Tinkler’s Hunter Ports T5 proposal, which he had slated for the old BHP steelworks site at Mayfield, would have boosted capacity at the port by 100 million tonnes a year and would have competed with a 120Mt Xstrata and Rio Tinto-backed Port Waratah Coal Services T4 proposal on Kooragang Island.

“The decision by the O’Farrell government is condemning Newcastle to a future as Old Sydney Town despite it being the lifeblood of the NSW economy through its export earnings for the state,” Tinkler said.

“The people of the Hunter and Newcastle … are now being asked to accept that coal will forever be railed through the middle of Newcastle suburbs and the townships of the Hunter Valley.”

The state government’s controversial decision comes as infrastructure is being put in place to deal with the Hunter Valley coal exports of the future.

“The government’s strategies focus on coal facilities on Kooragang Island,” NSW Premier Barry O’Farrell said in a statement.

The site proposed by Tinkler is "more suited to handling multi-product, container, general cargo and dry bulk terminal freight", according to O'Farrell.

PWCS said the decision to reject the Hunter Ports T5 proposal gave the Hunter Valley coal industry the certainty it needed to maximise exports in accordance with the region’s robust export plan.

“The Hunter Valley coal chain is working to a comprehensive coal export plan that has made it a global supply chain model,” PWCS chief executive officer Hennie du Plooy said.

“As part of that plan, the industry very clearly asked PWCS to deliver T4 to provide the next tranches of coal loading capacity.

“Producers have validated the plan by locking into long-term contracts to use the capacity of T4.

“Accordingly, PWCS is well advanced into the T4 planning approvals and project development process.

“Feasibility, geotechnical and environmental work is also advanced.”

PWCS said the Hunter Ports T5 proposal was an “incomplete concept” from outside the hard-won industry framework and did not appear to have been costed or modelled against the overall coal chain.

Further, T5 was proposed on land that had been ruled out for coal loading operations because it is earmarked for other functions, and because it sits adjacent to residential areas.

“Ongoing speculation about T5 was creating uncertainty for the entire Hunter Valley coal chain and the coal export plan the industry is working under,” du Plooy said.

“This could have resulted in delays in delivering the capacity the industry requires to grow.”

PWCS currently has coal loading capacity of 133Mt, which will rise to 145Mt by 2013. Loading capacity from T4 will be required from 2015.

In 2011 PWCS loaded 98.5Mt onto export vessels, indicating a need for the rest of the coal chain to align with loading capacity – a process occurring under the Hunter Valley’s long-term coal export plan.

Newcastle’s coal export plan was enacted in January 2010 after nearly two years of negotiation between the Hunter Valley coal industry and the NSW government, with guidance by former premier Nick Greiner. The plan was authorised by the Australian Competition and Consumer Commission.