For marron and prime lamb producer Richard Hughes, a peat bog at the bottom of his picturesque valley in WA's South Coast forest region used to be a liability — but now it is considered "black gold".

It is the secret ingredient behind Australia's champion single malt whisky.

"I used to lose sheep and the odd cow in there because they'd fall into [the peat bog] and couldn't get out and personally I ended up in there once, about waist deep, and was a little concerned for my own safety," Mr Hughes said.

"That's how I probably discovered the amount of peat and the depth of peat here."

What is peat? It's an accumulation of partially decayed vegetation or organic matter that forms in wetland conditions

It's an accumulation of partially decayed vegetation or organic matter that forms in wetland conditions Peat, which forms more commonly in conditions found in the Northern Hemisphere, is harvested as source of fuel in some parts of the world

Peat, which forms more commonly in conditions found in the Northern Hemisphere, is harvested as source of fuel in some parts of the world In whisky production, peat fires are sometimes used to dry malted barley. The spirit's level of smokiness is then based on the amount of time the grain is exposed to the pungent peat smoke during drying Source: peatsociety.org and whisky.com

Mr Hughes started selling the peat to home gardeners about three years ago — but when Albany-based distiller Cameron Syme visited the farm, near Walpole, a decade-long search was over.

Mr Syme had been hunting further east for peat to smoke the barley that goes into his craft single malt and mixed grain whiskies.

He said the peat at Mr Hughes' farm provided a unique Australian flavour because of its botanical composition — and it has been a key ingredient in why his Limeburners single malt whisky has been judged the nation's finest at the Australian Distilled Spirits Awards for the past two years.

"There are uniquely Australian plants here, so as this smokes, the flavours that come off it will be nothing like Scottish or Irish peat at all," Mr Syme said.

"To be able to have access to a peat bog here, which is millennia old, that produces something from this region that is unique from this region, I think just stays into that terroir and the provenance."

Cameron Syme's Limeburners distillery has been operating for 12 years. ( ABC News: Sean Murphy )

Defending the title at the Australian Distilled Spirits Awards

Mr Syme's Great Southern Distillery at Albany will also defend its title as the Australia's best distillery at the national industry awards in Melbourne next week.

Mr Syme said the industry had come a long way since he started his company 12 years ago, when there were only four other craft whisky producers and about a dozen more distilleries making other spirits like gin, vodka, and rum.

"There's now 90-odd distilleries in the country so it's been a boom time for craft distilleries," he said.

Cameron Syme's whisky has won multiple awards — and will again seek to take the title of Australia's best. ( ABC News: Sean Murphy )

"From my point of view, a number of my colleagues are also doing great things, so whether we win or not — whoever wins — I'm sure is going to be well and truly the best whisky in the country for the year or the champion distiller."

In the past year Great Southern has expanded to Margaret River and the Porongurups, north of Albany.

Mr Syme said the Margaret River distillery would focus on producing white spirits and a regional brandy.

"We're collaborating with local winemakers to try and find some of the very top wines over there and then put them into brandy," he said.

"I think it's a key thing — Margaret River to me is really Australia's premier wine region and I think the Great Southern is another one of them, so if we can source very top quality wine from those regions we'll be able to make top quality brandy out of it."

The Porongurup distillery would produce mixed grain or bourbon style whisky, Mr Syme said, and he was hoping to also develop a malting plant to cut costs and take advantage of the region's abundant grain production.

"We'd like to start to work in collaboration with farmers where we know we can get paddock-to-bottle provenance and we can really provide value back to them," he said.

"It goes from, say, $350 a tonne [at] farm gate to $1,100 to $3,000 a tonne after it's malted, so if we can do that within the Porongurups we can offer those farmers some added value for them.

"Plus, we're also going to be providing another export commodity out of the region."