Port of Newcastle is being careful not to count its chickens before they hatch, again, but its executives and shareholders are doubtless thrilled at the prospect of legislation passing through Parliament this week to scrap penalties it has long argued are preventing it from investing in a container terminal.

Lake Macquarie MP Greg Piper and the government have agreed on amended legislation which will open the door for the private port operator to build a terminal once it has topped up its lease payment to the state.

The top-up represents the difference between the price Port of Newcastle paid for a 98-year lease in 2014 and the price it would have paid if the container penalties had not been in place.

After years of political brawling, an ICAC investigation, a parliamentary inquiry and two court actions by the Australian Competition and Consumer Commission, the port could be free to develop the automated Newcastle Deepwater Container Terminal on former BHP steelworks land beside the south channel of the Hunter River at Mayfield.

Now the ball is in the private consortium's court to build the thing.

The port has said it stands ready to find investors to help it fund a $2.4 billion terminal, though it could be many years before it accumulates the market share to trigger the penalties, let alone reach anything like full capacity.

The Morrison government was poised to kick in $250 million of taxpayers' money during the election campaign but canned the announcement at the last minute. Port staff had even taken delivery of a giant container-shaped cake to celebrate.

A Labor source said after the budget last month that the $250 million was "gone".

Port of Newcastle says the Mayfield site has the capacity for a freight terminal handling two million containers a year and ships carrying up to 10,000 containers each, or even larger vessels if the channel is modified.

NSW Labor last week sought to amend Mr Piper's legislation to guard against the prospect of Port of Newcastle selling the lease at a "windfall" profit once the penalties were scrapped, insisting on a "guarantee" from the operator that it would build the terminal.

The government amendments appear to achieve that aim by forcing Port of Newcastle to apply for a review of its lease price then cough up the top-up payment before the penalties are scrapped.

Presumably, the port is unlikely to fork out several hundred million dollars if it is not serious about developing the terminal.

The arrangement also gives the government a fig leaf of cover against claims it is backpedalling on an ugly privatisation of public assets.

Taxpayers aren't left with the bill to compensate NSW Ports, at least not until the several hundred million runs out, and Port of Newcastle doesn't walk away with something it didn't pay for.

Indeed, if the Mayfield terminal doesn't happen or is a flop, the government pockets a nice little earner.

The question remains whether NSW Ports is getting what it paid for, which was a monopoly over container movements in the state.

The government will argue the Botany and Kembla operator will still get compensated for container movements in Newcastle above the cap set out in the lease contracts.

If NSW Ports was of the belief that, regardless of the compensation it receives, the container penalties would stop Port of Newcastle developing a rival terminal, then the matter may be heading for the courts.

The Federal Court, ruling on an ACCC action last year, found Port of Newcastle's plans for a large-scale terminal at Mayfield would be "fanciful" even without the penalties in place.

"No private operator of the port of Newcastle, acting rationally, could have satisfied itself that in the reasonably foreseeable future a container terminal at the port of Newcastle would be viable for so long as Port Botany has capacity," Justice Jayne Jagot wrote in her judgment.

NSW Ports told a NSW upper house inquiry in early 2019 that a Newcastle container terminal would be a "white elephant".

Then treasurer Gladys Berejiklian, justifying her decision to conceal the port penalties from Parliament, told budget estimates in 2016: "85 per cent of all containers that come off the port at Port Botany are distributed within 40 kilometres. Major freight operators do not want multiple ports of stops when they are bringing their goods to NSW."

If the penalties go, the NSW public will have a chance to see who was right.

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