Opinion: WA's gas reservation policy third age

Did you know WA's gas reservation policy is responsible for producing fertilisers, industrial chemicals, ammonia, civil explosives, titanium dioxide for pigments, alumina, magnetite, cement and lithium hydroxide?

Well, it is.

And the policy will soon lead to the production of a range of critical minerals that will be used in the energy transition globally.

Without WA's gas reservation policy none of this would have been possible. The policy has been in place in various forms since the late 1970s when gas was discovered in waters off the coast of north west Australia in large quantities, and state governments mandated that a portion of that gas should be reserved for domestic use to underpin our industrial development.

Thanks to the foresight of Premiers Charles Court and Alan Carpenter in particular, WA now has more than 400,000 jobs that are possible because of good energy policy. Since the early days it has been a bipartisan policy – with good reason.

Recently, the Economics and Industry Standing Committee of WA's Legislative Assembly carried out a review of the policy and made 77 findings and 30 recommendations. Essentially these recommendations are designed to make the policy future proof and ensure we have several more decades of secure, affordable gas supply to underpin those jobs and develop new ones in a range of emerging industries.

There is no doubt that while the policy has been good for WA, it lacks compliance measures to ensure that gas is supplied to the domestic market not just when it is convenient for the LNG producers, but when the market needs it.

The Committee made some very good recommendations to improve accountability and transparency, but also went a step further and suggested reforms to improve the market itself such as by introducing a long-term trading market, as well as highlighting the importance of gas storage going forward.

The Committee was in no doubt that in order to keep our gas supply secure for the future, new gas fields needed to be developed – both offshore and onshore.

All the research that the Committee looked at from AEMO and other experts indicated WA would need gas for decades to come, not in spite of the global energy transition, but in order for WA itself to decarbonise.

In the short term, we will need an increase in gas supply to displace coal as a power source, which will produce a dramatic reduction in CO2 emissions and will be essential to provide back-up to renewable energy entering the grid.

But the majority of gas used in WA, as indicated above, is used as industrial feedstock – to make products that are traded globally and that underpin our economic well-being. For the foreseeable future, there are no commercially available substitutes to natural gas as feedstock.

To keep the policy working into the future, it needs a range of reforms including compliance measures, some standardisation of obligations, improvements to the gas market to make it more transparent and responsive, and measures to underpin the rapid development of new gas fields.

One area where new gas can be developed quickly is from Retention Leases, particularly those sitting in the Carnarvon Basin within reasonably close proximity to existing infrastructure – both offshore and onshore facilities.

The Committee's recommendations on Retention Leases – to move to a more "use it or lose it" policy - aligns closely with the Federal Government's Future Gas Strategy. It is pleasing the two governments are now working together to tighten this area of policy to make sure those fields under Retention Leases are developed as soon as commercially viable, or if not, then they should be returned to the pool so that other businesses can exploit them.

There are also gas fields in the Perth Basin in the development stages which need to be brought to market as soon as possible. It makes sense for the Perth Basin resources to be retained for domestic use, given their proximity to existing infrastructure and to the major gas using industries in WA. The Committee rightly recommended that no export permits should be granted while there is domestic gas shortfall, and then only granted when there the domestic market is expected to be well supplied for a period of time.

The Committee's report and the government's response to it – expected soon – marks an important milestone in the history of this critical policy for West Australians. If the government adopts the bulk of recommendations, and it should, then WA will be well placed to continue its economic development, providing good quality jobs to future generations, and importantly, to support our decarbonisation path.

And perhaps Premier Cook can add his name to the two illustrious predecessors by crafting the third stage of WA's much heralded domestic gas reservation policy.