The New South Wales government will increase coal royalties by 2.6 percentage points from July next year in a move that the treasurer, Daniel Mookhey, says will deliver $2.7bn into state coffers over four years.
Mookhey announced the change on Wednesday morning, a fortnight out from the first Minns government budget since Labor came to power in March after 12 years in opposition.
Treasury estimates the changes could see an increase to a household’s annual power bill by up to $5.80 on average. It will come into effect on 1 July 2024.
The treasurer has promised that every dollar raised in the changes would be “ploughed back” into essential services and cost-of-living relief.
He said the change was needed given how much the global situation had changed since the rate was last increased in 2009, referring in part to Russia’s invasion of Ukraine last year.
“The last time royalty rates in NSW was changed was just after the iPhone 3 was introduced. That’s an eon,” he said.
“Market conditions have clearly changed. The existing coal royalty system is out of date. That’s why we are modernising these rates to ensure that the people of NSW do indeed share in the wealth that their resources create.”
The announcement came after the energy minister, Penny Sharpe, on Tuesday announced the government would “engage” with the owner of Eraring – Australia’s biggest coal-fired power station – for a “temporary” extension of its operating life.
A final cost and length of extending operations of the 2,880-megawatt power plant near Newcastle would hinge on negotiations with owner Origin Energy.
Sharpe said on Wednesday she had yet to pick up the phone for those discussions.
Mookhey insisted the royalty changes represented a “fair outcome for the people of NSW”.
He said he was confident relationships with nations that would be affected by the decision, including Korea and Japan, had been managed appropriately, even if “not everyone will be pleased”.
The Greens energy spokesperson, Abigail Boyd, said the increase was an “insult” and “leaves far too much on the table” when compared with the system in Queensland.
“[It] shows just how cosy with, or fearful of, the fossil fuel industry this NSW Labor government is,” she said.
Last year, the Queensland Labor government announced a dramatic overhaul of mining royalties in the state by introducing three new trigger points based on the skyrocketing coal prices at the time.
Under the system, which was lashed by the mining sector, companies are charged 20% when coal prices are $175-$225 a tonne, rising to 40% when the coal price exceeds $300 a tonne.
Mookhey said it was the previous government’s decision not to implement a similar plan last year when coal prices were “significantly higher”.
The natural resources minister, Courtney Houssos, said the government had “struck the right balance”, ensuring the “ongoing stability of the mining sector”.
The NSW Minerals Council chief executive, Stephen Galilee, disagreed. “The increase in coal royalty rates announced today by the NSW government will impose a significant additional impost on coal producers at a challenging time of lower coal prices and increased operating costs,” he said.
The former NSW Nationals leader and Bathurst MP, Paul Toole, accused the government of a “cash grab”.
“The current royalties’ regime already ensures mining companies pay their fair share, with higher coal prices delivering record royalties receipts in the recently ended financial year,” he said.
“There is no justification for raising royalty rates at a time when coal prices have moderated.”
