Higher royalties for QLD mines sparks fear for regional job loss

‘Inconceivable’ new royalty tiers have been introduced in Queensland to capitalise on booming coal prices but industry leaders believe the move to siphon an extra $1.2bn will cost regional jobs and ‘permanently scar’ the industry.

A multinational mining company with major assets in Central Queensland says it will lose 60 per cent of its profits through a plan to siphon an extra $1.2 billion in mining royalties over the next four years.

Booming coal prices have pushed Queensland’s windfall from royalties and land rents up $5.794 billion for the 2022-23 financial year.

The Queensland Government is expecting mines to pour $7.83bn into state coffers to spend over the next 12 months.

But in his budget speech handed down on Tuesday, Treasurer Cameron Dick said the end of the royalty freeze on June 30 also came with a further hit for the state’s mines.

“For a decade, multinational coal companies have benefited from royalty arrangements that have been frozen by successive Queensland Governments,” he said.

“Few industries in the world have enjoyed such a long period without change.

Treasurer Cameron Dick has handed down the State Budget in Queensland for FY23. Picture: NCA NewsWire / John Gass

“But from July 1, the 10-year freeze comes to an end.

“It is time for new arrangements to be implemented … arrangements that reflect coal prices in excess of $500 per tonne, not the $150 per tonne for which the existing royalties were designed.”

Mr Dick said three new progressive royalty tiers would be introduced — 20 per cent for prices above $175 per tonne, 30 per cent for prices above $225 per tonne and 40 per cent for prices above $300 per tonne.

“Each of these new tiers applies only on the margin, so at a coal price of $302 per tonne, the 40 per cent rate would only apply to the last $2,” he said.

Coal prices are booming and the Queensland Government is taking advantage for royalties revenue.

“We know the foreign shareholders of coal companies won’t like these changes. But they can rest easy.

“We are not increasing the rates that apply at the existing tiers, as the former LNP Government did in 2012, during an industry downturn.

“The new regime is forecast to deliver an additional $1.2 billion in royalties over the forward estimates, 30 per cent less than was forecast through the changes made by the former LNP Government in 2012.”

Anglo American Australia CEO Nick Barlow said Queensland’s coal royalty rates were already among the highest in the world.

“This new tax is inconceivable, and it will place a heavy burden on our sector and Queensland mining regions,” he said.

“Our steelmaking coal business in Australia competes for capital against other options within our global diversified mining portfolio, and the new extraordinary progressive tax tiers will hurt the business case for new investment.

“Significant capital investment is required to sustain mining operations, including in constructing and preparing mining areas, mining equipment and infrastructure.

“In a highly cyclical business, we need higher price periods to make these investments, which not only create jobs and support our regions, but also benefits the Queensland economy.

“We estimate the new tax will mean that we will now contribute around 60 per cent of our profits to governments, when you take into account state and federal taxation.”

WARNINGS HIKES COULD COST JOBS

Queensland Resource Council chief executive Ian Macfarlane. Picture: Contributed

Queensland Resources Council chief executive Ian Macfarlane said Queensland mine companies were already paying “double the royalties” of New South Wales.

He said a hike risked losing future investment which in turn meant losing regional jobs.

“The Treasurer told us there would be an increase but we never imagined it would be to this magnitude and it is a huge kick in the guts to the industry,” he said.

“It’s unbelievable.

“To then add three more tiers, the top of which is 40 per cent, is just staggering.

“The industry feels as though, A, it is being totally underappreciated for keeping Queensland’s economy going during Covid, and secondly we now feel like we are under attack from the state government.

“These are extraordinary increases and far higher than anywhere else in the world but also far higher than anyone else expected.

“It means the investment climate in Queensland is now permanently scarred in terms of overseas investors coming here because they see these sorts of taxes on the coal industry and they wonder what else is going to be taxed.

“Money that would have been spent on upgrading projects, expanding projects and on new projects, just won’t be spent now.

