A year and a half ago, WA’s domestic gas policy was being lauded as the solution to the eastern states' energy woes.

Now, a parliamentary inquiry has found it is no longer fit for purpose and suggested government intervention may be necessary to prevent shortfalls that "threaten thousands of WA jobs [and] jeopardise billions of dollars’ worth of economic activity".

During the energy crisis in the eastern states in 2022, the policy was hailed as a masterstroke by helping keep supplies high and prices low.

But there have been warnings of parallels between WA and the eastern states recently as prices have risen in the West as well, prompting calls for a rethink.

The inquiry's interim report, tabled in state parliament this morning, says the current policy is unlikely to mitigate gas shortfalls, which it warns could threaten thousands of jobs and jeopardise billions of dollars of economic activity.

Chair of the committee conducting the inquiry, Peter Tinley, said gas producers were providing, on average, 8 per cent of their gas reserves to the domestic market – about half of what they were required to.

He said there was no evidence there would not be enough gas to keep the lights on in coming years, but that shortages could affect industries like fertiliser production that relied on natural gas.

"There is a choice here. The industry can lead itself out of this and help the people of Western Australia, or the government can step in and use a range of things, which include potentially legislation," Mr Tinley told ABC Radio Perth.

"There are other methods that they can use and it’s not up to me to say which one’s better over another."

He said part of the issue was the "policy" was not enshrined in one place, but in different state agreements for individual projects – ranging from the Pluto LNG development in 2006 when "everybody was sort of making it up", to more modern forms.

The committees's report found that had led to a lack of consistency, transparency and accountability with "considerable variation" between producers, resulting in some acting "seemingly without regard to either the spirit of the … policy or their social contract with the Western Australian community".

Mr Tinley later told parliament a common problem across the agreements was the requirement for the 15 per cent of reserved gas to be offered to the WA market was made in "good faith".

"How hard did they try? Who's checking on their methodology for their marketing and who is holding the compliance stick, if you like, to ensure they are doing it in good faith?" he said.

'Not an acceptable state of affairs'

There was "significant evidence", Mr Tinley said, of "various potential buyers of gas who wanted to do a contract but couldn't get the terms" they wanted.

"There needs to be a separate process by which that is tested and some way in finding that those people that are really quite frankly not living by the spirit of the policy and actually being a little bit too tricky," he said.

Fellow Labor MP David Scaife was more pointed in his criticisms of some gas producers who he said were not honouring their commitments.

"Some are doing so by relying on the ambiguous language to enshrine the policy in the various piecemeal agreements," he told parliament.

"Some are doing so by relying on the limited enforcement options available to the state, and some are doing so simply because the profits to be made from LNG exports justify the risk of suffering the costs of non-compliance.

"That is not an acceptable state of affairs."