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How a measly $2 sparked a “whatever it takes” war between big coal and Labor

Another bruising encounter of the coal wars kicks off this week over what the State Government claims is all for the sake of a claimed hike of $2.

Nov 21, 2022, updated Nov 21, 2022
Adani's thermal coal mine has avoided problems with its insurer Marsh.

Adani's thermal coal mine has avoided problems with its insurer Marsh.

If the Government’s claim is correct, a lot is being put at stake for $2.

What’s likely to occur is a two-year brawl, funded by a reported $40 million from the resources industry and in what Queensland Resources Council boss Ian Macfarlane told The Australian would be a “whatever it takes” campaign.

It will be socially and politically divisive and likely to come down to the industry claiming jobs and businesses in the central Queensland coal fields will be sacrificed by Labor’s tax (royalties) grab. The FIFO seats in the outer suburbs and the Gold and Sunshine coasts were also likely to be targeted.

The divide between the south east corner of the state and central Queensland is likely to be exposed again and it could have (and should have) been avoided.

It all stems from the State Government’s royalties hike, which includes an increase to 40 per cent at the top level.

The reason it implemented the hike was to get a piece of the extraordinary prices coal companies were receiving which peaked at an eye-popping $US670.50 a tonne in March this year. But it was also because the Government is desperate for funds to get its staggering level of debt down.

It was meant to raise $1.2 billion over four years but the industry claims it has already achieved that and a lot more because, ironically, they have been making a killing on the global markets.

According to the Government report which used ABS data, in the September quarter Queensland coal exports were $18.4 billion, up 75.3 per cent from the $10.5 billion in exports in September quarter 2021. The continued high prices drove the value of Queensland’s coal exports to a new record 12-month high of $A79.7 billion in the year ended September 2022.

In some sections of the industry there is a lot of head scratching about what it has done to be treated like this, which is remarkable considering the brutal wars that have played out in recent years.

But the always fraught relationship between coal and Labor is probably as bad as it’s ever been and now likely to get worse.

The Queensland Resources Council chief executive Ian Macfarlane said the campaign against the royalties will be launched on Wednesday and agrees it all could have been avoided had the industry been able to put its case before the Budget.

But we’ve been here before. The Rudd Government’s failed super profits tax tried the same thing and failed when the industry unleashed a campaign against it, which then led to a pretty dismal series of failed prime ministerships and social division.

The mining industry also took aim at the Greens at a recent state election which led to a fallout in its membership that remains unhealed today to some extent.

In a report released late on Friday ahead of this week’s mining industry lunch, the State Government said that for high-quality hard coking coal, at the expected medium-term price of $US160/t ($A213/t, at an exchange rate of $US 0.75), the new tiers are estimated to add less than $A2 a tonne to the royalties payable by producers.

“This represents only a marginal increase in the average rate per tonne from 10.7 per cent to 11.6 per cent. The application of existing allowable deductions would further reduce the royalty payable.

“Therefore, even at the very high price of $A400/t, the effective royalty rate, including the impact of the new tiers, is only around 22 per cent.’’

Well, the industry is not going to buy that. Macfarlane said he is not sure how the Government has done its maths and claims the royalty hike is far greater than $2, while others in the industry say that production cost of $US150 a tonne means barely any margin before the higher tier rates kick in. And they claim that the higher prices they receive compensates them for long periods of low prices.

Macfarlane said at a thermal coal price of $US250 to $US300, the royalty hike was likely to be about $100.

When the mining industry meets this week, the guest speaker will be Japan’s Ambassador Shingo Yamagami, rather than Premier Annastacia Palaszczuk. That’s a snub and a deliberate one.

Yamagami weighed into the debate earlier this year when he broke convention and attacked the State Government over its royalties hike. He’ll probably do that again.

So, what we are left with is a hugely important industry pitted against a Government that is already hamstrung by a bin-fire of issues.

It has a chance to rectify it, or at least mollify the industry, in the upcoming mid-year economic review. It should take it.

 

 

 

 

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