“There will be jobs lost as a result of that.

“We’ll be considering our response over the next week or so.”

Since October 1, 2012, the highest marginal royalty rate applicable to Queensland coal royalties has been a rate of 15 per cent, payable on that part of the average price per tonne exceeding A$150.

Isaac Mayor Anne Baker said the debate on rates should take place between companies and the government and it was not her council’s position to interfere in the discussion.

“Whatever the outcome is, our region and our communities should never be worse off,” she said.

“Our regions should be maintained and sustainable going into the future.”

Coal companies will have increased royalties in the coming year.

Budget documents say the new tiers come amid “the exceptional surge in coal prices experienced across 2021 and early 2022” and were not expected to have “any material impacts on the coal industry”.

“With spot metallurgical coal prices reaching as high as around A$900 per tonne, the current royalty structure does not provide a fair return to Queenslanders during periods of such high prices,” it reads.

“To ensure Queenslanders receive a fair return on the use of the state’s valuable and limited natural resources in periods of high prices, the government is introducing three new tiers to the coal royalty structure, with effect for coal sold, disposed of or used on or after July 1, 2022.

“This is estimated to generate additional royalty revenue of around $1.2 billion over the 4 years ending 2025–26.

“However, a substantial proportion (around $765 million) will be in 2022–23, as coal prices are expected to return to longer run prices over the next year.

“The addition of the new tiers is not expected to have any material impacts on the coal industry or viability of producers, given the increases are applied only at relatively high prices.”

CALL FOR ROYALTIES TO FLOW BACK TO REGIONS

Mackay Mayor Greg Williamson said this week he wanted that royalties money to flow back to the regions where investment in social infrastructure was desperately needed as well as health and road spending.

Mackay Mayor Greg Williamson says regional Queensland deserves its fair share. Picture: Duncan Evans

Resource Industry Network says if mining royalties are set to increase progressively based on coal prices, they need to come with a guarantee – to return the difference in royalties to the regions generating the wealth.

RIN says resources boosted the Queensland economy “by a whopping $84.3 billion” last financial year, with the Mackay region contributing a significant $18 billion of this total.

But general manager Dean Kirkwood said as the industry moved into a new era of carbon neutral mining, it was essential the regions driving the innovative solutions to make this happen were supported in their journey.

“Investing in the regions just makes sense when it comes to delivering net zero solutions,” he said.

“The Mackay region, including Isaac and Whitsunday, has the capability and experience to fast track the new mineral economy.

“Our world-leading expertise in resource extraction and processing, high-tech engineering and manufacturing, and efficient mining operations have leveraged our value on the world stage.

“So it’s essential that our METS sector is part of the conversation if we are to lead the world in critical minerals processing.

“Given that resources account for one in every $5 spent in the Queensland economy, investing the royalties back into a region that’s embracing new industries and advanced manufacturing is vital.

“It means we can continue to be at the forefront of global mining innovation and technology, and as a result, allow Queensland to benefit and prosper from our immense natural resources.”

Mr Dick told Queensland Parliament all of that $1.2 billion, and more, would go back to regional Queensland where the royalties were generated. “We will build a new hospital for Moranbah,” he said.

“We will expand Mackay Hospital, Townsville Hospital, and Cairns Hospital. More beds in hospitals at Rockhampton, at Hervey Bay, and at Sarina.”

Mr Dick said the state was in good economic shape too, noting Mackay had the lowest unemployment rate in Queensland at 2.4 per cent.

“The Australian Bureau of Statistics tells us Queensland created 1500 new jobs each and every day for the month of May,” he said.

“The value of Queensland’s overseas merchandise exports totalled $99 billion in the 12 months to April 2022.

“This is 72.3 per cent higher than the corresponding period a year ago, and the state’s highest 12-month total on record.

“Our strong economic recovery stood the state in good stead when faced with a range of economic challenges earlier this year.”

Originally published as Higher royalties for QLD mines sparks fear for regional job loss