Status of Port of Newcastle container cap?
From: Greg Cameron
Sent: Sunday, 31 May 2015 6:32 PM
To: Gladys Berejiklian (firstname.lastname@example.org)
Subject: Status of Newcastle container cap
The Hon. Gladys Berejiklian MP
Treasurer, and Minister for Industrial Relations
Dear Ms Berejiklian,
Does the cap on container movements at the Port of Newcastle still exist?
The cap was imposed for the purpose of leasing Port Botany when The Hon. Mike Baird MP was Treasurer. It was included in the confidential Scoping Study for the Port Botany lease prepared by Morgan Stanley. The government leased Port Botany in April 2013.
Another of the lease arrangements is that the government will compensate the Port Botany leaseholder if a container terminal is built at the Port of Newcastle and port throughput exceeds a prescribed number of containers.
The government was negotiating with Anglo Ports to build a container terminal at Newcastle port until November 2013, when the government withdrew. Anglo Ports was the preferred proponent in a tender run by the NSW government through Newcastle Port Corporation, to build and operate a multi-purpose cargo facility that was to include a container terminal, with a capacity of at least one million containers per year.
NSW Treasury said that the negotiation with Anglo Ports was an attempt by the (former) government to dictate an uneconomic enterprise contrary to market demand. It said that such attempts by government ”are examples of the kind of rent seeking activity likely to encourage influence peddling or corruption”. Treasury also said that ”as the container port did not proceed, there is no decision to review”.
As demonstrated by the government’s agreement with the Port Botany leaseholder in April 2013, the government knew that allowing Anglo Ports to build a one-million capacity container terminal meant paying compensation to the Port Botany leaseholder. The government should not be paying compensation to the Port Botany leaseholder under any circumstances, let alone for any enterprise that the government considers is ”uneconomic” and ”contrary to market demand”.
The government agreed to pay compensation to the Port Botany leaseholder for a reason. The most likely reason is loss of business due to competition. Therefore, the government, obviously, considers that a container terminal at Newcastle port is a commercially viable enterprise capable of competing successfully with Port Botany. There was no risk to government, because the proposed investment involved private capital.
There is no need to cap container movements at Newcastle port if a container terminal is, as the government claims, ”uneconomic” and ”contrary to market demand”. An investor using private capital succeeds or fails by virtue of their ability to conduct a viable enterprise. However, an investor is obstructed when government intervenes to promote a contrived market. By imposing anti-competitive ports leasing arrangements, the government is dictating which economic activity should, and should not, occur, which is a contrived market.
Treasury made its accusation on 22 August 2014, during a Budget Estimates hearing. Anglo Ports ”categorically denied” the accusation in a statement published on the NSW Parliament web site dated 10 February 2015. The company also said that it did not withdraw from the negotiation with the government.
At any time, the Newcastle port leaseholder can build a container terminal on the former steelworks site, which it controls. Additionally, a container terminal can be built on land not controlled by the Newcastle port leaseholder. But a container terminal is limited by the cap imposed on it by the government, including if the cap applies to the number of containers that may be shipped through the port.
The government says that there is no need to provide funds for paying compensation to the Port Botany leaseholder because ”there will not be an extension [of the cap]”. The government will not extend the cap until a prescribed number of container movements is reached at Port Botany and Port Kembla. It is noted that the ACCC made reference recently to the undesirability of the same company being both Port Botany leaseholder and Port Kembla leaseholder.
Questions seeking disclosure of these leasing arrangements and compensation payments were directed to The Hon. Duncan Gay MLC, Minister for Roads, Maritime and Freight, on 23 October 2014. Mr Gay advised that these questions should be directed to the Treasurer and they were so directed, on 5 May 2015. Over the intervening months, the government has refused all other requests for disclosure of these arrangements.
Assuming that the cap still exists, there is no evidence that it is lawful, or enforceable. The government would have its reasons for refusing to provide the information sought.
Florey ACT 2615
Copy: MPs; media.
