Costs still in the pipeline after Barossa win for Santos

Santos will have to wait months to recoup fees from a Federal Court victory that cleared the path for its $5.3bn Barossa LNG development.

Santos is expected to push quickly to finalise works on its $5.3bn Barossa LNG development. Bloomberg

Santos will have to wait months to recoup fees from a Federal Court victory that cleared the path for its $5.3bn Barossa LNG development, and even then unclear details about who funded the environmental challenge may prevent the gas giant from ever retrieving full out-of-pocket ­expenses.

The Federal Court on Monday rejected a claim the gas giant’s proposed 262km pipeline would cause irreparable damage to First Nations people and their lands.

The ruling came just weeks after the National Offshore Petroleum Safety and Environmental Management Authority gave the gas giant the green light to resume drilling.

The decision by Federal Court judge Natalie Charlesworth included a stinging critique of claims put forward by the Environmental Defenders Office (EDO), which had taken a lead role in opposing the Barossa development, and she awarded costs to Santos.

Justice Charlesworth said costs would need to be paid in a lump sum, but work on determining the amount would not begin until after January 29, when parties could digest her findings and potentially appeal.

Santos will need to then submit details on its legal costs – which may run into tens of millions of dollars – to the Federal Court, which will make a determination on how much the gas giant should receive and the capacity of those behind the action to pay.

The challenge to Santos’s pipeline plan was brought by the EDO on behalf of Tiwi Islander Simon Munkara, but he is unlikely to be financially responsible for the legal action.

Legal sources familiar with the case, who declined to be named as they are not authorised to talk on the matter, said the court would seek information from the EDO.

“The EDO will need to provide clarity about who funded the case. The EDO could have borne the financial burden, but it might also be one specific donor. The court will want to know before it can make a determination,” said one source.

“I don’t think Mr Munkara would have financially agreed to bring this case and he is unlikely to have the means to repay costs which will be substantial. If it is him, then Santos may not recoup any of its fees.”

There also remains substantial uncertainty about what costs Santos could claim. Legal fees are substantial but there would also be significant costs associated with idling vessels laying the pipeline.

Santos was in November barred from fully laying the pipeline as intended, with the Federal Court ordering that works be limited to uncontested areas until a ruling was made.

Santos is now expected to push quickly to finalise works after the ruling but remains wary of any fresh legal challenge.

Legal challenge

The prospect of legal challenges has emerged as one of the biggest threats facing Australia’s $90bn LNG industry.

The ruling from Justice Charlesworth has widely been interpreted as raising the bar for similar challenges, but the EDO continues to loom large.

The EDO, which began to again receive money from the Labor government last year after a 10-year funding drought initiated by the Abbott government, is carrying out four additional cases in the Federal Court.

One involves Woodside’s $16.5bn Scarborough offshore gas field and another relates to the federal government’s $13bn Murray-Darling Basin water plan.

The Australian Conservation Foundation, which brought the case against Woodside and is being represented by the EDO, claims the Scarborough project will emit 1.37 billion tonnes of greenhouse gas pollution over 25 years, which would negatively impact the Great Barrier Reef and result in coral bleaching. The case is due to be heard in September.

Each claim is expected to be costly, and the Santos ruling is expected to have substantial funding impacts.

Financial support

“What will be very interesting is the reaction of EDO’s financial backers.

“The EDO gives very little away about who is funding it, but there are serious questions about the impact of a costly loss to continue with existing claims and its ability to attract new donations and funding,” said one legal source who spoke on condition of anonymity.

The EDO did not respond to questions from The Weekend Australian.

However, chief executive David Morris this week described the Santos ruling as an “exceedingly disappointing outcome for our clients”.

“We have been inspired by the great courage and strength shown by our clients,” he said.

“We are still digesting the lengthy judgment and need to engage with our clients further before making any more comments.”

Transparency

But top lawyers say charity law allows non-profit climate litigators to operate with low transparency obligations.

Clifford Chance partner Sam Luttrell told The Weekend Australian: “Charity law as a regulatory framework for de facto prosecutors of ESG complaints is unsatisfactory in many ways including the transparency of funding.

“That I think is an issue that will come into the foreground in the next year or so.”

Clifford Chance is a global law firm headquartered in London, and Dr Luttrell is based in Perth.

His work focuses on investment protection in the natural resources sector, including oil and gas.

Dr Luttrell told The Australian said Justice Charlesworth’s remarks were “strong”.

“The Federal Court was clearly concerned that there had been an improper degree of involvement by the EDO in the taking of evidence from people in the Tiwi Islands,” Dr Luttrell said.

“The remarks that the court made were quite strong in this regard. They included a finding by the judge that Indigenous instructions had been distorted and manipulated before being presented to the Federal Court via an expert report,” he said.

Scathing judgment

Justice Charlesworth was scathing of some elements of the EDO’s approach in her judgment, and said a cultural mapping exercise and “related opinions expressed about it are so lacking in integrity that no weight can be placed on them” and they were at least in part confected.

In another criticism, she said an EDO lawyer and an expert witness engaged in “subtle” coaching of witnesses.

Lawfare

Johnson Winter and Slattery partner Samantha Daly said the non-profit has probably learned some legal lessons after the case, noting that it was complex due matters of intangible Aboriginal cultural heritage.

“I think as well as specific legal lessons learned for the EDO coming out of this, there are broader considerations for them as to when there is this lawfare approach, or a multi-pronged attack on a project or company, (and) careful consideration needs to be given as to which actions are brought and how,” she said.

“The loss, for example, in this case could potentially take a bit of wind out of their sails in seeking to delay or prevent the Barossa project from going ahead.

“I think we have seen in recent years … the level of lawfare increased dramatically on a number of big oil and gas projects and other fossil fuel projects.

“This might give a bit of time to pause and reflect.

I don’t think it’s going to stop altogether, but maybe a bit of careful selection as to which cases they take on and how they go about it.”

Donations

According to the EDO’s latest financial report covering the year to June 30, 2023, it collected more than $10m from donations and bequests – amounting to 75 per cent of its total revenue – and $1.2m from state governments, including grants amounting to 9.09 per cent of total revenue.

The EDO also receives international grants.

A breakdown in contributions showed that last financial year the charity received $401,627 via grants from the Queensland state government and $391,265 the year before that.

The EDO received $100,000 via a Northern Territory of Australia government grant plus $175,000 the year before that.

As well, the report shows a $156,062 grant from the ACT government in the 2023 financial year, and a $149,505 grant the year before.

The Albanese government reinstated federal contributions to the EDO after former Prime Minister Tony Abbott scrapped them in 2013.

The first amount of a total $10m was allocated in the forward estimates to reach the charity this financial year.