Energy economic Bruce Mountain warns of Middle Arm ‘white elephant’

A prominent energy economist warns the proposed Middle Arm development is doomed to become a white elephant. Read why.

A new report warns Middle Arm will be a white elephant if the current proposal goes ahead. Picture: Glenn Campbell

An Energy economist has warned the Northern Territory’s proposed Middle Arm industrial development is doomed to become a white elephant, whose failure would have the biggest impact on Territory taxpayers.

Victoria Energy Policy Centre director Bruce Mountain authored a report, published this week, which reviewed the NT government’s Stage 2 business case for the Middle Arm Sustainable Development Precinct.

Commissioned by the Environment Centre NT, the report found that none of the customers earmarked to operate at Middle Arm are likely to be willing or able to pay for the costs of building or operating the facility.

That was because, it argued, none of the five “not to deal” proponents – Fortescue, Tivan, Tamboran Resources, TE H2, Avenira – had expressed interest in using the core Middle Arm offloading facilities, wharves and jetties (indeed Fortescue has already quit the project entirely).

The Territory government’s preferred business case, however, expects to recover almost $500m a year from charges to use those core facilities.

Victoria Energy Policy Centre director Bruce Mountain.

“I’m mystified why a proposal is being made for Middle Arm at all, I couldn’t find any developer meaningfully interested in what it was going to offer,” Professor Mountain said.

“As it stands, the conclusion must be that an allocation of $1.5bn from the Commonwealth if spent on Middle Arm, will be squandered on infrastructure with no plausible user.

“If developed as currently proposed, Middle Arm will be a white elephant.”

However NT Government Treasurer Bill Yan said the government remains committed to the Middle Arm Sustainable Development Precinct which “is one of the most significant economic projects for the NT.”

“This is about securing our future, bringing new industries, advanced manufacturing and energy opportunities to the Top End,” he said.

“The precinct will support onshore processing of gas, minerals, hydrogen and renewables, creating long-term jobs and value for the Territory.

“Middle Arm is being developed as a low-emissions industrial hub, with sustainability and innovation at its core.

“It will strengthen Australia’s supply chains and energy security as well as reduce reliance on offshore processing. Long-term projects like this bring flow-on benefits for regional and remote communities.”

Professor Mountain said the most likely Middle Arm customer was Tamboran, but its contribution would not cover more than “a tiny portion” of the development cost.

In January Tamboran signed a Memorandum of Understanding with Santos to explore a joint expansion of the existing Darwin LNG facility at Middle Arm.

At the same time Tamboran reiterated its commitment to develop a second plant at the site if its gas exploration in the Beetaloo scales up.

NT government outline of the proposed Middle Arm Sustainable Development Precinct.

While the Federal Government had committed $1.5bn to the project, Professor Mountain estimated Territorians would be saddled with $5.5bn in capital outlays to get Middle Arm off the ground, and a further $140m annual operating expenditure for the next half century.

Professor Mountain said that investing such eye-watering amounts in a “build it and they will come” type venture was risky, unprecedented, and would leave the Territory to face “economic losses many times greater” than the Commonwealth, with “far smaller capacity to absorb such economic losses”.

Louise McCormick, the Territory's Investment Commissioner. Picture: Glenn Campbell

Earlier this month NT infrastructure commissioner Louise McCormick called for more attention to be paid to the current funding for Middle Arm, arguing the federal loan arrangement risked “limiting the project’s development and reducing its benefits”.

“With the current model of equity investment, the Territory is expected to make a positive return on investment and pay back the funds with interest,” she wrote in a piece for the Australian Strategic Policy Institute.

“This means the Territory will need to draw down on its self-generated revenue, which in turn will make it more difficult and costly to comprehensively develop the precinct and increase the risks for the Territory.”

At a debate on the weekend Lingiari MP Marion Scrymgour told the crowd that the Territory and federal governments were not “anywhere near getting the sign off” on Middle Arm funding, due to a stalemate over equity.

Country Liberal candidate for Solomon Lisa Bayliss said Territorians were “tired of people from down south telling us how to live”.

“The CLP is 100 per cent supportive of the Middle Arm Sustainable Development Precinct and the jobs it creates for the Top End,” she said.

Originally published as Energy economic Bruce Mountain warns of Middle Arm ‘white elephant’