The Western Australia Department for Regional Development describes the Royalties for Regions program (RfR) as the means to support the State Government's promise to develop its regional areas into “strong and vibrant regional communities that are desirable places to live, work and invest”.
The department’s website states, “since December 2008, Royalties for Regions has invested $6.1 billion of the State's mining and onshore petroleum royalties to more than 3,600 projects and programs, including transfers to the Future Fund and other Special Purpose Accounts”.
If the Liberals win the election, they plan to take $800 million in funds from the lucrative scheme to pay for recurrent costs of regional services, such as water and buses which currently come out of the consolidated account in 2018/19 and 2019/20.
The WA Treasurer says the Liberals would maintain $1 billion a year for the program, and the cuts would see some money redirected towards infrastructure operating costs and Indigenous communities, where funding utilities is costly.
"There's an increasing liability to fund utilities in Aboriginal communities," he told ABC radio.
"We're going to use Royalties for Regions - these are Aboriginal communities in regional rural Western Australia ... to fund that."
However, Premier Colin Barnett has insisted the fund would "remain intact" and all of it would go into regional WA, but adjustments would be made to pay for operating costs of new facilities built under the program like sporting and community centres.
He said people in the regions had told him they couldn't afford to staff or maintain such major assets and didn't need more but wanted other things like road upgrades.
"It has for eight years been incredibly successful, but the project now has got to, I guess, a maturity stage," Mr Barnett told reporters on Thursday.
"We will continue to put hundreds and hundreds of millions of dollars of additional funds into the regional areas, but I'm listening to people in country areas.
"We're just going to run it in a slightly different way."
WA Nationals leader Brendon Grylls said Labor had been warning for weeks that the Liberals were committed to changing Royalties for Regions and that was confirmed "at 10 minutes to midnight".
The relationship has been tense for some time, particularly after the Nationals opposed the sale of Fremantle Port, and Mr Grylls now says attacking his prized brainchild is the "final betrayal".
"It beggars belief," he told 6PR radio.
"It will make for a very tense conversation should we be in a position to form government after the election."
Mr Grylls said the parties couldn't form government again, "not if the RfR program is going to be dealt with in the way that they've said".
The plan would cost the Liberal party votes in regional WA, he added.
Mr Barnett said he would invite the Nationals to form government "but we are the major party and we will set the agenda".
Implementing the Royalties for Regions scheme was Mr Grylls' condition to back the Barnett government after the 2008 election and form a coalition, earning him the title "kingmaker".
Earlier on Thursday, Mr Barnett told the broadcaster it was Mr Grylls' call if he went ahead with his threat to quit the frontbench over the issue.
The Nationals and Liberals are also at odds over Mr Grylls' central policy for the current election, to increase an iron ore charge paid by BHP Billiton and Rio Tinto by 20-fold.