The NSW government will increase coal royalties by 2.6 per cent from next year as part of a plan to ensure the state receives "a fair return" for its resources.
The new scheme will improve the budget's position by more than $2.7 billion over four years from 2024-25.
NSW Treasury figures show the Muswellbrook and Singleton local government areas contribute more than 50 per cent of the state's coal royalty revenue annually.
NSW coal royalties have not increased since 2009 and since then, international prices have surged, including in 2022 as a result of Russia's invasion of Ukraine.
"This is a fair outcome for the people of NSW. The old system is out of date. The market has moved on. That's why we are modernising the state's coal royalties," NSW Treasurer Daniel Mookhey said on Wednesday.
From July 1, 2024, the new rate for open-cut mining will be 10.8 per cent, while the rate for underground mining will be 9.8 per cent and the rate for deep underground mining will be 8.8 per cent. The rates are currently 8.2 per cent, 7.2 per cent and 6.2 per cent respectively.
A company spokesman reiterated the concerns following Wednesday's announcement.
"This will increase costs amid already rising inflationary pressures and at a time when the rest of the world is investing heavily in resource sector development," he said.
"We acknowledge the consultation undertaken with the industry by the NSW government, however the overall impact of this cost increase on top of other recent state and federal policy changes makes doing business harder and more uncertain."
Glencore, which is a partner in the Hunter Valley Operations project, said it was "very disappointed" that the government had decided to "significantly increase" coal royalties.
A spokeswoman said the company's coal business contributed $8.1 billion to the NSW economy and provided work for 6320 employees and contractors.
"We strongly believe that the state is already earning a fair return for its resources and that the coal industry's contribution to NSW economy goes way beyond royalties," she said.
"It is very important that the NSW government is not dismissive of the contribution of the coal sector to the state economy or the role our companies play in providing jobs, supporting communities and local businesses."
The NSW Minerals Council said in a statement that the increase in coal royalty rates would impose a significant additional impost on coal producers at a challenging time of lower coal prices and increased operating costs.
"The coal industry directly employs nearly 30,000 people in NSW and supports 180,000 indirect jobs. Nearly 7,000 NSW businesses are part of the mining supply chain. Coal remains NSW's most valuable export commodity by far and continues to deliver over 70 percent of electricity used in homes and businesses across NSW," it said.
"While realistic about the likelihood of an increase in royalty rates, the NSW Minerals Council and coal producers maintained throughout the NSW Government' consultation process that the current royalty structure and rates were appropriate for NSW, and should be retained."
Upper Hunter MP Dave Layzell said the royalty increase was an "outrageously lazy effort" to fund future budgets.
He cited government figures that showed NSW coal royalties between the 2015-16 and 2021-22 financial years totalled almost $12.5 billion.
"Premier Chris Minns and Treasurer Daniel Mookhey must now come clean with my electorate and NSW regional mining communities on the future for the former Nationals and Liberals Government's Resources for Regions program," he said.
"Unless I am mistaken, the change to improve the state's budget position by more than $2.7 billion over the four years to 2028, is simply about grabbing low hanging fruit to beef-up consolidated revenue.
But the director of the public interest think tank Climate Energy Finance Tim Buckley described the move as "politically courageous".
"The government said it would use the extra revenue to provide cost-of-living relief and to rebuild essential services, including housing supply, filling 1112 nursing positions, out-of-home care for state wards and foster children, and ensuring there are enough teachers in schools," he said.
The think tank had been advocating for the introduction of a progressive coal royalty scheme, similar to what has been introduced in Queensland.
The scheme delivered a one-off boost to the budget of more than $10billion, which enabled the government to apply a $550 electricity bill rebate for all households. The rebate was more than any other state in Australia and offsetting the fossil fuel-driven energy price crisis.
"CEF prefers the Queensland government's progressive royalty approach, given it only applies in full less than once a decade or or even more infrequently, at times of coal export sector super-profits, but an increased share is definitely a good start. A flat royalty impacts coal mine viability in periods of low prices and pressured profitability," Mr Buckley said.
NSW Greens treasury and energy spokeswoman Abigail Boyd described the royalty increase as "an insult".
"A 2.6% increase to coal royalties, with a 12 month delay, is an insult and shows just how cosy with, or fearful of, the fossil fuel industry this NSW Labor government is," she said.
"The Greens have been calling for an increased and progressive coal royalty structure that would bring in increased revenue similar to that enjoyed by Queensland. $2.7 billion over four years isn't nothing, but it leaves far too much on the table.
"Whitehaven Coal just announced a 37% increase on post tax profits, Glencore 60%. Across the board, these massive coal companies have delivered eye-watering profits, gouging consumers with inflated coal prices.
IN THE NEWS:
Sign up for our newsletter to stay up to date.