenger services.
Secret fee cover-up
On 17 October 2013, Roads, Maritime and Freight Minister Duncan Gay, disclosed to the NSW parliament that a ‘cap on numbers’ of containers was in place at the Port of Newcastle. Although more than 100 Questions On Notice about the ‘cap on numbers’ have been asked in parliament since October 2014, Mr Gay and Ms Berejiklian are only prepared to say that there is no legislated cap on container movements at the Port of Newcastle, a fact previously known. The purpose of this ‘cap’ and associated charge would be to deter development of a container terminal.
No provision is being made by the government in state budgets for paying compensation to NSW Ports because the ‘cap on numbers’ will not be extended. The government considers that the ‘cap on numbers’ is adequate for compensating NSW Ports.
A minimum charge of $100 per container is needed in order to compensate NSW Ports, because this is NSW Ports’ average charge at Port Botany.
For a typical container ship carrying 10,000 containers – 5,000 as import and 5,000 as export – the cost of visiting the Port of Newcastle would be at least $1 million more than visiting Port Botany. However, a container terminal will not be developed at the Port of Newcastle on these terms because shipping lines and their customers will not pay an extra $1 million per ship’s visit. Should the ‘cap on numbers’ and a charge on containers at the Port of Newcastle prove to be unlawful, or unenforceable, the commercial impediment to developing a container terminal will be removed.
Only a court can ultimately decide when the NSW government was carrying on a business, as Newcastle Port Corporation (NPC), for the purpose of the “Commonwealth Competition and Consumer Act 2010” (CCA); and, whether a government charge of $100 per container would be lawful under Section 45(2)(b)(ii), which says:
“A corporation shall not give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision has the purpose, or has or is likely to have the effect, of substantially lessening competition.”
The Australian Competition and Consumer Commission enforces the CCA. However, the ACCC advises that it is not taking any enforcement action in relation to confidential ports’ leasing arrangements based on confidential information supplied by NSW government officials. Presumably, the NSW government informed the ACCC about the ‘cap on numbers’, a charge on containers, and the date nominated by the NSW government that NPC ceased carrying on a business for the purpose of the CCA.
Doubtless, NPC was carrying on a business for the purpose of the CCA in 2010 when it conducted a public tender for developing a multi-purpose terminal, including a container terminal with minimum capacity of 1 million containers per year, at the Port of Newcastle. For the duration of its negotiations with the successful tenderer, Anglo Ports Pty Ltd, which lasted until November 2013, NPC would have given notification of all changes in its requirements pursuant to the tender. It defies reality that a ‘cap on numbers’ and an associated charge were not notifiable changes.
NPC was still carrying on a business for the purpose of the CCA on 14 December 2011 when the NSW government announced the appointment of Morgan Stanley to conduct a scoping study into leasing Port Botany. One of the instructions given to Morgan Stanley was for the payment of compensation to the future Port Botany leaseholder based on a ‘cap on numbers’ at the Port of Newcastle.
NPC was still carrying on a business for the purpose of the CCA when the NSW government reached agreement with NSW Ports on the terms and conditions of a 99-year lease to Port Botany, on 12 April 2013. Two months later, on 18 June, the NSW government announced its intention to lease the Port of Newcastle, subject to a scoping study. The decision to lease the Port of Newcastle was announced on 5 November 2013.
Mr Gay confirmed that NPC was carrying on a business for the purpose of the CCA when the ‘cap on numbers’ was ‘in place’:
“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.”
In a statement published on the NSW parliament web site dated 10 February 2015, Anglo Ports said the NSW government advised of changed requirements pursuant to the tender, on several occasions:
“… the Hon M Baird MP, as Treasurer, by decisions of 30 August 2012 and 26 July 2013 dictated that a container port not proceed at Newcastle. There were other decisions on the container port proposal, including by Mr Baird and by Mr E Roozendaal. There were thus several decisions about the container port proposal capable of being reviewed.”
Anglo Ports did not disclose whether NPC amended the tender to include the ‘cap on numbers’ and any associated fee. It was responding to serious allegations made by NSW Treasury at a Budget Estimates hearing on 22 August 2014.
In a media statement dated 4 March 2015, the NSW government 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.”
In response to a Budget Estimates Supplementary Question (no. 29) on 29 September 2015, Ms Berejiklian said:
“I am advised that the lessee could develop a container terminal at the Port of Newcastle if it wished to do so.”
Presumably, Ms Berejiklian meant that Port of Newcastle Investments could develop a container terminal subject to complying with the ‘cap on numbers’, and any associated charge.
On 31 May 2016, the Australian Competition Tribunal declared the Port of Newcastle shipping channel service. A charge on containers at the Port of Newcastle could be unenforceable should the ACCC arbitrate the port operator’s charge for container ships and deem it to be unreasonable.
The NSW and Australian governments are covering-up a potential breach of the CCA by refusing to disclose whether and when a charge was applied by the NSW government on container movements exceeding a ‘cap on numbers’; and, the date nominated by the NSW government that NPC ceased carrying on a business for the purpose of the CCA.
The implications for infrastructure development in NSW of this cover-up are extensive, as explained at www.containerterminalpolicyinnsw.com.au.