Rees Squeeze Hits Coal

Newcastle Herald

Friday November 7, 2008

Ian Kirkwood

THE cash-strapped State Government is set to rip hundreds of millions of dollars per year more from the Hunter coal industry through a dramatic restructuring of the coal royalty regime.

The Government has not denied reports it plans to lift royalties to between 8 per cent and 10 per cent of coal sales, compared with the existing regime of 5 per cent for deep underground coal, 6 per cent for underground coal and 7 per cent for open-cut coal.

Mining companies are up in arms about the proposal, which is expected to form part of next week's state mini-budget, the first for Premier Nathan Rees.

The Hunter Business Chamber has declined to comment on the plan until after a meeting expected to take place today between coal companies and the Government, but the proposed increase has been welcomed by the NSW Greens, who want the extra money spent in the Hunter.

The State Government earned more than $840 million last financial year from coal royalties, and the new regime together with generally higher prices since then could take the annual total to about $1.5 billion, most of it from the Hunter and Gunnedah basins.

The NSW changes are apparently modelled on a new regime introduced in Queensland in July.

Queensland Treasurer Andrew Fraser said the new scale meant the Government would charge "7 per cent of the value up to $100 a tonne and 10 per cent of the value thereafter".

NSW Minerals Council chief executive Nikki Williams said yesterday the proposed NSW scheme was coming at the worst possible time.

"Assuming that the mining industry has a capacity to pay regardless of circumstances runs counter to how commodity-based economies actually work and ignores the interrelationship between economic downturn and demand for minerals," Dr Williams said.

NSW produced about 130 million tonnes of saleable coal in 2006-07, with exports from Newcastle expected to hit about 95 million tonnes this year.

Hunter steaming coal could easily average $150 per tonne, but the NSW and Queensland royalty schemes both allow producers to deduct various costs, including shipping, from their rateable earnings.

The office of Treasurer Eric Roozendaal did not respond to requests for comment yesterday.

© 2008 Newcastle Herald

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