Australia's Queensland state government has delivered a record budget surplus, largely driven by increased coal royalties, that will help finance A$19bn ($12.9bn) in renewable energy infrastructure for the state.
The Queensland treasury estimates metallurgical and thermal coal royalties will rise to a record A$15.3bn for the 2022-23 fiscal year to 30 June, according to the state's 2023-24 budget. This is up from the previous estimate of A$10.7bn in the December budget update and the A$7.24bn received in 2021-22.
Around A$5.7bn is in additional royalties owing to the introduction of new upper tiers in the coal royalty regime from 1 July, according to the Queensland Resources Council (QRC), which represents mining firms in the state. This additional unexpected increase in costs to coal mining firms has made investment in both coal and other minerals riskier in Queensland, QRC chief executive Ian Macfarlane said.
The state does not expect coal exports to suffer in the short term and has given no indication that it plans to reverse the royalties increase. Queensland coal exports fell by 0.5pc in 2022-23 from the previous year, according to the budget papers, which forecast a rebound of 6.25pc in 2023-24. The decline in 2022-23 was partly because of unseasonal wet weather in parts of the state and issues with the logistics infrastructure, particularly around Gladstone.
The Queensland government will use the increased revenue from coal royalties to help fund its Queensland energy and jobs plan, which will invest A$19bn over four years in wind, solar, storage and transmission to help the state meet its renewable energy targets.
The huge 2022-23 royalty revenues were driven by record thermal coal prices of around $400/t (A$590/t) in July-January, attracting royalties of 40pc on the proportion of the price that was over A$300/t. Queensland's royalty rates are progressive, so coal sold at A$310/t will attract a royalty of 40pc on just the top A$10/t, with 30pc on A$75/t, 20pc on A$50/t, 15pc on A$25/t, 12.5pc on A$50/t and 7pc on the remaining A$100/t.
At high-grade thermal coal prices of $132.80/t (A$196/t), producers are paying a 20pc royalty on the A$21/t that is above the A$175/t threshold with the remainder at the same rate as in 2021-22.
Metallurgical coal producers largely paid lower royalties than high-grade thermal coal producers in 2022-23 as prices were lower, but are likely to pay more in the future as pricing returns to more normal patterns and as decarbonisation takes longer for steelmaking than for electricity. Queensland has increased its medium-term outlook for hard coking coal prices to $175/t from $160/t, putting it in the realm of paying 30pc royalties on a proportion of sales.
| Queensland royalty revenue | A$bn | |||||
| Royalties | 2021-22 (actual) | 2022-23 (actual) | 2023-24 (budget) | 2024-25 (projection) | 2025-26 (projection) | 2026-27 (projection) |
| Coal | 7.24 | 15.30 | 5.35 | 4.02 | 4.22 | 4.40 |
| Petroleum | 1.18 | 2.33 | 1.28 | 1.22 | 1.14 | 1.04 |
| Other royalties | 0.49 | 0.48 | 0.50 | 0.48 | 0.46 | 0.44 |
| Total royalties | 8.91 | 18.11 | 7.13 | 5.72 | 5.82 | 5.88 |
| Source: Queensland government | ||||||
