Senator Patrick also accused Prime Minister Scott Morrison of politicising Defence Department planning by promoting Newcastle, Port Kembla and Brisbane as the three short-listed ports for a new east coast submarine base despite knowing that the "detailed planning process" the PM referred to on Monday had identified Sydney Harbour and Jervis Bay as the Navy's two preferred sites.

Newcastle lord mayor Nuatali Nelmes has slammed the proposal, which could also make things even more difficult for the city's container terminal hopes, especially if the vacant steelworks site at Mayfield was chosen despite Defence now publicly preferring Port Kembla.

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The half-share in the 98-year lease held by China Merchants Ports has been less controversial nationally than the lease of parts of Darwin Harbour a year later, in 2015, to Chinese firm Landbridge.

Port chief executive Craig Carmody yesterday defended the ownership, saying management was "once again disappointed in the tone of the conversation" surrounding Newcastle when its leaseholders were prepared to invest heavily in the business.

"These insinuations were raised during the Port of Darwin discussion last year and were proven to be baseless," Mr Carmody said.

"We are once again disappointed in the tone of the conversation when this same company is prepared to spend billions on diversifying the local economy."

Defence confirmed in June last year that it had reviewed the port's ownership in 2018 and that it had "consulted internal stakeholders who identified no concerns regarding the transaction".

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However, Senator Patrick said the port was "critical infrastructure" and that Beijing could influence China Merchants regardless of its corporate structure.

Senator Patrick said that "even without the submarines" he was concerned about the China Merchants stake and said the company would be "obliged to have regard to the wishes of Beijing".

"It can't be Chinese-owned if Newcastle is to be chosen as a nuclear submarine base," Senator Patrick said.

On the short-list announced by Mr Morrison on Monday, Senator Patrick said three Defence reports - which he obtained under Freedom of Information and which have been supplied to the Herald - showed Sydney and Jervis Bay on the south coast were the first and second Defence choices.

He said the Navy did not want "multiple" bases, and preferred for various reasons of logistics, labour supply and military planning to have the submarines housed at or near an existing facility.

Fleet Base East, as the Sydney Harbour facilities are known, extends beyond the administrative centre, HMAS Kuttabul, to Garden Island dockyard and wharves at nearby Woolloomooloo.

The Jervis Bay facilities, HMAS Creswell, includes the Royal Australian Naval College - the Naval equivalent of the Army's college at Duntroon in the ACT - and has other training facilities.

Jervis Bay had been recommended as a submarine base as far back as 1978 in a Defence White Paper when Bob Hawke was Labor PM, but community opposition was strong and land that Navy would likely have used to expand was declared a National Park in 1992.

It has more recently been drawn into the PFAS controversy, after contamination was confirmed by Defence at the base, its adjacent test range and some of the nearby waterways.

Senator Patrick said the question was why Mr Morrison left Sydney off the list, saying it appeared the government considered the politics of nuclear submarines in the capital too hard to confront.

"Why is it OK to have nuclear submarines in other areas if it's not all right in Sydney?" Senator Patrick said.

Senator Patrick was elected to the Senate to replace Nick Xenephon as a member of the Centre Alliance grouping. He quit the party in August 2020 and is one of the senators up for re-election, with his term expiring in June this year.

He recently dismissed speculation he was considering a run in the House of Representatives seat of Grey, held safely by the Liberals, insisting he would run again in the Senate as an Independent.

Opinions vary on the need for a nuclear "industry" to support the subs, which would be powered by miniature "fission" reactors generating heat to create steam to drive a turbine for propulsion - along the lines of a miniature power station.

But Senator Patrick said the Lucas Heights research facility was another reason to favour Sydney, beyond its obvious size and depth as a harbour.

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Some have suggested Darwin as a base closer to where the submarines might be needed but Senator Patrick said the waters off Darwin were too shallow, meaning they would be unable to dive to a safe depth, leaving them vulnerable to attack by ship, by plane or by missile.

The government's broad description of the PM's announcement is that the AUKUS partners - Australia, the US and UK - are examining everything that underpins the delivery of nuclear submarines including design, construction, safety, operation, maintenance, training, regulation, environmental issues, infrastructure, industrial support and workforce.

The Herald put various questions about the short-list and the Port of Newcastle's ownership to the PM's office, Defence Minister Peter Dutton and his department - telling them it had copies of the Naval studies favouring Sydney and Jervis Bay.

Defence responded with four sentences, saying "the three sites were selected as preferred options following a recent Defence review" of 19 options (as reported yesterday).

Only one site, Port Kembla, was referred to by name in the four sentences, reinforcing speculation it is the Navy's preferred option.

"Changes in commercial activity at Port Kembla has realised a large pocket of land which is now potentially suitable for creation of a new naval base," Defence said in an apparent reference to land north of Foreshore Road on the southern shore of Port Kembla's outer harbour.

Port Kembla is a much smaller harbour than Newcastle, although both have been dredged to depths of at least 15m in places to accommodate laden coal ships.

Port of Newcastle has considerably more vacant land than Port Kembla, which has also been touted recently for a hydrogen hub backed by Fortescue Group's Andrew Forrest, and an offshore wind farm.

Cr Nelmes was quoted in the Guardian yesterday attacking the Prime Minister's announcement as "a fantasy", and typical of Canberra making "unilateral" decisions about Newcastle despite knowing it was a nuclear-free zone.

"We are not getting lumped with their mess," the Guardian quoted her as saying.

Responding to Herald questions, the lord mayor was more circumspect, saying the organisation she led was "deeply concerned about the grave threat that nuclear weapons pose to communities around the world" and believed its residents had the right to live in a world free from such threat.

At this stage, Canberra says it intends its nuclear submarines to carry conventional (non-nuclear) weapons, but at least some US submarines carry nuclear weapons, despite it's position to not "confirm nor deny" their presence on vessels, while UK submarines are the heart of its Trident nuclear program.

Liberal Newcastle councillor Callum Pull said he had lodged a notice of motion calling on the council to write to Mr Morrison saying it supported the base, arguing it was not "a fantasy project" but about "jobs and prosperity".

Councillor Pull said it was important that Newcastle declared its support for the project.

"Were competing against two other major cities, we need to make clear that we want the base, we want the jobs, and that were ready to do what is necessary to secure the project," Cr Pull said.

Wollongong Lord Mayor Gordon Bradbery, an Independent, has said this week that Wollongong was also a nuclear-free zone, although he told the ABC that was "largely symbolic".

Cr Bradbery said it would take a lot to shift public opinion in his city towards the idea, but he could see the benefits.

Another Independent Wollongong councillor, NSW Ports executive Dom Figliomeni, said bipartisan support would be needed to help secure the project for Port Kembla.

Federal Labor cautiously backed the nuclear submarine proposal and the ditching of the previous contract with France last September.

Opposition leader Anthony Albanese noted at the time that $4 billion had already been spent on the $90 billion project, which would likely include a substantial compensation to France in the form of a "break fee" for cancelling the contract.

After this week's announcement, Mr Albanese accused the government of trying to "defend the country (by) media release".

Mr Morrison made Monday's announcement at the Lowy Institute, where Mr Albanese is scheduled to speak tomorrow on Labor's defence plans.

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