Coal brawl fires up as industry raises questions over billions in royalties
Booming commodity prices meant the State Government would collect an extra $18 billion in coal mining royalties over the next four years that it had not anticipated and the mining industry is asking: where would that money go?
QRC chief executive Ian Macfarlane (Photo: QRC)
The Queensland Resources Council has thrown down the gauntlet to the State Government, saying it would not accept the new royalty regime and not ruling out a political campaign against it.
The QRC released a report from analysts Commodity Insights which claims the Government misled the public over the royalties issue and massively understated revenue it would receive from it over the next four years.
In this year’s Budget, the Government added extra royalty tiers in a bid to capture some of the benefit of extraordinary prices being received by coal companies. By way of example New Hope today reported a 1138 per cent increase in its full-year profit to $983 million.
The new tiers take the royalty rates from 15 per cent for prices above $A300 a tonne to 40 per cent. It estimated it would earn an extra $1.2 billion under the scheme.
QRC chief executive Ian Macfarlane said Treasury would have easily earned that extra $1.2 billion in the past three months and the industry would continue to criticise the Government over the issue.
While the State Government appears to be receiving a windfall its GST grants from the Federal Government would be affected negatively by the extra income.
“The industry cannot accept the quantum of this rate rise. It is a doubling of the existing rates in real terms if you compare prices and royalties per tonne,” Macfarlane said
“For the top level, royalties will be paid at 40 per cent and assuming that you are making a profit you then pay 30 per cent company tax so you are paying 70 cents in the dollar.”
“We are not considering a compromise. It’s clear the Government has raised all the money it needs to raise.
“I think the Government has just completely got it wrong. If $1.2 billion is their target for the next four years they have already got that in their pocket.
“The question is: why do all this damage to future investment and jobs in this state to your biggest export industry if you have the money you need?”
Asked if the industry would campaign against the royalties as it did against the Greens at the previous state election Macfarlane said: “We will have to see what the future brings, but the resources industry is not going to accept this tax.”
Such a campaign is not unprecedented. The Australia-wide mining sector took on the Rudd Government over the mining super profits tax and won. Adani took on the State Government in a public campaign over its Carmichael mine and eventually won. The QRC also targeted the Greens at a previous state election and claimed victory when the party’s overall vote was reduced.
A spokesman for the Treasurer, Cameron Dick, said if coal prices were higher than Treasury’s forecast then any additional royalties would “only be a fraction of the record profits that coal companies would be making from resources owned by the people of Queensland”.
“Queenslanders deserve to see the benefit of high prices,” he said.
“Importantly, at current prices, Indonesia coal producers are paying higher royalty rates than companies in Queensland.”
The Government has maintained that the new rates would only impact peak periods, but the Commodity Insights report found that in the past 10 years the rates would have applied 60 per cent of the time.
“These new rates would apply for over half the time in a normal market,” the analysis claimed.
It also said Treasury’s estimates for royalty revenue in 2022-23 is less than half of the next most conservative forecast by Westpac. The Federal Government’s Office of the Chief Economist forecast almost $18 billion in royalty revenue.
Macfarlane said Westpac, which was among the more conservative forecasters on coal prices, forecast $2.8 billion would be collected this financial year and that was $2 billion more than Treasury had forecast. Other forecasts for the current year were between $5.7 billion and $13.8 billion higher than Treasury forecasts.
“It’s an anti-coal move by the Queensland Government,” he said.
Macfarlane said the industry would have sat down with Treasury and provided the State Government with the cash for particular projects similar with what was done previously when Jackie Trad was treasurer.
“We did offer to sit down and talk about what the Treasurer had on his mind. That offer was flatly rejected,” Macfarlane said.