Sydney Airport is holding all the cards in fraught negotiations over land needed for the Berejiklian government's $1.8 billon Sydney gateway link to WestConnex, threatening to delay completion deadlines for the project.
The state cannot compulsorily acquire airport property crucial for the gateway, unlike the homes in Sydney's inner west, which have been bulldozed for the WestConnex tollroad.
Leaked documents marked "Cabinet in confidence" show the capital cost of the Sydney gateway link between the airport and WestConnex was estimated at nearly $1.8 billion as early as 2016.
Two-thirds of the funding for the gateway was expected to come from the WestConnex budget – $400 million more than the government has previously allocated.
Sydney Airport has wanted ''replacement land'' as compensation for the state acquiring land needed for the gateway project. Credit: Daniel Munoz
The documents, obtained by The Sydney Morning Herald and the ABC, show that separate tolls, freight levies and access fees for the airport were considered to close the $600 million gap in funding for the link.
The single biggest cost of the gateway is about $550 million in property acquisitions, half of which was expected to go to Sydney Airport.
The preferred route for the motorway from a WestConnex interchange at St Peters in the inner west runs through the airport's "northern lands", a 13-hectare block it has under a 99-year lease.
Detailed plans show the gateway will comprise a "Mascot flyover" near the airport's domestic terminal, ramps and both a "New Airport Drive" and a "New Qantas Drive" connecting to WestConnex.
The so-called gateway motorway to the airport and port are crucial to the WestConnex toll-road project.Credit: John Veage
They also reveal the cost of duplicating a freight rail line around the northern fringe of the airport to Port Botany will cost $280 million, and has been considered separate to the gateway for the "purposes of project funding".
While the state has compulsorily acquired hundreds of properties for WestConnex, the documents reveal that buying the northern lands for the gateway will require a "negotiated settlement" between the state, the Commonwealth and Sydney Airport.
The state cannot use its compulsory acquisition powers, and the Airports Act prevents the Commonwealth from using its powers to do so without amending legislation.
In contrast to the airport's position, many homeowners and businesses whose properties were compulsorily acquired for WestConnex complained they were compensated at below market value and were unable to purchase in the same areas.
The gateway project is pivotal to the success of WestConnex because of the crucial access it will provide to the country's busiest airport, and second-busiest container port.
While it is scheduled to open in 2023, the documents reveal a "potential risk" of the timeframe blowing out because the project is "highly reliant" on reaching a deal with the airport over compensation for land.
Sources have told the Herald that the negotiations between the state and the airport have stalled because the two sides cannot agree on a way to break the deadlock.
Sydney Airport told the state's top road officials at the outset of negotiations that it wanted a replacement parcel of land in return for the acquisition of the northern lands.
A study later identified three possible options as the Cooks River freight terminal, the Kogarah Golf Course and Qantas freehold land.
While the state could compulsorily acquire any of these three, it was found that the cost of doing so would be greater than the fair market value of the airport's northern lands.
Ways to cut the cost of the project have also been considered, such as ditching the Mascot flyover, but the documents show the relatively minor savings would be outweighed by a reduction in the amount of traffic the gateway could carry.
An option to defer the project was also weighed up, but it was found that it would provide only a short-term solution.
The route through the airport's northern lands has been identified as the best option because it affects fewer businesses than a south-east route, which would impact four business parks whose land value is estimated at $800 million.
A western route would also require costly remediation of land, or disturb the large Cooks River freight terminal.
The documents show road tunnels were ruled out early on in the planning process because of poor ground conditions at the old Tempe tip, and the need to reconfigure the WestConnex interchange at St Peters.
A spokesman for Roads Minister Melinda Pavey said the government was in the "early stages of the Sydney gateway project and will keep the community updated".
Sydney Airport did not answer specific questions about the negotiations but said in a statement that "the NSW government is determining the right solution for the area and we support the state's process".