Australasian Centre for Corporate Responsibility v Santos Limited [2026] FCA 96

[4]

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540

Australasian Centre for Corporate Responsibility v Santos Limited [2026] FCA 96 | Case summary | Zoe

[141]

In this role Ms Luo reported to Rowan Mackay, Manager Strategy Energy Solutions, until March 2020 and Chad Wilson, VP Energy Solutions, from April 2020 until September 2021.
From October 2021 to April 2023, Ms Luo was a Senior Advisor Hydrogen Development at Australian Gas Infrastructure Group (AGIG) and in May 2023 she commenced her current role as Chief Advisor and General Manager Strategy at Cooper Energy Ltd.
Ms Luo holds a Bachelor of Engineering and Bachelor of Science from Monash University, which she obtained in 2008, an MBA from the University of South Australia, which she obtained in 2013 and a Graduate Certificate, Energy and Resources: Policy and Practice from University College London, which she obtained in 2013.
Ms Luo was cross-examined.
Nicholas Hugh James Harley who from February 2020 to August 2024 held the role of Project Manager, Carbon Capture and Storage within the Energy Solutions division. In that role Mr Harley was responsible for the development and delivery of a large-scale CCS project at Santos' gas fields in the Cooper Basin (Moomba CCS Project). He was accountable for bringing the Moomba CCS Project online, including the engineering, procurement, construction and commissioning of the CCS facility, the transport pipeline and the field injection wells and oversaw a team tasked with delivering the Moomba CCS Project (Moomba CCS Project Team). At the time Mr Harley gave evidence, the Moomba CCS Project Team comprised approximately 30 people but during 2020 was smaller, comprising approximately six people.
In August 2024, Mr Harley's title changed to Subsurface and Approvals Manager as part of a restructure. Mr Harley became responsible for managing subsurface elements of the Moomba CCS Project and project approvals. He is no longer responsible for the development and delivery of the whole of the Moomba CCS Project.
From February 2007 to August 2010 Mr Harley was employed by Santos as an engineer. After completing an MBA in 2011 Mr Harley worked at McKinsey & Company in London in their oil and gas practice, working across Africa, the UK, Europe and South East Asia.
In about August 2013 Mr Harley rejoined Santos. Since that time and until taking on his current role he held the following roles:

[143]

Mr Harley holds a Bachelor of Engineering (Hons, Mechatronics) and a Bachelor of Economics from the University of Adelaide, obtained in 2006, and an MBA from Judge Business School, University of Cambridge, obtained in 2011.
Mr Harley was cross-examined.
The ACCR submits that in making factual findings about what "grounds" Santos had at the time of the announcements in question I should adopt the "helpful working hypothesis" that "contemporaneous documents written in the ordinary course of business are of great importance" (citing Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126; (2021) 396 ALR 193 at [239] (Allsop CJ, Besanko and Middleton JJ)) and that Santos' decision-making process can be seen through those contemporaneous documents to have materialised relatively spontaneously and organically. Coupled with that the ACCR submits that I should place little to no weight upon what Santos' lay witnesses purport to recall thinking at the time of the announcements in December 2020 and January 2021, except where the recollection is supported by a contemporaneous document.
While I accept that the contemporaneous documents created at the relevant time are of "great importance", I also accept that it does not follow that, in light of the documents that were relied on before me, I would give little or no weight to the oral evidence. The documents are to be viewed in context. That is having regard not only to the whole of the documentary record but also where relevant to the oral evidence.
As Santos submits, this is not a case where the oral evidence is superfluous or might be rejected because it is inconsistent with the contemporaneous documents. The documents reveal and record the roles of the various individuals within Santos and the development of material by those with relevant responsibility. Material was submitted to senior management and discussed. Evidence of those discussions is not always evident on the face of the documents, and the oral evidence serves to fill the gaps.
The oral evidence given by the lay witnesses also explained why and how certain options were developed and/or included in the material, particularly in the Net Zero Roadmap. Evidence of that nature can assist in providing context and background.
That said, I am acutely aware of the caution given against "reliance on subjective evidence from the representor as being necessarily likely to give an accurate picture of what information the representor 'had' as a basis for any prediction or forecast made": see Australian Competition and Consumer Commission v Woolworths Limited [2019] FCA 1039 at [135] (Mortimer J as her Honour then was). I will proceed with that caution in mind and having regard to the overall circumstances of the case.
As to the evidence given by Santos' lay witnesses, the ACCR submits that I would have little confidence in the affidavits of Messrs Woods and Jaffray and Ms Luo given they were sworn in late November 2023, around three years after the relevant events. It contends that the ordinary processes of human recollection would make it virtually impossible to recall what set of considerations were playing upon a person's mind at the time of making a decision three years ago and that the affidavits adopt "a dubious trope" with the witnesses purporting to recall precisely what he or she did or did not believe or think at the time the Targets were announced.
That the affidavits were sworn three years after the relevant events is not an uncommon occurrence and of little moment or indeed, relevance. As Santos submits, the ACCR did not suggest to the witnesses in cross-examination that their key recollections were only formed at the time their affidavits were sworn. Their recollections were not challenged on that basis, and the ACCR cannot sustain such a submission having not taken that step.
The ACCR also challenges the reliability of each of Messrs Woods and Jaffray and Ms Luo as witnesses based on their demeanour and the evidence they each gave in cross-examination.
The ACCR submits that Mr Woods' evidence should not be accepted unless it was against interest or corroborated by a contemporaneous document. It supports that submission based on the following contentions: first, Mr Woods could not remember a whole range of important details, for example whether he spoke to Ms Luo about hydrogen emissions, whether he told Ms Luo in about mid July 2020 that it was important that the proposal be "zero emissions hydrogen" and which Santos employee had suggested that Santos calculate 50% market share by volume of hydrogen; secondly, Mr Woods was otherwise argumentative and unreliable and was shown to be a partisan witness including by using his time in cross-examination to deflect attention away from areas in which he perceived Santos' case may be weak; thirdly, Mr Woods was prone to giving pre-prepared speeches that were non-responsive to questions; fourthly he repeatedly sought clarification of questions which needed no clarification, instead of giving frank answers; and finally, on several occasions he contradicted himself where his perception of Santos' interest changed.
I did not find Mr Woods to be argumentative, unreliable or partisan. Certainly, Mr Woods held his ground when challenged on aspects of his evidence. But that is not a reason why I would not accept any of his evidence. While Mr Woods may in some respects have been defensive, I did not find him to be partisan. That Mr Woods, or any other witness, could not recall particular matters is also not a reason to discount the totality of that persons' evidence. Human memory is fallible and more so as time passes. Overall, I found Mr Woods to be a satisfactory witness who did his best to assist the Court.
The ACCR accepts that Ms Luo was generally an honest and intelligent witness, a sentiment with which I agree. However, it goes on to submit that the frequency with which Ms Luo could not recall important events and circumstances again means that the Court should place little weight on what she claims in her affidavit to have had in mind at particular points in time, illustrating that point by reference to examples. I disagree. As I have said, that a witness may not recall the answer to a specific question does not undermine the whole of their evidence. Ms Luo gave evidence four years after the relevant events and a year after she completed her affidavit. That she could not recall some matters of detail or events is hardly surprising. As I have already observed I found Ms Luo to be an honest witness, who did her best to assist the Court and who gave her evidence in a considered way.
The ACCR describes Mr Jaffray's evidence as relatively inconsequential in the context of the case but submits that, to the extent he purported to give evidence of what he subjectively had in mind in 2020, the Court should place little weight on that evidence for the reasons set out at [37] above. I do not accept that Mr Jaffray's evidence is "inconsequential". His evidence discloses that, given his role at Santos as VP of People and Sustainability during the relevant period, he had a significant role overseeing the preparation of papers submitted to the Santos Board about the Targets and the Net Zero Roadmap. Mr Jaffray's evidence, supplemented by documentary evidence, provides a fuller chronology of the development of the Targets and the Net Zero Roadmap.
I have no reason to doubt that Mr Jaffray is anything other than a truthful witness whose evidence was largely not challenged and which I would accept.

[158]

Santos submits that Ms Parker has not undertaken work on behalf of investors as claimed in her report and is not qualified to opine on their attributes, views or expectations.
In order to test Ms Parker's claim to have undertaken work on behalf of investors, Santos served a subpoena on Ms Parker seeking documents relevant to [20] of her first report. In response Ms Parker produced two documents relating to a single entity, Regnan Pty Ltd. Those documents are a proforma document titled "engagement guide - climate change XYZ Company Inc" and an invoice made out to that entity. The invoice from Ms Parker's consulting firm to Regnan disclosed that Ms Parker's work was to undertake environmental, social, and governance (ESG) assessment scores for two different entities.
Ms Parker described Regnan as an investor research and engagement firm which provides services to the investment community but is not itself an investor. Regnan develops reports and disseminates a range of different materials to its clients who are institutional investors, asset managers and banks. Ms Parker was a contractor to Regnan for several years and undertook her work for it using its servers. Thus, she did not have further documents to produce in answer to the subpoena served on her. Ms Parker's evidence was that that work gave her insight into what investors were interested in, based on what those investors asked Regnan to produce.
That evidence clearly supports Santos' submission that Ms Parker has not undertaken work on behalf of investors and is not qualified to opine on their attributes, views or expectations. Based on the documents produced in answer to the subpoena served on her, the closest she came was the limited work she undertook for a research firm which, in turn, produced material for investors. Even accepting that Ms Parker was a contractor to the research firm for "several years" does not assist to qualify her to provide an opinion about investors' views or expectations. Ms Parker did not refer to that work in her curriculum vitae, and it is impossible to assess her qualifications in that regard. I would reject Ms Parker's asserted expertise about investors.
There were also other aspects of Ms Parker's evidence which were troubling.
Ms Parker expressed opinions in areas where she did not have the requisite expertise and/or the proper foundation. For example, she gave evidence about the availability of carbon credits including by reference to the development of future policy. However, in cross-examination she conceded that she had not read the "relevant Australian government reports concerning the gas industry". In another example Ms Parker said that she had no opinion on whether "as a potential supplier of hydrogen, ... Santos would have substantial bargaining power in the circumstances of those industries as one of the only credible large scale suppliers of such services ... likely to emerge" but then went on to deny, in my view somewhat implausibly, that such matters would have any bearing on Santos' bargaining power.
Ms Parker also expressed a view in her first report (at [38]) that it was "likely that many of Santos' industrial natural gas customers in Australia using gas for heating and other industrial purposes are likely to exceed 100,000 tonnes CO2-e of operational emissions annually and therefore be captured under the [Safeguard Mechanism]". In cross-examination Ms Parker accepted that she had not undertaken any investigation or analysis to support that opinion. She said that it was "a general statement based on the size of the gas facilities". Despite the fact that in a later joint report Ms Parker accepted the analysis of Santos' expert, Mr Snow, which impacted the opinion she expressed at [38] of her first report, she refused to accept or concede that her opinion was erroneous. Rather, she came up with a new and alternative basis to justify her opinion.
Ms Parker was also shown to be selective in her evidence. In her first report at [19] she gave evidence about the stakeholder concerns that she recommends her clients consider in relation to carbon offsets. However, she did not include in her report by way of balance the benefits perceived by stakeholders in relation to carbon offsets. This omission was highlighted by an advice she in fact gave to one of her clients which included both the negative and positive features of offsets perceived by stakeholders. In cross-examination Ms Parker tried to explain the disparity in an unconvincing and argumentative way.
Santos also raised concerns about Ms Parker's understanding of the Taskforce for Climate-Related Financial Disclosures (TCFD) and contends that she misrepresented the TCFD framework. I address the TCFD framework and Santos' submissions in relation to Ms Parker's evidence below.
The ACCR submits that Ms Parker was a careful witness who properly acknowledged when she did not have expertise to answer a question. That was not the impression I had of her as a witness. While on a few occasions Ms Parker said she did not have the relevant expertise to answer a question, more frequently she tried to explain away evidence that she did not perceive would assist the opinion she gave in her reports in an unconvincing and argumentative way. She was not prepared to make concessions. I have set out some examples above. Overall, I did not find Ms Parker to be a satisfactory witness and would place very little weight on her evidence.
Timonthy Grant who is the founder and director of Lifecycles, a supplier of life cycle assessments and circular economy services across Australia. Mr Grant established Lifecycles in 2003. He holds a Master of Engineering (Cleaner Production) from RMIT University and a Bachelor of Applied Science in Environmental Assessment and Land Use Policy from Deakin University.
Mr Grant has also held the following positions:

[162]

Professor Cook prepared one report concerning CCS. There was no dispute that Professor Cook is an acknowledged expert in CCS and that his evidence should be accepted to the extent it is relevant.
David Collis who since 1986 has been a professor of strategy at the Harvard Business School specialising in corporate and global strategy. From 1997 to 2002 Professor Collis was a professor at the Yale School of Management and from 1985 to 1986 and in the Autumn of 2003 at Columbia Business School. In those roles he taught and continues to teach MBA students across the full range of strategy courses and has developed corporate and global strategy courses. Professor Collis also teaches strategy in all of Harvard's Executive Programs, including specialised courses on corporate and global strategy. From 1978 to 1982 Professor Collis was a management consultant with The Boston Consulting Group in London where he specialised in corporate strategy.
Professor Collis has a Bachelor of Arts (in economics) and M.A. (Cambridge University), an MBA (Harvard Graduate School of Business Administration) and a Ph.D. in business economics (Harvard University).
Professor Collis prepared one report in relation to long term corporate strategy. Once again, there was no dispute that Professor Collis is an acknowledged expert and that his evidence should be accepted to the extent it is relevant.
James Arthur Snow who since 2008 has been an executive director at Oakley Greenwood, a consulting firm.
Among other things, Mr Snow has led, designed, and implemented extensive renewable gas and energy projects for groups such as the Commonwealth Department of Industry, Science, Energy and Resources (DISER), Water Authorities (Yarra Valley Water, BAWB), the Energy Network Association, Australian Hydrogen Council, APA Group, Victorian Department of Environment, Land, Water and Planning, Tasmanian State Development Department and the New Zealand Gas Network Businesses. He has also led the development of stretch goals for the Low Emissions Technology Statement (LETS) working with the LETS Taskforce (Messrs Finkel, Clarke and King) focussing on energy storage and the role of renewable gases (hydrogen and renewable methane). Mr Snow is also engaged with developments related to hydrogen markets and how hydrogen technology can be monetised, including as dispatchable (demand side) load, liquid fuel replacement and through methanation, and has assisted State Governments and the Federal Government on renewable gas policy matters.
Mr Snow has been involved in the design, construction and operation of gas pipelines, gas distribution systems, coal, naphtha and natural gas fuelled steam methane reforming (SMR) plants producing hydrogen syngas and towns gas, LNG and compressed natural gas facilities, natural gas, diesel, CSG and LNG power stations, high voltage electricity power lines, heavy trucking motive power such as mine trucks, gas cleaning equipment including CO2 extraction, coal handling and coke oven facilities in steelmaking, ammonium nitrate plants, brown coal gasification and the gasification of biomass, water and waste water treatment facilities and associated biomass rendering plants and anerobic diesters. He also has a background in the production, distribution, storage and end use of hydrogen through his work with ammonia, SMR, towns gas, coal to gas, and liquids to gas.
Prior to joining Oakley Greenwood Mr Snow held the following roles:

[164]

Since 2016 Mr Snow has been an adjunct professor at the University of Queensland, Energy Initiative, although this honorary title and departmental affiliation is under review given the recent establishment of the ARC Centre of Excellence for Green Electrochemical Transformation of Carbon Dioxide (GETCO2), where Mr Snow is a key Industry Participant, and the closure of the Energy Initiative.
Mr Snow is also a Fellow of the Institution of Chemical Engineers, Past Chair of the Australian Chemical College and Fellow of the Institute of Engineers Australia. He has a B.E. (Chemical) Honours.
Mr Snow prepared one report which addressed a number of areas including a life cycle analysis, the meaning of net zero emissions, the domestic and export hydrogen markets, infrastructure for hydrogen and blue hydrogen.
While the ACCR accepts that Mr Snow has a long history working in or with the gas industry, it submits that I would treat his evidence with caution and only accept it where it was supported by other experts or documentary evidence. This approach is urged because the ACCR says that Mr Snow was willing to venture opinions on topics on which he had no expertise and without a proper basis.
Mr Snow provided an extensive report (as well as participating in the preparation of a number of joint reports - see below). Overall, I found him to be a frank witness who had a deal of practical experience which he brought to bear in his report and in giving evidence. Where a question strayed into an area that was not within his area of expertise, he informed the cross-examiner accordingly or, as necessary, informed the Court and the cross-examiner of his source of the information relied on to address the gap in his own expertise, for example in relation to the material used to construct a pipeline to transport hydrogen.
The ACCR refers to Mr Snow's evidence about the meaning of the term "zero emissions hydrogen" which is set out in Part 4.2 below. In summary, he expressed the view in his report that at the relevant time the Australian energy industry used that term to refer to green and blue hydrogen. In cross-examination Mr Snow frankly accepted that he could not locate any published work that expressed that view and also acknowledged that in an article he had co-authored he and his junior colleague had referred to blue hydrogen as "low net emissions". He conceded these matters without prompting or the need for repeated questions from the cross-examiner.
The view expressed by Mr Snow and his co-author in November 2021 is at odds with the view Mr Snow expressed when asked about the definitions at an earlier but proximate point in time. That evidence is addressed further below (see [557]). However, it does not cause me to discount the whole of Mr Snow's evidence or treat it in the manner the ACCR contends.
Sanjay Unni who is the managing director of the Berkeley Research Group (BRG), an expert services firm specialising in economics and financial analysis. Dr Unni leads BRG's securities practice which addresses a wide range of issues relating to transactions in financial instruments. Dr Unni joined BRG in October 2010. From May 2000 to September 2010 he worked at LECG LLC, another expert services firm, in the positions of senior economist (May to December 2000), managing economist (January to December 2001), senior managing economist (January 2002 to April 2006), principal (April 2006 to November 2007) and director in the securities practice (November 2007 to September 2010).
From August 1984 to May 2006 Dr Unni had various teaching roles at Southern Methodist University, Dallas, Texas, University of Texas at Dallas, University of Strathclyde, Glasgow and University of California, Berkeley.
Dr Unni has a B.A. (Honours), Economics, University of Delhi (1984), M.A., Economics, Southern Methodist University (1994) and Ph.D., Economics, Southern Methodist University (1994).
Dr Unni prepared two reports. In his first report he addressed three questions: first, what if any impact did the announcements at the Investor Day Presentation of the target to reduce Scope 1 and Scope 2 absolute emissions by 26‐30% by 2030 from a 2020 baseline, a target of net zero Scope 1 and Scope 2 absolute emissions by 2040 and the Net Zero Roadmap (together Target Information) have on the price of Santos' shares; secondly, what if any impact did the restatement of the Target Information in the 2020 Annual Report and the 2021 Climate Change Report and/or statements made in relation to the Target Information in those reports have on the price of Santos' shares; and thirdly, from an economic perspective why did the Target Information, when provided to the market, affect or not affect (as the case may be) the price of Santos' shares as set out in the answers to questions 1 and 2? In his second report Dr Unni responded to aspects of Ms Parker's evidence.
Dr Unni was of the opinion that neither the announcement of the Target Information on 1 December 2020 or the restatement of that information on 18 February 2021 had any impact on the stock price of Santos' shares. Dr Unni set out the bases on which he had formed those views including by carrying out event studies which, he explains, is a methodology developed by financial economists to analyse whether an event that discloses information to market participants about a company affected the price of the company's shares. More particularly, an event study examines the returns on a company's shares (i.e. percentage change in share price from one day to the next) and identifies how much of the return is attributable to the events in issue, after controlling for other factors influencing the share price on the same day.
The event study for 1 December 2020 showed that:

[167]

Mr Hutley: Yes. Now, there's a table there. And that records your event study analysis for 1 December 2020, is that correct?

Dr Unni: That is correct, yes.

Mr Hutley: And your model predicted that Santos' shares would decrease by 0.057 per cent - 0.57 per cent, I'm sorry?

Dr Unni: Yes, that is correct.

Mr Hutley: But in fact, the shares went up by 0.81 per cent, is that correct?

Dr Unni: The shares went up by 0.81 per cent

...

Mr Hutley: Therefore, you observed an abnormal return on that date, of 1.38 per cent?

Dr Unni: Yes, that is correct.

Mr Hutley: However, your view is that this return was not statistically significant, under the test provided by the event study model, correct?

Dr Unni: Yes, that's right.

Mr Hutley: And that is because it was less than 1.96 per cent, correct?

Dr Unni: That is because the figure described in this chart as the: T statistic Was less than 1.96.

Mr Hutley: Quite. And that meant that you could not exclude, to a 95 per cent degree of confidence level, that the abnormal return you observed was caused by factors other than the release of the information by the company. Is that correct?

Dr Unni: Yes, that's correct.

Mr Hutley: It may have been caused by the release of the information by the company, if the company released fresh information. But you can't tell, because it may have been caused by other factors, correct?

Dr Unni: This abnormal return is within a range of fluctuations that one observes, even on days without any news released by the company. And so, we don't have an objective basis to conclude that this return was attributable to the release of news.

Mr Hutley: Quite. So what you're saying - it may have been, but you can't say whether it was, or it wasn't, because it may have been caused by what you call ordinary fluctuations, correct?

Dr Unni: I think a more precise statement would be that I had no basis to say that it was caused by the news.

Mr Hutley: You had no basis to say it wasn't, also, correct?

Dr Unni: The nature of the hypothesis being tested here, is whether we have a basis to know that this news - this price was - reaction was caused by information. And so that's

Mr Hutley: Yes?

Dr Unni: the reason I'm - that I'm reporting the test of that hypothesis. Yes.

Mr Hutley: Now would you address my question, if you would be so kind. You have no basis for saying it wasn't caused by the release of the information, have you?

Dr Unni: I have no basis to identify any particular causal factor for this fluctuation. Yes.

Mr Hutley: So is the answer to my question "yes"?

Dr Unni: To - yes, to the extent it's consistent with what I said. Yes

[182]

The TCFD is a body established by the International Bank of Settlements and comprises senior executives of major corporations from around the world. The TCFD describes its remit to be "to develop climate-related disclosures that 'could promote more informed investment, credit [or lending], and insurance underwriting decisions' and, in turn, 'would enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system's exposures to climate-related risks'". The TCFD developed four recommendations in relation to climate related financial disclosures around four thematic areas that "represent core elements of how organisations operate". They are: governance; strategy; risk management; and metrics and targets.
The 2021 Climate Change Report referenced the TCFD recommendations and was expressed to be "TCFD aligned".
There is some disagreement between the parties about the scope or role of the TCFD framework. It concerns "financial filings" and "financial reporting". For example, the TCFD "believes disclosures related to the Governance and Risk Management recommendations should be provided in annual financial filings", "[f]or disclosures related to the Strategy and Metrics and Targets recommendations, the [TCFD] believes organizations should provide such information in annual financial filings when the information is deemed material" and "[c]ertain organizations - those in the four nonfinancial groups that have more than one billion USDE in annual revenue - should consider disclosing information related to these recommendations in other reports when the information is not deemed material and not included in financial filings".
Ms Parker suggested that financial disclosure was one of "four different pillars of disclosure" in the TCFD. I do not accept that evidence. The four "pillars" of the TCFD are as set out above. It is clear on a review of the TCFD framework document each "pillar" concerns financial disclosure.

[202]

(1) between May 2019 and May 2020, the Energy Solutions team conducted a detailed review of several alternative medium and long-term clean energy business opportunities. The production of hydrogen was one of three projects selected for further analysis and the Board endorsed a proposal to prepare a budgeted plan to pursue hydrogen production;

(2) Santos was assessing and developing projects to create land-based carbon offset opportunities, such as reforestation projects in Australia, and avoided deforestation projects in PNG and a savannah burning project in the Northern Territory. Prior to 2019 these types of projects were progressed by the Energy Solutions team but in 2019 Santos created a Carbon Solutions team to oversee their development. These projects would enable Santos to own and generate voluntary carbon credits or ACCUs that could be traded and used to offset its emissions;

(3) climate targets became regular topics in Board meetings. The Board was interested in Santos' progress towards achieving its targets;

(4) Santos publicly reported its progress against its announced climate targets, and it was a regular topic at investor days. The Clean Energy Strategy was also a focus of discussions with banks and the investment community, in particular superannuation funds. Santos relies heavily on external financing and the banks with which it dealt expressed a need to understand more about Santos' climate strategy. Superannuation funds also wanted to see demonstrable pathways to decarbonise; and

(5) emissions reductions targets (as described below) were included in the individual scorecards of Santos executives and senior leaders and in the company scorecard. Performance on delivery of emission reductions was discussed in weekly operational meetings and performance against plan was a key item in each monthly ExCom meeting. In addition, the Board Risk Appetite Statement, which is a risk assessment statement undertaken by Santos in relation to all transactions, was revised to ensure impact of emissions on any key project approval was highlighted to the Board.

[203]

In 2017, as part of the 2016 Strategy, Mr Jaffray established the Energy Solutions business (which became the Energy Solutions team). At inception the Energy Solutions business consisted of Mr Jaffray and two other team members. However, it grew and, by the time Mr Jaffray handed over responsibility for the Energy Solutions team in September 2018, the core team comprised approximately eight members, in addition to a number of other people working on Energy Solutions projects throughout Santos.
The Energy Solutions business was, and the Energy Solutions team continues to be, an evolving business with an entrepreneurial culture and mindset. As set out above, its purpose is to identify and pursue emissions reduction and low-emissions technologies to reduce or remove emissions across Santos' portfolio, but also for the purposes of developing products that can generate revenue by being offered and supplied to third parties.
When the Energy Solutions business was first established, the team focussed on researching and investigating a broad range of potential technologies and options as part of a global technology review. This included looking at opportunities that could be available in relation to a number of by-products produced in Santos' operations, including carbon, salt and water. It became apparent relatively quickly that there were a number of interesting opportunities in relation to carbon, and over time, the Energy Solutions business became more focussed on technologies relating to reducing carbon emissions. At an early stage, the Energy Solutions business identified CCS technology as a potential opportunity given Santos' existing infrastructure and assets, including its gas processing facilities and associated pipeline infrastructure at Moomba, as well as a number of depleted gas fields in the Cooper Basin with significant storage capacity. That said, CCS was not the only technology the Energy Solutions business identified. Early on, it also identified DAC and hydrogen production as opportunities and looked into technologies to reduce energy consumption, such as solar technologies and wind and heat recovery.
Ms Luo was a member of the Energy Solutions team. She was involved in the following initiatives being developed by that team:

[204]

(1) Moomba CCS Phase 1 (see [185] below) - prior to January 2019 (when she went on leave) Ms Luo had a key role in the development of the Moomba CCS Project in relation to the design of the above-ground facilities required to support the project, led by Christian Winterfield who was principally responsible for its progress. After returning from leave in August 2019 Ms Luo did not have a direct ongoing role in the Moomba CCS Project but remained aware of its progress as it related to the assessment of other potential CCS opportunities;

(2) energy efficiency projects - the Energy Solutions team conducted a series of workshops when it was initially formed in 2017 to identify emissions reduction projects across Santos' five core assets. These projects were assessed and grouped into three tiers:

(a) tier one projects which were typically small-scale, operational changes that could be implemented directly by the each of the Santos business units that manage Santos' assets (referred to as the Asset teams), with support where required from Energy Solutions;

(b) tier two projects which were medium term projects that required capital investments, but utilised existing, well understood technology. These were usually led by the Energy Solutions team until the project was ready for final investment decision (FID); and

(c) tier three projects which were longer term projects, incorporating new technology, such as integration of renewables, which were usually led by the Energy Solutions team;

(3) land-based offsets - Santos had an existing portfolio of land-based offset projects which were managed through a collaboration between the Carbon and Sustainability team and the Asset teams. Ms Luo was aware of these projects and ensured that they were correctly incorporated into the Net Zero Roadmap;

(4) in early 2020 the Energy Solutions team began considering other potential CCS opportunities, either at Moomba (beyond Moomba CCS Phase 1) or another site. Ms Luo was involved in the assessment of those opportunities;

(5) hydrogen with CCS - in mid 2020 Santos conducted a concept study into the production of blue hydrogen at Moomba (Moomba Hydrogen Concept Study) which included engaging a consulting firm to conduct an assessment of hydrogen production at Moomba. Ms Luo led the activities being undertaken as part of the concept study;

(6) Cooper electrification/hydrogen fuel - from late 2019 the Energy Solutions team had been assessing the potential electrification of Santos' operations in the Cooper Basin (Cooper Electrification) and a proposal for Santos to use hydrogen as fuel to power those operations once electrified (Hydrogen Fuel). The use of Hydrogen Fuel was an opportunity Ms Luo had identified arising from the Moomba Hydrogen Concept Study that could operate in tandem with the Cooper Electrification assessment; and

(7) embedding emissions reductions within day-to-day operations - this involved working with the Asset teams to develop ways in which achieving emissions reductions could be embedded in the structure of Santos' operations.

