Coal royalties to deliver budget repair, fairer return for NSW
The Minns Government will update NSW coal royalty rates to make sure the state earns a fair return for its resources under modern market conditions.
The new scheme will see coal royalties increase by 2.6 percentage points from 1 July 2024. It will replace the emergency domestic coal cap and reservation measures the previous government introduced in December 2022.
The changes will improve the state’s budget position by more than $2.7 billion over the 4 years from 2024 to 2028.
Coal royalties have not increased since January 2009. Since then, international prices have surged, peaking well above $500 per tonne in late 2022 as a result of Russia’s invasion of Ukraine.
International prices have since remained above average, trading consistently above $200 per tonne.
Existing discounts for underground and deep underground mining (deeper than 400m) will continue.
The decision also mitigates a $1.3 billion write-down in royalties revenue in the forthcoming budget.
The government will use the funds raised rebuilding the state’s essential services, as well as providing families with cost-of-living relief.
Under the new system the rates for open cut, underground and deep underground mining will be:
|Type of mining||Open cut||Underground||Deep underground|
|Coal royalty rate from July 2024||10.8%||9.8%||8.8%|
|Current coal royalty rate||8.2%||7.2%||6.2%|
The new system was developed following extensive consultation with the mining industry as well as NSW’s key trading partners. The consultation included:
- Two roundtables, attended by 13 mining companies.
- Seven individual meetings between the Treasurer, the Minister for Natural Resources and major mine operators.
- Twenty written submissions from representatives of the coal sector, including from coal mining companies and coal fired power generators.
- Detailed consultation with affected companies on price forecasts, currency assumptions, volume growth and cost curves. The Treasurer and the Minister for Finance then met with an industry delegation to discuss feedback.
- A roundtable with 4 major power companies, spanning the generation, distribution and retail sectors of the electricity industry.
- Two detailed consultations between NSW Treasury and the Consuls-General of Japan and Korea.
The announcement is a key element in the government’s long-term plan to balance the need for budget repair, rebuild the state’s essential services and take pressure off NSW families and businesses.
NSW Treasurer Daniel Mookhey said:
“This is a fair outcome for the people of NSW. The old system is out of date. The market has moved on. That’s why we are modernising the state’s coal royalties.
“The new scheme will make sure the people of NSW share in the wealth their resources create.
“I want to thank all of the mining companies, the power companies, and our key trading partners for their extensive engagement with the NSW Government ahead of the forthcoming budget.”
Minister for Finance and Minister for Natural Resources Courtney Houssos said:
“Coal is an important part of the state’s energy mix and a key contributor to our economy.
“Having embarked on extensive consultations with mining companies, industry groups and our trading partners, we have struck the right balance.
“These changes will take effect on 1 July 2024 giving the industry time to adjust and upholding the Minns Labor Government’s commitment not to consider royalties changes while emergency measures were in place.
“The Minns Government is committed to ensuring the ongoing stability of the mining sector, while rebuilding essential services for the people of NSW.”
Minister for Energy Penny Sharpe said:
“The coal price caps were an emergency measure to keep electricity prices under control during a global energy crisis.
“Going forward, it’s important our energy sector has certainty about NSW’s policy settings.”