The Defence Department has ruled out building a rail line into the Tindal RAAF Base as part of its $1.1 billion upgrade.

The decision comes as a blow to the much talked about "logistics and agribusiness hub" which is in its final planning phase to be built between the Katherine railway terminal and the Victoria Highway.

Defence has opted to use road tankers to supply the new six million litre fuel farm on the Tindal base which is part of the new upgrade, a parliamentary hearing was told last week.

The US military is also building fuel storage facilities as Tindal as part of the United States Force Posture Initiatives.

It has long been hoped Defence would be a big user of a freight hub in Katherine to funnel munitions and fuel into the base.

The dream of Defence becoming an anchor tenant of any freight hub goes back as far as the CLP Government of Adam Giles.

 How the fuel farm will look.

Transport Minister Peter Chandler in 2016 said a rail link between the hub and Tindal could give Katherine the edge it needed to be viewed as the NT's transport heart.

The Defence White Paper outlines $20 billion in federal government spending on infrastructure over the next two decades, including a potential link to the base from existing rail network "to support the transporting and handling of explosive ordnance and bulk fuel", Mr Chandler then said.

A Federal Government public hearing on the upgrade was to be held in Katherine last week but submissions were instead made by teleconference.

Despite Prime Minister Scott Morrison's enthusiasm for the project when he visited in February, the Parliamentary Standing Committee on Public Works has to look closely at the spending detail and heard from Defence last week, including its decision not to build a rail link.

Subject to the expected Parliamentary approval, the design work is expected to be finished by mid-2021, with construction expected to start in the next few months and be completed in late-2027.

The first part of the works "will also address a significant shortfall in permanent living in accommodation facilities required by the increased operational tempo at RAAF Base Tindal".

The committee heard a separate fuel farm, aircraft parking apron and associated facilities are proposed to be constructed at Tindal by the US to support its own flying operations.

"Refurbishing the existing fuel farm will not provide the increased capacity and utility required," Defence officials told the commiittee.

While a traditional design approach was considered, the preferred option is new construction based on a proven US Department of Defense 'cut and cover' design involving hardening of a minimum of two bulk storage tanks by encasing in concrete and mounding with fill. This approach will ensure that the proposed adjacent fuel farm can operate independently and/or be linked to operate with a fuel farm planned by the United States Government. The fuel farm design also provides for a hydrant refuelling system to service the proposed aircraft parking apron.

An aviation fuel farm is proposed, to provide a total storage capacity of six megalitres. The two storage tanks will be made of steel, encased in concrete and earth-mounded for protection. The fuel distribution system will enable fuel to be off-loaded from road tankers, checked for quality, stored and then pumped into RAAF refuelling trucks or directly to aircraft parked on the nearby aircraft parking apron using an integrated hydrant refuelling system. The control system, pipework reticulation and hydrant systems have been designed to integrate with the planned United States fuel farm to be constructed under the United State Force Posture Initiatives.

The proposed fuel farm includes a control centre and fuel quality laboratory, tanker loading and off-loading equipment, electrical and mechanical services buildings and measures to protect the environment from potential fuel spills.