The announcement to abolish flat rate royalties and replace it with a value system was announced in NSW Treasurer Michael Egan’s mini-budget last week. The revelation has since been met by strong opposition from coal companies.

On Tuesday industry representatives met with the treasurer to negotiate a deal whereby industry would pay the $44 million the government initially said it would raise from the new scheme in 2004/05. NSW Minerals Council executive director John Tucker said the $44 million would be raised through the existing royalty scheme, perhaps through a surcharge on the flat rate.

In return, industry would work with government for the next six months to design and appropriate scheme and then implement it through the first half of 2005. Tucker said the scheme would most likely still be ad valorem, but at a workable level.

“The answer was no, as simple as that. The treasurer said this is about taxes, we don’t negotiate over taxes, we don’t have uncertainty, we just determine them and impose them,” said Tucker.

He added the treasurer said the government planned to raise more than $100 million from royalties, contrary to the initial estimate of $44 million put to the NSW parliament last week.

“In essence, they want to be able to raise that order of money even in the worst performing years and not just in the best ones,” he said.

“The point we have been stressing is on average return on investment, one or two good years do not make for a good, strong sustainable industry.”

Tucker said the industry was carrying out investigations looking at the coal industry’s historic profitability, to convince government if they were to implement the system at proposed levels, over the last 10 years the coal industry would have made a 4% return on investment.

“If we are right about 4% profitability, NSW is not going to be able to continue to be a place that attracts capital.”

He said the industry was considering its next steps.