Massive America's Cup rectification cost ignored by Minister
by Richard Gladwell, Sail-World.com/nz 21 Jan 2018 21:30 PST
22 January 2018
Wynyard Wharf looking south - the 80-95 year old wharf will need considerable rectification work before being covered in for Cup bases - Wynyard Point, Auckland, New Zealand © Richard Gladwell
Claims from the Minister of Economic Development, David Parker that his pet option for the location of America's Cup bases would save several million dollars appear to fly in the face of a 2016 Supreme Court Decision.
That overturned a High Court decision in 2014, which said that Auckland Council's Panuku Developments, as current owner of the contaminated land, was responsible for its $50 million rectification. The decision covered only the Mobil NZ leased sites but is clearly relevant to all other leaseholders in the Tank Farm area now known as Wynyard Point.
Used since the 1920’s as storage for bulk storage of oil and petroleum products. The Supreme Court noted that the sites are “heavily contaminated as a result of leakage and spillage over the intervening years until the tenancies ended in 2011.
In today's edition of the NZ Herald the front page lead story is headlined "America's Cup: War of wharves erupts" and subtitled "Minister's Tank Farm move at odds with agreement by Council, Team NZ," it says that Parker has received a letter saying that in-principle the leaseholder on the Wynyard Point location, Stolthaven has agreed to "move its hazardous facilities [tanks/silos] off its southern tank farm by the end of the year."
"If that can be finalised, and I think there is a good chance it can be, the overall construction cost savings to the country are likely to be tens of millions of dollars and the [75 metre] Halsey St extension is then rendered unnecessary," Parker told the Herald.
However Radio New Zealand's Todd Niall, who covers local government as well as the last four America's Cups reports that the offer came with a price: "Norwegian-owned multinational Stolthaven has told the government that in principle it is prepared to move early, but only if it's paid a $6.1m fee to break its lease." For Todd Niall's full report click here.
It is hard to believe that Parker, who is also the Attorney General would be unaware of an 18month old decision handed down by the Supreme Court (the ultimate appellate body in New Zealand) which decided that any cleanup of contaminants in the area known as Wynyard Point was at the landowner's cost not that of the vacating leaseholder. The 2016 case was between Auckland Council's then development arm Development Auckland Ltd and Mobil NZ Ltd. The latter had inherited the original leases from various oil supply companies over the intervening 96 years.
The Council was trying to rely on a clause in the lease agreement that the land would be left in "a clean and tidy condition", a standard clause in lease agreements under New Zealand law. If that same clause is in the Stolthaven lease contracts then it would seem that the 2016 Supreme Court decision is relevant.
The Council wished to have that "clean and tidy condition" clause interpreted in a way that would make the leaseholders responsible for the removal of contaminated soil that had built up over the 96 year period of the occupation of the land - used for fuel offloading and storage.
The Court refused to interpret the clause in the way sought by the Auckland Council because "the fill used for the reclamation included demolition debris, gas works waste, refuse from city tips and material extracted from the harbour in the vicinity of sewage and gas works discharges.”
"As well, in 1986 Shell spilled a considerable amount of aviation fuel on adjoining land which also contributed to the accumulated contamination on the land leased by Mobil," the Decision continued.
In simple words, the land was already contaminated before the current leaseholder took it over and therefore they could not be held financially liable for the sins of their forebears.
The Court also noted that to rectify the contamination it would be necessary to excavate the site to a depth of 3.5metres, remove the contaminated spoil to a special site or facility and replace the excavated material with clean material.
The Court noted that the cost of that at exercise in 2016 was $50million for the Mobil NZ leased area. The leases terminated in 2011 and the land was handed back to then Development Auckland, now Panuku Development Auckland Ltd - the body charged with the development of the development of bases for the 36th America's Cup in Auckland).
In 1990 there was a negotiation between Auckland Council [Development Auckland Ltd] and the leaseholders over the contamination removal issue. The negotiations broke down, and Mobil decided to just leave the lease agreements as they stood and the oil company vacated in 2011 -presumably triggering the legal action and Appeals culminating in the Supreme
Compromise base deal reached in November
In their investigation of options for the America's Cup, Panuku Developments initially came down on the side of a 225-metre extension to Halsey Street Wharf, which would have housed all eight bases including a permanent base for Emirates Team New Zealand.
The Council decided to opt for a compromise option, backed by the Mayor Phil Goff, which had just a 75-metre extension to Halsey Street and Hobson Wharves which would house five bases, including a permanent base for Emirates Team New Zealand.
The costings for the Wynyard Point option favoured by the Minister Parker and vocal pressure groups involved no extension to the Halsey Street or Hobson Wharves and had a $100million price tag attached to it by Panuku - relating to the removal of tanks, negotiation of early exits from leases, and contaminated soil rectification.
Minister Parker dismisses this cost saying only the cost of the Wynyard Point base option should be considered which is reported at just $12million - well shy of estimates from Panuku.
In its preliminary Resource Consent submissions lodged on January 15, 2018, Panuku Developments showed a detailed plan of the complex development work required in the Wynyard Point option. That included two very high-risk warnings and one high-risk warning.
Serious downsides to Parker Proposal
In the Council Hearing which anointed the Mayor's Wynyard Basin proposal, Emirates Team New Zealand expressed strong reservations about the Wynyard Point proposal. These included the amount of dredging on the Westhaven marina side to take the water depth from the current 2.5metres to over 5.5metres needed to float the AC75 yachts competing in the 2021 America's Cup.
Other issues with the sites are well known to sailors - being the exposure to strong south westerly winds - with no protection for the yachts during rigging and spar removal.
