After a fractious few days the WA Nationals, which is affiliated with the National Party but maintains a separate structure and identity, leader Terry Redmond yesterday stood aside for Royalties for Regions architect Brendon Grylls.

Grylls had previously led the party between 2005 and 2013 before standing aside for Redmond, who led the party to a poor showing in the 2016 federal election.

He moved on Redmond on Friday with a headline-grabbing move heading into the leadership spill talking up changes to the iron ore and gas regimes, a high risk strategy that some expect will resonate with voters who are wondering why state debt is exploding beyond $30 billion and where the proceeds of the resource boom have gone.

Yet while Grylls' iron ore plans have been laid bare, his plan to expand WA's gas reservation scheme is more nebulous - and no one can tell Energy News exactly what it entails.

In terms of iron ore, Grylls wants to go back to the 60-year-old state agreements that underpin production from BHP Billiton and Rio Tinto and boost the royalty paid from 25c per tonne to $5/t.

He says the changes to the mining tax alone would help reduce debt by raising $1.5 billion a year, or $7.2 billion across the forward estimates, helping return the budget to surplus.

But he is open to scrapping that plan if the big resource companies dig deep and lobby Canberra, as they did in the 2010 anti- Resource Super Profits Tax battle.

He wants to see an increase in WA's take of the GST, up from a return of around 30c in the dollar last year to a floor of around 70c, although that would require all the other states getting on board.

Energy News has thus far been unable to speak with anyone at WA Nationals with an understanding of the new domestic gas policy that the junior coalition partner wants to bring to the table and could use as a bargaining chip if WA Nationals secure the balance of power at the 2017 state election.

Oil and gas companies were less involved in the vociferous ‘axe the tax' shouting in 2010, so it is little wonder the gas grab plans are more nebulous.

Energy News understands Grylls wants to expand the Carpenter government's policy beyond a requirement that 15% of the gas from offshore fields be made available to the domestic gas market, a policy the Barnett government has maintained since coming to power, by specifying when gas comes to market after a field is developed.

WA is about to see the Waitsia field come online in the northern Perth Basin, and has a number of developing unconventional resources in the Canning and Perth Basins, but they are some time off being delivered and face technical hurdles.

Grylls wants to help accelerate developments of new domgas projects, at least as far as the state is able, and his plans have the backing of the Domgas Alliance, which represents the state's major gas buyers.

Domgas Alliance

Domgas Alliance executive director Matt Brown confirmed the alliance has held preliminary discussions with Grylls on the domestic gas reservation policy, but he told Energy News he had not seen a final policy beyond some broad brush objectives.

Brown said domestic gas supply would be a significant issue in the lead‐up to the 2017 state election.

"If we want to grow our industrial base and create more jobs then we need to ensure we have a secure and affordable supply of natural gas," Brown said.

"The Western Australian community simply cannot understand how a state with vast resources of natural gas cannot deliver secure and affordable supply to its own local industry and local jobs.

"We need only to look to the United States where abundant gas supplies have led to an economic and industrial renaissance."

APPEA

The Australian Petroleum Production and Exploration Association told Energy News that it was still trying to understand Grylls' proposals, but that it preferred free market solutions to any WA gas shortage than intervention.

APPEA chief operating officer - Western Australia Stedman Ellis said plans to expand gas reservation would destroy jobs and investment in regional communities, undermine the state's finances and reduce the volume of gas available for local use.

"The only change that should be contemplated is the complete removal of the policy," Ellis said.

APPEA has long argued that reservation is effectively a tax on gas production as it undermines energy security by discouraging the investment needed to increase gas supply and put downward pressure on prices.

"Gas producers are already struggling with low commodity prices. Imposing further costs on gas operations would undermine their international competitiveness and raise serious sovereign risk questions for the state," Ellis said.

Ellis urged the WA Nationals to focus on policies that encourage investment in gas production.

"Any move to expand the existing reservation policy by imposing further restrictions on gas exports would be extremely irresponsible," he said.

"Forcing more gas into an already over-supplied domestic market in WA will also undermine investment in the onshore gas industry, which pays royalties directly to the State Government.

"This would actually mean less money to repair the state budget and less money for the National Party's Royalties for Regions program.

"It is akin to killing the goose that lays the golden eggs."

APPEA pointed to the recent reviews by the ACCC and the Productivity Commission into the east coast gas markets, warning the economic costs of reservation far outweigh any perceived benefits."

Domgas sellers

A Chevron spokesperson told Energy News that the company would "meet its domestic gas commitments and at full capacity, the Gorgon and Wheatstone projects could supply around 50% of current domgas supply in WA".

"Chevron has long-term domestic gas agreements with WA customers and continues to engage potential customers," the spokesperson said.

Woodside Petroleum, as operator for the North West Shelf Venture and a partner in the Wheatstone LNG development, said it remained interested in supplying gas into the local market, as evidenced by its new short-term gas supply deal between Synergy and Woodside.

"Woodside continues to seek out opportunities to market to new and existing customers on commercial terms and takes a portfolio approach to our domestic gas marketing," a spokesperson from the Perth-based oiler said.

Gas also provides around 22% of Australian electricity, and WA's gas market is separate from the east coast market. In the east, where gas shortages are also on the cards, it is claimed that most of it is being exported at prices lower than some Australians are paying.

So far WA Premier Colin Barnett has rejected Grylls' plans.