First Job Cuts Now Royalty Hikes: Queensland Coal Sector Left Reeling

Sept. 11, 2012 - PRLog -- Under the changes announced in the Budget, from October 1, 2012, the Queensland government is raising the royalty payable on the value of coal sold for between A$100-150/t from the previous single rate of 10% to 12.5%. A new rate of 15% will apply to coal sold above $150/t.

Premier Campbell Newman’s first budget since gaining power earlier this year has left coal industry stakeholders shell-shocked, with peak mining body the Queensland Resources Council (QRC) condemning the changes.

“The Newman government inherited from [former] Labor [government] the highest coal royalties in Australia but their own hike could see Queensland grab the dubious honour of being the highest taxing coal jurisdiction in the world,’ QRC boss Michael Roche said.

“The combination of company income tax and the new royalty rates will mean Queensland carries an effective taxation rate of 50% on a typical coking coal operation.

“For some existing high cost coal mines, the new royalty structure could be the final straw.”

Referring to discussions held between the Newman government and the coal sector, Roche added: “The trouble is the Newman government seems to have been listening to industry but not comprehending what they were hearing”.

A day after announcing it will close the Gregory coking coal mine in Queensland and axe 300 jobs, a BHP Billiton spokesperson told Energy Publishing the company is disappointed by such a large increase in royalties.

“Queensland already had one of the world's highest comparable coal royalty regimes, and we have made it clear to the Queensland Government that any additional royalty impost will directly impact the profitability of our existing operations, and will affect future business decisions regarding growth capital allocation,” the spokesperson said.

“We have had lengthy discussions with the Queensland government to explain our concerns about any increase in the royalties, but no consultation occurred about the specific higher royalty rates announced today.

“We made it clear to the Queensland Government that in the current environment any additional taxation impost will directly impact the profitability of our current operations and will affect business decisions on capital growth allocations in the state,” the spokesperson added.

Yesterday the sector suffered its biggest day of job losses in history with BHP announcing it will shed 300 jobs while Xstrata Coal announced it will cut 600 jobs throughout its operations in Australia. The job losses, both companies said, were attributable to high labour costs, falling coal prices and a high Australian dollar.

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