Western Australia's government will block future construction of the Perth Freight Link despite $1.2 billion in federal funding remaining on the table.
Transport Minister Rita Saffioti will on Wednesday introduce legislation rezoning the Beeliar Wetlands to stop future road development.
It will effectively kill off the controversial Roe 8 and 9 project, which was first proposed by the former WA Liberal government in 2014 and would have cut through a large portion of the environmentally significant wetlands on the way to Fremantle Harbour.
Voters effectively rejected the proposal by electing a Labor government in 2017 and expanding the party's majority at this year's election.
But federal budget papers released on Tuesday included a statement that the Morrison government "remains committed to the extension of the Roe Highway".
"To this end, the Australian government will provide $1.2 billion to the first WA government willing to construct the Roe 8 and 9 extensions and is therefore recording this commitment as a contingent liability in the budget," it said.
Premier Mark McGowan said the Morrison government should spend the money on providing another coronavirus quarantine facility for returned travellers.
"What the Commonwealth could do is use that $1.2 billion to build a quarantine facility to meet the needs of the nation," he told reporters.
"That'd be a far better use of that money."
The new legislation will rezone about 34 hectares to a parks and recreation reserve, "ensuring this area is protected from development forever".
Labor has promised to spend $3 million on building a new boardwalk and viewing platform at the wetlands, as well as completing additional revegetation works.
The McGowan government hopes to eventually ease traffic congestion in the southern suburbs by closing Fremantle Port and building a new outer harbour in Kwinana.
It plans to open the multibillion dollar new freight port by 2032 but is yet to decide on how it will transition from the existing port.
Mr McGowan said the contribution of iron ore revenue to the federal budget showed WA had "once again carried the country".
"The success of our industries, the fact that we kept our mining industry open during the depths of COVID, has supported the entire nation," he said.
Federal Labor MP Josh Wilson accused the Liberals of "holding WA to ransom over this dead and discredited vanity project".
Australian Associated Press