A DISPUTE is brewing between the federal government and a company led by Chris Corrigan over competing plans to build freight terminals in Sydney’s west.

If unresolved, the dispute threatens one of the few proposals to remove hundreds of thousands of freight trucks that spill out of Port Botany each year and clog up roads through the city.

The impasse is over the use of adjacent sites at Moorebank, just south of the M5. One site, about 220 hectares, houses the Defence Department’s School of Military Engineering and is where sniffer dogs are trained for Afghanistan.

The government has spent $70 million on plans to move the school and on a business case for a freight terminal on the site. Cabinet must now decide whether to fund the project, understood to cost about $1.6 billion, in the budget.

The project would involve developing and then contracting out the operation of the freight terminal to logistics firms.

Freight trains would arrive from interstate and on a shuttle from Port Botany. Freight would be unloaded at the terminal and delivered by truck to warehouses across Sydney.

But Mr Corrigan’s company, Qube Logistics, part of a joint-venture with Stockland and Queensland Rail known as the Sydney Intermodal Terminal Alliance, is proposing to build and operate its own terminal on an adjacent smaller site (about 83 hectares), which it owns.

That site is now occupied by Defence’s National Storage and Distribution Centre. And while the alliance hopes Defence will soon announce plans to move, it does have the option to stay.

Qube has plans to buy out Stockland, and the project’s environmental impact statement will go on display this week.

However the two proposals are increasingly at odds and there is an expectation something will have to give.

The business case before cabinet argues for a larger facility to manage the expected growth in freight in and out of Port Botany for decades to come.

It also argues for open access at the site, which would enable different logistics companies to compete for the right to operate parts of the hub.

Officials who have worked on the business case believe that, in contrast, competition issues would emerge if Qube Logistics was allowed to control distribution at Moorebank.

The alliance last week wrote to the Prime Minister, Julia Gillard, to intervene.

A spokesman for the alliance said yesterday: ”We are at a loss to explain the Commonwealth’s [lack of interest] in a private sector proposal which can be delivered at no cost to federal or state taxpayers and would provide the freight and rail infrastructure urgently needed in NSW.

”It would be a bizarre outcome if $1 billion of taxpayers’ money was spent on a project which the private sector is willing to build at its own cost,” the spokesman said.

Representatives from Infrastructure Australia and Infrastructure NSW met Qube’s managing director, Maurice James, and senior state and federal officials on March 13 to try to break the impasse.