[206]

(1) the Asset teams created LTPs for each asset (e.g. the Cooper Basin). LTPs involved a forecast of the potential activities year-on-year for the life of the asset and were initially prepared as part of the FID approval process. The potential activities in an LTP over the life of an asset included exploration, development and production. In this context exploration means discovering new subsurface resources within existing or new basins and development means the activities undertaken to convert those resources into production, such as drilling wells and building surface infrastructure. The time horizon for LTPs could range from 10 to 30 years;

(2) the building blocks for LTPs were:

(a) the attributes of the subsurface asset, including geology, temperature, pressure and gas/liquid composition (such as hydrocarbons, CO2 and other gases). As geological data is inherently uncertain, the Asset team undertook a probabilistic analysis of its confidence of success for each field;

(b) engineering and construction activities required to commercialise the gas over a given timeframe, including drilling and well construction and building pipelines, compression and gas processing facilities;

(c) regulatory and stakeholder processes, including environmental and operating approvals and relevant native title and land-holder agreements; and

(d) Santos' overall strategy or corporate objectives at the time of development of the LTPs;

(3) the LTPs were also subject to changes in Santos' overall strategy. Significant portions of the LTPs at any given time remained subject to formal project approval. Closer to the date of any projected development, investment decisions had to be approved by Santos' senior executives, as part of the project approval process. This, combined with the long time horizon, meant that the data reflected in the LTPs was the least certain of the Portfolio data and could be subject to change; and

(4) the annual budget was Santos' principal organisational and operational planning process and was overseen by executives and management. As part of the annual budget process, the Board and executives would approve operating expenditure and capital expenditure for the following financial year and review years two and three. The annual budget process was informed by the business and the strategic direction determined by management and the Board.

[209]

From 2017 a critical aspect of Santos' approach to the annual budget process was its adherence to its disciplined operating model. This involved ensuring that each of Santos' core assets remained free cash flow positive at about USD40 per barrel of oil. Once the budget had been set the asset was required to operate within those limits. An asset manager may be able to modify his or her budget within the approved limits or on an individual item basis by approximately +/- 5%, but it was managed via the corporate delegation of authority for anyone within the asset to make a decision to do something different outside of the budget process.
At any point in time the CEO could decide to depart from the approved budget for an asset, for example by changing the production level compared to the production forecast on which the budget approval had been based. If an asset manager needed to change the forecasts in the budget, he or she would need to get approval from the CEO. Generally, Santos tried to treat the forecasts set for each budget year as firm unless something material changed or the CEO made a different decision.
The Portfolio team was the central repository for the budget forecasts and the LTPs for each asset. Mr Woods considered that the long-term production and emissions estimates maintained by the Portfolio team represented the Asset team's best view at the time of potential activities for the expected life of a particular asset based on various assumptions. As set out above, the LTPs included estimated production from developed, undeveloped, contingent and exploration projects. Production estimates for undeveloped projects were subject to investment decisions to be made by the asset at the time those projects were to commence development. In addition, all of the Portfolio team's longer term estimates were subject to the decisions, limits or parameters set by the CEO, generally during the annual budget process. As a result of the nature of the LTPs, they were susceptible to change and would be updated each year to reflect the latest external and internal conditions, including strategic direction.

[210]

Santos has executive and company scorecards to incentivise its employees. The executive scorecard sets out the metrics by which an individual executive's performance is assessed and performance based remuneration is determined. The company scorecard is determined by the Board and used by the Board to measure performance of the business and determine the size of the bonus pool each year.
Mr Jaffray was involved in the development of the 2020 and 2021 company scorecards in furtherance of the 2016 Strategy. In about 2020, an emissions reduction target was first included in the company scorecard. The 2020 company scorecard provides that the aim of the scorecard is to "align, motivate and reward Santos employees to deliver results which are aligned to the Santos strategy and which create shareholder value" (an almost identical statement is included in the 2021 company scorecard).
Slide 3 of the 2021 company scorecard (and slide 4 of the 2020 company scorecard) is split into four quadrants: sustainability; growth; production; and cost/financial. Each quadrant has a 25% weighting. Those quadrants are then further broken down into rows indicating sub-categories with different weightings. For example, in the 2021 company scorecard (and in the 2020 company scorecard) for "Sustainability", the allocations were 5% to carbon emissions, 5% to culture and 15% to health, safety and environment and for "Growth" 7.5% was allocated to low carbon growth projects (no weighting had been given to this item in 2020). Together, carbon emissions and low carbon products amount to 12.5% of the goals set in the 2021 company scorecard.
Mr Jaffray describes each of the 2020 and 2021 company scorecards as balanced, meaning that all four quadrants are weighted equally and no single quadrant has more impact than any other. Each quadrant, and each sub-category within each quadrant, is measured independently in that the metrics for each quadrant are required to be achieved whether or not metrics in other quadrants are achieved. By measuring each metric independently, the business and its employees are discouraged from focussing their performance upon certain metrics at the expense of others. There are financial consequences, in terms of the size of executive bonuses, for missing the threshold on any metric, and corresponding rewards, increasing in size, for achieving "target" or "stretch" on any metric.
For each sub-category, the company scorecards specify a "Threshold", "Target" and "Stretch" goal, each of which increases in ambition, with Threshold being the baseline performance expectation. By way of example Mr Jaffray explains that:

[224]

The Moomba gas field in the Cooper Basin presented a key opportunity for CCS development. The Energy Solutions team supported the development of the Moomba CCS Project and, from shortly after February 2020, when Mr Woods became responsible for that team, the Moomba CCS Project was managed by Mr Harley in his role as Project Manager, Carbon Capture and Storage. Mr Harley reported to Chad Wilson who, in turn, reported to Mr Woods.
The evidence establishes that as Project Manager, Moomba Carbon Capture and Storage, Mr Harley was intimately involved in all aspects of the planning, development and implementation of the Moomba CCS Project. It is not necessary to set out the extent of his activities.
The purpose of the Moomba CCS Project is to reduce GHG emissions by permanently and safely storing around 1.7 MtCO2e per annum in depleted gas reservoirs. Santos' equity emissions reduction from the Moomba CCS Project is estimated by Santos to be 1.1 MtCO2e per annum, net of additional emissions from extra fuel gas burned in the CCS process.
The accuracy and basis for the estimated 1.1 MtCO2e per annum emissions reductions from Moomba CCS Phase 1 (see below) was not in dispute except to the extent that the ACCR alleges that, as at December 2020 and February 2021, Santos was still considering using CCS (both as part of the Moomba CCS Project and any further CCS projects) for enhanced hydrocarbon recovery (EHR) or enhanced oil recovery (EOR) and that EHR/EOR would result in emissions that had not been accounted for in the 2030 Target and Net Zero Roadmap.
Mr Harley explains that the Moomba CCS Project is a key component of Santos' emissions reduction target in that it materially reduces GHG emissions and demonstrates the technical and commercial viability of large-scale CCS in Australia. The Cooper Basin has a storage capacity of up to 20 million tonnes per annum (Mtpa) of CO2 and, as at 1 December 2020 and 18 February 2021, Mr Harley was aware that Santos was considering options to store more than the 1.7 MtCO2e per annum through the Moomba CCS Project in the Cooper Basin. At that time Mr Harley had been involved in conceptual discussions about the use of the Cooper Basin's storage capacity through the production of hydrogen with CCS (blue hydrogen), DAC CCS (technologies that capture CO2 directly from the earth's atmosphere) and/or the creation of a commercial CCS hub to store CO2 transported from the east coast of Australia. Future expansion of the Moomba CCS facilities could support injection of CO2 from these sources.
Mr Harley considers that Santos is well-placed to store CO2 in the Cooper Basin, a very stable geological environment, with very low natural seismic activity, meaning that there is low risk of subsurface disruptions. Santos has operated in the area since the 1960s and so has a significant amount of production, drilling and seismic data from the Cooper Basin fields. This accumulated knowledge enables it to decide which reservoirs are best suited to store CO2.
Mr Harley describes the Moomba CCS Project as Santos' most mature CCS project to date. It will reduce the GHG emitted into the atmosphere by capturing CO2 from the Moomba gas plant before it is emitted and store the captured CO2 in geological formations in the Cooper Basin that have held various gases (including CO2) underground for tens of millions of years. There are three stages to the Moomba CCS Project:

[231]

On 27 November 2020 Mr Harley sent Mr Wilson a presentation titled "Moomba CCS FID Dec 2020" which had embedded in it two excel documents setting out economic modelling which, according to Mr Harley, do not include any inputs associated with EOR. Nor do other key project documents as at 1 December 2020 or 18 February 2021 disclose any intention to use CO2 from the Moomba CCS Project for EOR. That approach was confirmed by Mr Woods who said that, over a period, the possibility of utilising CO2 for EOR in the Cooper Basin was assessed by Mr Winterfield, who at the time was principally responsible for the progress of the Moomba CCS Project.
Mr Woods explains that through the analysis of core samples at a target reservoir, and modelling any benefits of using EOR, it was determined that the results were not favourable for economic recovery. In about early 2020, Mr Woods presented these results to Mr Gallagher who agreed that Santos would not pursue any further EOR in the Cooper Basin. Mr Woods then directed his team to cease all work on EOR and only focus on CCS (for permanent storage). EOR was also considered for a short time at Bayu-Undan (see below) but it was soon decided that there were no opportunities for EOR at that site because Bayu-Undan is a gas condensate field and the addition of a CO2 did not add any significant recovery. Mr Woods was aware that Santos stopped referring to EOR (or EHR) in conjunction with CCS in its climate change reports and instead referred to CCS (which does not include using EOR) as reflected in the Climate Change Report released to the ASX on 20 February 2020 (2020 Climate Change Report).
As Mr Harley continued the design process for the Moomba CCS Project he learned more about the specific equipment that would be acquired and its capability. One of the significant pieces of equipment that determines the CCS facility throughput is the gas turbine. In about mid 2020, the gas turbine that had been identified for acquisition was a standardised item not designed specifically for the project. That turbine had additional power capacity to support higher injection than 1.7 MtCO2e per annum. By October 2020 Mr Harley understood that the additional power generated by this turbine meant that the total capacity of the project could reach approximately 1.9 MtCO2e per annum for very little additional cost.

[232]

Modelling for the FID gate review included in the Project Economics Report was undertaken on a number of bases including "Scenario 4-Value Improvement-Full Life Cycle". Scenario 4 involved a 25-year life for the project and injection of 1.95 MtCO2e per annum, resulting in an estimated net reduction for the Moomba CCS Project of 1.89 MtCO2e from 2026 to 2046.
Mr Harley explains that in the development of the Moomba CCS Project, the Moomba CCS Project Team assessed the optimum target size for the project. In the first quarter of 2020, he determined that the optimum size was to target capture and sequestration of 1.7 Mtpa CO2e and project documentation was prepared on the basis of a targeted injection of 1.7 MtCO2e per annum.
The Facilities Basis of Design Document for the Moomba CCS Project dated 2 October 2020, and approved in December 2020, records the key design parameters and requirements for the Moomba CCS Project. The purpose of such a document is to specify the performance requirements of the facility that the design engineering contractors needed to design the facility. The Facilities Basis of Design Document records that the design accommodated a "turn-up capacity" of 1.9 MtCO2e per annum meaning that the project parameters, including the gas turbine and all other infrastructure, would enable the Moomba CCS Project to achieve injection of up to 1.9 MtCO2e per annum.
As a result, in the period December 2020 to February 2021, while the target for the project was 1.7 MtCO2e per annum, the approved design parameters accommodated a project that was capable of injecting up to 1.9 MtCO2e per annum. Once the Moomba CCS Project was built, achieving the higher level of injection would largely be a matter of injecting the CO2 available at the Moomba gas plant.
As set out above, economic analysis had been conducted by Santos' in-house economics team together with the Moomba CCS Project Team on a number of injection scenarios for the purpose of assessing how the Moomba CCS Project should operate and was summarised in the Project Economics Report. The "Analysis Summary" in that report includes:

[237]

(1) the Moomba CCS Project Team was working on Moomba CCS Phase 1 and had partnered with third parties, including Occidental Petroleum and BP, in conducting analysis and obtaining assurances in relation to the project. From that work, the Moomba CCS Project Team had a high degree of confidence that Santos could permanently store CO2 in depleted gas reservoirs in the Cooper Basin based on its extensive knowledge of the features of those reservoirs from its gas extraction activities over decades;

(2) based on the assessments of the features of the Cooper Basin that had been conducted by the team and third parties, the Moomba CCS Project Team had assessed that:

(a) the project could store up to 20 MtCO2e per annum in the Cooper Basin for more than 50 years before reaching capacity;

(b) Moomba CCS Phase 1 would involve storing 1.8 MtCO2e per annum and would generate emissions of approximately 0.1 MtCO2e per annum resulting in a net emissions reduction of 1.7 MtCO2e per annum; and

(c) Santos would be able to store CO2 at a cost of less than AUD30/tonne. This was one of the lowest cost CCS projects and was competitive with Santos' projections for the price of ACCUs by 2030, which was AUD35/tonne;

(3) the Moomba CCS Project Team had also assessed future CCS opportunities at Moomba, including using Moomba's CCS infrastructure to store CO2 from other sources, including Third Party CCS, DAC and blue hydrogen production at Moomba;

(4) Moomba CCS Phase 1 was well advanced in the front end engineering design (FEED) phase of Santos' project development process and the next step was the technical assurance gate. Corporate assurance sign off was given on 17 December 2020. The next step in the process was to move to the FID phase, which involves preparing a FID paper that attaches the assurance findings and is presented to Mr Gallagher and the ExCom for endorsement. By December 2020, the Moomba CCS Project was technically ready to move to the FID phase. However, that step was dependent on confirmation that Santos would be eligible to obtain ACCUs for the emissions reductions expected from the project;

(5) in addition to the studies being undertaken as part of the Moomba CCS Project, the Energy Solutions team had commenced three studies that would support the Moomba CCS Project. Those studies, which were approved by Mr Woods on 17 August 2020 concerned infrastructure routes that could assist Moomba projects (including the Moomba CCS Project), potential further reservoirs near expected points of high emissions likely to reduce cost of future CCS, and potential pipeline routes out of Moomba; and

(6) Santos had been in discussions with the AGIG in relation to a potential pipeline project that would link the Cooper Basin to the McArthur River in the Northern Territory, through the Amadeus gas fields near Alice Springs. On 19 August 2020, Mr Woods sent Mr Gallagher and others an email about the proposed pipeline in which he referred to its potential benefits including, among others, the potential to process CO2 and to use Moomba's CCS capacity, as well as the possibility of installing a dedicated CO2 line from Darwin to Moomba. Mr Woods considered that a pipeline of this type would enable Moomba to receive and store CO2 generated from projects in Northern Australia and would shore up the gas supply into Moomba that could be used to produce hydrogen. Mr Woods was also aware that early testing of the Dukas prospect in the Amadeus gas fields indicated that it could contain between 5% and 11% hydrogen.

[240]

So leading with the net zero emissions by 2040, and what I'm really pleased about is we'll be able to show you a roadmap to how we're going to do that. It's not just a number that's beyond all four retirement dates and we're all very comfortable putting out there to get us over immediate pressure, and from your perspective, and certainly from my own cynical perspective, I look at some of the targets other companies and other industries are making, some governments are making, with a bit of cynicism, because I don't see the plan. I don't see a roadmap on how they're going to achieve that.

What we wanted to share with you today was targets with a plan and a realistic, doable plan on how we're going to achieve that, and we'll share that with you later on this morning. Also pleased with the interest we're getting in that project, from all over the globe, and we've announced this morning some MOUs with SK in particular, our Barossa partner, looking at CCS expansion into National Carbon Credit bilateral agreement, so that's basically getting access to foreign carbon credits, qualify for foreign carbon credits from CCS here in Australia, and foreign investment funding, clean energy funding support for those types of projects, and of course the development of zero emissions hydrogen.

And why do we call it zero emissions hydrogen? Because it's the development of hydrogen with zero emissions, and what I mean by that is we can - we believe we've got a roadmap to creating hydrogen from our natural gas today at the long-term target prices government are putting out there for the mid 30s, we could make that today if there was a market to support it, and coupled with CCS be able to handle the CO2 that you would generate from that process. So it becomes a zero emissions hydrogen capability.

...

That's my favourite chart. That's why I laboured on it. Take note of that chart. That's my favourite chart. This chart is really talking about the way forward, right? This is the growth, and obviously you can see that bump that used to be 2025 is going to the end of 2025 now, and it's moved out a bit of time because of the impacts of COVID this year, because of the fact that we had to slow everything down. That won't surprise you. I think that that's probably what you all expect to see.

However, the quantum's the same. I think the other - and it took a lot for the organisation to do this, is to show you such a long-term outcome into the future, and I think the key takeaway I want to highlight here is the base business profile, going out as far as 2030. It's essentially a flat production profile. That would make sense, the long life natural gas assets, right, they typically have flat production profiles for long periods. The bumps are really either late life assets like Bayu-Undan or the oil and liquids projects, as you'd expect where you see higher decline rates. But the base business, which is predominantly long-life natural gas assets, you can see is a very steady, core business through to 2030.

...

I want to give you a little snippet of how you should think about switching to, say, hydrogen, right? One of the problems we have here on the east coast gas market is lack of infrastructure. That's after 50 to 60 years of operating a natural gas market. How quick do you think we'll build a hydrogen infrastructure to replace it. Fifty to 60 years, and we haven't built the natural gas infrastructure we need for the market. It's not going to happen overnight, and it will cost trillions - not billions - trillions of dollars to build that infrastructure. Now, put that on a global scale, because I've told you already, we could deliver hydrogen around $2 per kilogram or even less, today. Who'd buy it on scale? Nobody can take it, because the transportation challenges haven't been worked out yet. The infrastructure at the other end to process it, transport it, hasn't been worked out.

...

That's how we see our transition, and we think we're very well placed as Santos to lead that effort across our industry. We've got some unique opportunities to be a leader in that space. So this morning, particularly CCS has allowed us to talk about our new targets, and I'll quickly touch on those. And really, these reduction targets are designed to support Australia's commitment to the Paris Agreement, and so we had existing 2025 targets. They are maintained, and the good news is, we're ahead of those targets. Every year we set those targets, we're beating those targets, so that's good, and you can read about that in our climate change report, which will be issued earlier in the year. Riveting reading. I recommend it to everyone in the room. It actually is riveting reading. You should read it. It's a great report.

But today, we've announced some new 2030 targets, and pleasingly, the one around Scope 1 and Scope 2 emissions is to reduce those emissions from our existing business by 26% to 30% by 2030, based on our 2020 baseline, and what's important about that, we're actually ignoring the savings we've already made over the last few years. So those savings we've made in recent years with those Energy Solutions projects, we're banking them and we're starting from today's baseline, so it's a further 26% to 30% by 2030.

In addition to that, Santos is committed to reduce customer emissions, customer Scope 1 and 2 emissions - or Scope 1 emissions - by 2030 by greater than 1 million tonnes per annum, and we will do that by fuel switching, by either converting someone from coal to gas or diesel to gas or certainly cleaner fluids than they're using today. And so we'll work with our customers to do that, and ultimately, as I said, our roadmap to zero emissions by 2040.

Now, there's a number of technology enablers I won't go through at the bottom of this slide, as we've already talked about some of those on the previous slides. I talked earlier about how we want to be able to present a roadmap, and we're putting out there, you can hold us accountable to this if we're all around long enough to do so, but ultimately, we put our roadmap out there. You can see, I think it's a very logical roadmap. This is not timeline, so our emissions won't increase like this first bar shows. It just builds in the additional emissions that growth brings to the portfolio. We're building it from an accounting purpose, so you don't miss it. So you can see the true extent of the reduction that we're actually committing to.

...

And then we see CCS expansion, and there's a number of opportunities we're working on for CCS expansion, and of course the 2040 plan assumes that we will push our hydrogen business. We'll start to generate some hydrogen, and the great thing about that is that, as I say, we already have done studies and worked on that. We're not announcing a study today. We're announcing a plan. This is our roadmap to 2040 net zero emissions, and it's one that we'll share that journey and the progress on that journey with you as we go forward.

[246]

Once we start to generate hydrogen though from methane, and as we say we've got a lot of low-cost ingredients around us that make that possible at $2 or less, today per kilogram. One of the benefits to that is that you produce CO2 through the processing, and so by being able to capture that and inject that, and that qualifying for carbon credits to create zero emissions hydrogen, we can generate a lot there as well. If you think of carbon credits as your revenue stream, that becomes a revenue stream that heavily subsidises the cost of the hydrogen generation, and then use the hydrogen for your fuel. That's why having that ready-made market, internal market, can become a real lever for us to accelerate that process instead of waiting for the infrastructure build for export and of course the customer market to do that.

Other opportunities include bringing other peoples' CO2 back from other oil and gas operations elsewhere, and you'd be surprised at some of the things we've been asked to investigate, including CO2 from other parts of the world. Now I don't know how that works, but people want to talk to us about bringing their - importing CO2 into the Cooper Basin if we can permanently store it. So I think there's a long way to go to see what that will play out like, Mark; I don't think we understand and know yet what all the potential opportunities will be. But I think the exciting thing is because we're opening this opportunity up, opportunities are developing, and this is very much a new market, right, it's a new business if you like, and opportunities are opening up. But the Cooper Basin, just has the natural ingredients that gives it a competitive advantage that we haven't seen replicated anywhere else globally, and that might be good fortune - I'd love to say is good planning, I'm not sure I can. It's good planning to get the team to get us to where we are today, but Mother Nature's been pretty fortunate to us in terms of giving us the right location for this.

[257]

(1) Santos' forecasts for existing projects and approved growth projects were for production to peak in 2025 and, absent further growth projects, to decline to approximately 100 mmboe by 2030 and even further by 2040. Mr Woods believed that Santos' intention was to seek to maintain production at 2025 levels through other growth projects. Relevantly, as at December 2020 Mr Woods was aware of the following matters:

(a) in 2020 the Cooper Basin Asset team shifted its approach to production from seeking to grow production to maintaining broadly flat production. In about mid 2020 Mr Woods attended a meeting of Santos' senior executives at which Mr Gallagher informed the meeting that the production strategy for the Cooper Basin asset should be to achieve flat production at levels of approximately 17 mmboe focused on supporting the long term backfilling of production to preserve the life of the asset in line with the disciplined operating model. Mr Woods understood that a key reason for this decision was that sustaining significant growth in the Cooper Basin would be capital intensive and Santos was committed to its disciplined operating model approach, including by ensuring that the Cooper Basin continued to be free cashflow positive. Another reason was to ensure the longevity of that asset. Mr Woods cannot now recall the specific type of management meeting at which this decision was made; and

(b) in 2019 and continuing through 2020 the Cooper Basin Asset team had been assessing a new set of fields in an area called Moomba South. In April 2019 Santos announced the results of its phase 1 appraisal program which included that the preliminary indications were that those fields had "approximately 50% lower CO2 compared to adjacent field production". Santos continued to assess the Moomba South fields during 2020 and the Cooper Basin Asset team was planning to increase the amount of production from Moomba South into its plans. The analysis of Moomba South continued after 2020. Production from Moomba South could displace other potential sources of production that the Cooper Basin Asset team had been factoring into their plans. One such source was called "DD Coal" which refers to coal that is deeper than a few hundred meters under the surface. Mr Woods was aware that emissions intensity of gas production from DD Coal was higher than from other sources;

(2) he believed that future growth projects to maintain production levels were likely to be at no greater emissions intensity than the current portfolio of projects. This was because other opportunities available to Santos were generally from lower emissions intensity fields, such as PNG and the Dorado fields development (an offshore development project near Port Hedland, Western Australia), when compared to Santos' current portfolio including assets such as those in the Cooper Basin. Mr Woods gave examples of the potential growth assets with low emissions intensity that could increase production above the approximately 100 mmboe in 2030 on which he based his belief;

(3) Santos' commitment to the Targets meant that any decision about whether to pursue any growth project in the future would have regard to whether to do so was consistent with those Targets or otherwise could be further offset from additional activities considered as part of that project that were not in contemplation as part of the Net Zero Roadmap. This could include further land based offsets projects, or acquisition of voluntary credits or ACCUs from the market. From June 2021 this strategy was reflected in a change to Santos' Risk Appetite Assessment. The assessment includes a strategic risk exposure for "Carbon Emissions" which provides that there is no tolerance for a decision or activity that will result in Santos failing to meet its emissions reduction targets;

(4) it was possible for further production growth or revenue growth to come from projects that did not result in net positive emissions, such as the CCS Expansion and hydrogen with CCS opportunities; and

(5) the Net Zero Roadmap did not account for any future potential divestments Santos might make that had not yet been announced to the market.

[276]

Each of Messrs Woods and Jaffray and Ms Luo gave evidence about their respective roles in the development of the Targets and the Net Zero Roadmap.
Mr Woods was involved in developing the strategy for the Targets and the Net Zero Roadmap. At the time, he was also responsible for Santos' midstream gas processing facilities at Moomba, Port Bonython and Darwin LNG, its PNG LNG project and CCS projects. Given those responsibilities, Mr Woods was the executive with responsibility for a number of the projects and initiatives that would form part of Santos' strategy to achieve the Targets and the pathway reflected in the Net Zero Roadmap, but which were being progressed independently of the development of the Targets and the Net Zero Roadmap.
Each paper that was submitted to the Board was sponsored by a member of ExCom whose responsibilities included the area to which the paper related, referred to as the Executive Sponsor. As VP, People and Sustainability and as part of his responsibility in relation to sustainability, Mr Jaffray was the Executive Sponsor of Board papers about the Targets and the Net Zero Roadmap. In that role, from May to December 2020 he oversaw the direction and framing of the development of the strategy for the Targets and preparation of Board papers and presentations in relation to them and what would ultimately become the Net Zero Roadmap.
Jane Norman, Santos' Chief of Staff and VP Strategy who reported to Mr Gallagher, was the senior executive with responsibility for corporate strategy and also assisted with developing the strategy for the Targets and the Net Zero Roadmap.
In developing the strategy for the Targets and the Net Zero Roadmap, Messrs Woods and Jaffray and Ms Norman were supported by a number of teams at Santos, each of which was responsible for different aspects of the strategy, including the development and verification of data contained in Board papers and presentations. Primary support came from Ms Luo, as part of her role in the Energy Solutions team and because of her involvement in the initiatives described at [153] above, and Ms Genet.
More particularly, Ms Luo assisted Messrs Woods and Jaffray and Ms Norman by gathering and analysing data and information in relation to the relevant projects and initiatives being progressed or considered at the time, and which were considered as potential options to enable Santos to achieve the Targets.
It was apparent that the process of preparing the various presentations that led to the development of the Targets and the Net Zero Roadmap was collaborative and involved obtaining inputs from several parts of Santos' business and strategic direction, which came primarily from Messrs Woods and Jaffray and Ms Norman. Ms Luo observes that the information and data that she had in relation to the Targets changed over time, with new information becoming available and some information becoming outdated during the process, particularly as work on the underlying initiatives developed.
Messrs Woods and Jaffray and Ms Norman were also supported by other Santos teams which had operational responsibility for various initiatives, many of which were being progressed independently of the development of the Targets and the Net Zero Roadmap but which were also considered to be initiatives that could form part of Santos' strategy for achieving the Targets. This included Mr Harley, whose role at the time as Project Manager, Moomba Carbon Capture and Storage, sat within the Energy Solutions team.