While pressure groups claim they have stopped the incursion of wharves into the harbour, the Parker Proposal still has a 65 metre plus extension into the harbour to take the double base for Team New Zealand off the end of Hobson Wharf. The vexed Halsey Street Wharf proposed for an initial 225metre extension, then reduced to 75 metres under the Council preferred option, is still being extended by 25 metres under the Parker proposal.
And 80-95yr old Wynyard Wharf will have to be repaired and turned into a permanent structure, when it in the long term plans for Wynyard Point it should be slated for removal.
Of course, the racing for the America’s Cup will take place off Takapuna Beach on the edge of the Hauraki Gulf and not on the inner Waitemata Harbour in front of the America’s Cup Village as initially promoted by mainstream media and others. There is no need for facilities in the plans to watch the actual racing other than on Big Screens.
The Minister's original proposal also impinged on Site 18 - currently used for superyacht rig installation and servicing - and indications from the industry were that spar and rigging activity would be relocated to an overseas facility closer to the superyacht fleets. That would remove a major component of the ongoing revenue legacy of the development during and beyond the America's Cup(s). In a subsequent plan he dropped the use of Site 18 and instead reduced the base numbers from eight to seven.
Marching to the beat of a different drum
The letter from Stolthaven is the third incident where Minister Parker has tossed a spanner into the Panuku Developments planning process.
The first came from a walkabout he conducted, in mid-November, attended by several of the protest groups opposed to any further wharf expansion into the harbour. Following that the pressure groups announced that the Halsey Street extension favoured by Emirates Team New Zealand and Panuku Development would not proceed - four days ahead of a Council Meeting on November 23, which decided just that.
There the long and shortlist was reduced to just one - the Wynyard Basin option favoured by the Mayor, and aided by a surprise concession from Emirates Team New Zealand Board Chairman Sir Stephen Tindall that the team could live with the Mayor's Wynyard Basin option.
Undeterred Parker came up with a revised plan, outside the meeting which reduced the number of bases from eight to seven and dropped the use of Site 18 - the superyacht mast and rig servicing zone - for Cup bases.
At the next meeting in late December - the final Council meeting for the year, Minister Parker beamed in from Argentina via a text message conveyed to the meeting by Councillor Mike Lee.
Lee initially claimed it was from a senior Government official and under questioning revealed that it was from Parker who sought to have the Wynyard Point option left in the mix along with the Wynyard Basin.
Later in the morning, by a vote of 12-3, that request was ignored, and the chosen Wynyard Basin option was worked through over the Christmas break. A comprehensive Resource Consent application and supporting material lodged with the Auckland Council on January 15, 2018, as promised.
On the morning of the Resource Consent filing, Parker chimed in again via the NZ Herald still pushing the discarded Wynyard Point option.
While he conceded that "It may not work out but it's certainly worth looking at because if those issues can be resolved, it could well be a cheaper option by many millions of dollars.”
"If it is found to be viable and preferable to the basin option, Auckland Council has agreed to pause its application," Parker claimed.
He told the Herald the previous day (Sunday) that his Wynyard Point option would come down to so-called HASNO (an acronym stemming from the Hazardous Substances and New Organisms Act 1996) which presumably would have placed the excavation and removal of contaminated material under strictures of the Environmental Protection Authority, adding time and complexity to an already tight timeframe.
The NZ Herald story noted that "He [Parker] said the Government's work on the point option should be done before the end of the month when the council will publicly notify the resource consent application."
The Resource Consent and base construction are on a very tight deadline, with submissions closing on the Council preferred option at the end of February, and the matter then being referred and fast-tracked directly to the Environment Court for a final decision by early August, 2018.
The Protocol for the 36th America's Cup requires that a venue decision "shall be announced by RNZYS by 30th of August 2018".
The Bases need to be ready for the first arriving teams in the third quarter of 2019, which would enable teams to set up and have a full season of performance testing and shake-down ahead of the start of the Christmas Regatta 12-15 months later.
That timeline is quite minimal, in the 2017 America’s Cup some teams were set up in Bermuda in April 2015 for a regatta which got underway in late May 2017.
Pitch for cheapest and quickest option
At the November 23, 2017, Council Meeting Panuku Developments gave the “time to construct” durations as 18 months for the Halsey Street Extension, ten months for Wynyard Basin and 14 months for the Wynyard Point option as it was then. The costs at that point were $132million for the Wynyard Basin option, $169million for the Halsey Street Extension, and $170million for Wynyard Point. Base construction was put at $28million on top of those estimates.
On those criteria, the Council had selected the lowest cost and fastest to construct option.
On the most optimist basis, using those estimates, the Wynyard Basin option would be ready for teams by the end of June 2019 and the Wynyard Point by October 2019. However at that point, there had been no negotiation with leaseholders over relocation/early lease termination, and costs could increase along with delivery dates.
Given that Panuku has also made it clear that they do not have the resources to run multiple Resource Consent applications, it is difficult to understand why the Minister has so much difficulty accepting a democratic decision of the Council and landowner.
At the November 23 Council meeting questions were asked if the Ministry of Business, Innovation and Employment (MBIE) were working in conjunction with Panuku Developments, and the assurance was given that was happening, and there was common information sharing.
However, it would seem that after the December 14, 2017, Council meeting and the decision to apply for a Resource Consent for the Wynyard Basin option, MBIE and the Minister are now sailing their own course separate from the Auckland Council.
To view the Supreme Court Decision - Mobil NZ Ltd vs Development Auckland Ltd click here