Western Australia is the latest state to loosen its onshore fracking ban, but is lifting its oil and gas royalty at the same time.

The government says it will open 2 per cent of the state up to fracking — the areas already covered by existing exploration and production licences.

“Banning fracking on existing petroleum titles after the scientific inquiry found the risk from fracking is low, would undermine Western Australia’s reputation as a safe place to invest and do business,” said WA premier Mark McGowan.

“At the same time, it is crucial that the industry demonstrates that it has the support of landowners who, for the first time, will be able to say yes or no to any fracking production on their land.”

Fracking, or hydraulic fracturing, is a method of extracting oil and gas from small fissures underground.

A high pressure mixture of soapy liquid and sand is flushed down a well to crack open pores in rock and allow the gas or liquid to escape.

In May, the Northern Territory loosened its ban — with conditions — after an inquiry found that risks were minimal. Victoria and NSW maintain their absolute moratoriums.

The companies this could affect include Buru Energy (ASX:BRU) and Rey Resources (ASX:REY).

Buru says the inquiry conclusions “mirror every other scientific inquiry that has been conducted in Australia”.

The company has found unconventional gas in the Canning Basin and fracked three wells, but was prevented from further work by the moratorium.

Buru tartly noted the state government’s commitment to a transparent, risk-managed industry, saying “we also note that Buru Energy is already operating in a manner that generally meets or exceeds these proposed regulatory changes”.

The loosening of the ban comes with new restrictions and fees.

Royalties on unconventional oil and gas will rise to 10 per cent, matching that on conventional production.

Traditional owners and farmers will be able to refuse applications to operate on their land.

The ban will remain in Perth, Peel, the southwest of the state, the Dampier Peninsula in the Kimberley, and near drinking water sources.

The government says any royalties it receives from unconventional oil and gas production will go into a Clean Energy Future Fund.

The state said a 12-month inquiry by Environmental Protection Authority chairperson Dr Tom Hatton made 44 recommendations, including creating a code of practice and banning fracking within 2km of towns or settlements.

Mines and Petroleum minister Bill Johnston said the report demonstrated that the risks associated with fracking are minimal.