[278]

From May to August 2020, work was undertaken to develop potential options for the 2030 Target for consideration by Mr Gallagher and the rest of the Board. This included consideration of an appropriate emissions baseline, the nature of the emissions reduction target (e.g. whether it would be an absolute target or whether it would be adjusted for Santos' equity interests and, if so, how those adjustments would be made), the size of the target reduction in emissions, projected future emissions, and the potential initiatives, projects and activities that might enable Santos to meet the target.
In the week following the 2020 Board Strategy Day Mr Jaffray, Ms Norman and Ms Genet met to discuss the Board's expectations around targets, key internal and external strategic drivers for the 2030 Target, target options at an exploratory level and a work plan to further develop target options for review.
On 18 May 2020, following their meeting, Ms Norman sent an email to, among others, Messrs Woods and Jaffray, Ms Genet and Ms Luo with subject "[n]otes from 2030 Carbon emission reduction target discussion" which recorded notes from the discussion and "[a]ctions".
From June 2020 to August 2020 Messrs Jaffray and Woods, Ms Norman, Ms Genet and Ms Luo, among others, were involved in reviewing and commenting upon several drafts of a presentation entitled "Emissions Strategy and Targets" to be presented to the Board in August 2020 (August 2020 Board Presentation). That process included meetings between Messrs Jaffray and Gallagher, Ms Norman and Ms Genet, among others.
In preparing the presentation for the 2020 Board Strategy Day Ms Luo drafted the emissions forecast to 2030 (slide 56) using data contained in a spreadsheet attached to an email dated 9 May 2020 from Adam Bermingham, a member of the Portfolio team.
On 5 June 2020 Mr Bermingham forwarded an email dated 3 June 2020 to Ms Luo. The email dated 3 June 2020, which was addressed to Mr Wilson, provided "requested source data" and attached "latest portfolio production and emission forecasts (absolute emissions + emission intensity) split by asset on a full lifecycle basis". The email included:

[288]

In the revised draft of the August 2020 Board Presentation Ms Luo amended the emissions forecast slide (slide 6) to distinguish between existing production plans and "Growth" projects which were the Barossa, Dorado, PNG expansion and Narrabri projects. Ms Luo explains that the change did not affect the total emissions forecast and was only a re-characterisation of the existing data. The main reason for it was because the revised draft proposed two options for emissions reduction, both of which involved an emissions reduction target that was proposed to be met prior to the growth projects coming online.
On 21 July 2020 Mr Jaffray, Ms Norman and Ms Genet met with Mr Gallagher to discuss the work done on the 2030 Target and the draft August 2020 Board Presentation. Mr Jaffray recalls that at the meeting Mr Gallagher told him that he wanted further analysis to be conducted to assist with developing the 2030 Target. Mr Jaffray understood that Mr Gallagher wanted to understand all available or potentially available options to reduce emissions by 2030, which included use of CCS, reductions in customers' emissions by displacing their use of coal or diesel with natural gas and LNG, reductions in fuel, flare and vent (FFV) activities, purchasing of carbon credits as well as various potential hydrogen projects, both for producing hydrogen to be used in Santos' own operations, and to be supplied to third parties.
On 21 July 2020, after the meeting referred to in the preceding paragraph, each of Ms Norman and Ms Genet, sent an email to, in the case of Ms Norman, Messrs Woods and Jaffray and Ms Genet, and in the case of Ms Genet, Messrs Jaffray, Jain and Wilson, Ms Norman and Ms Luo, setting out notes of the meeting with Mr Gallagher and actions or next steps.
In the period that followed, further work was undertaken on the August 2020 Board Presentation.
On 23 July 2020 Ms Luo sent Mr Jaffray, among others, two emails attaching drafts of the August 2020 Board Presentation:

[291]

At the time of receipt of these emails Mr Jaffray was aware that Santos was progressing a study by GHD, a global engineering consultancy firm, about the production of hydrogen as part of the Moomba CCS Project which is the GHD Review described more fully below. Mr Wilson provided Mr Jaffray with periodic updates on the GHD Review.
On 29 July 2020 Ms Luo sent an email to Ms Norman, copying Messrs Wilson and Jain and Ms Genet, attaching a further draft of the August 2020 Board Presentation and responding to Ms Norman's earlier comments. In her covering email, among other things, she explained that on slide 3 she had removed "the additional emissions from Exploration" because she thought this "was confusing" and that all the "reduction calculations" were "done on 6.2 MtCO2e".
Ms Luo said that she understood that the emissions described as "Exploration" in slide 3 were high-level estimates of emissions that may arise from Santos developing and producing the exploration opportunities referred to in the information provided by the Portfolio team on 5 June 2020. She said that she proceeded as she did because she considered those exploration activities, and any potential projects and emissions that might arise from them, to be too contingent at that time. The result of this change was that the chart showed total forecast emissions for 2025 and 2030 of 6.7 MtCO2e and 6.2 MtCO2e, respectively. Ms Luo also included text on the slide stating that there would be "increasing intensity in the Cooper Basin", which was based on the data provided by the Portfolio team and not on any direct information she had received from the Asset team about the likely future emissions intensity in the Cooper Basin.
Later that day, Mr Jaffray provided Mr Gallagher with a further draft of the August 2020 Board Presentation. This draft presented three possible emissions reduction targets which could be achieved through a combination of Santos' energy solutions projects, supplemented by purchasing carbon credits, and included the potential cost of purchasing those credits.
On 3 August 2020 Ms Norman sent Mr Jaffray an email setting out her notes from a discussion with Mr Gallagher. Mr Jaffray cannot specifically recall the meeting but says that, as Ms Norman often sent summaries to attendees of meetings with Mr Gallagher shortly after the meeting took place, it is possible that he attended. In her email, Ms Norman records that one of the points discussed was to "[s]how us what a compound annual growth rate of 5% per annum looks like to 2030 from 2025?". It was Mr Jaffray's general understanding at the time that production levels decline over time from existing oil and gas assets, and that Santos' strategy was to seek to replace production from declining assets with production from other projects. He understood from this statement in Ms Norman's email that 5% compound annual growth rate (CAGR) was being proposed as one possible assumption to be considered for the purposes of understanding Santos' potential future production levels, taking into account the strategy that declining production from existing assets would be replaced.
On 5 August 2020, following her discussions with Mr Jaffray and Ms Norman, Ms Luo sent them an email, copying Ms Genet and Messrs Wilson and Jain, attaching a draft of the August 2020 Board Presentation in which Ms Luo wrote:

[339]

On 13 August 2020 at 10.46 am Ms Luo sent an email to Ms Genet and Messrs Jain and Wilson the purpose of which was to "document the changes that have been made in the last couple of days on this pack going to the Board and make sure that [the recipients] all understand the basis of the current document". The pack to which Ms Luo was referring was the final August 2020 Board Presentation sent by Mr Jaffray to Ms Devonish earlier that day. In relation to the emissions forecast slide (slide 4) Ms Luo noted that the following adjustments had been made:
1. 2005 emissions have been adjusted to include 2020 emissions for Northern Australia at a full year of 68.4% equity. This will not match any number that we publish or report, given that our equity change occurred on 28th May in 2020.
2. 2016/17 emissions have been adjusted for changes in equity between 2016/17 and 2020 - this includes for Varanus Island, Devil Creek and Northern Australia. This includes Northern Australia at 68.4% for a full year.
3. 2020 emissions are based on our LE for Operated assets, but with Northern Australia at a full year of 68.4% equity. Non-operated assets are assumed to remain flat from the latest published number from 2018/19. 2020 production is based on LE provided by Finance.
4. 2025 emissions are based on Portfolio with Dorado emissions adjusted. The Dorado Portfolio case assumed an emissions intensity from historical WA oil fields. The Dorado number shown here has been provided by the Project team, who calculated this based on flat gas compression and injection from 2025 to 2035 for Phase 1 development.
5. 2030 emissions are based on Portfolio with Dorado and Cooper Basin emissions adjusted. Dorado has been adjusted as per 2025. Cooper Basin emissions are assumed to remain flat from 2025. 2030 production is assumed to be flat - there is no basis for the production growth compared to Portfolio. This allows no emissions associated with production growth.
6. 2035 emissions are based on Portfolio with Dorado emissions adjusted as per 2025 and 2030. 2035 production is assumed to be flat and emissions associated with growth keeps the Portfolio emissions flat. There is no basis behind these assumptions.

[347]

Ms Luo: Yes. There was no analysis supporting the production and emissions numbers.

Mr Hutley: No. What it meant was if you accepted Portfolio - which I think you thought was the source of truth within this company; correct?

Ms Luo: We had previously been directed by Mr Gallagher to treat Portfolio data as the central source of truth. Yes.

Mr Hutley: Right. And treating it as the central source of truth, this document provided for 17 million barrels of oil being produced with zero emissions; that's correct, isn't it, as you understood it?

Ms Luo: Or changes in, yes, production and emissions intensity.

Mr Hutley: Or possibly anything, but you didn't know how it could be done; correct?

Ms Luo: No. We didn't have any analysis supporting that.

Mr Hutley: And that was your concern; correct?

Ms Luo: The purpose of this email was to document the changes that had been made over the past several days, just to ensure that it was all together in one location - that it was clear, the source of data.

...

Mr Hutley: You were saying this because you were worried that what was happening here didn't make sense; that's correct, isn't it?

Ms Luo: I state in my affidavit that I believe the changes were - made sense to me, at least some of them. The purpose of this email was to ensure that the decision-makers had the source of data for the inputs.

Mr Hutley: And when you said that some of them make sense, what you're referring to, the changes to Cooper and the changes to Dorado; that's correct, isn't it?

Ms Luo: Yes, I believe that's what I said in my affidavit, yes.

Mr Hutley: Yes. None of the other changes made any sense to you, did they?

Ms Luo: They were top-down assumptions, as I've stated.

Mr Hutley: Do you agree with what I have put to you? The other changes did not make any sense to you, did they?

Ms Luo: I think the change specifically to hold emissions flat rather than to allow them to decline did make sense to me because we didn't want to start from a lower emissions base than what would be aligned to the corporate strategy.

Mr Hutley: But what didn't make sense is to assume that you would produce 120 million barrels of oil if you made the assumption with respect to emissions; that's correct, isn't it?

Ms Luo: Specifically for the 2030 number, there was no analysis supporting those two numbers.

Mr Hutley: Do you agree with the proposition I put to you: keeping the emissions at one hundred and - the production at 120 million barrels of oil if you assumed emissions at 5.9 million did not make sense to you, did it?

Ms Luo: Specifically for the 2030 numbers, there was no analysis supporting that. Yes.

...

Mr Hutley: The proposition is you thought there was no basis to assume flat production at 120 million barrels at 2030 with emissions of 5.9 million tonnes per annum; that's correct, isn't it?

Ms Luo: Yes.

[391]

Following the October 2020 Board meeting, Ms Genet took responsibility for working with the Energy Solutions and Investor Relations teams to prepare slides about the Targets for inclusion in a presentation to be given on the Investor Day, i.e. the Investor Day Presentation.
As part of the preparation of the Investor Day Presentation summarising Santos' pathway to the 2040 Target, Ms Luo assisted with the design of a waterfall chart on slide 15 i.e. the Net Zero Roadmap. This included assisting with the order, sizing, colouring and description of the bars in that chart representing the opportunities that formed part of the Net Zero Roadmap (which is included in Annexure B to these reasons).
The Net Zero Roadmap did not show precise amounts for each of the bars. As part of developing the Net Zero Roadmap Ms Luo considered what amounts might reasonably be achievable for each of the projects based on the information and level of assessment that had been completed by that point in time. The size of the bars was scaled to reflect those amounts.
On 12 November 2020 Andrew Nairn, Head of the Investor Relations team, circulated a working draft of the Investor Day Presentation to, among others, Mr Gallagher which included a draft of the Net Zero Roadmap. The draft did not include a component for "Customer Scope 1&2 offsets" but did include "CCS scale-up". The ACCR submits that there is no evidence about who decided to amend the Net Zero Roadmap in this way, their reasons for doing so, or evidence of any further work or modelling having been carried out since it was approved by the Board at the October 2020 Board meeting. The ACCR submits that the Court should infer that there was no such work or modelling, it was simply a name change by the Investor Relations team.
But that inference is not available. First, the Board did not approve the Net Zero Roadmap at the October 2020 Board meeting. It approved the Targets and their announcement at the Investor Day. Secondly, the Investor Relations team was responsible for collating the Investor Day Presentation but not for the accuracy of its content. Thirdly, and critically, it is inconsistent with Mr Woods' evidence that he would have been spoken to about the inclusion of "CCS scale up" in the draft Net Zero Roadmap as he was the "point person" in relation to it. The evidence before me, some of which is set out below, shows that drafts were circulated for review of, and meetings convened to discuss, the Investor Day Presentation. Mr Woods was both a recipient of the drafts for review and attended meetings to discuss them.
On 19 November 2020 Mr Nairn circulated a working draft of the Investor Day Presentation which included "a number of updates for discussion" to Messrs Gallagher and Woods, among others. In the draft "CCS Scale-up" had been renamed to "Moomba CCS Phase 2".
On 20 November 2022 Julia Grewar, manager, Investor Relations team, circulated a further draft of the Investor Day Presentation to Mr Woods, copied to Ms Norman and Mr Nairn. In her covering email Ms Grewar asked Mr Woods to "update the energy transition and emissions reduction roadmap" following the review which had taken place earlier that day. Mr Woods forwarded the draft to Messrs Wilson and Nicholas Pembshaw, General Manager, Commercial Midstream Infrastructure and Low Carbon Operations team.
On 22 November 2020 Mr Wilson returned the draft Investor Day Presentation with his "answers and comments included". In relation to the Net Zero Roadmap included in the draft Mr Wilson added a comment next to the descriptor "Moomba CCS Phase 2" that:

[401]

On 30 November 2020 Mr Jaffray forwarded Ms Devonish's email to Ms Genet noting that they needed to verify slides 14 to 16 and asking that she "make the appropriate enquiries". By email also sent on 30 November 2020 Ms Genet informed Mr Jaffray that she had "reviewed the slides and sought input from others where necessary" and made "[s]uggested changes for accuracy" as set out in her email. In turn, on 30 November 2020 Mr Jaffray provided his comments on slides 14 to 16 in the draft pack to Ms Devonish.
Mr Jaffray's evidence is that at the time that he sent his email to Ms Devonish on 30 November 2020 he considered (and still considers) that the statements in slides 14 to 16 of the draft Investor Day Presentation accurately described Santos' strategy to set the Targets and its intention to achieve them. Mr Jaffray also considered (and still considers) that the Net Zero Roadmap (on slide 15) accurately described a pathway by which Santos could achieve the Targets, and that it was a pathway that Santos intended to implement. Taking into account the long-range nature of the Targets, it was Mr Jaffray's understanding at the time (and remains his understanding) that, while the Net Zero Roadmap represented a pathway that Santos intended to implement, the precise pathway to achieving the Targets would continue to evolve over the 20 year period to 2040 in light of future technological, economic, regulatory and other developments.
Mr Jaffray was confident that the team involved in developing the Targets and the Net Zero Roadmap had undertaken sufficient analysis to identify and develop a high level pathway that centred on CCS and hydrogen. Mr Jaffray was of the view at the time that CCS and hydrogen were known, existing and technically viable technologies. The challenge was making these technologies commercially viable. However, Santos had 20 years, which Mr Jaffray considers to be a significant period in the industry, equating to two or three business cycles, to achieve the Targets and he was confident that there were likely to be technological, regulatory and economic developments over that period that would positively impact commercial viability.
Mr Jaffray's confidence was based, at least in part, on his observations at the time of an increase in focus and commitment to decarbonisation globally, including the adoption of the Paris Agreement. This, in turn, was generating an increase in global demand for emissions reduction solutions. In Mr Jaffray's experience, an increase in demand can have a positive impact on technological development over time, as well as the emergence of necessary regulatory and economic developments to meet the demand. At the time Mr Jaffray considered that the pressure on governments to decarbonise was likely to continue to increase, and that this would occur over time through regulation, supported by economic incentives.
Mr Jaffray considered that an example of demand leading to significant technological, economic and regulatory change over a similar time period was the development of the LNG market. He was aware that, as recently as the late 1980s, there was very little LNG infrastructure globally and the LNG market did not exist in Australia. However, from the late 1980s, global demand for gas grew stronger, particularly in Asia. In order to meet the demand, the market needed to develop a way to transport gas to these markets, which is what occurred. By 2000, the technology had developed rapidly to enable a significant market in the transport of LNG, including large numbers of LNG transport ships and the establishment of LNG import and export terminals globally, including in Australia.
Mr Jaffray was also confident in Santos' ability to achieve the Targets because he knew Santos to be a business that was very good at setting a target and then implementing a strategy to achieve that target. For example, by 2020 Santos had successfully implemented a number of aspects of the 2016 Strategy. This included streamlining its business to focus on five core assets and significantly improving its financial standing. In addition, in the four years since the 2016 Strategy was developed, Santos had made significant progress in relation to the emissions reduction aspect of it. The Energy Solutions team had grown to become a significant and important division within Santos, Santos was on-track to achieve the 2025 Targets announced in 2018, and the Moomba CCS Project was at an advanced stage of development.
Mr Jaffray also understood at the time, in relation to the 2040 Target, that in addition to the emissions reduction activities that Santos intended to implement as set out in the Net Zero Roadmap, there would be the opportunity in the future for Santos to generate or obtain carbon credits, including ACCUs, to offset some of its emissions. He considered this to be another mechanism by which Santos could supplement its emissions reduction activities, if needed, to achieve the 2040 Target. For example, on 29 July 2020 Mr Jaffray provided Mr Gallagher with a further updated draft of the August 2020 Board Presentation. That draft presented three possible emissions reduction targets which could be achieved through a combination of Santos' Energy Solutions projects, supplemented by purchasing carbon credits, and included the potential cost of purchasing those credits.
On 30 November 2020 Mr Woods sent an email to Ms Luo with subject line "Can I have the numbers for each of the columns in the Roadmap to net zero slide". The email had no other content apart from Mr Woods' sign off. Mr Woods wanted to check how the waterfall chart in the draft Investor Day Presentation sent to him, I infer by Ms Devonish, reflected the emissions reductions from the projects on which he was working.
Later that day Ms Luo sent Mr Woods the figures he requested, which she said were the amounts for each of the bars in the Net Zero Roadmap, by providing the following table (Project Estimates Table) and additional commentary:

[411]

The 2030 Target and the Net Zero Roadmap adopt a 2020 baseline of 5.0 MtCO2e and forecast further growth projects that will result in a 2025 emissions amount of 5.9 MtCO2e i.e. the 2025 Forecast. The baseline for the 2030 Target and the Net Zero Roadmap represents Santos' equity share of Santos' Scope 1 and 2 emissions from the financial year ended 30 June 2020 production volumes, adjusted to include the Bayu-Undan project and the Darwin LNG at 68.4% from 1 January 2020.
Ms Luo explains that the 2020 baseline represented Santos' net share of Scope 1 and 2 emissions from FY2019/2020 production volumes, with some adjustments to reflect equity interest changes that had occurred during that year. The 2025 Forecast reflected data concerning further planned growth projects which Ms Luo had obtained from the Portfolio team. The 2020 baseline was finalised and the 2025 Forecast developed from about May to September 2020 and, according to Ms Luo, were subject to a number of changes throughout that period, as set out above.
Mr Jaffray says that prior to settling on the 2020 baseline, he was involved in discussions about whether a baseline from earlier years should be used for the 2030 Target. As set out at [292] above, during the 18 September 2020 Meeting Messrs Gallagher, Woods and Jaffray, Ms Norman, Ms Genet and Ms Luo discussed revising the baseline for the 2030 Target to Santos' 2020 emissions (adjusted for current equity). At the time, Mr Jaffray understood that the decision was made in part because selecting 2020 as the baseline, instead of an earlier year such as 2005, would mean that multiple adjustments would not need to be made for changes in emissions due to acquisitions or declines in production (except for the Bayu-Undan reservoir which was rapidly declining).
Mr Jaffray also understood that the Targets were based, in part, on the assumption that Santos' net share of Scope 1 and 2 emissions would increase from the 2020 baseline to 2025, as Santos achieved the 2025 Production Strategy, and then stay constant at 5.9 MtCO2e from 2025 into the 2030s. This was an assumption which arose in the context of his discussions with Mr Gallagher and Ms Norman in August 2020 in preparation for the August 2020 Board meeting.
Mr Jaffray understood that there would be a range of growth opportunities from which Santos would need to choose to achieve that objective, including for example its selection of gas asset fields which would result in lower levels of emissions intensity. The opportunities to be pursued by Santos would be influenced by Santos' long-term strategy to achieve revenue growth over time through carbon neutral projects, and from projects other than oil and gas, such as CCS and hydrogen.
Mr Jaffray observes that the assumption that Santos' net share of Scope 1 and 2 emissions would increase from the 2020 baseline to 2025 and then stay constant at 5.9 MtCO2e from 2025 into the 2030s was reflected in the overall evolution in Santos' operational strategy to manage more proactively and reduce emissions, including as part of the continued implementation and evolution of the 2016 Strategy. There were a number of initiatives and activities of which Mr Jaffray was aware that reflected this strategy, including the inclusion of an emissions reduction target in Santos' company scorecard and the inclusion of emission reduction and associated targets in the Santos executive scorecards (see Part 1.6 above).
Relevantly, Santos excluded from its emissions forecast for the 2030 Target any exploration opportunities where no decision had been made to pursue them to production and the May 2020 Board Presentation had provisional amounts for "Other potential growth" to accommodate this variable. At the time, Mr Jaffray understood that the "Other potential growth" referred to exploration activities around Dorado, the Beetaloo Basin, McArthur Basin and offshore Darwin LNG. Given the uncertainty in relation to them, these activities were not included in Santos' emissions forecast for the 2030 Target.

[414]

Ms Luo explains that the estimated reduction of 1.5 MtCO2e per annum in the Project Estimates Table for CCS Expansion represented the remaining reduction required for Santos to achieve the 2040 Target. At the time Ms Luo believed that Santos would be able to achieve emissions reductions of at least that amount from one, or potentially more than one, of the opportunities referred to in the preceding paragraph. She believed that the estimated reduction for CCS Expansion was conservative as the opportunities underlying that component could potentially generate a much larger emissions reduction. She also considered that the available CCS opportunities would enable Santos to reach its 2040 Target even if other activities in the Net Zero Roadmap were not progressed or did not result in the emissions reductions she had estimated for those activities. It was for that reason that she referred to the CCS Expansion amount in the Project Estimates Table as a "nominal number making up the difference" (see [345] above).
Mr Jaffray had a high degree of confidence in CCS as a technology and believed it would become a major growth opportunity for Santos over the coming decades. As at 2020 he was aware that CCS was a technology that was in use globally and recalls that in about 2017 or 2018, members of the Energy Solutions team visited a number of fully operational CCS sites in the United States of America as part of their research and analysis into CCS. He also considered that Santos already had many years of experience in parts of the CCS process at that time. For example, Santos had been capturing and separating CO2 from the gas streams of its assets as part of the venting process and had also been reinjecting gas into the wells of its assets (which was a well-established industry process) for a number of years. In addition, the Cooper Basin had a number of depleted reservoirs with large storage capacity. Accordingly, Mr Jaffray was confident that Santos had the technical expertise and capability to successfully implement CCS in its own fields. That confidence was also in large part based on the work Santos had undertaken and the milestones it had achieved since the establishment of the Energy Solutions team in 2017. CCS was identified as a potential opportunity from an early stage in the work of that team and Santos had since undertaken significant work in developing CCS, which had resulted in Moomba CCS Phase 1.
At the time of the Investor Day Presentation, Mr Jaffray understood that Santos also had been conducting work on additional projects that could be considered for CCS and which could replicate the success it had achieved with Moomba. Mr Gallagher identified "CCS growth projects" as "additional projects" which could assist in achieving the 2040 Target. Mr Jaffray also observed that the opportunity of utilising Third Party CCS to achieve emissions reductions had been under consideration since the August 2020 Board Presentation. Given the success of Moomba CCS Phase 1 and the opportunities of which he was aware in relation to other CCS projects, he had a high degree of confidence in the technical and strategic ability of Santos to implement Third Party CCS in the future.
At the time, Mr Jaffray understood that there was no established methodology for Santos to obtain carbon credits for the storage of carbon emissions generated and captured by third parties. However, he understood that third party customers could generate carbon credits by Santos storing their CO2 and that those carbon credits could be transferred to Santos as part of a commercial arrangement, or that Santos could use the revenue from sequestering the third party CO2 to purchase carbon credits. Mr Jaffray understood that there was an active market for carbon credits at that time, and that the ability to generate and sell those credits had the effect of incentivising businesses to reduce their carbon emissions. In Mr Jaffray's experience, it was also a common practice in commercial dealings for contracts between entities to contain clauses relating to peripheral instruments. He was aware, for example, that at the time there was discussion in the industry regarding "Green LNG Shipments", which he understood to be shipments which were contracted on the basis of a guarantee that all the emissions relating to the shipments had been offset, and that customers were prepared to pay a premium for such shipments.
Mr Jaffray was confident in the CCS technology and the demand for CCS in the future, given there had been significant national and international support for the development and expansion of the use of CCS. For example, prior to December 2020 he was aware that:

[426]

(1) it could be developed as an opportunity at Moomba or at another future CCS site;

(2) the work undertaken as part of Moomba CCS Phase 1 gave him confidence in the technical and commercial viability of CCS projects, and demonstrated that CCS could be undertaken at a low cost;

(3) a key cost for Third Party CCS is the transportation of CO2 to the CCS site which could be managed by:

(a) conducting studies such as those being undertaken by the Energy Solutions team at the time which were in relation to infrastructure routes that could assist Moomba projects (including the Moomba CCS Project); potential further reservoirs near expected points of high emissions likely to reduce cost of future CCS and potential pipeline routes out of Moomba;

(b) studying locations where it was possible to obtain the highest volumes of CO2 within a concentrated area, i.e. CO2 hubs. The mapping of these hubs would enable the most cost effective locations for developing infrastructure to capture and transmit CO2 to a Santos CCS site. The Energy Solutions team conducted these assessments regularly and communicated the results to Mr Woods; and

(c) continuing to engage with industry and governments to develop initiatives to support Third Party CCS;

(4) the demand for Third Party CCS would increase as:

(a) companies emitting CO2 sought to identify ways to decarbonise their operations in line with the global transition to net zero; and

(b) the price of carbon credits increased, which would make the direct decarbonisation offered by Third Party CCS competitive with opportunities for companies to offset their emissions through acquiring carbon credits;

(5) an ACCU methodology for CCS would be established (which occurred on 1 October 2021 pursuant to the Carbon Credits (Carbon Farming Initiative - Carbon Capture and Storage) Methodology Determination 2021 (Cth)). I note that it was not in dispute that it was reasonable for Santos to assume, as at December 2020 and February 2021, that an ACCU methodology for CCS would be established. While the methodology for Santos to obtain carbon credits for the storage of carbon emissions generated and captured by third parties had not been established as at December 2020, Mr Woods believed it likely that Santos would be able to obtain carbon credits for Third Party CCS given the environmental benefits of decarbonisation and government support for CCS. This would either be through a new ACCU methodology, international credits (for storage of CO2 captured in other countries) or as part of a commercial arrangement entered into with the third party that generated and captured the carbon emissions. As to any commercial arrangements, Mr Woods believed that the sequestering of a third party's emissions would enable the third party to generate ACCUs via existing methodologies and, as part of the commercial negotiation for providing CCS, Santos would seek to have those ACCUs transferred to it; and

(6) Santos would be able to identify a large number of potential customers for Third Party CCS. The sectors that Mr Woods considered as potential Third Party CCS customers, because they emit significant quantities of CO2, which are hard to abate, were coal power plants, ammonia producers, other gas facilities, critical metals producers, brickworks, plastics manufacturers and fertiliser producers, and other emitters that have net emissions baseline obligations across a variety of industries. At the Investor Day, Mr Woods said:

[439]

By the end of November 2020 Mr Jaffray was not aware of the precise level of emissions, if any, expected to be generated from the production of hydrogen by Santos. However, having reviewed work undertaken by Ms Luo in connection with preparation of the August 2020 Board Presentation he understood that any emissions would be negligible and sequestered.
At the end of November 2020, Mr Jaffray was comfortable including the Hydrogen with CCS component in the Net Zero Roadmap for the following reasons.
First, Mr Jaffray was confident a market for hydrogen would be established (with the necessary incentives from the Federal Government and other countries, including Korea and Japan), because of the significant pressure on companies and Australia as a whole to decarbonise and because renewable energy sources are not sufficient for certain industries. For example, renewable energy sources are not sufficient for industries with high power intensity requirements, such as some industrial processes (e.g. cement/brickmaking) or long-distance haulage. Mr Jaffray believed that hydrogen provided a solution for these types of applications.
Secondly, Mr Jaffray was aware, through his responsibility for the Public Affairs team, that State and Federal Governments had been progressing policies in relation to Australia's hydrogen industry. For example, in 2019 the Council of Australian Governments Energy Council published a document titled "Australia's National Hydrogen Strategy" which, among other things, referred to the expected future international demand for hydrogen and the potential for hydrogen with CCS. Mr Jaffray recalls that as at November 2020 hydrogen was seen in the industry as the answer for emissions reduction in the future, being a technology that could achieve the required transition to low emissions energy and given that solar and wind had limited large-scale application.
Ms Luo also gave evidence about this component of the Project Estimates Table.
Ms Luo was aware that the estimated reduction associated with this opportunity in the Net Zero Roadmap represented the emissions reductions that would be achieved if approximately 30% of the natural gas used in the east coast domestic gas market in a year was replaced with hydrogen supplied by Santos. In referring to a percentage substitution or percentage blend of hydrogen Ms Luo is referring to a percentage calculated by volume (rather than by mass or by energy output). At the time of preparation of the Net Zero Roadmap Ms Luo believed there was a reasonable prospect that Santos could produce and supply that amount of hydrogen by 2040 and that Santos would be able to reduce its Scope 1 and 2 emissions by an amount reflecting the emissions reductions that would result from Santos producing and supplying that amount of hydrogen (based on [436]-[441] below).
Ms Luo estimated the reductions associated with the Hydrogen with CCS opportunity to be 2.5 MtCO2e per annum (as set out in the Project Estimates Table). The emissions reduction estimates were based on the National Greenhouse Accounts Factors (NGA Factors) published by DISER. The NGA Factors state the emissions associated with the burning of natural gas distributed in a pipeline is 51.53 kg of CO2 equivalent per gigajoule (Natural Gas Emissions Factor). To determine the emissions reduction that would result from replacing an equivalent energy content of natural gas with hydrogen, Ms Luo multiplied the amount of hydrogen in gigajoules that would replace natural gas by the Natural Gas Emissions Factor. She did this as she believed that producing and selling hydrogen to consumers in place of natural gas would result in emissions reduction equal to the amount of emissions associated with the burning of natural gas and that there would be no emissions associated with the burning of hydrogen. Accordingly, the emissions reduction amount that Ms Luo included in the Project Estimates Table for Hydrogen with CCS did not account for any increase in emissions by Santos that would be generated in producing the hydrogen for sale to customers.
At the time Ms Luo was focusing on the possibility of Santos producing "zero emissions hydrogen" which, if implemented, would have resulted in no net increase in Santos' emissions.
The Waterfall Slide in the October 2020 Board Presentation (slide 8) included a range of potential emissions reductions between 0.9 and 4.4 MtCO2e per annum associated with hydrogen sales. Ms Luo explains:

[455]

Santos has commenced a concept study on a hydrogen future for the Cooper Basin. The concept study has been awarded to GHD, one of the world's leading professional services firms in resources, energy and environment.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said that natural gas can be de-carbonised at its source to make "zero-emissions" or "blue" hydrogen. The carbon dioxide produced as a result can then be safely and permanently captured and stored in the same reservoirs that the gas came from.

