- Defence Fuel Transformation Program—Tranche 2 Facilities project
Department of Defence
2.1The Department of Defence (Defence) seeks approval from the Committee to proceed with the proposed Defence Fuel Transformation Program – Tranche 2 Facilities project.
2.2Following on from the Defence Fuel Transformation Program – Tranche 1 Facilities project, the purpose of the project is to further reduce risk to the Defence Fuel Network and Defence Fuel Supply Chain. The project will achieve this aim through the upgrading and/or remediation of fuel installations across Australia to increase the resilience of the Defence Fuel Network, reduce the total cost of ownership, and improve industry collaboration in delivering an assured fuel network that meets Defence’s fuel requirements.
2.3The project will deliver facilities and infrastructure at the following locations:
- Victoria: Puckapunyal Military Area and Army Testing Grounds Monegeetta
- Western Australia: RAAF Base Learmonth, Australian Defence Satellite Communications Station Geraldton, Jindalee Operational Radar Network Laverton, and HMAS Stirling
- Queensland: Lavarack Barracks Townsville, Borneo Barracks Carbalah, Jindalee Operational Radar Network Longreach, RAAF Base Amberley and RAAF Base Townsville
- South Australia: Joint Proof and Experimental Unit Port Wakefield and RAAF Base Edinburgh
- Northern Territory: RAAF Base Tindal and RAAF Base Darwin
- New South Wales: Garden Island Defence Precinct, HMAS Albatross, HMAS Creswell, HMAS Waterhen, RAAF Base Williamtown and Holsworthy Barracks.
- The estimated cost of delivery of the project is $286.9 million (excluding GST).
- The project was referred to the Committee on 12 September 2023.
Conduct of the inquiry
2.6Following referral, the inquiry was publicised on the Committee’s website and via media release.
2.7The Committee received two submissions, two supplementary submissions, and two confidential submissions. A list of submissions is at Appendix A.
2.8On 2 November 2023, the Committee conducted a site inspection and public and in-camera hearings in Sydney, NSW. A transcript of the public hearing is available on the Committee’s website.
Need for the works
2.9The Defence Fuel Supply Chain distributes over $430 million of fuel annually through more than 100 sites across the country and is a critical enabler of the Australian Defence Force. Defence states the existing fuel supply network has several known network deficiencies, resulting in unacceptable capability and safety risks.
2.10In 2015, the Defence Fuel Services Branch conducted a Fuel Network Review and developed the Future Defence Fuel Network Implementation Strategy. The Strategy was endorsed in 2017, setting the performance baseline for the Defence Fuel Supply Chain.
2.11Government approval for the Defence Fuel Transformation Program was provided on 18 June 2018. The Tranche 1 project elements received Public Works Committee approval on an individual basis as medium works through 2019 and 2020.
2.12The project's objective is to address risk items not covered by the Defence Fuel Transformation Program – Tranche 1 and enable improvements to the Defence Fuel Supply Chain and Defence Fuel Network. The requirements of the project include:
- construction of new fuel facilities and infrastructure
- decommission and demolition of existing fuel facilities and infrastructure
- environmental remediation of sites where existing fuel facilities and infrastructure will be decommissioned and demolished
- communications infrastructure which will support the operation of Defence’s fuel network.
- Many of the fuel storage facilities are thirty years old and no longer fit for purpose. Some are even older:
…there could be some tanks in the ground around various installations that could be 50 years old. As old, single-walled steel tanks, they would be beyond their service life, typically—they're no longer meeting current standards and could potentially be causing environmental harm, or could do in the very near future. We have limited leak detection on those systems. The purpose of replacing that aged infrastructure with new infrastructure that is double-walled or self-funded immediately provides Defence with assets that are of very little risk to the environment, because any leak is immediately contained. Immediately, the environment would be better off.
2.14The works are expected to increase the service life of the fuel storage sites by fifty years:
… the design life for the facilities is 50 years. I understand that proprietary tank systems will provide a warranty of approximately 30 years, but the nature of self-funding and good leak detection means that you could be monitoring that asset, whether it be above or below ground, for a long time. It's expected that many of those assets will get well beyond 50 years of service life out of them.
