"NSW Labor is not proposing to alter mining royalties," a government spokesperson said yesterday afternoon.

The Labor pledge comes after Treasurer and Energy Minister Matt Kean said on Tuesday that royalties would remain as they were.

The potential for NSW to follow Queensland in lifting the coal royalty rate had become part of the battle between the coal industry and government over domestic electricity prices.

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In December the federal government capped the price of domestic coal at $125 a tonne and the state government passed related "directions" forcing export mines to supply domestic power stations.

Last June, the Palaszczuk government added rates of 20, 30 and 40 per cent to its existing 15 per cent top rate, lifting the likely take from $1.7 billion in 2020-21 to $7.3 billion in 2021-22 and $5.5 billion this financial year.

NSW rates of 6.2, 7.2 and 8.2 per cent brought in $3.6 billion last year, and a mid-year update is expected to lift this year's total well beyond the $4 billion predicted at the budget.

Environmentalists have pushed for higher coal royalty rates, and Mr Kean accused the industry this week of war profiteering.

NSW Minerals Council CEO Stephen Galilee welcomed the Labor move, with the March election just eight weeks away.

"Existing coal royalty rates have delivered billions of dollars in revenue for the people of NSW in recent years, with record royalty payments this year, and billions more forecast for the future," Mr Galilee said.

"Ruling out further royalty rate increases provides certainty for coal producers grappling with the burden of the coal price cap. These commitments will be welcomed by mining families and communities."

The intervention in the coal market has drawn attention from Australia's export customers, including our longstanding biggest buyer, Japan.

The Japanese consulate has confirmed writing to the NSW government conveying the concerns of Japanese power companies, saying they feared the moves could exacerbate shortages in a nation heavily dependent on Australian coal.

Since the early 1960s when the modern export industry began, Japan has traditionally paid the highest price for Australian coal to help guarantee security of supply.

A number of Japanese companies have small stakes in mines, but some, including Idemitsu - with Muswellbrook, Boggabri and Ensham in Queensland - have majority or outright ownership.

Idemitsu Australia CEO Steve Kovac yesterday described the coal reservation scheme as "a triple threat".

Mr Kovac said redirecting export coal to domestic use impacted on long-term supply contracts with international customers, affected Australia's reputation as a stable and reliable exporter and threatened future investment as "sovereign risk and fiscal instability grows".

He said there were "simpler ways" for the government to achieve its aims.

"It is inconceivable that the NSW government would direct our business to supply lower-quality coal, which we do not produce, to the NSW power stations to comply with their requirements " Mr Kovac said.

"This will result in a substantial financial loss as we would be forced to purchase lower-quality coal from other producers or traders to supply to the power stations. This makes no sense."

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