A new ferry terminal in South Island will not go ahead.
The Government had been looking at the business case for a new terminal at Clifford Bay in Marlborough, with Cook Strait ferries docking there rather than at Picton.
But Transport Minister Gerry Brownlee said on Thursday a new report shows that an upgrade of the Picton terminal would be significantly more cost-effective.
Mr Brownlee said a Clifford Bay terminal was estimated to have cost $530 million, and that cost would only grow as it would take until 2022 to build it.
He said a review of information including commercially sensitive reports from shipping operators showed the economic arguments for investing in a new terminal did not stack up.
The expected capital cost of upgrading the Picton terminal so it can deal with future freight volumes and ship configuration was not as large as previously predicted.
"What is evident now is that Picton is clearly capable of servicing both those particular points for at least thirty years."
The report also found the Government would have had to commit money to the project to get private sector involvement.
About $1.1 million has been spent on investigating the feasibility of building a new terminal.
Community and organisations happy
Community leaders and Destination Marlborough are thrilled at plans to keep shipping and ferry services coming into Picton.
The Marlborough District Councillor for the Marlborough Sounds, Trevor Hook, said the decision will mean certainty that there will be future growth at Picton and bodes well for the town and all of Marlborough.
Marlborough mayor Alistair Sowman said there's been no real investment in Picton over the past two years there's now opportunity for that to start again. He says he expects a public report within the next few weeks about expansion plans for the town's port.
KiwiRail said it is pleased to have certainty on a base for its Cook Strait ferries in the South Island. Chief executive Jim Quinn said the decision means the chance of making big savings in time and fuel costs has been lost.
"Well, it has been obviously - that's an outcome of this. But the team who have been accountable for this have clearly done their work and their judgement on balance is that those benefits are outweighed by the other costs. Our job is to operate within the context that's available."
The trucking industry said it would have been lumbered with much of the cost of building a new port. Ken Shirley, a spokesperson for lobby group Road Transport Forum, said he is glad the idea has been dropped.
"We never really got to the stage of knowing who would be paying for it. One of the concerns the road freight sector had was that they would be paying for the bulk of this, disproportionate to the amount of benefit they would receive from it."
Mr Shirley said better use of coastal shipping should be considered before thoughts of building a new port.