"The Cooper Basin hydrogen concept study builds on our progress towards the 1.7 million tonne Cooper Basin Carbon Capture and Storage Project for which Santos is targeting a final investment decision later this year, subject to a CCS methodology being approved for the Emissions Reduction Fund," Mr Gallagher said.

"Carbon capture and storage (CCS) is the fastest and most efficient route to a hydrogen economy, using less water, de-carbonising natural gas at its source and eliminating Scope 3 emissions."

"CCS enables the capture of carbon dioxide from the production of blue hydrogen, making it a 'zero-emissions' fuel.

"With over 65 years of experience in the safe production of natural gas, Santos has the operational knowledge, capability and infrastructure to be a leader in the creation of a hydrogen industry right here in Australia."

Mr Gallagher said the development of blue hydrogen from natural gas in combination with CCS will be critical in our transition to a low-carbon future.

"A CCS and hydrogen future proves that emissions reduction and job-creating resource development can work hand-in-hand."

...

Santos' proposed Moomba CCS Project in South Australia would capture the 1.7 million tonnes of carbon dioxide currently separated from natural gas each year at the Moomba Gas Plant and reinject it into the same geological formations that have safely and permanently held oil and gas in place for tens of millions of years.

"With the Cooper Basin's reinjection capacity assessed at up to 20 million tonnes of carbon dioxide per year for 50 years, it has the potential to de-carbonise energy at its source," Mr Gallagher said.

"This exciting opportunity could create high-skilled, well-paying and secure jobs, drive regional development, create new industries and deliver good outcomes for climate and the environment."

Santos and GHD aim to complete the concept study by the end of 2020.

[460]

Mr Woods cannot recall whether he was specifically aware at the time that the Targets were announced that the estimated emissions reduction from the Hydrogen with CCS and Hydrogen Fuel components did not include any emissions associated with the production of hydrogen that would not be captured by using CCS.
On 22 January 2021 Ms Luo delivered a presentation on the results of the Moomba Hydrogen Concept Study to Ms Norman and Mr Woods. In doing so she outlined the estimates, based on the results of the GHD Report, of the costs of producing hydrogen using the SMR Model and the ATR Model. This included, as a separate item, an additional cost of making the hydrogen "zero emissions", which was the cost of obtaining credits to offset the emissions associated with the production of hydrogen. For the ATR Model, Ms Luo's estimate was AUD1.99/kg of hydrogen, assuming a natural gas supply cost of AUD5/GJ. The cost of making the "zero emissions" hydrogen was AUD0.06/kg.
Ms Luo considered that Santos' ability to produce "zero emissions" hydrogen at around AUD2/kg established the potential for the product to be commercially viable because it met the Federal Government's goal of producing clean hydrogen (which included hydrogen made from natural gas using CCS) for under AUD2/kg. This goal was referred to in the First Low Emissions Technology Statement issued by the Federal Government in September 2020.
Ms Luo also considered that the ATR Model could be scaled up to a much larger production capacity than the 800 tonnes per day project assessed by GHD by adding further ATR modules. Ms Luo was not aware of any barriers that would prevent Santos from expanding the ATR Model, given the considerable space and resources at the Moomba site to support this. Ms Luo thought that scaling up the production could generate further economies of scale and reduce production costs further.
Ms Luo's presentation included a slide titled "Moomba 'zero-emissions' hydrogen study outputs" which recorded, among other things, that the daily production of 800 tonnes of hydrogen would result in the emission of 0.6 Mt of CO2. Mr Woods' view was that if that volume of CO2 was offset, then the hydrogen with CCS that Santos contemplated producing would be net zero. In cross-examination Mr Woods accepted that when Santos referred to "zero emissions hydrogen" that was only true if offsets for significant emissions of CO2 to the atmosphere were included but went on to explain that they used the language of "zero emissions" to account for the net effect of blue hydrogen and ultimately transitioning to green hydrogen.

[466]

Mr Woods believed that the capacity for blending could increase with government and infrastructure owner support for the adjustments set out in the preceding paragraph and in supporting pipeline operators whose revenue would be impacted by the lower energy density of hydrogen as a fuel (as they generally get paid for use of pipelines based on energy throughput).
The Energy Solutions team had been undertaking reviews of studies into potential solutions of the issues, which Mr Woods understood could include new lining for pipelines or "looping" pipelines (the installation of new pipelines alongside and parallel to the existing pipelines). He also understood that the distribution pipelines (the pipelines that deliver gas from the transmission pipelines to customers) in Australia would be suitable for high hydrogen content because they had previously been used for distribution of "town gas", which was a blended gas containing hydrogen that was generally used in Australia decades ago and some distribution pipelines were constructed from carbon steel.
Mr Woods was aware that, even if pipelines were limited to lower blends hydrogen, it was possible to enable the delivery of hydrogen blends higher than 20% to specific customers who had or, by 2040, would have equipment that could handle higher blends of hydrogen. He explains that this could be achieved through the use of Pressure Swing Adsorbers, a concept which had been mentioned to him by Mr Wilson in early 2020, which enabled the separation of hydrogen from other gas to a purity of greater than 99%, and that Pressure Swing Adsorbers were being used in other countries, such as Norway and the Netherlands. As a result, gas with a blend of, for example, 10% hydrogen could be transmitted through the pipelines, with the hydrogen being separated out by the Pressure Swing Adsorbers at a point closer to where the customer was located, which could then be delivered through shorter dedicated pipelines to that customer.
In relation to a dedicated pipeline for hydrogen transportation, Ms Luo:

[471]

In mid 2020 Mr Woods was aware that Santos' production and supply of hydrogen to its customers would not directly reduce its Scope 1 and 2 GHG emissions. However, he formed the view that Santos would be able to receive some of the benefit of those emissions reductions to offset its Scope 1 and 2 GHG emissions, by obtaining credits.
Mr Woods explains that in 2020, there was no existing ACCU methodology that would enable Santos to obtain ACCUs directly from the sale of hydrogen to its customers and there was a difficulty in being able to develop an ACCU methodology specific to hydrogen sales because, if both Santos and the customer could obtain ACCUs, there would be a risk of double counting, i.e. two ACCUs being generated for the same reduction in carbon emissions.
Despite this, at the time the Targets were announced, Mr Woods thought that it might be possible for an ACCU methodology to be developed to overcome this issue which was being managed by the Strategy and Sustainability teams. But, even if it could not, Mr Woods considered that Santos could try to rely on its customers generating carbon credits by substituting their existing natural gas usage for hydrogen (for which there was an existing ACCU methodology), and that Santos could negotiate the transfer of those credits to it as part of the commercial arrangement for supplying hydrogen or hydrogen-blended natural gas. That is, Santos could either offer to supply the hydrogen at a low price in exchange for the transfer of the ACCUs to it or supply the hydrogen at a higher price without the transfer of the ACCUs and use that additional income to purchase offsets. Mr Woods considered that a commercial arrangement of that type was possible given that the production and supply of hydrogen would provide the customer with the valuable opportunity of using existing methodologies to generate and surrender or sell credits.
Mr Woods also believed that it was possible for a range of government incentives to be introduced to support the development of the hydrogen market which could enable the reduction of Santos' Scope 1 and 2 emissions, either directly or by supporting the purchase of offsets. These could include incentives like those provided to energy producers that supply renewable energy into the National Energy Market, for example feed-in tariffs or large-scale generation certificates (LGC), created as part of the Federal Government's Renewable-Energy Target, tax-incentives to support hydrogen projects or infrastructure support. Such incentives could enable the reduction of Santos' Scope 1 and 2 emissions, either directly or by supporting the purchase of offsets.
Accordingly, at the time Mr Woods considered that the Federal Government would likely provide for hydrogen an incentive similar to the LGC for solar power, as the inclusion of hydrogen would lower the total number of emissions generated by households in a similar way to solar power, which would reduce Australia's total emissions. LGCs are generated where electricity produced by solar panels is fed into the National Energy Market. They can then be traded and used by, for example, coal-fired power stations to offset emissions. Mr Woods thought that LGCs were appropriate because, like renewable energy, if Santos' hydrogen was blended into the domestic gas supply (i.e. not supplied to customers directly), it would generally not be possible to identify which customers would be the end users of the hydrogen and therefore eligible for ACCUs (unless the hydrogen was removed from the pipeline by specific users, for example, by the Pressure Swing Adsorbers referred to above).
Mr Woods also believed that it was possible that by 2040, international bilateral agreements could be in place to generate international credits that Santos could use to offset its Scope 1 and 2 emissions. Relevantly, Mr Woods was lobbying the Federal Government to negotiate bilateral agreements aligned with Article 6 of the Paris Agreement (see [119] above), which was designed to enable the generation and transfer of carbon credits between countries. Mr Woods believed that the Federal Government was supportive of trying to achieve these agreements and that they would support the achievement of global emissions reduction. Mr Woods was also aware that, across Australia, there was considerable interest from international companies in investing in the development of carbon credit generating projects within Australia. He was aware from conversations he had with Santos' corporate customers in Japan and Korea that they were also seeking the support of their respective governments and the Federal Government to establish bilateral agreements to enable the trading of carbon credits across borders.
Ms Luo also believed that there was a prospect that Santos would be able to reduce its Scope 1 and 2 emissions by obtaining credits as a part of a commercial arrangement from Santos producing and supplying hydrogen. While the sale of hydrogen by Santos, domestically or internationally, would reduce Santos' Scope 3 emissions, Ms Luo believed there were two mechanisms or incentives that could improve commerciality and enable the sale of hydrogen to reduce its Scope 1 and 2 emissions.
The first of these involved Santos entering into a commercial arrangement with potential hydrogen customers that might enable Santos to obtain ACCUs.
Relevantly, in about August 2020 Ms Luo was involved in discussions with Mr Jaffray and Ms Norman about the possibility of Santos entering into a commercial arrangement with potential hydrogen customers that might enable Santos to obtain ACCUs. Ms Luo can no longer recall what precisely was said in those discussions but recalls that Mr Jaffray and Ms Norman discussed the existing ACCU methodology available for customers using coal who could apply for an ACCU if they switched to gas (Fuel Switching ACCU Methodology). The Fuel Switching ACCU Methodology was an eligible activity for the generation of ACCUs. Ms Luo was familiar with the Fuel Switching ACCU Methodology having considered its application to various opportunities that had been explored by the Energy Solutions team.
Ms Luo recalls that Mr Jaffray and Ms Norman suggested, and she agreed, that the Fuel Switching ACCU Methodology could conceptually be applied for customers switching to hydrogen. Under that methodology customers could obtain ACCUs for the emissions reductions resulting from the use of hydrogen instead of natural gas and, as part of the negotiations for the supply and price of the hydrogen, Santos could negotiate the transfer of some or all of the ACCUs generated by the customer. Ms Luo believed that an arrangement of that type was possible given that the production and supply of hydrogen would provide the customer with the valuable opportunity of using the Fuel Switching ACCU Methodology to generate and surrender or sell ACCUs.
The second methodology to improve commerciality and enable the sale of hydrogen to reduce its Scope 1 and Scope 2 emissions concerned government incentives such as: the development of a new ACCU methodology for hydrogen production (although any new methodology would need to overcome the issue of double counting referred to above); incentives similar to those provided to energy producers that supply renewable energy into the National Energy Market, for example feed in tariffs or LGCs created as part of the Federal Government's Renewable Energy Target (RET); and tax incentives to support hydrogen projects.
Ms Luo explains that these incentives could result in either a direct reduction to Santos' Scope 1 and 2 emissions or could generate additional income for Santos that could be used to acquire credits. The need for a carbon incentive or feed-in tariff to offset the supply cost differential between natural gas and blue hydrogen was referred to in slide 10 of the draft August 2020 Board Presentation which Ms Luo sent to Mr Jaffray and Ms Norman on 5 August 2020. Ms Luo believed that there was a good possibility that an incentive of this type could be introduced and compared the need for incentives for clean hydrogen to the incentives provided by State and Federal Governments to support the growth of the renewable electricity industry (solar and wind power) which included grants, feed-in tariffs and the RET, which enabled the generation of LGCs, which certified the electricity being produced as renewable and created an additional revenue stream for producers. Ms Luo believed that, in light of the government support demonstrated in the National Hydrogen Strategy and by various State governments, it was likely that similar incentives would be provided for clean hydrogen production in Australia.

[472]

The Cooper Electrification/Hydrogen Fuel component of the Net Zero Roadmap involves two aspects.
The "electrification" aspect of this component related to the Cooper Electrification project. Santos forecast that the potential emissions reductions that could be achieved from the Cooper Electrification project was approximately 0.12 MtCO2e per annum.
The Hydrogen Fuel aspect of the "Cooper Electrification/Hydrogen Fuel" component of the Net Zero Roadmap related to Santos producing and using hydrogen, instead of natural gas, as fuel within its own operations. This could reduce Santos' Scope 1 emissions as it would mean that Santos would not be releasing GHG emissions through the burning of natural gas to fuel its operations. The estimated emissions reduction arising from Hydrogen Fuel was 0.434 MtCO2e per annum. This also formed part of the Moomba Hydrogen Concept Study. Ms Luo considered that the use by Santos of hydrogen fuel was technically and commercially viable between 2030 and 2040.
The estimated reduction of 0.56 MtCO2e per annum included in the Project Estimates Table for "Electrification/Hydrogen Fuel" represented the emissions reduction that could be achieved if, after Santos completed Cooper Electrification, it then used hydrogen to generate power for its operations in the Cooper Basin (including Moomba and Port Bonython).
The accuracy and basis for the estimated emissions reduction from the Cooper Electrification and Hydrogen Fuel is not in dispute save in relation to the estimated emissions reductions from the use of Hydrogen Fuel to the extent that the ACCR alleges that the Scope 1 and 2 emissions associated with the production of hydrogen fuel has not been accounted for in the 2030 Target and Net Zero Roadmap.
Ms Luo explains that, at a high level, the calculation of the reductions that could be achieved from using Hydrogen Fuel started by taking the total amount of fuel gas being used by certain sites within Santos' operations as part of the Cooper Basin asset (including Moomba and Port Bonython), calculating the net fuel gas savings associated with Cooper Electrification (i.e. accounting for fuel gas savings in the upstream gas and oil fields and any additional fuel gas usage required at Moomba), and calculating the emissions that would be saved by using hydrogen as fuel instead of natural gas, using the Natural Gas Emissions Factor referred to at [392] above.
The emissions reduction amount for Hydrogen Fuel included in the Project Estimates Table did not account for any increase in emissions by Santos that would be generated in producing the hydrogen for use by Santos. This was because Ms Luo was focusing on assessing Santos' capability to produce "zero emissions hydrogen".

[483]

The ACCR alleges that Santos made misleading representations with respect to future matters. The principles to be applied for assessing whether there are reasonable grounds for making a representation as to a future matter were also not in dispute although, as will become apparent, whether the representations relied on were in relation to future matters was in contest.
If a person makes a representation with respect to any future matter and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. The person is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary: ACL subss 4(1) and (2); Corporations Act s 769C.
Whether there are reasonable grounds for making a representation is a question of fact to be determined at the time of making the representations. There will not be reasonable grounds for making a representation if, at the time it was made, the person making it did not have facts sufficient to induce in the mind of a reasonable person a basis for making the representation. That is to be assessed objectively and not by reference to the maker's subjective state of mind: Australian Competition and Consumer Commission v ACM Group Limited (No 2) [2018] FCA 1115 at [173] (Griffiths J).
In Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45 at [108] Mortimer J (as the Chief Justice then was) and Halley J observed, citing Australian Competition and Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [98]- [102], that:
1. In Dateline, the ACCC had characterised the underlying representations made by the respondent as representations of fact not opinion. Nevertheless, we consider that the following passages in Dateline apply with equal force where the relevant enquiry arises in circumstances where it is alleged that reasonable grounds are represented, by implication or otherwise, for a representation of opinion:
  1. Dateline submits that its success on the truth of the underlying representation is enough to defeat these grounds. In other words, so long as the represented fact is right, Dateline submits that the ACCC has not shown that it was misleading or deceptive for Dateline to have made the representation on incomplete or wrong reasons that it believed were correct and complete, and did not include the reasons showing it to be correct.
  2. We do not accept this submission. It is not a question as to Dateline's subjective belief. Rather, the representation that Dateline had reasonable grounds for making the several representations of fact is to be considered in light of the grounds which Dateline actually then knew and whether those grounds, objectively, were reasonable.
  3. There will not be reasonable grounds for making a representation if, at the time of making, it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation: Australian Competition and Consumer Commission v Jones (No 5) [2011] FCA 49 at [32]-[33]; George v Rockett [1990] HCA 26; (1990) 170 CLR 104 at 112.
  4. It matters not that it transpires, in due course, that the fact represented is true. That may simply be serendipitous. The representation, "I have reasonable grounds" for making the representation of fact is a discrete representation, indeed one which is likely to reinforce in the representee the reliability of the representation of fact.
  5. Moreover the reasonable grounds representation is also one of fact. It is not directed to grounds which may become known but are not then known. Consumers should be protected against such conduct where, in fact, objectively assessed, there were no reasonable grounds known to the representor.
Whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, is to be judged as at the date of the representation. However, examination of evidence of later events which may throw light "upon the overall probabilities" is not precluded: see City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94 (Mason P with whom Beazley JA agreed save in one respect) at [83].
In Husseini v Girchow Enterprises Pty Ltd [2024] FCAFC 143 a Full Court of this Court (Feutrill J with whom SC Derrington and Stewart JJ agreed) summarised the principles at [110]-[114], including:
1. In general, it is not possible to verify or falsify an opinion, promise or prediction at the time it is expressed or made. However, a statement of an opinion, a promise or a prediction may convey an express or implicit statement about the state of mind of the person making the statement to the effect that the person genuinely holds the opinion or believes that the promise or prediction will eventuate. The statement about the person's state of mind is a statement about an existing fact that may be verified or falsified. Likewise, a statement of an opinion, a promise or a prediction may convey an express or implicit statement to the effect that the person has reasonable grounds for holding the opinion or believing that the promise or prediction will eventuate: see, e.g_., Global Sportsman Pty Ltd v Mirror Newspapers Ltd_ [1984] FCA 167; 2 FCR 82 at 88.
2. Where a statement is made about a future matter (such as a promise or prediction) it may be quite difficult for the person to whom the statement is made to demonstrate that the person who made the statement had no reasonable grounds for it. As a consequence, s 51A was introduced into the Trade Practices Act 1974 (Cth) and equivalent provisions in the Fair Trading Acts of the States and Territories. Section 51A is now reflected in s 4 of the ACL. However, s 4 does not establish a norm of conduct. The norm is contained in s 18. Section 4 operates as an evidentiary provision that facilitates proof that a representation as to a future matter was misleading or deceptive or likely to mislead or deceive: see, e.g., North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 at - (Mansfield, Greenwood and Barker JJ).
Here, the ACCR attacks the process by which Santos developed the Targets and the Net Zero Roadmap. Relevantly, in Bonham atf Auchman Super Fund v Iluka Resources Ltd (2022) 404 ALR 15; [2022] FCA 71 Jagot J observed at [670]:

[488]

The characterisation of a statement as to one of belief or opinion or as to a matter of fact is to be assessed from the perspective of the person or "ordinary" or "reasonable" audience to whom the statement or representation is directed, rather than from the perspective of the maker of the statement: Ireland v WG Riverview Pty Ltd [2019] NSWCA 307; (2019) 101 NSWLR 658 at [30] (Bell ACJ, as his Honour then was, Barrett AJA agreeing).
Statements such as "Santos has today announced an ambitious roadmap to net-zero emissions by 2040", that Santos has a "realistic roadmap, real activities and a plan to achieve net zero by 2040" and that Santos expects to be net zero by 2040 are, in my view, statements about the future and, it follows as to "future matters". They are inherently statements about the future and convey an expression by Santos about where it expects its emissions to be as at 2040. That the statements may involve an element of opinion or belief does not change that characterisation.
In any event, as the parties seemed to accept, the characterisation of the Targets as "future matters" or as representations of present intention and opinion may not matter at a practical level. That is because Santos accepts that there was an implied representation that it had objectively reasonable grounds for identifying the Targets. That is, in its concise statement in response Santos says in relation to the impugned representations in relation to the 2030 Target and the Net Zero Roadmap (at [11A]), among other things, that "the net zero target was represented to be, and would have been understood to be, a target, plan or 'roadmap' based on reasonable forecasts, predictions and judgments about the kinds of future opportunities likely to enable Santos to achieve net zero emissions by 2040 ...".
As is apparent from the facts set out above and the analysis which follows, Santos has adduced evidence that it had reasonable grounds to support the representations such that the representations are not deemed to be misleading: see ACL, s 4(2) and Corporations Act, s 769C(1). Thus, on either analysis, the question is whether Santos had reasonable grounds, objectively assessed, for making the representations.

