Is the chemical storage facility required?

For full details about Coode Island.

In July, 2003,

The Environmental Group Ltd (EGL) has been awarded a contract by Leighton Contractors Pty Ltd at the Marstel Coode Island Terminal Project in Melbourne. EGL would carry out the design, manufacture and commissioning of the site's new propylene oxide vapour emission scrubbing system. The facility would receive shiploads of propylene oxide, benzene, styrene and other chemicals in order to store and distribute them to various industrial end users.

June 1997,

The Victorian Government announced it was abandoning plans to relocated the facility which now remains in the port of Melbourne at the Coode Island wharf facility.

A chemical storage facility with a capacity of 270 000 tonnes per year is being proposed for Victoria following a major incident.

In 1991, a chemical fire at the Coode Island chemical storage facility in the port of Melbourne caused alarm and much media coverage. Though there was a pall of smoke over the capital, all explosions, fires, damage and spills were confined to the site with no injuries and offsite effects confined to smoke inhalation. The government initially set up a Coode Island Review Panel followed by a second inquiry that has applied to the Federal Government which required revision of the application.

The facility is proposed for Point Lillias near the regional city of Geelong, which like Melbourne is situated on Port Phillip Bay. The site is considered by many to be environmentally sensitive and is further from most of the chemical companies served than Coode Island. Indeeed, an assessment by DVA Technica, an international risk assessor concluded "that the levels of individual and societal risks arising from the operation of the Coode Island facilities are within the accepted limits as defined by Victorian, national and international criteria. ..." .

The inquiry reports

We have reviewed the reports which are comprehensive (shelf-width 20 cm) and professional in detail. In our opinion however, they fail to adequately address the need for the facility - whether for safety or for economics. The emergency-related information suggests most of the products proposed for the facility could be handled with petroleum at the Port of Geelong.

More significantly, the long term need and justification for the facility has not been proven. Our estimates even suggest most of the imported chemicals could be replaced with next step products involving less than 500 jobs with offsetting downstream gains. In any event, most of Victoria's chemical industry, whose figure are included in the economic justification, would not even use the chemicals proposed for the facility. We disagree with the rationale.

The proposed facility is tainted with expediency. In our opinion, the state of Victoria could obtain a better return from an inquiry aimed at promoting world-class industry and only then considering the required infrastructure. The need now or later has not been shown.

The first Coode Island enquiry undertook a naive analysis and failed to recognise what we consider to be obvious demand and production trends. For example already Dow no longer produces styrene, styrene exports have fallen by two-thirds, phenol exports has in our opinion a doubtful outlook, and other predictable trends were not recognised. What would happen for example if Australia follows the trend overseas in reducing the level of benzene in petrol? It may well promote a local supply of benzene reducing, if not obviating, imports of a key chemical proposed for the facility.

The second inquiry simply addressed (and was confined!) to the environmental impact.

The Victorian Government has applied to the federal government for an excision of at least 20 hectares of bird-breeding land subject to the Ramsar Bureau treaty. To be approved, the facility must be "in the urgent national interest".

Submission

In a submission to the federal Government, the Victorian Government claimed...

	a direct annual economic impact of $1.6bn in turnover and 7 000 jobs
	an indirect annual economic impact of about $3.3bn in turnover and 32 000 jobs
	viability of the highly integrated major installation such as the Altona Petrochemical complex which has an annual turnover and 32 000 jobs.

As we pointed out, these figure are either grossly exaggerated or irrelevant to the proposed facility. The use of input-output multipliers on a gross basis and without full regard to user industries (eg. PVC plastics extruders) of the consequence of import tariff-inflated prices (that would be removed in absence of imports of VCM) is at best desribed as naive. The benefit to Australia of the facility, and in terms of the long term needs of the industry, is to be proven and if any net benefit, traded against the environmental cost.

The submission claimed the national interest arises from "the pivotal role of the chemical manufacturing industry in Australia's economy and its potential impact on the national balance of payments and employment". There is indeed uncertainty but that can be resolved by making a decision which is in the national interest.

In conclusion

The case for Point Lillias has first to be proven and then prioritised against other public funding activities that would help the petrochemical industry in Victoria.

Victoria requires a strategic plan to develop its chemical industry. The embellishment of the industry in the reports is unhelpful and only serves to create a false sense of confidence.

We were heartened to read the minutes of a federal government meeting (as reported in the Age of 22 December 1996) which said... "The figures contained in the submission which claim to demonstrate the project's economic benefit to the state/national economy, incorporate elements of the industry which do not plan to use the facility. While there is undoubtedly a need for a chemical importation storage facility to service the Victorian industry, the submission does not appear to make a strong case for siting at Point Lillias."

However on 16 March, the federal government said that they now accepted a case that there is an urgent national interest for an excision from the Ramsar treated protected land.

Point Lillias is only a small issue, but typical of information used to shape much of the development of Australia's manufacturing industry.

There is here a conflict of economic priorities and of politics; an unquantified trade-off between the risk and the economic cost; and an inadequate review of the long term issues (typical of short term politically motivated initiatives).

Our analysis of the reports

These pages are opinions and not advice. The reader should note the disclaimer