The Council of Australian Governments (COAG) may have to step in and help resolve the rising tension between the country's biggest resources firms, the governments of Queensland and Western Australia and the federal authorities over the controversial mineral resources rent tax.

BHP Billiton, Rio Tinto and Xstrata are insistent that state royalty taxes should be credited back on their MRRT dues but Prime Minister Julia Gillard appears adamant that the national coffers would not shoulder million-dollar tax refunds.

Instead, Ms Gillard and her cabinet pointed to state authorities as the end point of the miners' gripes since they would determine the royalty tax policies of their respective governments, meaning the level of royalties set to be paid by giant mining firms solely depend on state governments' predilections.

On their part, both Queensland and Western Australia, where much of the country's mining activities are concentrated, have earlier affirmed that state royalties to be imposed on miners would be lifted in accordance with their perceived economic interests.

WA Premier Colin Barnett declared on Monday that he would exercise the right of his state to determine state royalties and would shun any form of federal intervention while Queensland Premier Anna Bligh suggested that the latest tax row is largely the fault of the federal government.

Ms Bligh told The Australian that is was her understanding that the tax deal struck by Ms Gillard with the country's major miners embraces all forms of royalty taxes and federal authorities are bound by obligation to honour that agreement.

In an attempt to put an end to the issue, Federal Treasurer Wayne Swan floated the idea that COAG may intervene in light of its supposed federal impact, which is reportedly being considered by Ms Gillard.

Another suggestion, according to The Australian, delved on the possibility that states' GST receipts would be slashed to effectively cancel out the effects of surging royalties being implemented by state governments.

These suggestions came out amidst brewing indications that mining companies are gearing up for another word war with federal authorities and are dead-set on utilising advertising campaign to win the support of the Australian public and eventually pressure the government to dump the MRRT.