Options considered
2.15Defence considered three options for the project:
- Option 1 (do nothing): This option does not reduce the residual enterprise risk to the Defence Fuel Network nor facilitate long-term reform within the Defence Fuel Supply Chain
- Option 2 (in-budget): This option involves design completion of all sites and delivering as many sites as possible within the project budget in order of priority. Sites not affordable within the project budget could be either transferred to Tranche 3 or delivered via an alternative funding source.
- Option 3 (full scope): This option involves designing and delivering all sites. However, this option is not affordable within the project budget.
- Defence recommends Option 2.
Scope of the works
2.17The scope of work is across different sites and multiple stages:
- Element 1 – Garden Island Defence Precinct
- Demolition of Gun Wharf and Construction of a new wharf, provision of services distribution points, connecting pipework
- Element 2 – RAAF Base Learmonth (Ground Fuel Installation)
- Decommission and demolition of existing fuel installation and construction of new fuel installation
- Element 3 - RAAF Base Learmonth (Aviation Fuel Installation)
- Construction of new aviation fuel installation
- Element 4 - Puckapunyal Military Area
- Decommission and demolition of existing fuel installation and construction of new fuel installation
- Element 5 - Lavarack Barracks
- Decommission and demolition of existing underground fuel tanks, modifications to the existing fuel installation.
- Element 6 - Army Test Grounds Monegeetta
- Construction of new diesel fuel tanks and dispensing points, and decommission and demolition of existing fuel installation
- Element 7 - Borneo Barracks
- Construction of a new fuel installation
- Element 8 - Australian Defence Satellite Communications Station Geraldton
- Decommission and demolition of existing fuel installation, construction of a new fuel installation.
- Element 9 - Joint Proof and Experimental Unit Port Wakefield
- Decommission and demolition of existing fuel installation, construction of a new fuel installation
- Element 10 - Jindalee Operational Radar Network Longreach
- Provision of fuel installation remedial items
- Element 11 - Jindalee Operational Radar Network Laverton
- Decommission and demolition of existing oily waste tank, provision of fuel installation remedial items.
- If the project is tendered under budget or there is a retirement of risk provisions, Defence will use the savings to do project works in lower priority sites. Below the line scope items include:
- Project Element 12 – RAAF Base Amberley:
- Compliance and upgrade works on the fuel installation, including compliant dedicated fire system, new waste tanks and miscellaneous remedial works.
- Project Element 13 – HMAS Stirling:
- Installation of new diesel and unleaded petrol storage tanks which will be integrated with the existing fuel installation; and
- decommissioning and site remediation, including removal of underground fuel storage tanks.
- Project Element 14 - HMAS Albatross:
- Compliance and upgrade works on the fuel installation, including drainage and interceptors, and pipeline integrity and operations, as well as construction of a new bund for the existing Vertical Storage Tank; and
- demolition and site remediation of the concrete bund, drain pits to concrete bunds, various piping and instrumentation at the offloading bay, loading bay and bulk storage tanks.
- Project Element 15 - RAAF Base Williamtown:
- Construction of a new ground fuel installation, including new diesel fuel tanks, dispensing points with associated equipment, controls and infrastructure; and
- decommission, demolition, and site remediation of existing ground fuel installation, including removal of underground fuel storage tanks.
- Project Element 16 - Holsworthy Barracks:
- Compliance and upgrade works, including provision of compliant automatic fuel flow system and electrical integrity works.
- Project Element 17 - RAAF Base Townsville:
- Construction of a new ground fuel installation, including new diesel fuel tanks, dispensing points with associated equipment, controls and infrastructure; and
- decommission, demolition, and site remediation of existing ground fuel installation, including removal of underground fuel storage tanks.
- Project Element 18 - RAAF Base Darwin:
- Construction of a new ground fuel installation, including new diesel fuel tanks, dispensing points with associated equipment, controls and infrastructure; and
- decommission, demolition, and site remediation of existing ground fuel installation, including removal of underground fuel storage tanks.
