The NSW government has rejected an offer from Port of Newcastle to buy a large parcel of former BHP land crucial to the future of an expanded container terminal.
The private consortium tried to buy the 52-hectare "Intertrade" site last year to secure it as a transport and distribution centre for its proposed container terminal next door.
It is understood Property NSW plans to put the land on the market, though a spokesperson told the Newcastle Herald "no decision has been made on the future of this site".
Port of Newcastle is campaigning to overturn provisions in the Newcastle, Port Botany and Port Kembla lease agreements which penalise Newcastle financially if it develops a large container terminal.
An industry source told the Herald that selling off the Intertrade site to a third party, or insisting on particular "use conditions", could be a way for the government to "screw" Newcastle's plans for an expanded terminal.
The source said the port's Chinese partners, China Merchants Group, regarded the site as "essential" to the project.
"They might be able to build a terminal without it, but it will be suboptimal," the source said.
Property NSW confirmed the NSW Environment Protection Authority had inspected the site this month to assess the $21 million remediation works on the land, but this was not necessarily a precursor to it being sold.
"Any future use will be subject to its zoning and typical planning constraints, including taking into account environmental and heritage factors," a Property NSW spokesperson said.
A Port of Newcastle spokesperson said the terminal would be built on the consortium's "existing footprint" and the Intertrade site had been "identified as having potential to complement the port's role".
The spokesperson confirmed the port had made an unsolicited and unsuccessful offer to buy the land last year and was still interested in acquiring it.
The site's future could hinge on the outcome of Saturday's NSW election.
NSW Labor says it will include the port privatisation deals in a judicial review of the WestConnex and Sydney light rail projects.
NSW Ports, the consortium that paid the government $5.07 billion in 2013 for 99-year leases at Botany and Kembla, is facing a Federal Court action launched by the Australian Competition and Consumer Commission over what the commission regards as "anti-competitive" and "illegal" agreements.
A 2014 deal for the $1.75 billion Newcastle port lease required Port of Newcastle to take on the government's contractual obligation to compensate NSW Ports if it developed a rival terminal.
An upper house Public Works Committee inquiry confirmed last month that these aspects of the privatisation deals were kept secret from Parliament and called on the government to review the limits on Newcastle.
Meanwhile, NSW Farmers publicly endorsed a Newcastle freight terminal last week, arguing it will save growers an estimated $16 to $22 per tonne on rail freight from the state's north.
"Having a container terminal at Newcastle will mean a shorter trip for a lot of freight that currently goes straight past to Sydney, will avoid Sydney bottlenecks and congestion, will avoid double-handling at intermodal terminals, and will decrease trucks on the road in favour of rail," Moree cotton and grain grower and NSW Farmers board member Rebecca Reardon said.