Australasian Centre for Corporate Responsibility files landmark case against Santos in Federal Court

In an historic claim, the Australasian Centre for Corporate Responsibility (ACCR) will challenge Santos’ claims that natural gas provides “clean energy” and that it has a “credible and clear plan” to achieve “net zero” emissions by 2040 in the Federal Court of Australia.

This is the first court case in the world to challenge the veracity of a company’s net zero emissions  target, and a world-first test case in relation to the viability of carbon capture and storage (CCS) and  the environmental impacts of blue hydrogen.

Acting on behalf of ACCR, lawyers from the Environmental Defenders Office (EDO) will claim that  Santos is engaging in misleading or deceptive conduct in potential contravention of both corporate  and consumer law. ACCR will be represented in court by Noel Hutley SC, Sebastian Hartford-Davis and  Jerome Entwisle.

Some specific concerns raised by EDO on behalf of the ACCR include:

Clean Energy Representations

In its 2020 Annual Report, Santos made statements that the natural gas it produces is  a “clean fuel” and provides “clean energy”;

ACCR claims these statements convey that the extraction of fossil gas, and the end use of that gas, does not have a material adverse effect on the environment;

ACCR alleges that the report failed to disclose:

• that the extraction and processing of fossil gas, including by Santos, involves  the release of significant quantities of carbon dioxide (CO2) and methane (CH4)  into the atmosphere;
• that the end-use of natural gas releases material amounts of CO2 into the  atmosphere;
• that there are alternative energy sources presently available, which Santos does  not produce or intend to produce, that do not release any or any material  greenhouse gas emissions.

Net Zero Representations

In its 2020 Annual Report, Santos made statements that it had a “clear and credible” plan to achieve “net zero” scope 1 and 2 greenhouse gas emissions by 2040. A large amount of this  reduction is anticipated to come from future CCS processes and blue hydrogen.

ACCR claims these statements are potentially misleading because:

• Santos has firm plans to increase its greenhouse gas emissions through the  expansion of its natural gas operations, and has not yet decided whether to proceed  with its net zero plans; and
• Santos’ net zero plans depend upon a range of undisclosed qualifications and  assumptions about CCS processes.

In light of these matters, the EDO, acting on behalf of ACCR, has commenced proceedings in the Federal Court of Australia seeking to resolve the issues in dispute.

Commenting on the Federal Court proceedings, Dan Gocher, Director of Climate and Environment, said:

“Santos’ audacious ‘clean energy’ and ‘net zero’ claims must be challenged in a court of law.

“Santos has perfected the art of greenwashing, and shareholders continue to be misled by Santos’ clean energy claims.

“Santos’ ‘clean energy’ and ‘net zero’ claims pose a major risk to investors as it becomes  increasingly more difficult to differentiate between companies taking genuine action versus those relying largely on offsets or unproven technologies.

“More than 80% of Santos’ net zero plan relies on carbon capture and storage (CCS). The promise of CCS technology has been used by the fossil fuel sector to justify business as usual for decades.

“Whilst Santos claims it will produce zero emissions hydrogen, recent research has highlighted the carbon intensity of blue hydrogen production, demonstrating that CCS is not a cure-all for the emissions associated with hydrogen produced with fossil gas.

“To date the majority of CCS projects have failed. The technology is expensive and unreliable. As  demonstrated by the Gorgon CCS project, even operating projects struggle to meet CO2 capture  targets.

“Santos is planning to increase production by more than a third by 2025-26, which will come at the expense of emissions reductions in the critical decade to 2030.

“Santos has provided no detail on the completeness and permanence of CO2 capture at Moomba, along with how it will manage long term leakage risk.

“Santos has previously made multiple statements around its intention to use injected CO2 for  enhanced oil recovery (EOR) in the Cooper Basin, which is known to have high CO2 leakage rates. The exact role of EOR in Santos’ strategy must be disclosed to investors.”

Elaine Johnson, EDO Director of Legal Strategy said:

“Our client is taking this action to ensure Santos and other gas companies are held to account for the claims they make about their product and its future in a highly carbon-constrained global economy.

“There are serious questions about the future of the gas industry in the face of the global energy transition. The gas industry has a legal responsibility to be upfront with investors about that.

“Given the seriousness of the risks of continued fossil fuel use, gas companies must be completely transparent about their future planning. Plans should be robust, detailed and open to scrutiny.

"Instead we see ‘net zero’ plans that contain very little detail and which are often contingent for their success on unproven processes, such as carbon capture and storage.

“New gas projects are entirely at odds with what the science says is required to tackle climate  change. Greenhouse gases generated from new gas projects are dangerous pollutants which,  acting cumulatively, pose real and existential threats to people and our environment.

“Claims like those made by Santos need to be based on solid foundations. If companies are telling investors they have a credible pathway to net zero emissions, they need to have robust, sound plans to back them up.

“Companies have a legal obligation to be upfront and honest with investors in their annual reports. This is particularly important to investors who are trying to assess which companies will survive  and thrive in a rapidly changing global energy economy.”

Background

ACCR claims that by making the above representations, Santos has engaged in conduct that was  misleading or likely to mislead in contravention of s 1041H of the Corporations Act 2001 (Cth) and  s 18 of the Australian Consumer Law (ACL) (Schedule 2 of the Competition and Consumer Act  2010 (Cth)). Further, in making representations that gas is a ‘clean’ fuel or energy source, ACCR  claims that Santos engaged in conduct that was liable to mislead the public as to the nature,  characteristics, suitability and quality of Santos’ primary product - being ‘natural’ gas – contrary to s  33 of the ACL.

About EDO

Environmental Defenders Office (EDO) is the largest environmental legal centre in the Australia Pacific, dedicated to protecting our climate, communities and shared environment by providing  access to justice, running groundbreaking litigation and leading law reform advocacy.

We are an accredited community legal service and a non-government, not-for-profit organisation  that uses the law to protect and defend Australia’s wildlife, people and places.