The Queensland Government has told miners to prepare for its "horror" budget that will be launched in September.
A major focus for the budget will be addressing the state's falling mining royalties income, as Queensland looks to increase revenues and save $4 billion, News.com.au reports.
An increase in the levels of mining royalties has been pointed to by QLD treasurer Tim Nicholls as a solution to its revenues shortfall.
"We are looking at a range of taxes… one of those recommended by the commission of audit, obviously out there, is royalties, the price we get paid for coal or gas pulled out of the ground. That is one area.
"It's likely that the royalty return to the state will be less than otherwise would have been anticipated," he said.
"We're going to have to make some decisions about it."
The news has not been welcomed by miners, and is unlikely to be welcomed by the Federal Government.
The Queensland Resources Council stated that increased costs to miners will damage the coal industry.
"What we have told the Queensland Government clearly and with the best interests of the state in mind is that in many cases, the Queensland coal industry is already globally uncompetitive.
"At current prices, most thermal coal mines in this state are either running at a loss or struggling to stay in the black. It is not a position unique to thermal because the contagion is spreading quickly among our premium coking coal operations.
"The reality is that most QRC coal members are well down the track of extensive cost reviews. Further job losses are a certainty. The bottom line in 2012 is that many Queensland coal producers are now generating cash losses."
QRC CEO Michael Roche added that "for some mines I fear it could be the tipping point".
The Federal Government has already butted heads with state governments over increases to mining royalties.
In the Mineral Resources Rent Tax the government says it will cover the costs of state royalty regimes, to ensure that miners do not get double hit with taxes, however it also threatened state governments not to raise royalty rates, adding that if states did then they put future federal funding at risk.
"As my colleagues Tim Nicholls and the Premier Campbell Newman are all too often reminding the people of Queensland, QLD deputy premier Jeff Seeney said, "this is going to be a horror budget".