[490]

The ACCR submits that because of the "pervasively deceptive nature" of Santos' conduct, the case is unlikely to turn upon the characteristics attributable to the target audience but, nonetheless addresses the question. Contrary to that, Santos submits that the characteristics to be attributed to the target audience is a critical issue in the case.
Santos is a publicly listed company. Its impugned conduct was directed towards a section of the public generally rather than only to identified individuals. That being so, the Court approaches the question of whether the conduct is likely to mislead or deceive at a level of abstraction and must consider: the likely characteristics of the persons who comprise the relevant class to whom the conduct is directed; and the likely effect of the conduct on ordinary or reasonable members of the class, disregarding reactions that might be regarded as extreme or fanciful: see ACCC v TPG at [22(e)]. The principles were summarised in Self Care at [83] (see [458] above).
In Self Care the High Court cited with approval the decision in Australian Competition and Consumer Commission v Google LLC (No 2) [2021] FCA 367; (2021) 391 ALR 346 (Thawley J) at [90]-[98] in connection with the proposition that "it is necessary to isolate an ordinary and reasonable 'representative member'(or members) of that class, to objectively attribute characteristics and knowledge to that hypothetical person (or persons), and to consider the effect or likely effect of the conduct on their state of mind". The ACCR submits that the following three principles can be distilled from the Google (No 2): firstly, where the class has variable characteristics, it may be necessary to isolate a number of hypothetical persons within the class, there being no single hypothetical person (at [91]); secondly, the identified hypothetical person is not capable of only one response or reaction, there may be a number of different "reasonable" responses to conduct (at [92]); and thirdly, the attribution of knowledge and characteristics is to be informed by the statutory purpose of protecting ordinary or reasonable consumers (at [96]).
The ACCR submits that therefore the Court is required to objectively attribute characteristics and knowledge to one or more hypothetical persons and that, when properly applied, this intellectual construct advances the normative purpose of the statute: the protection of consumers, by allowing a range of reasonable responses; and making due allowance for the "heavy burdens" created by the statute, by discarding reactions that would not be ordinary and reasonable.
In contrast, Santos supports the attribution of characteristics and knowledge to a single hypothetical person and rejects a test that involves isolating a number of hypothetical people. Santos submits that it is very doubtful that the concept of multiple hypothetical persons is consistent with what the High Court has said in a line of decisions about the attribution of characteristics, knowledge and a range of reasonable reactions to a representative member of the class, relying, by way of example, on Campomar v Nike International [2000] HCA 12; (2000) 202 CLR 45 at [103].
The Court must identify the effect or likely effect of the impugned conduct on the ordinary reasonable members of a class by isolating an ordinary and reasonable representative member or members: see Self Care at [83]. I accept that it is open to identify more than one representative member of the class of persons to whom the impugned conduct was directed.
However, Santos submits that this is not a case where the approach in Google (No 2) of identifying multiple hypothetical persons is appropriate. That is because, although existing and potential investors in Santos may have variable characteristics, the target audience is a specific subset of those investors, and it is common ground that this subset has relevantly the same or similar characteristics. The ACCR disputes that there is any common ground that the target audience is a "specific subset of investors or potential investors", which is a "particularly interested and educated investor" and who is "relatively sophisticated".
The parties agree that the target audience comprises existing and future investors in Santos and financial institutions and corporate advisors. The ACCR says that this is sufficient identification of the target audience, and it is "not necessary to identify the audience more precisely" (referring to Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39, [36] (French CJ, Gummow, Hayne and Kiefel JJ)) whereas Santos adds a qualification that the knowledge and sophistication of financial institutions and corporate advisors is likely to be greater than other investors. From that point the parties diverge, each attributing different characteristics to the target audience.
The ACCR submits that the audience is not homogenous or uniform and encompasses a diverse range of the investing public, large and small and sophisticated and unsophisticated, as evidenced by the following breakdown of shareholders in the 2020 Annual Report:

[496]

Santos submits that, given the nature of investments in the oil and gas industry, inherently exploratory, capital intensive and attended by risk, the target audience would not assume that all announcements were of viable projects, rather than exploratory opportunities. It contends that investors in the oil and gas sector, in a context of heightened concern about climate change, would also have knowledge of the energy transition and would have understood that, with global ambitions to achieve net zero by 2050, the Net Zero Roadmap comprehended a timeframe within which the Australian, and also the global, energy transition would not likely be complete. Investors would have understood a mainstream view that natural gas had an important role.
Santos contends that a reasonable member of the target audience would have understood that the Targets were long-term, uncertain and subject to factors outside of Santos' control and that those uncertainties and exogenous factors were magnified for the 2040 Target and the Net Zero Roadmap because they were for two decades into the future in an evolving environment. It says that a reasonable member of the intended audience would also have understood that the Targets were very different from a short-term forecast.
I do not accept that the target audience is as specific a subset of investors as contended for by Santos. Nor is it as broad as the ACCR submits. In my view the target audience had the characteristics described below.
First, the target audience comprised a large and diverse group of investors, both individuals and institutional, and the impugned representations were of interest to that audience. The 2020 Annual Report discloses that as at 31 January 2021 there were 127,809 shareholders in Santos. As Santos seemed to acknowledge, existing and potential shareholders may have variable characteristics.
Further, Santos gave prominence to the impugned statements in each of the publications in issue, for example leading with the "net zero emissions by 2040" item at the Investor Day and placing a statement to that effect on the cover of the 2020 Annual Report. This belies the submission that the target audience was as narrow as Santos would have it.
The objective evidence supports a finding that the Targets were of interest to a broad target audience. For example, on 18 December 2020 Marco Beenen, CEO BW Offshore Norway AS sent an email to Brett Dale at Santos, copied to, among others, Mr Gallagher which included:

[515]

Santos submits that the impugned statements would be understood not only in the context of the 2020 Annual Report but also together with the Investor Day Presentation and 2021 Climate Change Report. It observes that the Investor Day Presentation included statements that the consumption of gas by Santos' customers generated Scope 3 emissions, and that Santos was transitioning to cleaner fuels. The statements concerning Santos' strategy for the transition to a low-carbon future provided the context in which "clean energy" and "clean fuels" were used, and the 2021 Climate Change Report was expressly referred to proximate to the impugned phrases (referring to the extract from the Directors' Report set out in the preceding paragraph).
As set out above, I do not accept that the target audience would necessarily be familiar with all of the impugned publications, but would be familiar with at least one such publication.
That said, I accept that the impression conveyed by the impugned statements was as set out below.
First, the 2020 Annual Report used "clean" to convey that "natural gas" was cleaner than coal and diesel, not to convey that natural gas had no GHG emissions on consumption. As is apparent from the extract from the Chairman and CEO Message set out above, Santos stated that it "has committed to working with [its] customers to reduce their emissions. In the near term, this means switching from heavier emitting fuels, such as coal and diesel, to cleaner fuels such as natural gas". That statement does not convey that natural gas is "clean" but that it is in relative terms cleaner than coal and diesel.
Santos also refers to the 2021 Climate Change Report which states that natural gas "produces half the greenhouse gas emissions of coal when used to generate electricity". To the extent a member of the target audience was familiar with that publication, he, she or it would have had that additional context. In any event, as Santos submits the ordinary person's understanding of the properties of natural gas is that when burnt it does emit GHGs.
Secondly, the description by Santos of it as a "clean fuels company" was made in the context of its statements about the "transition to a lower-carbon future" and "the transition from natural gas to hydrogen." That and the associated statement of Santos as a "clean fuels business" spoke of Santos' future aims. That is, as Santos put it, the type of company that Santos wanted to be as it transitioned to net zero by 2040. Santos aimed to use and supply fuels that would facilitate this transition. Contrary to the ACCR's submissions, read in context, those terms did not convey that Santos' present state is natural gas, which is a clean energy, while its future state is hydrogen which is a clean fuel.
The ACCR refers to the dictionary definition and the ordinary meaning or usage of the term "clean fuel". It says that it does not rely rigidly on the definition. I take that to mean that it does not rely on the dictionary definition alone. Nor should it. Sole reliance on the dictionary definition ignores the context in which the term is used. Further, as Santos points out the Macquarie Dictionary provides for a range of meanings of "clean" in collocation with other words including fuel and even coal and, given that taxonomy, it is unlikely that the reasonable reader would have understood Santos' use of the phrase "clean fuel" in the manner alleged by ACCR. Putting that to one side the dictionary meaning of "clean fuel" is a fuel which "produces minimal", not no, GHG emissions.
Thirdly, to the extent they were familiar with the 2021 Climate Change Report and/or the Investor Day Presentation, the reasonable member of the target audience would have understood that consumption of natural gas was a material contributor of GHG emissions. They would have been aware that those publications disclosed, among other things, Santos' Scope 3 emissions associated with the consumption of natural gas and CH4 emissions, in accordance with the National Greenhouse and Energy Reporting Act 2007 (Cth).
Fourthly, that Santos was addressing emissions from production through CCS and the Targets did not convey that material GHG emissions associated with Santos' business only arose in the production process and not through consumption. The emissions reductions targets listed in the 2020 Annual Report included a "2030 Scope 3 emissions target". Given that, a reasonable member of the target audience would not have understood the references to "clean energy" and "clean fuels" to convey that the consumption of natural gas did not release material GHGs into the atmosphere or contribute to global warming.
Lastly, the ACCR relies on an email from Peter Hearl, a director of Santos and a member of its Environment, Health, Safety and Sustainability (EHSS) Committee, dated 14 December 2020 in which Mr Hearl provided comments on a draft of the 2021 Climate Change Report. Among other things he commented that:

[543]

(1) in the Investor Day Presentation, slide 13 situated the production of "zero-emissions hydrogen" in a market-led transition to "cleaner fuels" over the next two decades. It depicted a step-change from the current state of "natural gas" to, ultimately, the future state of "clean fuels", including "[z]ero-emissions hydrogen expansion to dedicated hydrogen pipelines", "[h]ydrogen exports from Port Bonython" and support for "low-cost green hydrogen production". Slide 14 identified Santos' emissions reductions targets and listed "Technology Enablers", including renewables integration and CCS to "accelerate" the economic feasibility of hydrogen. Slide 15, the Net Zero Roadmap, indicated that "hydrogen" and "zero-emissions hydrogen", enabled by a CCS potential scale-up in the Cooper Basin or at other sites, were relevant to "the pathway to net zero emissions by 2040". Other slides, which provided an update on Santos' Midstream Infrastructure & Low Carbon Operations, stated that CCS enabled "clean" and "zero-emissions" hydrogen;

(2) the statements made by Mr Gallagher and Mr Woods at the Investor Day accompanied the Investor Day Presentation and a video shown at the Investor Day stated that "CCS unlocks the production potential of clean hydrogen ..." and "[w]ith further electrification of the Cooper Basin, and ongoing deployment of renewable technology, hydrogen could ... be produced from renewable energy at Moomba. ..." and "[z]ero-emissions hydrogen, produced from natural gas and renewables, would create a whole new export industry for Australia ....";

(3) in the 2021 Climate Change Report:

(a) "clean" and "zero-emissions" hydrogen were referred to together;

(b) the production of hydrogen was described as "carbon neutral" in two places. The description of "hydrogen fuel" accompanying the Net Zero Roadmap provided "[w]e will capture and store the CO2 produced in our Moomba CCS facility, so the hydrogen we use will be carbon neutral". In explaining "[t]he role of clean hydrogen in a lower-carbon future" Santos stated: "[w]hen used in conjunction with CCS, the hydrogen produced can be carbon neutral and also eliminates scope 3 emissions". The use of the term "carbon neutral" was not, as the ACCR contends, a "slip";

(c) the hydrogen opportunity was relevant to future components of the road to net zero by 2040. The ACCR relies on the statements at p.11 of the 2021 Climate Change Report that the hydrogen sold to customers "could have no emissions in its production ('Scope 1 and 2') or its end use ('Scope 3')". Santos points out that it did not say that hydrogen "would" have no emissions. The 2021 Climate Change Report acknowledged (at p.28) that "generating hydrogen from natural gas produces CO2", which "can be captured and stored"; and

(d) future production of hydrogen, or "clean" or "zero-emission" hydrogen, was generally tied to CCS and to the transition to lower CO2 emissions. However, the 2021 Climate Change Report also foreshadowed that hydrogen production with CCS would increasingly use renewable energy and (at p.28) that the Cooper Basin has "significant hydrogen production potential [through] hydrogen production from electrolysis using the Cooper Basin's world-class solar and viable wind resources"; and

(4) the statements in the 2020 Annual Report extracted at [534] above, would have been understood in the context of the references to hydrogen, including "clean", "zero-emissions" and "carbon neutral" hydrogen, in the 2021 Climate Change Report and at the Investor Day.

[545]

The ACCR submits that an ordinary and reasonable member of the target audience would understand "zero-emissions" and "clean" hydrogen to convey precisely what Santos said those phrases were intended to convey: i.e. hydrogen with "no emissions in its production (Scope 1 and 2)". It contends that a reasonable member of the target audience would understand from Santos' statements that it presently had the ability to produce hydrogen from natural gas using a production process which would generate zero emissions, because all production emissions would be captured by CCS. An ordinary and reasonable member of the target audience would not understand "zero emissions" to mean that all emissions would be offset by the purchase (and retirement) of carbon credits. In cross-examination Mr Woods accepted that "zero emissions hydrogen" involved a "net story" and, when confronted with the fact that Santos' representations did not include the word "net", he suggested that the "net" was "implied".
The ACCR submits that: the ordinary and reasonable user, who did not have scientific training, would not have inferred that "net" was implied; Santos was very deliberate in its use of the terminology "net zero" and "offsets"; and it used that terminology to refer to the Net Zero Roadmap and specifically identified the components of the roadmap that involved offsets. The same distinction was not made for blue hydrogen.
The ACCR observes that in its opening submissions Santos contended that the expressions "clean hydrogen" and "zero-emissions" hydrogen "were associated with" the production of hydrogen that involved low-carbon emissions and with hydrogen having the ability to reduce carbon emissions, referring to the evidence of Professor Cook and Mr Snow. However, in cross-examination Mr Snow accepted that his view as at November 2021 was that blue hydrogen is "low net emissions" not "zero emissions", and that he would have expressed that view to a client if asked for his opinion on the matter. He also accepted that "zero emissions" was the terminology that was being used at the time to describe green hydrogen and that he could not identify one publication that referred to blue hydrogen as "zero emissions".
The ACCR observes that, in relation to "clean" hydrogen, the highest Santos' evidence goes is that the term did not have "an accepted meaning". The ACCR submits that if the term had no accepted meaning, then it was likely to mislead an ordinary and reasonable member of the target audience who, having read what Santos said about "zero emissions" hydrogen with "no emissions in its production", credibly believed that what Santos said was literally true.
The ACCR submits that it is important to observe that Santos does not submit that an ordinary or reasonable member of the target audience should be attributed with knowledge that the hydrogen production process involves the emissions of material amounts of GHG emissions. As Santos has been at pains to point out, blue hydrogen is a new product. The ACCR submits that the Court cannot infer any pre-existing knowledge about its properties or associated emissions.
In my view a reasonable member of the target audience would have understood "clean", "zero-emissions" and "carbon neutral" hydrogen to mean the production of hydrogen from natural gas with CCS with no net emissions. As explained below, a reasonable member of the target audience would not have understood those terms to mean hydrogen with no production emissions because all production emissions would be captured by CCS.
As Santos submits, "clean" and "zero-emissions" meant hydrogen produced from natural gas with CCS. That understanding was conveyed by the publications in issue. It is evident from the examples set out above that the expressions "clean hydrogen" and "zero-emissions hydrogen" were, in some places, used together and, in others, used interchangeably. Doing so conveyed that they were the same, namely hydrogen made from natural gas enabled by CCS with no net emissions.
As the examples set out above illustrate and as a review of each of the publications clearly demonstrate, each explains and conveys the impression that clean or zero emissions hydrogen is hydrogen produced with CCS. For example, in the 2021 Climate Change Report, the CEO statement clearly explained that it is CCS that "will unlock production of zero emission hydrogen".
That is, the publications in question conveyed that CO2 emissions generated from the production of blue hydrogen would be captured by CCS.
Santos submits that the reasonable member of the target audience would not have understood that absolutely all CO2 emissions would be caught by CCS but would have understood that most emissions would be caught, and Santos could purchase carbon credits to offset any residual emissions from the production of hydrogen. I accept that is so for the following reasons.
First and most critically, in the publications Santos indicates that it will be relying on offsets or carbon credits to achieve the 2040 Target. This included references to the use of "land-based offsets" and relevantly, the eligibility or finalisation of an ACCU methodology for CCS. Santos says that offsets had been a long-standing feature of its climate change policy. A review of Santos' Climate Change Reports in evidence before me bears out that submission:

[551]

(1) the 2021 Climate Change Report described the production of hydrogen as "carbon neutral". Professor Cook's view is that carbon neutrality and net zero have the same meaning and involve the balance between a company's total GHG emissions and its total mitigation activities including the purchase of carbon credits, the concept of net zero, and balancing emissions against reductions and offsets. Mr Snow expresses a similar view;

(2) Santos' publications indicated its hydrogen initiative was relevant to its transition to net zero by 2040. As Professor Cook explains, at the time of those publications, offsets or carbon credits were an accepted tool for mitigating emissions to achieve net zero. For example, after re-iterating (at [143] of his report) that the term net zero is not defined or used in the Paris Agreement, and as a consequence, there are various interpretations of the term, how it will be achieved, and how it will be maintained once it is achieved, Professor Cook explains:

In my experience, gained in my role as Chief Executive of CO2CRC and my professorial capacity within the Peter Cook Centre for CCS Research, in discussions with industry and government officials, through attendance at industry-research symposia and in chairing a focused workshop on negative emissions in 2019, the term "net zero" was used and understood by the energy industry in 2020 and before to mean balancing emissions and offsets, using a range of mitigation and removal options, including through CCS. Whilst recognising that "net zero" had a global context that I described above, the term has tended to be applied more "locally" by the energy industry, such that the total greenhouse gas emissions emitted to the atmosphere by a company or a facility or a region or a country, expressed in CO2e units, were balanced by offsets used by the company or entity or the national/global community, also expressed in CO2e units. A company may choose to confine its net zero target to its Scope 1 and Scope 2 emissions because it is largely responsible for their production, and it can realistically take responsibility for their mitigation. The term "net zero emissions" is frequently used to denote this objective. A company may also aspire to attain net zero for all its emissions including Scope 3, by encouraging or assisting its customers to attain net zero, including through the use of offsets and carbon credits and the application of CCS where appropriate.

And:

Net zero can potentially be achieved within the confines of a defined entity, solely through its own mitigation efforts, or through the purchase of credits (removal and avoidance) arising from the emission reduction efforts of another entity. In the case of a gas company, the emissions it generates are principally CO2, with some CH4, small amounts of N2O and other trace contaminants. Commonly, companies and other entities, including countries and cities, use carbon credits to "balance the books". The premise is that a CO2e unit released through an organisation's activities can be offset by removing/sequestering/reducing/avoiding an equal amount of CO2e (encompassing all greenhouse gases) by another entity and that this offset can be purchased through a carbon market, for example, to provide "net zero". The term "offset" is defined by the IPCC (2014), as a "unit of CO2-equivalent emissions that is reduced, avoided, or sequestered to compensate for emissions occurring elsewhere".

(Footnotes omitted.)

[552]

(3) Mr Snow expresses a similar view to that of Professor Cook, albeit in less technical terms. For example, he explained that, at the time of the relevant publications:

There was no "accepted energy industry meaning of net zero emissions for Scope 1 and 2 GHG emissions".

There was though a base presumption that to reach "net zero" emissions a company or jurisdiction (Australia and within Australia) was reducing their greenhouse gas emissions to a low level where a combination of direct GHG emissions reduction, GHG emission avoidance credits and/or carbon dioxide removal and storage credits would render the actual emissions for that company or jurisdiction to be at a net zero outcome.

There was effectively a self-fulfilling logic to the use of a term like "net" as in "netted off" jurisdictionally, by sector or by an individual company. It was not taken to mean for example that there would be no GHG emissions in 2050.

The use of the term "net zero emissions" was about a destination or end point by a given date, and there were variances in what this end point looked like or how it could be measured. It was not so much the pathway to achieving that outcome, and its most consistent use was in describing, and not actually setting, those target outcomes.

It was also about the context within which it was being used, politically for example was different to regulatory, and there were technical definitions, but this did not mean they were the accepted understanding within the Australian energy industry.

(4) the National Hydrogen Strategy acknowledged that not all emissions from the production of hydrogen using gas would be caught by CCS and it was technically feasible to produce hydrogen from natural gas at "acceptably low levels of carbon emissions" with capture rates of 90% or more. Relevantly, Associate Professor Beck and Mr Snow agreed in their joint report that most or nearly all CO2 emissions are captured from this process but not all. The rest are emitted to the atmosphere.

[556]

Mr Entwisle: It's true to say that the accepted industry meaning of zero emissions hydrogen was, in fact, green hydrogen, wasn't it?

Mr Snow: No, I don't believe that. No.

Mr Entwisle: Well, you haven't found one publication that refers to blue hydrogen as zero emissions hydrogen, have you?

Mr Snow: Correct.

Mr Entwisle: But you have found at least two publications that refer to green hydrogen as zero emissions hydrogen.

Mr Snow: Correct.

Mr Entwisle: So that was a terminology that was being used at the relevant time to describe green hydrogen; correct?

Mr Snow: It was, yes.

Mr Entwisle: And you can't say it was a terminology that was being used to describe blue hydrogen.

Mr Snow: Well, I can.

Mr Entwisle: On what basis, Mr Snow?

Mr Snow: As I said, that was the recall from my days in the industry.

Mr Entwisle: Yes.

Mr Snow: We were going through a period of great change, and the federal government had gone through, supporting, as we've seen, you know, the generation of hydrogen from gas, in terms of blue hydrogen. And what - what - what - let me finish. And so the industry itself - it's government, people with assets, investors, and people in the industry itself that use it. And so amongst that group, there was confusion about all of these terminologies. There may have been within the scientific journals an understanding of what zero emission meant to them. But in terms of the energy industry in Australia, it was quite distinctly variable. It was used - all of these terms were used like lay terms. We didn't have agreed standards for these. Now, there may have been within some of those areas people understanding that. And I think that's something that will come out later in one of the other conclaves, is that you can have a distinct understanding, as you're pointing out here, about what zero emissions means within these papers. But within the industry itself, there was quite a wide variety of lay terms being thrown around. Net zero, clean hydrogen, zero emission hydrogen, all those things were being used within the industry. But I do agree with you. Look, you know, the references here are more focused on the green hydrogen for zero emissions. But that's not my recall from what has happened in the industry and the way it was being used. That doesn't mean it had to appear in a publication.

[565]

As set out above, in my view, the reasonable member of the target audience would have understood that in referring to "clean" and "zero emissions hydrogen" Santos was referring to the production of hydrogen from natural gas with CCS and offsets. It follows that in making the statements about "clean" and "zero emissions hydrogen" in the Investor Day Presentation, 2020 Annual Report and the 2021 Climate Change Report Santos did not engage in conduct that was liable to lead the public and/or investors or potential investors into error or that had the tendency to do so in the manner alleged by the ACCR.
The ACCR makes submissions about the quantity of emissions associated with the production of blue hydrogen based on the GHD Report. Given my conclusion set out above it is not necessary to address those submissions in any detail at this stage save to observe that they ignore the fact, as the evidence disclosed, that the GHD Report was a preliminary study and, as Associate Professor Beck accepted in cross-examination, its purpose included the gathering of "technical information for Santos to use in structuring the project and in engaging with contractors and technology vendors in subsequent phases of the project" and that it "was an early stage concept study". The purpose of the GHD Report was not to provide a final recommendation about the actual plant and hydrogen production process to be implemented. The GHD Report, its role and the additional calculations carried out by Associate Professor Beck and Mr Snow are further considered in section 5.2.2 below.
The ACCR also submits that, if the Court concluded that the representations in question were liable to mislead (which it has not), it would find that the misleading impression conveyed by the conduct was deliberate because the use of "zero emissions" and "clean" hydrogen was motivated by a desire to be "lumped in" with green hydrogen and the chronology discloses an intention to persist with that terminology, despite the receipt of falsifying information and concerns raised by those familiar with the information.
That allegation was not pleaded, as it should have been, nor squarely put to any of Santos' lay witnesses: see Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [26] (French CJ, Gummow, Hayne and Kiefel JJ); Federal Court Rules 2011 (Cth), r 16.42 and r 16.43. Any suggestion that it is just a question for evidence as the ACCR suggests is rejected. Accordingly, if, contrary to my findings, I had been satisfied that the representations were liable to mislead the public as alleged, I would not entertain the ACCR's submission that the misleading impression conveyed by the conduct was deliberate.

[571]

The ACCR submits that in assessing the character and nature of the representations what matters is the contextual prominence given to the messages and the strong and forceful way in which Santos projected its confidence in those messages.
The ACCR submits that Santos represented at the Investor Day that the Net Zero Roadmap was "clear and credible" and supported by "a realistic, doable plan" and that it was a "realistic roadmap, real activities and a plan to achieve net zero by 2040". It contends that Santos did so in order to convey its own confidence and credibility to the target audience, and to encourage them to trust the integrity and reliability of the long-term targets. The ACCR refers to Mr Gallagher's statement that it was these features of Santos' "net zero" plan that distinguished Santos from its competitors, whom he suggested either lacked a "plan" or were merely announcing "aspirations". The ACCR submits that the implication of Mr Gallagher's language was that investors and other stakeholders should trust Santos' targets, which were "credible", "doable", "realistic" and based upon "real activities".
The ACCR submits that the Court should find that Santos' purpose in making the impugned statements was to meet what it perceived to be the expectation of its stakeholders and to make announcements that would be useful to the decision-making of the target audience.
The ACCR submits that the real question is whether a reasonable person in the position of Santos at the time would have considered that it had an appropriate basis for announcing not only a 20 year plan, but a 20 year plan that was different to and better than other plans of the same genre. It says that the Court can dismiss submissions to the effect that Santos' liability would have a stifling or stultifying effect because the Court is concerned with the enforcement of statutory norms, not the facilitation of (misleading) corporate plans and, in the enforcement of the statutory norms, what matters is making sure that consumers have access "to reliable, truthful and accurate information", referring to Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at [95]. The ACCR submits that to uphold its claims would not stultify diligently prepared and honestly announced transition plans.
The ACCR contends that, in part, what makes Santos' conduct so egregious is that Santos is sophisticated at long range planning. According to Mr Jaffray, it routinely produces LTPs ranging generally from 10-30 years for each asset, which involve "a forecast of the potential activities year-on-year for the life of the asset and were initially prepared as part of the process for FID approval". In addition, the ACCR observes that Santos was aware that "[c]arbon reporting has seen increased internal and external focus", and the role of its Portfolio team, includes to "provide line of sight to longer-term carbon forecasting". The ACCR submits that these matters underscore Professor Collis' evidence that 20 years is not an unusually long period of time for a long-term corporate strategy.
The ACCR submits that the fact that the impugned announcements relevantly concerned long-term targets does not free Santos from the need for rigour and robustness over the plan period. The purpose of the reasonable grounds criterion "is to require an appropriate basis for the state of mind (being the opinion or prediction) disclosed by the representation", referring to Australian Competition and Consumer Commission v Woolworths Limited [2019] FCA 1039 at [103]. Referring to evidence given by Professor Collis, the ACCR says that a reasonable company in the position of Santos would have a "well documented analysis which is data driven, quantifiable and externally validated" and would have spent "months (typically at least four or five and possibly up to twelve)" developing it, rather than a matter of weeks. The ACCR contends that it is striking that Santos fell well short of Professor Collis' standards and that he was not asked to look at any of Santos' relevant processes despite his obvious expertise to do so. The ACCR submits that the Court should infer that such evidence would not have assisted Santos' case.
In considering these submissions, it is first necessary to have regard to the impugned statements in context.
On 1 December 2020 the Investor Day Presentation was given and released to the ASX. The ASX media release included a statement that Santos had announced "an ambitious roadmap to net zero emissions by 2040 and new emissions targets designed to support Australia's commitment to the Paris Agreement". The Chairman and CEO Message in the 2020 Annual Report used similar language, referring to the announcement in December 2020 of "industry leading emission reduction targets" as did the 2021 Climate Change Report in referring to "Industry-leading targets".
True it is that Santos used emphatic language including Mr Gallagher's statement at the Investor Day about a "realistic, doable" plan and the statements in the 2020 Annual Report and the 2021 Climate Change Report respectively that its transition roadmap was "clear and credible" and that Santos has "a clear, tangible pathway" to reach the Targets. However, it did so in the context of announcing the Targets and in order to express its view that there was a real possibility of achieving them if, as Santos submits, markets and regulations evolved in particular ways, consistent with a view taken of the energy transition and global ambitions to achieve net zero by or after 2050.
Both ACCR and Santos refer to and rely on different aspects of Professor Collis' evidence. It is convenient to set out the relevant parts of his evidence.
As set out above, Professor Collis was asked four questions. The first of those was to describe the purposes of a company setting a long term corporate strategy including targets. In his detailed response to that question Professor Collis considered the purpose and elements of a strategy, its timeframe and strategy implementation.
Professor Collis explained that the elements of a strategy are its objective, scope, competitive advantage and strategy statement.
As to scope, Professor Collis explained that it concerns the precise domain in which the firm will play and establishes boundaries around the markets in which the firm will compete which can cover products, technologies, industries, geographies and value chain activities. Relevantly, Professor Collis says that no strategy can be precise about exactly what it will do in the plan period and that setting out specific initiatives years in advance is impossible in a world of continuous change. Professor Collis also observes that the actual path taken, and tactics adopted during execution of a strategy are not set in concrete in advance but adapted over time as required to meet the stated strategic objective.
In relation to timeframe for a strategy Professor Collis explains that the length of a plan period for a corporate strategy will vary by industry. One driver of a plan period is the life of asset investments. Professor Collis also notes that while a company expects and hopes that a chosen strategy can be followed over the entire plan period, if circumstances change, the appropriate thing to do is to adapt the strategy to meet those new circumstances. Professor Collis describes two types of change: the first, continuous tactical adaptations that must occur in response to evolving external conditions while implementing the strategy; and the second, a radical change in strategy when external changes are so far-reaching that they invalidate the assumptions and logical underpinnings of the original strategy. Professor Collis observes that at every point in time the strategy should be set as one that is best for the next five or 10 years, being the appropriate strategy time frame.
Question 2 asked Professor Collis to describe the nature of the processes, the characteristics of the information or data, and of the assumptions, that would be appropriate for a company to use when setting a long-term corporate strategy or target, including but not limited to a long term ESG or net zero target.
Usually, the substantive corporate strategy review would be undertaken by an internal group of strategy experts and senior executives bolstered by specific outside expertise and the many individual workstreams would typically be synthesised by a steering committee and integrated into a coherent strategy for the company setting out its objective, scope and the competitive advantage to be pursued. According to Professor Collis, a thorough review of a large company's corporate strategy may take months, usually at least four or five and possibly up to 12 and can be expensive.
As a general proposition Professor Collis notes that corporate strategy will typically be set by senior executives and approved by the company's board and that most companies will undertake a substantial strategic review periodically, say every five or 10 years, while a less extensive review and update will usually take place annually.
Professor Collis also notes that there are many frameworks for strategic analysis but that all agree on the need for a "well documented analysis which is data driven, quantifiable and externally validated", which explains why the development process must be so extensive.
One aspect of Professor Collis' response to question 2 concerns data sources. He notes that strategic objectives typically require external data for their development and that long term ESG targets are "perhaps based on the most complex set of data inputs and subject to the most external contingencies". Professor Collis says that the selection of a target can be drawn for a wide variety of metrics and, as it is to be achieved over a long term, the extent of variability in the external environment that must be considered can be enormous. To understand the variability, data has to be collated on a number of relevant issues and from a wide range of sources. Professor Collis notes that, unlike in the case of short term financial forecast, the data available in setting a long term ESG target is typically uncertain and disparate and accordingly, the uncertainties inherent in a long term strategic objective (including a long term ESG target) will often reflect the limitations in the available data, will involve a degree of managerial judgment and the ultimate formulation of the strategy will typically involve an evaluation of a number of different scenarios, each of which is highly uncertain.
Another aspect of Professor Collis' response to question 2 concerns the assumptions made for long term strategic objectives. In summary Professor Collis said:

