The NSW government has offered an olive branch to the state's mining sector by announcing a freeze on mining royalty rates.
The move was announced by Deputy Premier Paul Toole in the coal-rich Hunter Valley, where several local and multinational coal companies are navigating new government-imposed price caps.
Mining royalties are the fees paid by mining companies to the government in exchange for the right to extract a resource.
Due to the scale of mining in the Hunter region and other coal-producing areas like the Illawarra and the Central West, mining royalties form a considerable revenue stream for the state government.
Last financial year NSW mines generated more than $3.5 billion in royalties and were forecast to tip $5 billion at the end of June this year.
The government on Tuesday promised to freeze the rate of royalties until the end of the coal price cap in June next year.
While Mr Toole refused to give a figure on how much revenue NSW would lose from the freeze, he said he was "confident" the state's budget would not be impacted.
"Coal is generating billions of dollars back to the NSW economy ... that goes towards hospitals, police, education," Mr Toole said.
"I'm confident that it's not going to be impacting on them.
"We know that there are record prices when it comes to thermal coal for exporting at this point in time, so we know that there is more going back into NSW."
Export coal is currently selling for $460 per tonne but under the cap, will sell for $125 on the domestic market.
'Double-whammy' impact eased
Mr Toole said the move would give certainty to coal producers while they were bound by the national price cap and state-imposed coal reservation fund.
"I want to make sure that those businesses that are directly or indirectly associated with coal in this state have certainty," he said.
"Coal mining is significant, it employs a lot of people in these areas and it helps drive economic activity."
The freeze comes ahead of the March state election and as the NSW Minerals Council continues to express frustration with the federal government's coal price cap and the state government's coal reservation policy.
Under that policy, a number of NSW coal exporters have been directed to keep seven to 10 per cent of coal extracted for domestic use.
The Hunter Valley's Mount Arthur Coal last month told its 2,000 employees the financial pressures of the reservation policy could force it to close earlier than anticipated.
NSW Minerals Council chief executive Stephen Galilee said "hundreds of millions of dollars of lost revenue" would be felt by the state's mining sector during the course of the price cap.
"The price cap is a significant intervention in the coal market," Mr Galilee said.
"It's going to create a lot of cost, complication and a heavy burden on coal producers so removing the fear of a double whammy of a royalty increase at the same time as the price caps are in place, is a relief."
