West Gate Tunnel budget blows out by $3.3bn

Victoria is not ruling out legislating to prevent taxpayers from footing a multibillion-dollar bill after the cost blowout.

Transurban CEO Scott Charlton. Picture: Aaron Francis

Victoria is not ruling out legislating to prevent taxpayers from footing a multibillion-dollar bill after a cost blowout at the state’s West Gate Tunnel development.

Transurban, the publicly listed toll road giant overseeing the landmark infrastructure project, on Monday said it would be asking taxpayers and its builders to help it pay for $3.3bn in costs that were not originally forecast.

When finished, the development will connect the West Gate Freeway in Yarraville with CityLink at Docklands. It was originally set to open next year.

The delay is related to a dispute over who will pay for the disposal of three million tonnes of soil, some contaminated with carcinogenic chemicals.

Transurban, in a Monday notice to shareholders, said the “subcontractor’s claims are higher”, the total costs “remain uncertain”, and there is “no reliable time frame” for the West Gate Tunnel’s completion.

Sources close to Transurban’s building consortium, CPB and John Holland, have told The Australian the true size of the cost blowout is closer to $5bn.

The West Gate Tunnel was originally expected to be completed ahead of the November 2022 election. But in an ongoing dispute with its builders, Transurban has repeatedly pushed that timeframe out — first to 2023, then 2024. On Monday, the company said it was no longer able to commit to any specific completion date.

Transurban took the market-led proposal to the Andrews government as it was looking for an alternative to the Napthine government’s East West Link, which it scrapped at a cost to Victorian taxpayers of $1bn.

Tunnel boring on the route from the West Gate Freeway in Yarraville to CityLink at Docklands was supposed to start in 2019, but machines at the Yarraville end in Melbourne’s inner west remain idle. Transurban chief executive Scott Charlton said: “We had hoped this project would be open for the community next year; however, that is no longer achievable, and we are unable to put a reliable time frame on its completion.”

While environmental planning approvals have been granted to Hi Quality in Bulla, Maddingley Brown Coal and Cleanaway in Ravenhall to accept the toxic soil, Transurban says the dispute with its builders remains unresolved.

“Tunnelling has not commenced as a result of a dispute arising between the project parties relating to changes in the requirements for disposal of soil contaminated with PFAS (a type of chemicals),” the company’s results noted.

“In addition, there are a range of other disputed matters, including those related to relocation of utilities and impacts associated with Covid-19 restrictions.

Mr Charlton had earlier this year acknowledged “substantial” cost blowouts but declined to comment on whether they amounted to a previously speculated figure of $3bn, on top of the $6.7bn already budgeted.

But Premier Daniel Andrews said the new construction cost was “not a settled figure”.

“I’m just about sick and tired of some of the games that are being played here,” he said.

“Transurban came to the government with this project, they chose the builder, and they need to get an outcome with their builder.”

Transport Infrastructure Minister Jacinta Allan said the government would use “every option available” to resolve the situation, refusing to rule out legislating to force Transurban to deliver on its contractual obligations.

However, Ms Allan said the onus was on Transurban to resolve the dispute and get the project done.

“Transurban has today told its investors that it believes it has a multibillion-dollar problem with the contract it signed with CPB and John Holland — it’s in the interests of their shareholders that they get on and resolve that dispute,” she said.

“We need an alternative to the West Gate Bridge — and that’s why we’ve been working with Transurban to try and fix their mess, and we’ve been clear with them that time is running out.”

Opposition transport infrastructure spokesman David Davis said motorists were paying for a road that may never be built.

Courtesy of legislation that passed the Victorian parliament in early 2019, drivers using the Kennett-era CityLink toll road from Melbourne’s east to the airport are being hit with a toll hike to pay for the West Gate Tunnel, with tolls on that road allowed to increase by 4.25 per cent each year over a decade. Victoria’s Parliamentary Budget Office estimated in 2019 the deal would reap Transurban $37.3bn over 25 years.

“Whilst the tunnelling hasn’t started, whilst we don’t know when it’s going to finish, whilst we don’t know how much it’s going to cost, we do know one thing: that when you drive home tonight, on an existing CityLink road, you will pay an extra toll, an increasing toll, to pay for this project where the tunnelling hasn’t commenced,” Mr Davis said.

“You may never use the new road, whenever it’s built, whenever it’s finished, whatever decade it’s in, if it’s finished. But you will pay the tolls.”