The people of Australia collectively own all the resources under the ground. This means that the coal in NSW is the property of the Australian people too.

Because of this, mining companies have to pay the NSW Government a “royalty” if they want to dig up and sell coal.

Royalties are not taxes. They are a payment for a resource. Just like a builder has to pay for the bricks used to make a house and pay tax when they sell the house, mining companies have to pay royalties for coal and then pay tax once they sell it.

If NSW were a country, it would be the third-largest exporter of coal in the world, smaller only than Queensland and Indonesia. With all that coal production, the mining industry and politicians frequently claim that coal royalties are large enough pay for services like schools, hospitals, teachers and nurses.

Here’s one quote from former NSW Deputy Premier John Barilaro:

“[Coal] is the state’s largest export commodity, and is a major source of revenue, which the NSW Government uses to help fund essential services and infrastructure such as schools, hospitals, roads and transport.”

But do royalties really fund all these things?

The short answer is no.

How big are royalties?

In 2022-23, coal royalties were only 4.2% of total NSW Government revenue: about $4.5 billion. That figure was unusually high because global coal prices went up after Russia’s invasion of Ukraine.

From 2013-14 to 2022-23, royalties averaged just 2.4% of government revenue: between $1 and $2 billion.

For comparison, the NSW coal industry exported almost $60 billion of coal in 2022-23.

What’s more, those royalties don’t fund specific programs or services, like schoolteachers or nurses: they’re just lumped with the rest of government revenue. That means they fund on average only 2.4% of any schoolteacher or nurse.

Funding the regions?

The NSW Government also likes to claim that coal royalties are funding specific coal-producing regions, like the Hunter Valley. This is just spin.

NSW has a fund called Royalties for Rejuvenation, which supposedly takes a cut of coal royalties and reinvests it in coal-producing regions.

But here’s the kicker. Not a single dollar has been spent yet.

The government’s simply been putting money into the fund, but it’s all locked up until 2028-29. And the fund is only worth $78 million — less than a quarter of the cost of one recent new regional hospital.

Now the NSW Government wants to establish a new fund called the Future Jobs and Investment Fund, but it doesn’t look like it’ll be getting much more money than the current fund.

The costs of coal

And if that wasn’t enough, the public also has to put up with all the costs of coal.

Coal mining has significant health costs: air pollution causes lung and heart diseases for nearby communities.

Rehabilitating coal mines once they close is also very expensive. Even though mining companies are supposed to pay for rehabilitation, the costs often fall on the taxpayer. The Australia Institute has estimated that filling in the giant holes left behind by open cut coal mines in the Upper Hunter region would cost between $12 and $25 billion. For comparison, the NSW Government only holds about $4 billion in bonds to pay for this rehabilitation.

And of course, there are the costs of climate damage from greenhouse gas emissions. The three new coal mine expansions in NSW approved in September are expected to cause lifetime emissions of 1.357 billion tonnes. That’s equivalent to about three times Australia’s total annual emissions. Even though most of this coal will be burned overseas, the emissions will still end up in the same atmosphere as Australia, so the effect is as if the coal were burned in NSW.

To sum up, NSW produces a lot of coal, but the public — who owns the coal — gets hardly anything from it. Meanwhile, coal companies reap enormous profits.

Remember this spin the next time you hear the coal industry or government telling you coal pays for your schools and hospitals.