PERTH (miningweekly.com) – Diversified miner Glencore has urged the New South Wales government to undertake "genuine two-way consultation" with the coal sector before any major policy changes.

The state government last week said it was “considering all options” as the state’s temporary coal cap is set to expire at the start of July 2024.

In December last year, the New South Wales government imposed domestic coal reservation and price cap orders on a number of New South Wales producers which have historically supplied coal to the domestic energy market to offer at least 18.6-million tonnes into the domestic market. These orders are to apply from April 1, 2023 to June 30, 2024 and are designed not to impact existing coal supply agreements.

The state government’s move followed on from the federal government introducing a 12-month price ceiling on domestic coal of A$125/t in New South Wales and Queensland in a bid to bring down domestic energy prices.

The Queensland government last week said that it had started formal consultation with the coal industry, and was inviting input in reviewing the impacts of the coal market price emergency directions on both the industry and the electricity market, understanding the likely impact on domestic coal prices and electricity prices when the temporary cap ends, considering alternative policy options necessary to minimise the impacts on electricity bills, and understanding the effects of a possible new coal royalty rate system, or adjusting the existing royalty rates in order to respond to market conditions.

“We will be engaging closely with the mining industry as we consider how to best provide relief to families and households from increasing electricity prices,” Finance and Natural Resources Minister Courtney Houssos said.

“We are committed to a clean energy future, but we understand the important role coal plays today in our energy mix and for our state's economy. We will form a considered view on these issues and are committed to ensuring the ongoing stability of the New South Wales mining sector."

Glencore on Wednesday pointed out that coal was one of the State’s most important sectors, which has consistently delivered for the people of New South Wales in terms of jobs, royalties, investment and energy security with coal continuing to deliver about 70% of the state’s electricity. 

“The coal price cap is very poor public policy and shows that flawed market interventions by government pose serious domestic and international reputational risks. 

“Prior to the introduction of the coal price cap, we asked to see the previous New South Wales government’s modelling that would show a benefit to the electricity consumer. None was provided and the coal price cap has failed to provide a benefit to anyone other than the electricity generators,” Glencore said.

“Electricity prices are driven by supply and demand. To lower the cost of electricity while also increasing the share of renewable energy, government needs a pragmatic approach which protects the security of the current electricity supply while also encouraging additional supply.

“The New South Wales Budget is already benefiting from increased coal royalties with mineral royalties lifting by more than 50% to A$5.5-billion in 2022/23.  These royalties contribute to funding New South Wales hospitals, schools, infrastructure projects and essential services.    

“The key risk to continued coal production, and government royalties, is the increasing difficulty in securing project approvals from federal and state governments. Without continued coal production, the discussion on coal royalties may become a moot point.”

Glencore warned that drastic changes to the royalty regime for a revenue grab, such as the Queensland government, would put investment and associated jobs at risk across the Hunter region, at a time when the region was already under pressure.

“It’s important that the New South Wales coal sector and the contribution of the thousands of coal mine workers are not taken for granted,” the miner added.