- Project Element 19 - HMAS Creswell:
- Miscellaneous compliance and upgrade works, including new portable leak detection unit and replacing high-density polyethylene Fuel line with Stainless steel pipe.
- Project Element 20 - HMAS Waterhen:
- Miscellaneous compliance and upgrade works, including new monitoring alert system, new dispenser point and emergency stop system.
- Project Element 21 - RAAF Base Edinburgh:
- Provide a facility to connect the portable leak detection unit to the Air Movements Hydrant Line.
- Project Element 22 – Design only elements:
- Design of remediation and minor capital works at HMAS Stirling, RAAF Base Townsville, RAAF Base Williamtown and RAAF Base Tindal.
- Project Elements 12to 22 which are not carried out in Tranche 2 will be seen to in Tranche 3, the next and final stage of the fuel transformation works planned by Defence. The works in Elements 1 through to 11 have been prioritised in Tranche 2 because these assets are either at the end of their life, pose safety, compliance and environmental risks or do not meet current and future fuel capacity requirements.
- Elements 1 through to 11 will increase aviation fuel capacity by 16 percent. The works will decrease diesel and unleaded fuel capacity by 13 and 61 percent respectively.
- At the public hearing, Defence discussed how the works fit into its long-term net-zero strategy, explaining that the new works will be adequate for the storage of biofuels:
We don’t have electric tanks. It's difficult to stop and charge in battle. The initial move to clean energy types by ADF capabilities is most likely to be through drop-in fuels—renewable, diesel and sustainable aviation fuel… 'Biofuels' is another term for them. We are also in the very initial steps of using these biofuels in our platforms… The thing about biofuels is that they're exactly the same; they're just produced differently, and they can be stored in these facilities.
Potential impacts
2.22There will be minor traffic increases to each site during construction to enable the works to be completed. Traffic will be managed through the review and approval of each contractor’s construction management plan. After construction there will be a negligible increase in traffic at existing sites.
2.23Defence has determined that existing environmental and heritage values will not be significantly impacted by the project. Therefore, the project is not required to be referred to the Minister for the Environment and Water under the Environmental Protection and Biodiversity Conservation Act 1999.
2.24In its submission, the City of Sydney Council expressed concerns about potential visual and noise impacts to local residents, as well as the management of works at the heritage listed Gun Wharf. After the submission was published, the City of Sydney Council had a further meeting with Defence to discuss these concerns.
2.25The City of Sydney Council advised the Committee that, as a result of the meeting with Defence, it was now reassured that there would be no unreasonable impact on residents:
It's understood that a noise vibration mitigation plan has been prepared, and that identifies some construction noise related impacts and recommends mitigation methods. Our only recommendation or suggestion in that regard is that a formal process be established for any noise related complaints to be directed to.
2.26The City of Sydney Council noted that Defence could further clarify how ecological impacts of the works, particularly to the marine habitat, would be addressed.
Community and stakeholder consultation
2.27Defence developed a community consultation and communications strategy, and has engaged with, or will engage with, a variety of internal and external stakeholders during the project including; local business chamber, federal members, local councils, state government, relevant federal, state and local Departments/Councils and community groups.
2.28Defence conducted three virtual community consultation sessions on 4 and 5 October 2023. There were three attendees across the three virtual community consultation sessions. Defence also conducted one in person community information sessions on 9 October 2023 at the Holiday Inn at Potts Point Australia which had 8 participants. The participants at the virtual and in-person sessions were a mixture of local residents, local government members and business groups.
2.29At the public hearing, the City of Sydney Council outlined how the Committee’s inquiry had improved the community and stakeholder consultation process, enabling them to receive further information about the planned works at the Garden Island Precinct:
A letter was sent to the lord mayor [from Defence]. I'm not sure of the date of that letter. I think it was in September sometime. That letter was then sent to my team to look into what the project is and to answer questions that the lord mayor had about it. In this case we were able to obtain the statement of evidence on the website. That's how we came across what the proposal is. We then made our submission on 12 October. Our submission involved discussing the statement of evidence with our internal specialists, particularly our heritage specialist. As reflected in our letter, that was quite limited, given the limited information in the statement of evidence. Following the submission of that letter, we then received correspondence from the Department of Defence inviting us to a hearing, which took place on Monday the 30th.