[575]

In answering this question Professor Collis considered a number of things including "assumptions and uncertainties". His response was similar to that which he gave to question 2 (see above). He said that assumptions on which a long term ESG target are based "include all the exogeneous factors at work over a long period of time that drive the relative costs of different fuel sources; consumer willingness to pay for renewable energy; government policies and regulations; levels of infrastructure investment in ecosystems surrounding each fuel; rates of progress in all the different technologies, such as CCS; global economic growth and so on". He noted that the greatest uncertainty surrounds the ability to realise a long term ESG target. This is because the date of the target is so far into the future, the factors determining whether the right path has been chosen to reach the target are so many, interdependent and unpredictable that it is likely that there will be some variance from what is initially assumed somewhere along that path. There is also the risk of the unknown.
Given the extent of the uncertainty, an effective process will regularly review future scenarios in preparation for altering the target when assumptions on which the original target was premised are invalidated.
The fourth question was whether the Net Zero Roadmap was a long-term corporate target or strategy of the kind Professor Collis had described in his answers to questions 1 to 3. Professor Collis answered yes to that question providing his reasons for doing so.
In summary Professor Collis' evidence establishes that long range ESG targets necessarily involve assumptions about external future contingencies and do not require a basis only in existing, objective or verifiable facts. To the extent Ms Parker gave evidence to the contrary I would give it very little weight (for the reasons set out at [72]-[79] above). That said, as Professor Collis accepted in cross-examination, that a plan is long term or attended with uncertainty does not mean that there is no need to analyse the robustness of the assumptions over the plan period.
I accept Santos' submission that it developed its targets as part of an annual review process of the type described by Professor Collis and that they were the culmination of work over a number of years towards a wider strategy. So much can be gleaned from the work commenced in 2016 as described by Mr Jaffray (see [145] above) and the development of the 2016 Strategy, the establishment of the Energy Solutions team and a review of the 2018, 2019 and 2020 Climate Change Reports. Those reports recognised the role of natural gas in the energy transition and the opportunities for CCS. As to the latter, by way of example the 2018 Climate Change Report referred to longer term developments such as CCS, noting that it "will be required to meet both emission reduction targets and growing energy demand"; the 2019 Climate Change Report, which announced the 2025 Targets, included as target 3 the assessment of the feasibility and potential investment in technology that can deliver a step change in emissions such as carbon capture, utilisation and storage; and the 2020 Climate Change Report noted that as part of its strategy Santos was actively pursuing CCS which it saw as a "critical technology to limit global temperature increases to well below 2 degrees Celsius".
By the Investor Day Presentation, the 2020 Annual Report and the 2021 Climate Change Report, Santos further developed its thinking and announced the Targets together with the Net Zero Roadmap which provided a plan for how it proposed to meet the 2040 Target in particular. The Targets were long term and, as Professor Collis explained, must of their nature have included a number of interdependent and unpredictable assumptions which were sensitive to factors beyond Santos' control.
The Targets were announced at a time when there appeared to be heightened scrutiny by investors on companies about their decarbonisation strategies. In a paper titled "Valuing ESG: Doing Good or Sounding Good", B. Cornell, Anderson Graduate School of Management and A. Damodaran, Stern School of Business, dated 20 March 2020, which was in evidence before me, the authors observed that "[u]sing criteria based on environmental, social and governance (ESG) considerations has become an increasingly important aspect of investment decision- making, particularly for high profile institutional investors" and "[o]n the corporate side, there has been a growing awareness of the need to be or at least appear to be socially responsible, either to fend off pressure from interest groups and media, or to market themselves to customers".
Dr Unni was asked about that paper. Contrary to the ACCR's submission, his evidence was not that many investors do take ESG information into account when making investment decisions. Dr Unni's evidence was about the premise on which the authors proceeded in the paper. After agreeing that the paper did not say that investors were not concerned with ESG performance, Dr Unni had the following exchange about the paper with Mr Hutley SC:

[583]

As set out above the 2030 Target and the Net Zero Roadmap assumed that Santos' emissions baseline as at 2030 and 2040 would be 5.9 MtCO2e per annum on the basis that emissions "will remain flat" between 2025 and 2040. The ACCR contends that the Court should find that this was not a reasonable assumption.
The ACCR submits that the evidence establishes that critical elements of the emissions baseline for the 2030 Target and the Net Zero Roadmap were changed and then finalised, effectively overnight between 10 and 11 August 2020, as a result of directions from Mr Gallagher who chose not to give evidence. It contends that there is no evidence that Mr Gallagher or anyone else spoke to any of the managers of the numerous assets covered by the Portfolio estimates to inquire about the potential for emissions savings on current production, let alone its replacement and augmentation to arrive at 120 mmboe by 2030. The ACCR says that the change to 120 mmboe and 5.9 MtCO2e by 2030 was effectively done in the middle of the night on 11 August 2020 with no analysis and was contrary to the Portfolio team's growth estimates and management's agreed approach of 3% CAGR.
Santos submits that the annual emissions depicted in the Net Zero Roadmap were its actual emissions of 5.0 MtCO2e for FY2019/2020 growing to 5.9 MtCO2e in 2025 due to "Production growth to 120 mmboe" (Growth Bar). It says that the Growth Bar accounted for Santos' target to achieve yearly production of 120 mmboe by 2025 through additional growth projects chosen for development at that time. Santos submits that the Net Zero Roadmap assumed annual emissions of 5.9 MtCO2e from 2025 to 2040 which reflected Santos' production strategy of growing production to maintain annual output at around 120 mmboe and Santos' ability, and strategic decision, to select growth projects with lower CO2 content, so that emissions could be maintained at the 2025 levels of 5.9 MtCO2e per 120 mmboe.
Santos submits that the Court should not accept the ACCR's attack on the assumptions that: after 2025 Santos could maintain 5.9 MtCO2e per 120 mmboe because the Portfolio data showed about 5.9 MtCO2e for 103 mmboe modelled for 2030; and emissions at the Cooper Basin would be flat at 2.2 MtCO2e per annum because Portfolio data showed increasing emissions. Santos submits that the ACCR's submissions depend on a mischaracterisation of what Portfolio data represents, on an unfounded assumption that, on and after August 2020, the Portfolio data accurately reflected prevailing and future conditions at Cooper Basin, when the evidence showed that was not the case, and that they give insufficient weight to the strategic optionality available to Santos which was properly determined at a senior executive level, rather than at lower levels within Portfolio or other teams.

[584]

The evidence before me in relation to the role of the Portfolio team is set out above. The following emerges from that evidence.
The Portfolio team estimates were an aggregation of data provided by the Asset teams.
In order to provide that data, each of the Asset teams developed LTPs and annual budgets for the assets for which that team was responsible. LTPs involved a forecast of the potential activities year on year for the life of the asset, including exploration, development and production and uncommitted and contingent projects which might not be implemented. In short, the LTP (and thus the data provided to the Portfolio team and on which it relied) was an Asset team's view of its asset with significant parts of it remaining subject to formal project approval.
The Portfolio team's data was only updated annually, as part of a formal refresh process linked to the setting of the annual budget for each asset. The annual budget was Santos' principal organisational and operational planning process. It was overseen by executives and management. The production and emissions estimates in the Portfolio data, drawn from the LTPs, provided an appropriate starting point for budget setting but other factors were also potentially relevant, and Portfolio data was subject to management and strategic decisions, including through the formal budget process.
While each year, as part of the budget process, Asset teams sought budget support for their proposed programs in relation to their asset, it was the CEO and chief financial officer who set limits and parameters, based on Santos' strategic direction, with which the Asset teams were required to comply. At any point in time, the CEO could make a decision to depart from an approved budget, for example, by changing production levels, as was the case here. In fact all of the Portfolio team's longer-term estimates were subject to the decisions, choices, limits or parameters set by the CEO, and an Asset team could be directed to select fields and wells to drill that would maintain a flat emissions profile.
The Portfolio estimates represented long-term modelling of options that were available to be pursued by Santos, taking into account economic, commercial, engineering and strategic considerations. They did not reflect strategic decision-making.
The Portfolio data in question in this proceeding was from May 2020, with some corrections made in June 2020 for reporting errors at Cooper Basin. Those figures did not reflect the production problems that developed at the Cooper Basin commencing in July 2020 or the solutions which management implemented as a result.

[590]

Subsequently, adjustments were made to the emissions forecast. In particular on 29 July 2020 Ms Luo removed the emissions associated with "exploration" (see [245] above). These were high level estimates of emissions that may arise from Santos developing and producing the exploration opportunities referred to in the tab titled "Organic Growth Summary" in the spreadsheet provided to her by Mr Bermingham on 5 June 2020. Ms Luo considered them to be "too contingent" at the time. In her covering email circulating the updated slides for the August 2020 Board Presentation Ms Luo described the inclusion of the additional emissions from exploration as "confusing" hence she stripped them out. In cross-examination Ms Luo explained that the "exploration emissions that were in the previous versions assumed a success case for all the exploration assets" and adding them was confusing because "it implied it had the same amount of certainty as the other emissions forecasts on the chart".
The ACCR submits that it would have been reasonable for Santos to use Portfolio estimates of current and future growth opportunities to set its projected future emission baseline. However, that is not what Ms Luo thought at the time she was considering the data for the purpose of preparing revised slides for the August 2020 Board Presentation. Further, as Santos submits, it would not be reasonable to assume as at 2020 that its emission in 2030 would include emissions from every opportunity available to it. As Mr Woods explained, Santos had a disciplined operating model which constrained its deployment of capital and it made strategic decisions at the relevant time about which growth projects to pursue. Relevantly, Santos' strategy was not to develop all potential options but to target 120 mmboe per annum.
In a subsequent draft of the August 2020 Board Presentation Ms Luo amended the emissions forecast slide at Mr Jaffray's request, by, among other things, increasing production from 2025 to 2030 by a 3% CAGR. This of course had a corresponding effect on emissions (see [249] above). As set out above, Mr Jaffray's unchallenged evidence was that the application of a CAGR was considered at the time as one possible assumption for the purposes of understanding future production levels, taking into account the strategy that declining production from existing assets was to be replaced.
The ACCR submits that it would have been reasonable for Santos to adopt 3% CAGR as a proxy for the emissions it was forecasting for its activities in 2030 or 2040 and notes that Mr Jaffray's evidence is that 3% CAGR is a commonly used long term growth assumption across industrial industries, although he now claims, without relying on any contemporaneous evidence, that he thought at the time it was on the high side. But the adoption of a 3% CAGR was no more than, as Mr Jaffray describes it, one possible assumption to be considered in the course of developing and modelling the Targets. Ultimately, that assumption was not pursued. I infer that is because it was not consistent with the strategy that was set, the maintenance of production at 120 mmboe.
There was much activity in the period 9 to 11 August 2020 leading up to the finalisation of the August 2020 Board Presentation (see [254]-[274] above). This included meetings with Mr Gallagher reviewing drafts of the presentation. The ACCR attacks two aspects of the instructions given by Mr Gallagher over this period, namely his instructions to hold overall emissions flat at 5.9 MtCO2e; and to hold emissions for Cooper Basin flat at 2.2 MtCO2e.
The direction to hold emissions flat at 5.9 MtCO2e from 2025 and to hold production flat at 120 mmboe from 2025 came from Mr Gallagher, although the former was conveyed by Mr Jaffray to Ms Luo after he met with Mr Gallagher. While the two instructions were given at different times, they are clearly related.
As set out at [261] above, on 11 August 2020 Mr Jaffray sent a marked up draft of the August 2020 Board Presentation to Ms Luo reflecting his earlier discussion with Mr Gallagher. The emissions forecast slide included the instruction to "Adjust forecasts" and relevantly "Cooper flat at 2.2", "Growth bar holds emissions flat at 2025 levels, ..." and to "Forecast out to 2030". Ms Luo followed Ms Jaffray's instructions and provided an updated draft of the August 2020 Board Presentation later that afternoon. That is, Ms Luo implemented the instruction to "hold emissions flat" with no adjustment made to production levels. Rather, the 3% CAGR assumption was maintained for production in Ms Luo's draft. As the ACCR submits this gave rise to an "absurdity". Production was increasing without any change to emissions. But the "absurdity" was obviously an error which was subsequently corrected by the instruction from Mr Gallagher in his email sent on 11 August 2020 at 10.20 pm attaching the draft August 2020 Board Presentation in which he had annotated the emissions forecast slide with his instruction to "Assume 120 mmboe from 2025 onwards ie Flat!".
The emissions baseline as settled by Mr Gallagher, with flat emissions and corresponding flat production, was included in the final August 2020 Board Presentation.
The ACCR submits that Mr Gallagher's directions were objectively unreasonable. In support of that submission, it observes: first, Portfolio was forecasting that production from existing and "major growth" assets would decline to 103.8 mmboe by 2030; secondly, Portfolio was forecasting that Santos' emissions at 2030 for existing and "major growth" assets at a production level of 103.8 mmboe would be 6.13 MtCO2e. If adjusted to reflect the other changes to the baseline, with Cooper Basin held "flat" at 2.2 MtCO2e and Dorado (referred to as "Bedout") at 0.27 MtCO2e, then emissions at that level of production would be 5.9 MtCO2e at 2030; and thirdly, Santos was not planning to allow production to decline to 103.8 mmboe by 2030. Mr Gallagher's instruction was to hold production flat at 120 mmboe by 2030.
The ACCR submits that the absurdity of the baseline assumption is that the 5.9 MtCO2e per annum budget was already exhausted by assets which Portfolio was estimating would produce only 103 mmboe by 2030 and for Santos to emit only 5.9 MtCO2e per annum by 2030, whilst holding production at 120 mmboe as Mr Gallagher apparently intended, it would need to increase its production by 16.5% (17 mmboe) on top of Portfolio's estimates without any material increase in emissions associated with that increased production.
These submissions ignore the evidence that Santos could choose lower CO2 fields that would allow it to deliver on its production and emission targets. When cross-examined about her email sent on 13 August 2020 explaining the changes to the emissions forecast slide, Ms Luo accepted that the slide no longer incorporated Portfolio data and that there was no analysis supporting the production and emissions numbers. But when Ms Luo was asked whether it was correct that the emissions forecast slide "provided for 17 million barrels of oil being produced with zero emissions" she responded, "or changes in, yes, production and emissions intensity" (see [288] above). That is, Ms Luo recognised that the forecast emissions could be achieved by changing production.
The Portfolio data captured in a series of spreadsheets titled "Portfolio Carbon Emission Forecasts" dated May 2020 supports and illustrates this position and the ability for Santos to choose the opportunities it wished to pursue in accordance with its strategy. The spreadsheet titled "SKIN 4 May 2020" recorded average emissions intensity in the period 2025 to 2030 for existing projects to be between approximately 52 and 55 KtCO2e/mmboe with declining production, while the spread sheet titled "Organic Growth Summary" recorded average emissions intensity in the same period for growth options to be between approximately 27 and 36 KtCO2e/mmboe.
Mr Woods was Chair of the Reserves Committee and accordingly was aware of field developments and their respective emissions. Relevantly, he gave evidence in relation to the Net Zero Roadmap including that the roadmap itself did not include the forecast that by 2030 Santos' production levels would decline or include emissions from potential growth projects that might present themselves in the future. Mr Woods did not think that the latter would materially increase Santos' emissions beyond 5.9 MtCO2e as disclosed in the Net Zero Roadmap because among other things:

[592]

The ACCR submits that, based on her role as described by her and Mr Jaffray, Ms Luo's state of mind at the time of the development of the Targets and the Net Zero Roadmap was very significant. The ACCR submits that it is quite clear that Ms Luo did not, at the time, support all of the decisions that Mr Gallagher made in relation to the emissions baseline and the Court should find the direction to hold production and emissions flat made no sense to Ms Luo at the time. The ACCR relies on Ms Luo's contemporaneous emails and evidence she gave in cross-examination.
However, the ACCR overstates and, to an extent, takes Ms Luo's evidence out of context. The ACCR relies on emails sent by Ms Luo in relation to the changes in the emission forecast on 12 August 2020 to Mr Ali, a member of the Portfolio team, and on 13 August 2020 to Ms Genet, copied to Messrs Wilson and Jain. Ms Luo's evidence of her reasons for sending these emails is set out respectively at [277] and [286] above.
The email exchange with Mr Ali in fact included an email from Mr Ali who raised a concern about changes made outside of the "portfolio refresh cycle" which were unauthorised and may "serve to inflame [Mr Gallagher] if it is not underpinned by a fully informed process". In response Ms Luo informed Mr Ali that the instructions to hold emissions and production flat came from Mr Gallagher. In her email, Ms Luo also said that the flat emissions for Cooper Basin and for the whole portfolio had "effectively no basis". As was clear Ms Luo considered that Portfolio data was the "central source of truth". She wished to explain to Mr Ali why the emissions forecast slide did not reflect the Portfolio data and the source of her instructions.
Ms Luo's evidence in cross-examination that there was no "bottom up analysis" of the numbers included in the emissions forecast slide and that it was a "top down assumption" was consistent with the fact that the instruction to proceed with the flat emissions and production numbers came from Mr Gallagher. Ms Luo's evidence was that the departure from the Portfolio data made sense to her and the decision to keep the emissions flat was reflective of Santos' strategy to grow its portfolio and thus not to use Portfolio data which showed a declining production and emissions profile.
In her email sent on 13 August 2020 Ms Luo recorded the changes she made to the emissions forecast slide. She sent the email to ensure that the decision makers had the source of data for the inputs. While some of the changes made sense to her, she described others as "top-down assumptions". Ms Luo accepted that there was no basis to assume flat production at 120 mmboe at 2030 with emissions of 5.9 MtCO2e per annum. But, that evidence must be understood in the context of Ms Luo's explanation that there was no Portfolio data to reflect the assumptions that were adopted.
Ms Luo's evidence must also be considered in the context of her role. As Santos submits, in developing the Targets and the Net Zero Roadmap, Ms Luo's role was to support Santos executives, including Messrs Woods and Jaffray, by gathering and analysing data and other information. She provided "inputs" by collecting information and undertaking analysis for those executives who had oversight of the initiatives referred to in the Net Zero Roadmap. She did not have a decision-making role. Strategic decisions about production and emissions were made by the CEO and senior executives and not by more junior employees like Ms Luo. Portfolio data was only prepared annually. Unsurprisingly, intervening strategic decisions may need to be made after preparation of the data. That is what occurred in 2020 with the development of the Targets and the Net Zero Roadmap.
That Ms Luo was attuned to deviations from Portfolio data is entirely consistent with her role. Santos submits and I accept that the practice of treating the Portfolio estimates as a source of truth by employees at Ms Luo's level of the organisation ought not to be understood as precluding strategic choices or decisions being made by the CEO, in consultation with other senior executives, based on up-to-date operational data and strategic imperatives.
The ACCR submits that Santos' lay witnesses were completely silent on the absurdity to which Mr Gallagher's direction gave rise, that it should be inferred that their evidence on that question would not have assisted Santos case, referring to Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419, and that the Court should not draw any inferences favourable to Santos from other evidence in relation to the baseline issue, referring to Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 at [63].
However, the "absurdity", which is said to be the growing of production without growing emissions (see [631] above), is answered by Santos' documented intention, ability and incentive to replace production with lower CO2 opportunities. That appears from the evidence before me, including the unchallenged evidence given by Messrs Woods and Jaffray. They addressed the topic and no Ferrcom inference is available.
The ACCR also submits that an inference of the kind formulated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 should be drawn in relation to Mr Gallagher who was not called. The ACCR submits that there is no contemporaneous record of what Mr Gallagher was thinking in issuing the key directions, and no probative evidence that his directions had any basis in any work actually done by Santos. They contend, to the contrary, that Mr Gallagher's directions were inconsistent with Portfolio, and were contrary to the forecasts which management prepared based upon the best available data, the decision not to call Mr Gallagher is therefore significant and the Court should infer that his evidence would not have assisted Santos on this issue.
There was no requirement that Santos call Mr Gallagher. As it submits, it is entitled to select its witnesses: see AHG WA (2015) Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2023] FCA 1022; (2023) 303 FCR 479 at [263]. Mr Gallagher's decisions and instructions about the emissions and production targets and about the ability to select lower CO2 fields are recorded in emails and in drafts of the presentation documents. The question for the Court is whether Santos had reasonable grounds for assuming flat emissions from 2025. This can be evaluated by reference to the knowledge of relevant employees as Santos' agents: see Crowley v Worley Limited (2022) 293 FCR 438 at [117], [120]. Santos is entitled to rely on Messrs Woods and Jaffray and Ms Luo. It is not limited to Mr Gallagher. In the circumstances I would not draw the inference the ACCR urges in relation to Mr Gallagher.

[600]

That is, as at 11 August 2020 Ms Luo was aware that Santos could choose the fields it proposed to develop. Her evidence in chief was not "hindsight justification" but is supported by this contemporaneous email.
The ACCR next refers to Mr Gallagher's email sent on 10 August 2020 (see [258] above) and the meeting on the morning of 11 August 2020 attended by Messrs Gallagher and Jaffray and Ms Norman (see [257] above) at which it says the Cooper Basin emissions were evidently discussed. The ACCR submits that the difficulty is that Ms Luo was not at the meeting and, as Ms Norman noted in her email reporting on the meeting "Mr Gallagher still hasn't seen the LTSP for Cooper so is not convinced that there is a robust plan before these forecasts". The ACCR submits that the Court should therefore find that Mr Gallagher had not seen the Portfolio numbers and, nevertheless, made decisions to override Portfolio's data. The ACCR also observes that the marked up slide deck forward by Mr Jaffray to Ms Luo on 11 August 2020 at 12.08 pm contained an instruction that Cooper Basin emissions should be held flat at 2.2 MtCO2e and submits that there is no evidence explaining this instruction (as distinct from the 2.0 MtCO2e instructed by Mr Gallagher) which reversed Mr Yeates' review in May 2020 and overrode the latest Portfolio case.
The evidence before me provides support for Mr Gallagher's view about lower emissions in the Cooper Basin. First, in Ms Norman's notes of the 11 August 2020 meeting with Mr Gallagher she records his view that "Moomba South and Inglewood are huge fields which are lower CO2 fields and therefore CO2 emissions will drop in absolute and intensity terms". In other words, Mr Gallagher understood that to be the case and that understanding was recorded by Ms Norman in her email sent to Ms Luo on 11 August 2020 at 10.28 am in which Ms Norman says that "[Mr Gallagher] thinks that lower CO2 fields (Moomba South, Inglewood) would reduce emissions, not increase them ...". Secondly, as Mr Woods explained, in 2019 and continuing into 2020 the Cooper Basin Asset team had been assessing a new set of fields in Moomba South and was planning to increase the amount of production from Moomba South into its plans (see [211(1)(b)] above). There is nothing before me to suggest that the slide presentation titled "Moomba South YE2019 Reserves and Contingent Resources (Prelim.)" dated 14 September 2020 which recorded modelling for Moomba South, Moomba North and Big Lake was already included in Portfolio data.
As set out above, Ms Luo had no difficulty overlaying Mr Gallagher's "view that Cooper Basin emissions will remain at 2.2 MtCO2e" and in doing so adding a note that "this was not supported by any existing Portfolio case". Ms Luo's unchallenged evidence is that it was acceptable to overlay the estimates maintained by the Portfolio team because the Cooper Basin Asset team could be directed to select fields and wells to drill that would maintain a flat emissions profile as part of implementing an overall emission reduction strategy.
Mr Woods' evidence is that in 2020 the Cooper Basin Asset team shifted its approach to production from seeking to grow production to maintaining flat production, a decision made for free cash flow reasons and to ensure that Santos stayed within its disciplined operating model. In cross-examination Mr Woods gave the following evidence about the Cooper Basin asset in 2020 and the instruction to maintain flat emissions for Cooper Basin:

[605]

As set out above, the "Electrification/Hydrogen Fuel" component of the 2030 Target and the Net Zero Roadmap involves two aspects.
The "Electrification" aspect was a project Santos was assessing to reduce the use of fuel gas by it in the Cooper Basin through the centralised electrification of some or all of the gas-driven compression infrastructure. The parties agreed that the potential emissions reductions that could be achieved from this project was approximately 0.12 MtCO2e per annum. The basis for the estimated reductions for the Cooper Electrification project is not in dispute.
The "Hydrogen Fuel" aspect related to a project under consideration by the Energy Solutions team to use some of the hydrogen that would be produced at Moomba as fuel (instead of natural gas) to power Santos' operations in the Cooper Basin and Port Bonython. This could reduce Santos' Scope 1 emissions as it would mean that Santos would not be releasing GHG emissions through the burning of natural gas to fuel its operations. The parties also agreed that the "Hydrogen Fuel" component of the Net Zero Roadmap represented "potential emissions reductions" of approximately 0.434 MtCO2e per annum.
The accuracy and basis for the estimated reductions from the use of "Hydrogen Fuel" is not in dispute except to the extent that the ACCR submits that those emissions reductions did not account for the Scope 1 and 2 emissions that Santos knew would be generated from the production of the "blue hydrogen" in the 2030 Target and the Net Zero Roadmap.
The ACCR submits that Associate Professor Beck and Mr Snow have calculated that the additional emissions from production would result in at least 80,000 tonnes of additional Scope 1 emissions (reducing this aspect of the Net Zero Roadmap from 0.434 to 0.35 MtCO2e per annum), assuming constant natural gas production, referring to the joint report of Associate Professor Beck and Mr Snow (Beck/Snow Joint Report) at [39]. The ACCR says that this figure would be greater if gas production was increased to produce the hydrogen, and if CH4 emissions were included, referring to Associate Professor Beck's opinion at [43] of the Beck/Snow Joint Report.
The calculations undertaken by Associate Professor Beck and Mr Snow, the results of which are summarised at [39] of the Beck/Snow Joint Report, were included in answer to the following question:

[613]

Mr Grant accepted in cross-examination that, in relation to emissions, "the quantum relative differences between technologies can vary depending on a range of technological and commercial choices made by producers of the technology".
A similar view is expressed in the IEA report "Towards hydrogen definitions based on their emissions intensity" dated 13 April 2023 which relevantly noted that "emissions associated with the production of hydrogen can vary significantly between production routes, depending on the fuel, technology and the rate at which CCS is applied" and that "[l]ow-emission hydrogen production is more costly, but scale-up and technology innovation can make low-emission hydrogen competitive in the short term in regions with abundant renewable resources or access to cheap fossil fuels and geological CO2 storage".
Relatedly, as set out at [409] above, in carrying out the GHD Review, Ms Luo on behalf of Santos instructed GHD that Santos' intention was to seek to reduce Scope 1 and 2 emissions associated with the production of blue hydrogen as far as was technically and economically feasible and then to use carbon offsets in order to achieve a net zero hydrogen product. An acknowledgment of that intention is included in the GHD Report. The ACCR seems to ignore this evidence or to assume that Santos would not proceed in accordance with that stated intention.
Associate Professor Beck's evidence, which supports Santos' stated intention, was that any subsequent phase of hydrogen development could explore an increased overall capture rate for its hydrogen production plant and could explore increased variable renewable energy (VRE), both of which could reduce emissions associated with the production of blue hydrogen.
Mr Snow gave evidence about potential advancements in technology or operations including VRE and improvements in CCS efficiency and their impact on the level of emissions included in the GHD Report. Given the confidential nature of an aspect of Mr Snow's evidence in this respect, I will not set it out in full. However, it demonstrates that the introduction of these two improvements would have a seemingly significant positive impact. In her third report Associate Professor Beck broadly agrees with Mr Snow that improving CCS capture rates and VRE were important process improvements to reduce emission from hydrogen production and that the latter was a possible and sensible next step for Santos, although she did not believe it was likely in the short term.
As to CCS capture rates, Santos could construct a plant with an overall capture rate of 90%-95%. As acknowledged by Associate Professor Beck in cross-examination, as at December 2020, ATR technologies capable of achieving overall capture rates of 95% were available. Associate Professor Beck opined in her third report that it was "highly unlikely" that such a system would be "retrofitted" at Moomba. However, in giving that opinion Associate Professor Beck assumed that the 800 tpd ATR plant assessed in the GHD Report would be the plant that Santos built, and any process improvements would only be considered subsequent to construction of that plant, i.e. improvements would be "retrofitted". As I have already observed, no specific plant configuration had been selected.
As to VRE, both Associate Professor Beck and Mr Snow agreed that using 80% VRE was a possible and sensible step for Santos to take. As set out above, Mr Snow's evidence establishes that doing so would reduce emissions associated with hydrogen production in a not insignificant and, I accept, as Santos submits, material way. Further, as Santos submits and as was apparent from cross-examination of Associate Professor Beck, assuming that:

[615]

In her third report Associate Professor Beck expressed the view that achieving 80% VRE was unlikely. That view can be given no weight. In cross-examination Associate Professor Beck clarified that her view was limited to the short term and was based on a single slide summarising the assess phase outcomes of the Cooper Electrification Project. Associate Professor Beck understood that the "assess phase" of a project is a preliminary phase in its development and is followed by a "select" phase where the project opportunity is refined. Associate Professor Beck's view was not based on any assessment undertaken by her of the technical or economic feasibility of increasing VRE at Moomba.
The ACCR says that Santos' contentions and the calculations on which it relies do not take the matter very far because they nevertheless demonstrate that the production of hydrogen by Santos will involve material GHG emissions, 350,000 tonnes per annum which is 5% of the emission baseline of 5.9 Mtpa. The ACCR also says that there was no evidence that Santos was contemplating increasing the amount of VRE as posited in the alternative scenario i.e.with 80% VRE.
These submissions and the associated submission that there is no evidence for the suggestion that Santos would have departed from the proposals in the GHD Report are not to the point. Although GHD proposed certain models for hydrogen production, there is no evidence that Santos was going to build those models. The ACCR's position assumes that Santos was bound to proceed in accordance with the GHD Report. It was not and there is no evidence that any decision had been made about the hydrogen production model that would be pursued.
Santos makes a number of other submissions about the emissions calculations carried out by Associate Professor Beck insofar as they provide for additional CH4 emissions. Given my views expressed above and that the calculation relied on by the ACCR to support its submission proceeds on an uncertain assumption, I do not intend to address those submissions.

