A new industrial precinct in Darwin Harbour could cause "significant adverse impacts to human health", according to an environmental report released by the Northern Territory government.
The NT government is spearheading plans to develop a manufacturing and minerals precinct in Middle Arm, south of Darwin.
The proposal includes a petrochemicals manufacturing facility, which would convert natural gas into products like plastics and paint.
The federal budget promised $1.5 billion for a new wharf and offloading facility in the area, however the funding has not been allocated over the forward estimates period.
The NT government said the precinct would also include carbon capture and storage technologies, as well as hydrogen and mineral exports, deeming it a low emissions precinct that will create 20,000 jobs.
The potential threat to human health was flagged in a risk assessment the government was required to submit under the environmental approvals process, which noted its proximity to residential Palmerston and ranked the risk as "uncertain".
But environmental advocates have labelled the report an "incredibly concerning" warning.
"You're talking about ammonia, methanol, hydrogen and gas liquids processing in Middle Arm, which is actually a petroleum refinery," Jason Fowler from the Environment Centre NT said.
"This is all occurring within three kilometres of the suburb of Palmerston.
"If you look anywhere around the globe, you're not finding massive petrochemical refineries right next to suburbia."
'Significant impacts to marine water'
The report to the NT Environmental Protection Authority also warned threatened species as well as migratory shorebirds and habitat could be impacted, with about 1,500 hectares of land proposed to be cleared for the precinct.
"Significant impacts to marine water and sediment quality" in the harbour, as well as to marine ecosystems could result from dredging and shipping operations, it said.
In response to the report, the Northern Territory and federal governments have committed to partnering on a detailed assessment of the precinct to identify and protect environmentally significant areas.
"Environmental considerations are paramount in the development of the Middle Arm Sustainable Development Precinct," NT Environment Minister Eva Lalwer said.
"Baseline investigations are underway, including identifying plant and animal biodiversity, marine environmental values, and air and water quality to inform detailed planning for the precinct."
Timeline is locked in, Joyce says
Deputy Prime Minister Barnaby Joyce was in Darwin on Tuesday, where the Coalition is targeting two federal seats, spruiking his government's commitment to developing the Middle Arm precinct.
He said the area would invite $16 billion in private investment and linked the spending to national security.
"Our vision is to make Darwin an even bigger and stronger city," he told ABC Radio Darwin this morning.
But asked yesterday if the investment would effectively fund a second port to bypass the one leased to Chinese-owned firm for 99 years, Mr Joyce said: "I'm not going to talk about anything but what we're doing here".
He also did not provide a specific timeline for when the money would be spent, but insisted "the timeline is locked in".
Mr Joyce insisted the proposal would not be put to a business case or feasibility study, despite a media release at the time of the announcement saying the funding was "conditional pending completed business cases demonstrating value for money and sufficient public benefit for investment".
His office has not yet responded to a request for clarification.