Legislative Council Questions and Answers No. 1— Tuesday 5 May 2015
5 MAY 2015 (Paper No. 1)
TREASURER—PORT OF NEWCASTLE—Dr Faruqi to ask the Minister for Roads, Maritime and Freight, and Vice-President of the Executive Council representing the Treasurer, and Minister for Industrial Relations—
- Is compensation payable to the Port Botany leaseholder if container movements exceed an annual threshold at the Port of Newcastle?
- If so, what is the annual threshold?
- What is the amount of compensation per twenty-foot equivalent unit (TEU)?
- Is the Port of Newcastle leaseholder required to pay the Government a fee for container movements through the Port of Newcastle on the same or similar terms as the Government is required to compensate the Port Botany leaseholder?
- If so, when did the Government undertake to pay compensation to the Port Botany leaseholder and to impose a fee on the Port of Newcastle leaseholder?
- How many containers must be moved through Port Botany and Port Kembla before an extension is allowed in the number of container movements at the Port of Newcastle that do not attract the compensation payment and fee respectively?
- Is the purpose of the fee charged of the Port of Newcastle leaseholder to constrain the number of containers passing through the Port of Newcastle?
- If not, what is the purpose of the fee?
- Is the purpose of the fee charged of the Port of Newcastle leaseholder to prevent development of a container terminal at the Port of Newcastle?
- If not, what is the purpose of the fee?
- Did the Government abolish the cap on container movements at Port Botany to increase the value of the lease to potential purchasers?
- Did the Government agree to compensate the Port Botany leaseholder in respect of container movements at the Port of Newcastle to preserve the commercial value of the Port Botany lease?
- Was a cost-benefit study of the proposal to compensate the Port Botany leaseholder if container movements exceed an annual threshold at the Port of Newcastle undertaken?
- If so, will the Government release it?
- What will be the impact on the New South Wales economy of preventing competition between New South Wales ports for handling containers?
- What are the estimated additional costs to the Northern New South Wales economy to require goods to be transported to Port Botany by truck for export as opposed to the Port of Newcastle?
- What are the estimated additional costs to the Northern New South Wales economy to require imported goods to be transported between Port Botany and western Sydney before being transported by truck to northern New South Wales?
- What will be the impact on the New South Wales economy of predicating future growth in Port Botany container movements on transportation by truck?
- What is the container-carrying capacity of the rail line serving Port Botany?
- Will the Government fund the Western Sydney Freight Line?
- If not, who will fund this line?
- When will the Commonwealth Government respond to the Government’s request for funds to build stages 2 and 3 of the Northern Sydney Freight Corridor?
- Are there state or Commonwealth Government funds available for building the Western Sydney Freight Line and stages 2 and 3 of the Northern Sydney Freight Corridor?
Publication of Questions Answer to be lodged by Q & A No. 1 (Including Question Nos 0001 to 0012) 09 June 2015
LEGISLATIVE ASSEMBLY QUESTIONS AND ANSWERS Monday 2 March 2015
12 DECEMBER 2014 (Paper No. 23)
*6677 PORT OF NEWCASTLE AND PORT BOTANY LEASES—Mr Tim Crakanthorp asked the Treasurer, and Minister for Industrial Relations—
- 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?
- Did the Government agree to compensate NSW Ports for container numbers in excess of the cap at the Port of Newcastle?
- Did the Government advise bidders for the ports leases to obtain regulatory approval from the ACCC in relation to the cap on container numbers at the Port of Newcastle?
- Will the cap on container numbers at the Port of Newcastle reduce competition between ports in New South Wales for the container trade?
- Has the ACCC advised the Government that the cap on container numbers at the Port of Newcastle may be unlawful and could be unenforceable?
The transaction arrangements that the State entered into with the successful bidders for Port Botany and Kembla and the Port of Newcastle reflect its Freight and Ports Strategy, that Port Kembla should 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 Newcastle; and the landside infrastructure costs to support a major container facility at Newcastle are higher than for Port Kembla.
The arrangements do not prohibit the development of a container terminal at the Port of Newcastle and enable the growth of container volumes through Newcastle servicing that region.
The Government’s transaction team engaged extensively with the Australian Competition and Consumer Commission regarding the competition and regulatory framework, including the container arrangements.
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.