[620]

The ACCR submits that despite these facts, Santos persisted in making grossly misleading statements that it could capture all the CO2 involved in the production of hydrogen, and persisted with the language of "zero emissions hydrogen", whilst at the same time omitting to make any reference to the emissions generated in the production of blue hydrogen and to its apparent intention to purchase a large number of offsets. Mr Woods was unable to explain why the word "net" had not been used to describe Santos' hydrogen plans. His evidence was that "most people who understand hydrogen, blue hydrogen in particular, know that you have to offset your emissions. I think that's not news to anyone". The ACCR submits that evidence should be rejected.
The ACCR submits that the Court should find that Santos determined to persist with the terminology of "zero emissions" and "clean" hydrogen, despite knowing that it would be producing material volumes of CO2, that it is open to find that the misleading impression created by the conduct was deliberate and, in any event, the Court should find that Santos did not have a reasonable basis for assuming that its hydrogen would be emissions-free. The ACCR contends that this fatally undermines the reasonableness and credibility of the 2030 Target, the 2040 Target and the Net Zero Roadmap.
Before proceeding further I will address the ACCR's submission that Santos engaged in deliberate or dishonest conduct. To the extent the ACCR contends that is so, my findings at [566] apply equally. That submission is not open on the pleaded case and I do not intend to address it further.
I turn to consider the balance of the ACCR's submissions. Santos says they are based on an incorrect premise, namely that it assumed that "its hydrogen would be emission free". Santos submits that it did not make that assumption but that it reasonably assumed that emissions from the production of blue hydrogen would be captured by CCS, addressed through technology improvements or offset through carbon credits.
The following evidence relied on by Santos bears out that submission:

[621]

(1) at the time the Targets were announced Mr Woods held that belief (see [415(1)] above);

(2) Mr Woods was regularly updated on the progress of the GHD Review by Mr Wilson and Ms Luo and by December 2020 he was aware that GHD had confirmed the technical feasibility of production of blue hydrogen at Moomba for about AUD2/kg. Mr Woods explains how that outcome fortified his view that Santos could obtain offsets in respect of any emissions that could not otherwise be captured and also demonstrated commercial feasibility (see [415(2)] above);

(3) when Ms Luo instructed GHD to undertake the GHD Review, among other things, she informed GHD that Santos' intention was to seek to reduce emissions associated with the production of blue hydrogen as far as was technically and economically feasible, and to obtain credits in respect of any remaining emissions (see [409] above);

(4) Ms Luo also considered that Santos' ability to produce zero emissions hydrogen at around AUD2/kg established the potential for the product to be commercially viable (see [418] above);

(5) in cross-examination Mr Woods candidly accepted that he always understood that, even with CCS, there would be some emission of CO2 into the atmosphere in the production of hydrogen;

(6) Mr Woods explained that a decision was made within Santos that it would refer to blue hydrogen with CCS and carbon offsets as zero emission hydrogen;

(7) contrary to the ACCR's submission, Mr Woods' evidence was that Santos understood the broad range of likely emissions from the production of hydrogen. The GHD Report provided precision;

(8) Mr Woods explained that at the time he made statements at the Investor Day he understood that Santos' proposed production of blue hydrogen was zero emission hydrogen because it included CCS and because Santos was going to offset any emissions through carbon credits. His evidence was that the oral presentation (recorded in the transcript) and the video shown at the Investor Day explained Santos' intention to start with blue hydrogen with offsets and then transition to green hydrogen;

(9) Ms Luo was also aware that hydrogen production would have Scope 1 and 2 emissions associated with it production which Santos would need to sequester or offset with carbon credits and that the majority of the emissions would be sequestered with the remainder then offset;

(10) Ms Luo explained in cross-examination that the assumption in the Moomba blue hydrogen study was that any Scope 1 and 2 emissions generated through the production of hydrogen would be captured and sequestered or offset;and

(11) Ms Luo also gave evidence in cross-examination that the assumption underpinning the Net Zero Roadmap in relation to hydrogen production is that the emissions would be either captured and sequestered or offset. For that reason the buying of offsets relating to the manufacture of hydrogen does not appear in the roadmap.

[626]

I want to give you a little snippet of how you should think about switching to, say, hydrogen, right? One of the problems we have here on the east coast gas market is lack of infrastructure. That's after 50 to 60 years of operating a natural gas market. How quick do you think we'll build a hydrogen infrastructure to replace it. Fifty to 60 years, and we haven't built the natural gas infrastructure we need for the market. It's not going to happen overnight, and it will cost trillions - not billions - trillions of dollars to build that infrastructure. Now, put that on a global scale, because I've told you already, we could deliver hydrogen around $2 per kilogram or even less, today. Who'd buy it on scale? Nobody can take it, because the transportation challenges haven't been worked out yet. The infrastructure at the other end to process it, transport it, hasn't been worked out.

...

And we want to stay predominantly a gas company, and we believe the transition for gas will be from natural gas over the decades to hydrogen gas, but it will still be a gas industry. It'll be a very strong gas industry, and we believe we have the skills and the capabilities and the natural resources to be part and a very successful part, and there will be huge opportunities, I believe, for us, if we can get first mover advantage in that transition.

But the timing of that transition will be dictated, in my view, by how quickly the market transitions. It's not about the suppliers transitioning, because we need people to sell it to. We need buyers who want it, and we will transition as the market requires, and we're very plugged into that. We're dealing with various organisations across Japan, Korea and elsewhere, and we're involved in those conversations, so we've got a very good feel for what the pace of that will be from our buyer environment, and that's important, because we believe that buyers of hydrogen tomorrow are the buyers of LNG today. It's the same buyers. It's the same industries. It's the same companies, and so we will transition with them.

[631]

(1) at the 2020 Board Strategy Day Santos considered the possibility of "blending" 10% hydrogen into the existing gas network as a way to reduce or offset Santos' emissions at the time;

(2) following Mr Gallagher's intervention on 18 September 2020, Ms Luo initially postulated "H2 sales offsets" of 1 Mtpa CO2e which equated, roughly, to the 10% blending figure that had earlier been calculated and considered. In cross-examination, Ms Luo conceded that these were "notional numbers for the potential credits [Santos] could generate through those opportunities" and that it was an assumption she made "to the best of [her] ability";

(3) there was evidently discussion of higher potential offsetting figures for the "H2 sales offsets" at a meeting which took place on the morning of 29 September 2020 between Ms Luo, Mr Woods, Ms Genet and Mr Jain. Ms Luo agreed that the 50% figure was "obviously an output of that discussion" but no-one could remember quite how the participants arrived at 50%, and it is not otherwise explained in the evidence. According to Ms Luo, it was the result of a discussion in which she provided "the market and technical specifics on how much hydrogen could potentially be blended" and Mr Woods provided "the direction on commercial strategy". But Mr Woods said that he thought that "they were just ranges" and could not "be specific on who suggested the figure of 50 per cent". He could not recall seeing any documents (other than the draft Board presentation) that explained the basis for the assumption, and none have been discovered. There seems to have been no further analysis following the 29 September 2020 meeting. By 1.21 pm the same afternoon, Ms Luo had produced a new draft of the Board presentation that included the "50% H2 East coast domgas" assumption, equating to 4.4 Mtpa CO2e in offsets;

(4) the assumption as settled in the meeting on 29 September 2020 was then presented to, and approved by, the Board at the October 2020 Board meeting. No further changes were made, and no more analysis was done in the approximately three hours between 10.30 am and 1.21 pm appearing to be the total time spent on this major assumption; and

(5) at some unspecified point following the October 2020 Board meeting, Santos settled on 30% as the appropriate market share by volume. How this occurred is opaque in the contemporaneous documents. The 30% market share assumption does not appear anywhere in the documentary record until 30 November 2020, one day prior to the Investor Day Presentation. The only modelling that had been performed by Ms Luo or her team at the time was on the basis of 10% market share by 2030. No contemporaneous work was done to justify the 30% assumption, either in terms of the market share or in terms of the delivery method. Santos can point to no real analysis that it did in 2020 of the identity of its customers for the 30% by volume, nor the transportation method to those customers of that volume of hydrogen, nor what basis it had for predicting that Santos would be able to acquire sufficient credits from its customers.

[632]

As to the blending assumption, the ACCR observes that in Santos' early work, it is clear that it was assuming as a delivery method that 10% hydrogen by volume would be "blended" into natural gas pipelines which the parties agree could be done with minimal adjustments to existing infrastructure and appliances. The parties also agree that a 20% blend by volume into natural gas pipelines is the upper limit. The ACCR submits that if Santos was assuming it could blend 30% hydrogen by volume into the east coast gas network, its assumption was patently unreasonable. It also says that if Santos was making some other assumption, it would have been documented but, as no other assumption was documented, the Court should find that no other assumption was made; or, if some other assumption was made, it was made without Santos having conducted any appropriate analysis to justify a "clear", "credible" plan based upon "real activities" which was "not just a number".
I do not accept that Santos did not estimate the prospective size of the market for hydrogen at 2040 or consider whether there were any major variances related to the source of hydrogen that might impact its market share. That is for two reasons.
First, Ms Luo's evidence demonstrated that she understood the likely hydrogen market. For example: she was aware of studies undertaken by third parties about the potential to develop hydrogen; she understood in 2020 the amount of gas that would be required to produce the posited volume of hydrogen, including taking into consideration the volume of gas that Santos was producing at Moomba; she considered the likely competitive environment for hydrogen in 2040; she believed 50% by volume of the east coast domestic market by 2040 was a reasonable assumption based on the understanding at the time of the potential future market for hydrogen in 20 years' time and that 50% blend of hydrogen by volume into the east coast gas market represents approximately 16% to 17% by energy; and she brought her understanding of the future potential hydrogen market and the technical specifics on how much hydrogen could potentially be blended to the discussion, while Mr Woods provided the direction on commercial strategy for Santos in selling that hydrogen to the market.
Ms Luo also explained that calculations had been undertaken by Jenny Day, an engineer in her team, to support the estimate of the projected size of the east coast gas market in 2030, measured in petajoules by reference to projected natural gas consumption, and the volume of hydrogen needed to meet a proportion of that energy requirement. Ms Luo explains those calculations.
Secondly, the evidence relied on by the ACCR to underpin its submission that the "hydrogen with CCS" component of the Net Zero Roadmap was speculative and that Santos did not estimate the prospective size of the market for hydrogen as at 2040 or consider whether there were any major variances related to the source of hydrogen that might impact its market share cannot be viewed in isolation. It must be considered against other work which the evidence shows had been undertaken by Santos both prior to and after the October 2020 Board meeting and the Investor Day.
More particularly, by the time the Net Zero Roadmap was prepared, Santos had been engaged in thinking about, and had undertaken work in relation to, the potential market for hydrogen. This was evident from the following:

[633]

(1) there were a number of available external market studies concerning the potential to develop a hydrogen industry, and government support for a hydrogen industry both within Australia and elsewhere including the COAG Energy Council National Hydrogen Strategy dated November 2019, the Gas Vision 2050 Report dated September 2020 and the Future Fuels CRC into industrial equipment dated February 2020 of which Mr Woods and Ms Luo were variously aware. Based on reports of this type Mr Woods recognised that, while there was only a small existing market for hydrogen at the time, there was a significant opportunity for the development of a domestic and export market and a range of different potential customers and Ms Luo believed there was significant government support for development of a clean hydrogen industry in Australia;

(2) internal Santos documents reflected the sentiments referred to in the preceding subparagraph. For example a presentation titled "Hydrogen: Creating a Hydrogen Future" dated November 2020 acknowledged that meeting climate change targets will require carbon neutral fuels such as hydrogen and explained current hydrogen use, why hydrogen was important, that hydrogen demand growth would depend on policy and incentives, global demand for hydrogen, Australian domestic demand, potential for hydrogen use in industrial equipment, hydrogen project strategic options for Santos and so on. An updated version of this presentation titled "Moomba Hydrogen Project' was prepared by Ms Luo in January 2021 (2021 Moomba Hydrogen Presentation);

(3) in cross-examination, in response to a question as to whether she considered what the competitive advantage for hydrogen might be in 2040, Ms Luo said that she did consider that, based on the studies and reviews done to date and that "[i]n moving forward with the Moomba blue hydrogen study, we believed that Santos had a competitive advantage in developing blue hydrogen for both domestic as well as export use";

(4) as is evident from the presentation referred to at (2) above, Santos considered the potential market for hydrogen. That is, domestic and global demand as well as potential use in industrial equipment. As to the latter Ms Luo explains that Santos had been looking into the potential to use hydrogen as a fuel gas in some of its equipment in the Cooper Basin and GHD conducted an assessment on what hydrogen blends certain equipment could tolerate. Ms Luo believed that if Santos' industrial appliances could take higher blends, then so could its industrial customers;

(5) Santos was aware of export options for hydrogen. For example, in the "Moomba Hydrogen Project Initial Gate Review" prepared and approved in January 2021 there is reference to the project targeting both domestic and export markets and the need for "conversion technologies" to enable export of hydrogen to international markets. In 2020 Santos and potential partners undertook joint hydrogen export concept studies. One of its partners, KHI, completed a "Concept Assess Phase study to assess the feasibility of hydrogen liquefaction and export at Port Bonython". In addition, as set out above, Santos entered into MOUs with various companies to explore hydrogen production and export demonstrating the potential for opportunities to export hydrogen; and

(6) Santos recognised the long term potential for the production of green hydrogen. In its 2021 Climate Change Report, under the heading "Why hydrogen?", it said:

[644]

Other evidence also bears out the preliminary nature of the GHD Report and the fact that no final decisions had been made about the design to be adopted for the hydrogen production plant. As Associate Professor Beck acknowledged the object of the GHD Report was "to provide Santos with representative information about what a blue hydrogen project looked like" and it was an "early concept study". Associate Professor Beck accepted that she was not aware of, and had not seen anything to suggest, that Santos had selected a specific plant configuration and that the final choice of plant design for any hydrogen production process would affect the quantity of emissions from the production of blue hydrogen. To like effect, Mr Snow indicated the preliminary nature of the GHD Report at [653] of his report (see [670] above).
The GHD Report estimated that producing 800 tpd of hydrogen would result in an additional 0.6 MtCO2 to offset based on the ATR Model. However, Associate Professor Beck accepted that, following the GHD Report there would have been subsequent investigation and development of any hydrogen production plant.
The ACCR has not established that there was no reasonable basis for Santos to assume it could produce sufficient hydrogen to achieve the estimated reduction of 2.5 MtCO2e. I address the role of carbon credits below.
As for transportation, the ACCR contends that the ability to economically transport the amount of hydrogen Santos needed to achieve the "Hydrogen with CCS" component of its Net Zero Roadmap was an essential assumption underlying this part of its plan.
One option for transportation was blending into existing pipelines. The ACCR observes that Santos' internal documents identify that blending 10% hydrogen into existing transmission pipelines would allow for transportation of a maximum of 161 tonnes of hydrogen (equivalent to 22 TJ) per day which equates to 58,765 tonnes per year, significantly less than the amount required to fulfill the 30% assumption (which equates to 340,000 tonnes per year).
The ACCR refers to evidence given by Messrs Martin and Snow in relation to hydrogen transportation and the issues they raised about blending hydrogen in natural gas and the effect on customer appliances and transmission pipelines and their agreement that the problems identified were "not in fact fully solved" at the relevant time. The ACCR submits that the issue of long-distance transmission ultimately came down to whether it was reasonable for Santos to assume that an entirely new pipeline network would be constructed to carry hydrogen. The ACCR submits that, while the experts accepted that this was technically feasible, Santos had no basis to assume this would occur over the timeframe covered by the Net Zero Roadmap, there is no evidence that any government or private body had announced plans to do this and no indication that Santos was proposing to pay for it.
The ACCR notes that Santos' internal documents identify a range of nascent hydrogen transport options, none of which supports an assumption that Santos could transport hydrogen sufficient to supply 30% of the east coast gas market by 2040. The domestic transport options are listed in the 2021 Moomba Hydrogen Presentation in a slide titled "Pipeline transport assessment". The ACCR submits that, even if the significant challenges noted in the slide could be overcome, the maximum they could cumulatively supply (together with 10% blending into existing transmission pipelines) was approximately 350 tpd of hydrogen (or 127,750 tonnes per annum), which is significantly less than the amount required to supply 30% of the east coast domestic market. The ACCR observes that the only transportation option under consideration that would allow Santos to transport 800 tpd of hydrogen was a dedicated pipeline from Moomba to Port Bonython for export which was estimated to require CAPEX of approximately AUD950 million and, evidently, the economics of long-distance transport of hydrogen were effectively unknown to Santos. The ACCR submits that, in any event, export options were not relied on in the contemporaneous documents to support the "Hydrogen with CCS" numbers, no doubt because there were even greater barriers to obtaining credits for international customers' emissions reductions.
The issue raised by ACCR in relation to transportation of any hydrogen produced and its submissions proceed on the basis that before including "Hydrogen with CCS" in the Net Zero Roadmap, Santos had to have in place a solution for transporting hydrogen to end users. As the ACCR points out, Messrs Martin and Snow agreed that there were problems with transporting hydrogen by blending into existing pipelines which had not been solved at the time. But Santos was aware of those problems and, indeed, made the market so aware.
At the Investor Day Mr Gallagher, in speaking about the switch to hydrogen, made the comments set out at [699(1)] above. That included a statement that at the time nobody could take hydrogen at scale because "the transportation challenges haven't been worked out yet" and "[t]he infrastructure at the other end to process it, transport it, hasn't been worked out."
The 2021 Climate Change Report included in relation to the Net Zero Roadmap and "The road to 2040":

[647]

(1) pipeline transport was to be considered as part of the GHD Review;

(2) from mid 2020 to early 2021 Ms Luo prepared presentations which, among other things, concerned this topic. For example, a presentation dated June 2020 "Hydrogen fuel of the Future" referred to the blending of hydrogen into existing gas infrastructure and into end user appliances as well as the transport of hydrogen over long distances as technical and commercial challenges as well as identifying "enabling activity" for each challenge; and a presentation dated titled "Hydrogen project update for CEO" dated July 2020 noted that pipeline options were being assessed with key partnerships and that non-disclosure agreements and MOUs were under discussion, set out the hydrogen transport opportunities and identified key challenges which included both blending and transportation;

(3) a presentation to the Board at the August 2020 Board meeting titled "Hydrogen: Creating a Hydrogen Future" also identified the technical challenges such as transporting hydrogen over long distances and blending into end user appliances;

(4) in October and December 2020 Mr Woods, among others, was briefed on the status of the Jackson to Brisbane oil pipelines and whether they could be returned to service for hydrogen transmission. The accompanying slide deck identified the technical challenges, risks, costs and timing associated with the proposal, noting that it would take about two and a half years to return the pipelines to service. The proposed next steps were to "define commercial opportunity" and "refine project plan";

(5) in December 2020 Santos, Epic Energy and KHI prepared joint concept studies which included a preliminary assessment of the transport of hydrogen via a dedicated pipeline from Moomba to Port Bonython and port storage, loading, shipping and unloading;

(6) the minutes of a hydrogen monthly meeting which took place on 1 February 2021 show ongoing work on pipeline blending and transportation options; and

(7) in February 2021 Santos and Chiyoda Corporation prepared a Moomba hydrogen export concept study which assessed options for transporting hydrogen to Port Bonython by hydrogenation or a dedicated pipeline.

[648]

Mr Snow's evidence about what was happening in relation to the issues that arose for transporting hydrogen at the time is also relevant. He observed that Government "would have been conducive to co-fund studies or trials as to suitability or technical options for using hydrogen at high pressure in transmission pipelines", that "the Government envisaged research, pilot projects, trials, and demonstration projects that considered the eventual use of 100% hydrogen in gas networks, and either the Government, or the private sector, would have been charged with funding or co-funding these activities" and that Government may well have considered a "broader suite of subsidies to support a transition to 100% hydrogen in gas networks if the other earlier work showed promise and benefits for customers and emission reductions".
Mr Snow referred to a number of studies being undertaken at the time to explore solutions for the blending and transportation of hydrogen. He was of the view that "there was a consensus that hydrogen could be introduced to distribution gas networks with some changes and updates, but that a lot more work would need to be undertaken to examine the use of hydrogen in existing high pressures gas transmission pipelines". He gave evidence about the level of work being undertaken to explore solutions. Relevantly, Mr Snow was of the view that, while some options may have proved to be not technically feasible and commercially unattractive, others may well have proved attractive, which is the nature of research work and trials in industry.
As Santos submits, it was reasonable for it to investigate options for the transport of hydrogen as the evidence set out above demonstrates that it did, with the expectation that a technically and commercially viable solution could be identified. That the solution may be costly (potentially trillions of dollars) is not a reason to conclude that Santos had no reasonable grounds to include "Hydrogen with CCS" in the Net Zero Roadmap. To the contrary, Santos was aware of the potentially high costs but continued to investigate and consider how it could meet the technical and commercial challenges of transportation.
It follows that I am not satisfied that the ACCR has established that there was no reasonable basis for Santos to assume that it could transport the hydrogen produced to end users.

