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Treasury reveals NSW coal royalties hike to be higher than Queensland’s

A Queensland Treasury analysis shows that NSW’s newly-introduced coal royalties would be higher than those in Queensland over the medium-term price forecasts.

 

Sep 08, 2023, updated Sep 08, 2023
Coal prices have rebounded but pressure grows on emissions (File image: Supplied)

Coal prices have rebounded but pressure grows on emissions (File image: Supplied)

The analysis provided to In Queensland follows the NSW decision this week to impose a 2.6 per cent increase in its royalties from July next year with the expectation that it would deliver about $2.7 billion in revenue over four years.

It follows moves by Queensland to introduce higher royalties for its coal, but rather than a blanket increase, it created a system of tiers in which the royalties increase dramatically as the price rises above $175 a tonne. It generated a multi-billion windfall for the Government as prices for both thermal and coking coal boomed to record levels following the Russian invasion of Ukraine.

However, the Queensland Resources Council has campaigned against the move claiming Queensland’s royalty rate was five times that of NSW and was the highest in the world.  It also claims that billions of dollars in project investment was at risk.

BHP has also announced an investment strike on growth projects in Queensland, although it has refused to reveal which projects would be affected by that move.

The Queensland Treasury analysis said that given NSW was maintaining a flat rate structure for each extraction method, it would not benefit from future periods of elevated coal prices to the same extent that Queensland would “through its progressive royalty structure where higher rates apply at higher prices”.

“Under NSW’s new regime, when coal prices are below $A100 a tonne, Queensland’s coal royalty rate of 7 per cent will be lower than NSW’s rate, regardless of the extraction method,” the analysis said.

“For open cut coal (which comprises around 80 per cent of both NSW and Queensland coal production), Queensland’s ‘effective’ coal royalty rate will be lower than NSW’s rate for prices up to around $A195/t.

“Queensland’s effective royalty rates will be higher than NSW during periods of high prices. However, at prices in line with Queensland Treasury’s medium-term expectations, Queensland’s effective rate for premium thermal coal would be lower than NSW for open cut and underground coal, while Queensland’s effective rate for lower quality ‘non-premium’ thermal coal would be lower than NSW for all extraction methods.”

The Queensland Resources Council chief executive Ian Macfarlane said tGovernment was clutching at straws to say NSW coal royalties will be higher than Queensland’s in many circumstances.

“The only circumstances would be if coking coal prices fell to $US95/tonne or below, which for many mines is well below the cost of production. If that was the case, mines would be closing down across Queensland, destroying the state economy and putting thousands of people out of jobs,” he said.

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“Queensland predominantly produces higher-priced coking coal,  so it’s also ludicrous for Treasury to use NSW’s lower thermal coal prices as a point of comparison. There is also no indication coal prices are going to fall to the levels being quoted by Treasury.

“Based on the coal price today, Queensland producers are paying five times more in royalties than NSW. Once the increased flat royalty is introduced in NSW from July next year, Queensland’s top royalty rate will still be paying about four times more than NSW.

“The Queensland Government has damaged investor confidence in the resources sector and is now trying to use a comparatively modest tax hike in NSW to justify its own extraordinary tax hike.  This decision is costing Queensland jobs and investment now and will continue to do so in the future.

“The real point of difference between what’s happened in NSW and Queensland with royalties is that at least the NSW Government consulted industry instead of ambushing it.”

 

 

 

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