BHP’s plans to pause investment in Queensland due to recent increases in State Government royalty taxes is just the tip of the coal mountain, according to the Queensland Resources Council (QRC).
Chief executive Ian Macfarlane said the decision was no surprise to the industry.
In its preliminary final report, BHP said that after considering a number of factors including the royalty hike, which he said was “quite sudden”, the end of operations at the BHP Mitsubishi Alliance (BMA) sites could be “earlier than previously anticipated”.
The company, operating in Central Queensland, is largest coal producer in Australia, and is a joint venture with BHP and Mitsubishi each owning 50 per cent.
“It didn’t involve any engagement with industry which has been a significant increase in the sovereign risk associated with Queensland, which has caused us to say we really can’t deploy further capital into that business for the time being and we’ll go back and reassess what the plans for the business are going forward,” BHP chief executive officer Mike Henry told the ABC.
Macfarlane said the Queensland Government’s decision to lift the rates to the highest in the world – without consultation and behind closed doors – was a huge blow to the sector and has harmed Queensland’s international reputation as a safe place to invest in resources projects.
“This decision to halt investment in Queensland for the foreseeable future and reassess its plans for the business going forward is typical of what we warned the Queensland Treasurer would happen since he unilaterally decided to add three new tax tiers to the coal royalty system in the May budget,” he said.
“This is not an isolated case – coal companies, large and small, are saying to us they’re going to have to put a hold on investments for now and see what happens with the State Government around royalties.”
Macfarlane said there was no need for the government to impose a ‘super tax’ on coal because Queenslanders were already benefiting from higher coal prices under the previous royalty regime.
“As commodity prices go up, so do royalties – that’s how the system worked,” he said.
“The State Government has effectively killed Queensland’s golden goose – the resources sector – and put at risk the economic and employment future of Queensland.
“As an export industry, resources companies have to navigate the highs and lows of the international commodity price cycle, so ripping billions out of our sector when prices are high doesn’t allow companies to ride out the tough times when prices inevitably fall again.”
The QRC compiled the following statements from various companies in response to the royalty hikes:
Coronado Global Resources
“We continue to pay our share of royalties, corporate tax, payroll tax, land tax, tenement rentals, and financial provisioning scheme deposits. Companies will always consider investment decisions on a case-by-case basis, and the imposition of additional royalties on Queensland business puts it at a competitive disadvantage to lower cost jurisdictions within Australia and overseas.”
Bowen Coking Coal executive chairman Nick Jorss
“This tax grab will permanently bake in Queensland as the regime with the highest royalties in the world, ostensibly to solve a near-term Government funding issue. This raises substantial risks to further investment in Queensland mining and regional Queensland jobs. I believe it is important that the Government now sits down with the industry to try and find a workable and equitable solution.”
BHP President Minerals Australia Edgar Basto
“We are deeply concerned about the negative impact this new tax will have on production, jobs and the communities of Central Queensland. The cost of doing business in Queensland is already high, and further cost pressures will discourage investment, operational growth, job creation and local business spending across the state.”
Bravus Mining and Resources
“This latest Queensland Government cash grab from the resources sector not only threatens the livelihoods of hard-working regional Queenslanders, but also the future and prosperity of communities like Townsville, Rockhampton, Clermont, Moranbah, Emerald and Mackay. It beggars belief that once again regional Queenslanders are being fleeced to plug Labor’s budget black hole in Brisbane.”
Anglo American acting CEO of Anglo American in Australia, Nick Barlow
“Queensland’s coal royalty rates were already amongst the highest in the world. This new tax is inconceivable, and it will place a heavy burden on our sector and Queensland mining regions. Our steelmaking coal business in Australia competes for capital against other options within our global diversified mining portfolio, and the new extraordinary progressive tax tiers will hurt the business case for new investment.”