Cost of the works
2.30The estimated total capital out-turned cost of the project is $286.9 million (excluding Goods and Services Tax). The cost estimate includes management and design fees, construction, information and communications technology, furniture, fittings, equipment, contingencies and a provision for escalation.
2.31Defence provided further details on project costs in its confidential submission and during an in-camera hearing.
Revenue
2.32There will be no revenue generated by this project.
Public value
2.33Defence has assessed public value, opportunities and benefit to the community as a result of the proposed works:
- Economic impacts – the project will support the Australian economy, in particular the construction and professional service sectors associated with each site
- Employment opportunities – the project will employ a diverse range of consultants, contractors and construction workers, and is expected to generate opportunities for up-skilling and job training to improve individual skills and employability on future projects
- Local industry and Indigenous business involvement opportunities - Defence and the Head Contractors will actively promote opportunities for small and medium local enterprises through construction trade packages. The Head Contractors will also develop a Local Industry Capability Plan and an Indigenous Participation Plan to detail how it will engage with and maximise opportunities for local industry and Indigenous businesses, while providing value for money to the Commonwealth
- Health and safety – Defence has undertaken a comprehensive evaluation to ensure the well-being and protection of all individuals involved, including employees, contractors, and the general public. This evaluation includes Risk Assessment, Safety Training, Regulatory Compliance, and Safety Measures.
Committee comment
2.34No issues or concerns with the proposal were identified by the Committee, and the Committee is satisfied that the project has merit in terms of need, scope, and cost.
2.35The Committee acknowledges that Option 2 is the preferred option for this project, having been assessed as viable, affordable, represents good value for money, and prioritises the sites most urgently in need of fuel transformation works.
2.36The importance of the proposed works in terms of increasing Australia’s fuel holdings and the security of Australian Defence operations is acknowledged by the Committee.
2.37As recommended by the City of Sydney Council, the Committee encourages Defence to establish a formal complaints process for residents affected by noise and vibration relating to works at the Garden Island Precinct.
2.38The Committee encourages Defence to monitor any impact to marine ecology in relation to the demolition of Gun Wharf and the construction of the new, perpendicular wharf at the Garden Island Precinct.
2.39The Committee acknowledges Defence’s long-term commitment to net-zero and that the proposed works will support Defence’s future transition to biofuel, as the proposed fuel transformation works will be adequate for the storage of biofuel as well as fossil fuel.
2.40Having regard to its role and responsibilities contained in the Public Works Committee Act 1969, the Committee is of the view that this project signifies value for money for the Commonwealth and constitutes a project which is fit-for-purpose, having regard to the established need.
2.41The Committee would also like to comment on the below-the-line items which are to be completed as part of the project if funding allows (see paragraph 2.18). The Committee notes that completion of these items in conjunction with the proposed works would maximise efficiency in both time and cost. For clarity, the Committee therefore expressly recommends that these works be done in conjunction with the proposed works if funding allows or additional funding is obtained.
2.42The Committee was satisfied with the need for, scope and estimated cost of the proposed below the line items, and recommends that the Department of Defence conduct these additional works in conjunction with the listed project scope where budget is available.
2.43The Committee recommends that the House of Representatives resolve, pursuant to section 18(7) of the Public Works Committee Act 1969, that it is expedient to carry out the following proposed works: Department of Defence – Defence Fuel Transformation Program – Tranche 2 Facilities project.
2.44Proponent entities must notify the Committee of any changes to the project, scope, time, cost, function, or design. The Committee also requires that a post-implementation report be provided within three months of project completion. A report template can be found on the Committee’s website.
Mr Graham PerrettMP
Chair