[649]

It was not in dispute that Santos assumed that it would obtain about 2.5 million carbon credits per annum from supplying its blue hydrogen produced at Moomba to customers.
However, the ACCR submits that assumption on the part of Santos was unreasonable and, considering the sheer number of credits it proposed to acquire from its customers (equivalent to 2.5 MtCO2e), the assumption was so material that it ought to have been disclosed in any event.
The ACCR submits that Santos' assumption about obtaining 100% of the carbon credits generated by its hydrogen customers was unreasonable for the following reasons.
First, the ACCR says that carbon credits had value to customers and that carbon credits such as ACCUs are valuable fungible assets with a market value. The ACCR submits that the likelihood was that Santos would not be able to acquire 100% of any credits generated by its hydrogen customers because those customers would have their own uses for the credits and, as Ms Luo said, whether Santos could acquire them would be a matter for commercial negotiation. The ACCR submits that to assume that Santos could acquire 100% of the credits forecloses the result of the nuanced commercial negotiation that would need to take place, which would generate different outcomes on a case-by-case basis. It contends that no one within Santos can be shown to have turned their mind to this issue at the time and, in reality, there was simply no time to do so. The ACCR submits that the Court should find it was unreasonable for Santos to assume that it would acquire 100% of credits whilst at the same time having a financially viable hydrogen business.
The ACCR also refers to Mr Snow's evidence in cross-examination to the effect that if Santos was proposing to supply hydrogen to the full range of customers in the east coast gas market (residential, industrial and gas generation), it could not assume that ACCUs would be generated from all of those sales under existing methodologies and the only way that Santos could receive credits from every sale was if it only sold hydrogen to industrial customers and made it a "condition of sale" that the customer transfer the credit back to Santos. The ACCR observes that there is no evidence that Santos intended to do the latter and that, in the absence of evidence, it should be seen as hindsight justification, seemingly invented during the trial by Santos' senior counsel and should be ignored. The ACCR also submits that, even if Santos had considered bundling the credits with the hydrogen as a "condition of sale", there would be a huge question as to whether this scheme contravened s 45 or s 46 of the Competition and Consumer Act 2010 (Cth) and develops that submission.
The question that arises for resolution is whether Santos had reasonable grounds for considering that it could obtain carbon credits for supplying blue hydrogen.
Mr Woods' and Ms Luo's evidence about the way in which they considered that Santos could obtain carbon credits for its supply of hydrogen produced at Moomba is set out respectively at [430]-[434] and [436]-[441] above.
One possibility, to which the ACCR does not refer, is that the Government could introduce a new regulatory scheme providing carbon credits to suppliers of accredited injected and blended hydrogen or hydrogen used by industry to replace fossil fuels as well as to accredited CCS schemes. As the evidence shows, Mr Woods and Ms Luo recognised, as at December 2020 and February 2021, that there was no method for Santos to obtain ACCUs from supplying blue hydrogen but considered that one could be introduced. Their belief was based on analogous developments in the renewable energy space, such as large-scale generation certificates (LGCs), and the potential for developing a fuel-switching methodology for switching from natural gas to hydrogen.
I accept that it was reasonable for Santos to consider that a methodology to obtain ACCUs from supplying blue hydrogen would develop by 2040. As of December 2020, and February 2021, offset projects that could be eligible for ACCUs (or another form of carbon credits) in future decades were not fixed. As Professor Cook opined, this was an evolving area and new emission abatement opportunities would likely arise which could provide credible pathways for governments to support in the future, including through the development of new policies relating to offsets, among other things. Professor Cook also considered that third party CCS is a significant abatement opportunity and one he expects will be supported through carbon credit arrangements of some type.
The following matters provide further support for the conclusion I have reached:

[655]

Contrary to the ACCR's submissions it was also reasonable for Santos to consider that it could acquire ACCUs by entering into commercial arrangements. For the reasons set out above, it was not the case that Santos would need to acquire 100% of any ACCUs generated by its hydrogen customers. Santos had reason to believe that it may have the benefit of an ACCU methodology for the supply of hydrogen which was to be developed. In any event, as Mr Snow explains ACCUs were largely created to provide a monetary benefit for offsetting the additional costs of developing emissions reduction opportunities and for customers to implement them. They are a financial instrument and a way for a customer to make money. He notes that a form of bundling ACCUs and hydrogen supply may be attractive to a producer and buyer of hydrogen given the history of bundling in the renewable energy space.
The second matter raised by the ACCR concerns restrictions on transfers and double counting. The ACCR refers to evidence given by Ms Parker and Mr Snow about carbon credits. They identified two potential mechanisms for credits to be generated: under the Industrial Electricity and Fuel Efficiency (IEFE) methodology, industrial users could generate ACCUs by reducing their GHG emissions through "fuel switching" from higher emissions fuels; and an entirely new methodology that would allow Santos to generate certificates by supplying hydrogen into pipelines.
As to the first of the two methods the ACCR submits, based on Ms Parker's evidence, that many of Santos' potential hydrogen customers would not be eligible to generate, let alone sell, ACCUs from this activity and, even those who were eligible may require the emissions reductions to be credited against their baseline under the "Safeguard Mechanism". This meant they could not sell the ACCUs without engaging in impermissible "double counting" of the emissions reduction. While it seems that Santos does not dispute this, the ACCR notes that it cross-examined Ms Parker on the basis that "double counting" was not unlawful.
Ms Parker's evidence is that under the IEFE methodology, electricity generators with over 30MW capacity which are connected to the national grid are not eligible and thus if any of Santos' natural gas customers were electricity generators connected to the grid, they would therefore not be eligible to generate carbon credits for switching from natural gas to hydrogen. Ms Parker also says that for small energy users, such as households and businesses, there is currently no ACCU scheme available for the generation of carbon credits from fuel switching. That is, Ms Parker, and thus the ACCR's submission, assumes, without any basis, that Santos' customers are either electricity generators with over 30MW capacity or small energy users. The ACCR also assumes, again without any basis, that Santos' customers are covered by the Safeguard Mechanism.
As to the second of the two methods, the ACCR observes that it was a scheme that Mr Snow was involved in promoting at the time and submits that no such scheme existed as at December 2020 and February 2021 and there was no public announcement that any Australian Government was contemplating such a scheme. The ACCR contends that, even if such a scheme had been in Santos' reasonable contemplation, it is not at all clear that it would have actually resulted in carbon credits being generated that could be used to offset Santos' Scope 1 and 2 emissions. The ACCR also points out that Mr Snow accepted that any such methodology would give rise to a double counting issue.
Any contention by the ACCR that no ACCU methodology existed or was contemplated or could have been developed in December 2020 or February 2021 is rejected. The evidence referred to above shows that as at September and December 2020 the Government was contemplating and then announced CCS as one of five priority ERF methods to be developed in 2021.
The ACCR refers to the Safeguard Mechanism. Mr Snow explains that it commenced in 2016, covers designated Safeguard Facilities emitting more than 100,000 tonnes of CO2e per year and sets legislated limits, known as baselines, on the GHG emissions of these facilities. Safeguard Facilities are eligible to participate in the ERF and create ACCUs from eligible projects, bid in ERF auctions, or sell their ACCUs through the secondary market. This has led to addressing the potential issue of double counting.
An Australian Government fact sheet titled "The Safeguard Mechanism: Carbon Offsets and Avoiding Double Counting of Emissions Reductions" explains that double counting can occur if a safeguard facility receives ACCUs for reducing its emissions and then surrenders those ACCUs to further reduce its net emissions under the safeguard mechanism or if a safeguard facility receives ACCUs for reducing emissions and sells them to another safeguard entity for use as an offset.
Mr Snow explained in cross-examination that the Safeguard Mechanisms do not prevent a safeguard mechanism facility from selling its ACCUs provided it does not claim the benefit of the reduction towards its own baseline. Equally, as Ms Parker acknowledged, a safeguard facility can purchase ACCUs from a non-safeguard facility.
Finally, contrary to Ms Parker's evidence and as Santos explains, it is possible to step out of the Safeguard Mechanism. The way in which that can occur is set out in the National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act). Section 22XJ of the NGER Act provides for when a facility is a "designated large facility" for a financial year. Relevantly, that occurs when:

[675]

Ms Parker was cross-examined about her evidence concerning the availability of international offsets. In relation to the international carbon offset market generally, she accepted that there would be a scheme for the trading of international credits relating to hydrogen but, what was to be covered by Art 6 of the Paris Agreement was not yet clear.
As to the development she described to Art 6 of the Paris Agreement in December 2021 (see [761] above), Ms Parker accepted that the opinion she expressed that the "exclusion would apply to projects where Santos' customers switched from fossil fuels to hydrogen fuel purchased from Santos" because it would be classified as a future carbon avoidance activity was not based on any particular reference source but was her view based on her personal knowledge. She described it as a conclusion borne of common sense because for her "a fossil fuel being replaced by hydrogen means that the emissions that would otherwise be there will not be there" and "[t]hat's a carbon avoidance activity".
Ms Parker accepted that the document at footnote 28 in support of the proposition that "some key areas of ITMO definition under Article 6 were progressed, including an agreement that these UN-issued carbon offsets may only be generated from carbon removal projects" recorded that what was agreed at the time was that the Subsidiary Body for Scientific and Technological Advice would undertake certain work including considering whether "internationally transferred mitigation outcomes could include emissions avoidance". She also accepted that there was still a possibility that this could happen, i.e. that transferred mitigation outcomes could include emissions avoidance. As at the end of 2021 the Subsidiary Body was instructed to develop recommendations for consideration at the meeting of the parties to the Paris Agreement in November 2022 as set out in the "Report of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement on its third session, held in Glasgow from 31 October to 13 November 2021" including "[c]onsideration of whether internationally transferred mitigation outcomes could include emission avoidance".
The final matter relied on by the ACCR is cost. The ACCR submits that Santos' credit acquisition assumption was unreasonable in the absence of modelling of the kind that it carried out for the 2030 Target, including a sensitivity analysis of the potential quantum of credits required with and without Santos' emissions reduction projects and of credit prices ranging from $5-$35 per tonne of CO2. The ACCR submits that a reasonable person would have done the same analysis for the 2040 Target. The ACCR contends that if Santos used internally consistent assumptions, then it would have modelled the impact of the USD140 per tonne of CO2 carbon price that Ms Luo relies on in relation to Third Party CCS and, at that price, the cost of the 2.5 million credits to be acquired would be in the range of USD350 million per annum.
It is true that Santos did not do any modelling in relation to the 2040 Target as it did for the 2030 Target. However, that omission needs to be understood in the context of the relative timeframes for the 2030 Target and the 2040 Target. As Santos submits, the projects relevant to the 2030 Target were further advanced than the initiatives identified as relevant to the 2040 Target and thus amenable to financial modelling.
Further, the ACCR selects USD140 per tonne of CO2 as the carbon price to be modelled based on Ms Luo's evidence in relation to Third Party CCS (see [381] above). However, when instructing GHD in relation to the GHD Review, Ms Luo instructed GHD to include in its assessment of production cost a carbon price of AUD30 per tonne of CO2 for expected emissions (see [409] above). That is, there is no certain or actual carbon price referred to in the evidence before me on which any reliable modelling could be undertaken.
It follows that the ACCR has not established that Santos' assumption that it would obtain about 2.5 million carbon credits per annum from the supply of its blue hydrogen to customers was unreasonable.

[680]

(1) the idea of a CCS opportunity for the Barossa project was first introduced to the Energy Solutions team in May 2020 and a decision was made to undertake a small scale internal study in order to determine, among other things, whether to progress this CCS opportunity any further;

(2) in June 2020, Santos employees including Ms Luo prepared a framing level study in order to "assess potential project viability and enable a decision to take the project further into a Concept level study". The focus at the time was "whether to initiate early engineering and commercial studies to progress the project further". The analysis undertaken showed that "the project currently does not meet corporate economic hurdle rates based on the assumed Corporate Carbon price assumptions";

(3) in early July 2020, a presentation seems to have been made to Mr Woods. In the absence of any evidence of what was discussed at the meeting the ACCR says that it should be inferred that the outcome of the meeting was not to develop the Bayu-Undan CCS project any further. This inference is based on Ms Luo's evidence in cross-examination that "after we put forward the presentation on Bayu-Undan, it had been on pause at this point in time" and "I don't think I knew if it was moving forward at this point in time";

(4) as at 20 September 2020, when Ms Luo first attempted to map out the Net Zero Roadmap to 2040, she did not think to include Bayu-Undan CCS. Her view was that she did not have "any other real projects to include in the cost curve" at the time and this was so despite her being aware of the work that had been done on Bayu-Undan at that time;

(5) at the time Santos made its announcements on 1 December 2020 nothing had changed. On 20 December 2020, Santos' chairman, Mr Keith Spence, circulated some comments on a draft of the 2021 Climate Change Report. He proposed a correction to the use of the plural, "projects", in a reference in the report to "our world-leading CCS projects": His comment was:

[684]

I do not accept that this email demonstrates that Santos had only the vaguest idea of how the project might work. First, the email cannot be viewed in isolation. In the background the Bayu-Undan CCS project was progressing as can be seen from Mr Winterfield's report. In his email Mr Gallagher set out a proposed high-level strategy for working with, among others, relevant governments. He wanted the strategy worked on immediately. This suggests that Bayu-Undan CCS was in fact an important project which management at the most senior level wished to progress. That work was undertaken. On 12 January 2021 Rowan Mackay sent a work in progress commercial framing for Bayu-Undan CCS to Ms Norman and Mr Wilson.
After February 2021 work on Bayu-Undan continued. On 9 March 2022 Santos announced "entry into the front-end engineering and design (FEED) phase for the proposed Bayu-Undan [CCS] project". On 29 August 2022 Santos as operator of the Barossa joint venture announced FID had been taken to proceed with the Darwin Pipeline Duplication Project, located offshore the Northern Territory. That decision was said to extend the "Barossa Gas Export Pipeline to the Santos-operated Darwin LNG (DLNG) facility and allow for the repurposing of the existing Bayu-Undan to Darwin pipeline to facilitate [CCS] options". This project was contemplated as part of the framing study referred to above.
As Santos submits, whether the Bayu-Undan CCS exploration and analysis work was at a sufficient level to be called a project is not to the point and is not determinative of whether Santos reasonably relied on Bayu-Undan CCS in forming its views about CCS Expansion. As the facts establish, Santos was actively considering the opportunity to develop Bayu-Undan CCS in the first half of 2020 and again from November 2020. That was sufficient to provide reasonable grounds for Santos to consider that it could contribute to achieving the 2040 Target.
While the announcements in March and August 2022 about progress in relation to the project post-date the impugned publications, given the other evidence before me they can be viewed as reasonably predictable developments. That they occurred within a relatively short period casts light on the overall probability that it was objectively reasonable for it to consider that the Bayu-Undan CCS opportunity could be part of CCS Expansion in the Net Zero Roadmap.

[685]

This CCS opportunity involves the storing of third party CO2 at Santos' Reindeer gas field in WA.
The ACCR submits that Santos had done even less work on WA/Varanus Island CCS than it had done on the Bayu-Undan CCS Project at the time of the announcements, noting that even Mr Woods describes "WA CCS" only as a "possible offshore CCS project" and concedes that WA CCS was a "lower priority opportunity than Moomba or Bayu-Undan" because the Reindeer gas field was still in production.
The ACCR contends that a reasonable person in possession of the work that Santos had done on WA/Varanus Island CCS by December 2020 or February 2021 would not have regarded it as providing any basis whatsoever for making a prediction that Santos would achieve all or any part of 1.5 MtCO2e of reductions or offsets, as part of what was supposed to be a "credible" roadmap based upon "real planned activities".
The ACCR submits that the only contemporaneous evidence of the status of the WA CCS project at around the time of the announcements is Mr Winterfield's email dated 7 January 2021 in which he summarised the state of Santos' knowledge in relation to the WA CCS project at that time and which, given its terms, demonstrate that at the time Santos had not even reached internal alignment between key personnel on the possible future approach.
The evidence before me about the WA CCS opportunity is limited. As set out at [373] above, Ms Luo was not involved in work in relation to it but received information about it from time to time. Mr Woods' evidence about the WA CCS opportunity is recorded at [372], [374]-[376] above. He considered that while it was a lower priority in December 2020, it still represented a significant opportunity.
The ACCR relies on Mr Winterfield's email sent on 7 January 2021 to demonstrate that little, if any, work had been undertaken on the WA CCS opportunity as at the time of the announcements. It is convenient to have regard to that email in context.
On 6 January 2021 Mr Mackay sent an email to Messrs Wilson, Winterfield and Jay Feeney which included:

[698]

The ACCR submits that Ms Luo's evidence is corroborated by the contemporaneous documents: the May 2020 Board Presentation recorded that storage in the Cooper Basin from third party CO2 pipeline imports or DAC was "too high cost to be viable" in relation to which nothing changed prior to February 2021; while Ms Luo was prepared to speculate that there was "potential for those costs to be reduced over time through new technologies and processes", the carbon price she mentions, USD140/tCO2 by 2040, is the IEA 2018 World Energy Outlook's "Sustainable Development Scenario" which Mr Woods agreed was "too ambitious" and "unlikely to be achieved"; and Ms Luo's view that she did not consider that Moomba CCS Phase 2 was "a real project to put forward in this document", was also the view of other relevant persons at the time, in particular Ms Genet and Mr Wilson.
In my view, it was reasonable for Santos to consider that third party CO2/DAC at Moomba could form part of "CCS Expansion".
Mr Woods gave evidence about Third Party CCS. In summary, as Mr Woods explains, Santos believed that by 2040 there would be demand from emitters of CO2, particularly in hard-to-abate sectors, to engage Santos to store their CO2 as they sought to decarbonise their operations in line with the global transition to net zero, and as the prices for carbon credits increased (see for example [378(4)] and [200(6)] above). That evidence was not challenged.
The ACCR relies on evidence it says was given by Mr Woods in cross-examination to undermine Ms Luo's evidence that there was potential for the costs for CCS to be reduced. In giving that evidence, among other things, Ms Luo referred to the projected increase of carbon prices based on the World Energy Outlook 2018 report published by the IEA which assumes a CO2 price in 2040 of USD140 per tonne (Ms Luo's evidence is set out at [380]-[381] above). But Mr Woods was not asked expressly about the carbon price in the World Energy Outlook 2018. He was asked a more general question about "sustainable development" numbers as opposed to "stated policies scenario" numbers and why he chose the latter in referring to the IEA's prediction in that report "that Fossil fuels would continue to supply the majority of energy demand in 2040". In that context Mr Woods gave the following evidence:

[700]

That general evidence cannot be interpreted to apply to Ms Luo's reference to the carbon price in the IEA's World Energy Outlook 2018. Mr Woods was not asked an express question about that. In any event, as Santos submits, even if Ms Luo's assumption of a CO2 price was ambitious, it does not negate the fact that the price of carbon credits was set to increase.
In addition, Professor Cook's evidence is to the effect that it was technically, environmentally and commercially realistic to anticipate that third party demand for storing CO2 would increase. Based on his experience, including his analysis of events between 2010 and 2020 in relation to the need for third party CCS for major emitters of CO2, he concluded that "in December 2020 and February 2021, it was feasible that by 2040, third party emitters of greenhouse gases would procure a company that utilises CCS in relation to its own operations to store the greenhouse gas emissions from those third parties. The type of third-party emitters that would procure such a service could include other gas producers, iron and steel, cement, urea, blue hydrogen producers and power companies, as well as DAC and BECCS projects".
Further, Santos' unchallenged evidence was that Cooper Basin had ample storage capacity as it could store up to 20 MtCO2e per annum for more than 50 years (see [180] and [380(1)] above).
Finally, Santos recognised that cost was a key factor for third party CCS and DAC at Moomba. It first recognised that to be so in the May 2020 Board Presentation. However, the evidence before me was that Santos considered that cost could be managed.
For Third Party CCS, Mr Woods identified a key cost as the transportation of CO2 to the CCS site but explained the ways in which that cost could be managed (see [378(3)] above). Mr Woods also gave evidence that the Energy Solutions team continued to assess alternatives to decrease the costs of Third Party CCS at Moomba. He believed that joint venture projects, government initiatives, repurposing of existing pipelines and the construction of new pipelines alongside existing ones were all possibilities that could occur over the next 20 years that would allow the cost of transporting CO2 to the Moomba CCS Project to become profitable, particularly in light of the increase in demand for CCS (see [378] above). Similarly, Professor Cook formed the view that although distance and transportation adds to the cost of Third Party CCS projects "by 2020, it did not pose an insurmountable technical challenge for the development of CCS hubs".
Santos also considered that DAC costs could be managed. Again, Mr Woods gives evidence that those costs would go down over time. He notes that Santos had commenced a project with the CSIRO to examine a potential DAC method that might significantly reduce the costs of DAC (see [379(2)] above).
Notably, Professor Cook expressed the view, based on his experience and analysis, that "whilst there is no basis for accurately forecasting future trajectory of costs, [he is] of the opinion that in 2020, it was reasonable to assume that capture costs of third party CCS and the cost of DAC would improve (ie decrease) in response to developing technologies, increased deployment and industry and government initiatives". This supports the reasonableness of Santos' views at the relevant time.

[703]

It was agreed between the parties that EOR is a term describing a number of techniques for the extraction of additional oil or gas from mature oil and gas fields, including by injecting captured CO2 into the reservoir. The ACCR says that EOR is significant in the context of this case because it is an activity associated with CCS, which Santos was touting as an emissions reduction opportunity, that would, if implemented, result in increased Scope 1 and 2 emissions from Santos' CCS projects.
The ACCR submits that the Court should find, based on Mr Harley's oral evidence, that the use of EOR would detrimentally impact the emissions associated with the CCS Expansion activity because it would increase hydrocarbon recovery and because of the "emissions associated with running equipment to process that oil if additional equipment was required to process that oil". The ACCR also submits that the Court should find that Santos positively intended at all times prior to the announcements in question, and was actively planning, to pursue EOR at Moomba beyond Phase 1 and in any other CCS projects. The ACCR refers to the evidence it relies on in support of that submission.
The ACCR submits that the Court should therefore reject Santos' pleaded defence, that it was "not the case that Santos intended to use CCS for enhanced oil recovery" (at [12(f)] of Santos' concise statement in response). It contends that the defence is contrary to the objective evidence and Mr Harley's concessions.
It is convenient to have regard to Mr Harley's evidence in considering whether, as the ACCR contends, Santos engaged in misleading conduct by not disclosing that it positively intended to pursue EOR opportunities at Moomba or at other CCS projects. Mr Harley was cross-examined about the role of EOR.
Mr Harley was first asked a question about [36] of his affidavit affirmed on 23 November 2023 where, after noting that the modelling for FID for the Moomba CCS Project did not include any inputs associated with EOR, he said that "[u]sing CO2 for EOR in Moomba CCS Phase 1 would affect both the net emissions associated with and economics of the Moomba CCS Project in a potentially significant way" and "[i]f EOR formed any part of the Moomba CCS Project at that time, [he] would have required it to be modelled and considered as part of the preparation for FID", but no such modelling was undertaken nor did Mr Harley give instructions for that to occur. Mr Harley had the following exchange with counsel for the ACCR, Mr Hartford-Davis, about that evidence:

[711]

The ACCR alleges that Santos conveyed by its conduct and by the language it used in the relevant announcements and at the Investor Day, including the emphasis given to the realistic, clear and credible nature of its targets, that it had identified a series of steps that were sufficient to achieve the 2030 Target and the Net Zero Roadmap. The ACCR submits that these positive representations were misleading because Santos did not have a clear and credible plan to achieve its targets by means of emissions reductions or offsets.
The ACCR submits that Santos' plans were rushed and speculative and that the evidence supports a finding that at the time the impugned announcements were made Santos had no real idea of opportunities from 2030 onwards and did not have any specific projects that it had been working on, of a kind which a reasonable person would have required before announcing a "clear and credible", "realistic" plan based upon "real activities".
In support of that contention the ACCR relies on evidence given by Professor Collis that "general corporate practice" is for there to be "substantive corporate review performed by an internal group of strategy experts and senior executives bolstered by specific outside expertise" which would typically take four or five months, and possibly up to 12 months. While Professor Collis accepts there are many different frameworks available to perform this sort of strategic planning, he says "all agree on the need for well documented analysis which is data driven, quantifiable and externally validated" which the ACCR says is clearly distinct to the process adopted by Santos.
Santos submits, and I accept, that the impugned statements must be considered in context. Santos did not represent that it was committing to undertake a series of inflexible steps to achieve the 2030 Target and the Net Zero Roadmap. The impugned statements concern Santos' long-term objectives which necessarily and reasonably remained subject to uncertainty and contingencies and dependent upon the emergence of new markets.
The target audience would understand expressions like "realistic and doable" or "clear and credible" as measured descriptors setting expectations lower than certainty. That a plan is realistic suggests that it can be achieved but not that it will be achieved. That is particularly understood when those expressions are read in context.
At the Investor Day (see the extracts at [699(1)] above) Mr Gallagher noted among other things the need for "a market to support [zero emissions hydrogen]", the need for "trillions of dollars" of investment in infrastructure to overcome challenges that "[have not] been worked out", and about the fact that Santos "will transition as the market requires" because it "need[ed] buyers".
The 2020 Annual Report noted that Santos "aims to be a world-leading clean fuels company, achieving net zero emission by 2040" and that it "will grow its clean fuel capability as customer demand grows". Similarly the 2021 Climate Change Report spoke of Santos "evolving its business" and set out the pathway to do so stepping through the type of initiatives and work that needed to be undertaken on a stepped basis and subject to outside factors which were not within Santos' control including for example the establishment of an approved methodology to earn ACCUs.
The statements made were, as Santos submits, about a long term strategic objective, subject to uncertainty given its nature and timeline. Putting to one side the importance of reading the statements in context, for the detailed reasons set out above I do not accept that at the relevant time Santos did not have a clear and credible plan as the ACCR contends. The evidence shows that Santos' plans were considered at numerous levels of the organisation in the period leading up to the announcement of the 2030 Target and the Net Zero Roadmap.
In the circumstances I am not satisfied that Santos' representations about the steps leading to the 2030 Target and the Net Zero Roadmap were misleading in the way the ACCR contends.

[712]

The ACCR observes that Santos used the term "reduction" in connection with the Targets, repeatedly. The ACCR alleges that in so doing Santos represented that it intended to reduce its Scope 1 and 2 emissions to achieve its 2040 Target. However, it did not disclose that the Net Zero Roadmap did not involve any further reduction in Santos' Scope 1 and 2 emissions from 2030 but depended entirely upon the acquisition of carbon credits. The ACCR submits that this was a matter which, assessed objectively, a representee would have been entitled to expect or infer would be disclosed, especially given the prominent use of the term "reduction" and the absence of discussion of "offsets" in the places a reasonable user would expect to find that discussion.
The ACCR submits that this conduct was misleading because Santos' "true 'plan'" was to seek to obtain millions of carbon credits for its customers' Scope 1 and 2 emissions reductions, which would then be used to offset, not "reduce", the substantial Scope 1 and 2 emissions from Santos' natural gas and hydrogen operations. The ACCR says that the "CCS Expansion" component of the Net Zero Roadmap involved Santos obtaining offsets from its customers' fuel switching or storing third parties' CO2 and the "Hydrogen with CCS" component involved obtaining offsets by way of a hypothetical plan to supply 30% of the east coast domestic gas market with hydrogen. The ACCR contends that Santos did not disclose that the 2030 to 2040 components of its Net Zero Roadmap were credit acquisition schemes rather than reduction initiatives.
The ACCR observes that in opening Santos suggested that its reliance on offsets was of no moment, and therefore it was not misleading not to disclose this reliance, because Australia's regulatory regimes allowed for offsetting. The ACCR submits that Santos' submission misses the point and that there is no suggestion that offsetting was illegal but an undisclosed reliance on offsetting was significant for at least two reasons:

[716]

For the following reasons I am not satisfied that the use by Santos of the descriptor "reduction" or "reduce" in connection with its Targets was misleading as alleged.
The Net Zero Roadmap concerned a pathway to a net zero target. It showed both increases in actual emissions and reductions. Santos submits and I accept that if the negative side of the ledger were all reductions of Santos' Scope 1 and 2 emissions (without any offsets) then it would represent absolute zero by 2040, rather than net zero, and no reasonable investor could have read the Net Zero Roadmap that way.
The ACCR relies on Ms Parker's evidence at [21] to [28] of her first report where she said:
1. There were several external developments through 2020 which also indicated that investors and companies were considering the use of carbon offsets in net zero plans. I describe some examples in paragraphs 22 to 28.
2. In November 2020, a private sector-led initiative called the 'The Taskforce on Scaling Voluntary Carbon Markets' (TSVCM) was launched. The goal of the Taskforce was to upscale the size and functionality of the voluntary carbon offset market over the next decade, partly in response to a perceived supply shortage based on current market trends.
3. The TSVCM Phase 1 report was published in January 2021, stating that 'if a large-scale, voluntary carbon market takes shape...' this will '...help companies achieve carbon neutral, net-zero and net-negative goals...our estimate is that voluntary carbon markets need to grow by more than 15-fold by 2030 in order to support the investment required to deliver the 1.5-degree pathway'.
4. The TSVCM included institutional investors, asset managers and industry representatives; oil and gas companies intending to use carbon offsets in their net zero plan which were participating in the Taskforce included Shell (Taskforce member) and Chevron (Consultative group).
5. High-profile investor initiative Climate Action 100+ published a Net Zero Company Benchmark Tool in December 2020, comprised of a set of disclosure indicators against which companies could be consistently assessed. Under the Decarbonisation strategy metrics in the Tool, Disclosure indicator 5.1 was as follows:

[717]

"The company has a decarbonisation strategy to meet its long, medium and short-term GHG reduction targets;" with corresponding footnote:

"use of offsetting or carbon credits should be avoided and limited, if at all applied. Offsetting or 'carbon dioxide removal' should not be used by companies operating in sectors where viable decarbonisation technologies exist. For example, offsetting would not be considered credible if used to offset emissions for a coal-fired power plant because viable alternatives exist to coal-fired power plants."

In September 2020, the Climate Action 100+ Steering Committee and lead investors had sent letters accompanied by a provisional copy of the Benchmark tool and supporting information to CEOs and lead independent director(s) of the CA100+ focus companies. I was working with several companies on the Climate Action 100+ focus list at the time that they received these letters and I was provided with a copy of the Benchmark Tool to review and incorporate into the work I was doing on carbon offset use in their net zero plans. Santos was on the Climate Action 100+ focus list since 2018 and I expect that the company CEO and lead independent directors would have also received this letter.

During 2020, several oil and gas companies were scaling up their capabilities in carbon offset generation via strategic acquisitions of project developers as well as investing in large-scale carbon offset projects to secure future supply. For example, Shell acquired carbon farming project developer Select Carbon in August 2020, and BP acquired a majority stake in forest carbon-management company Finite Carbon in December 2020.

Through 2020, NGOs and activist groups were expressing strong negative views in the public domain regarding emissions-intensive companies' use of carbon offsets in their long-term decarbonisation strategies. Mainstream media was also reporting 'exposures' of carbon credit schemes or projects, particularly questioning the heavy reliance on carbon offsets in the international aviation sector's long-term aspirational goal of net-zero carbon emissions by 2050. In my work with companies developing their Carbon Offset Strategy, I was specifically asked to consider reputational and litigation risks associated with their use of carbon offsets. This was partly driven by these trends in the media and by activists.

[718]

Putting to one side the limited weight I would give Ms Parker's evidence in light of my overall impression of her as a witness, in my view Ms Parker's evidence does not assist. Ms Parker sets out what she describes as "developments" in 2020 that indicated that investors and companies were considering the use of carbon offsets in net zero plans. Those examples, and that there was some criticism of companies using carbon offsets as part of their net zero strategies, do not make the language used by Santos misleading.
In any event the 2021 Climate Change Report expressly stated under the heading "[t]he road to 2030" that "... we will reduce our emissions by 26-30 per cent through a series of carbon abatement, emissions reduction and offset initiatives". Santos did not fail to disclose that it would rely on offsets. That is the reduction in emissions would occur through both "reduction and offset" initiatives. There are other references in the 2021 Climate Change Report, for example the hydrogen with CCS component of the Net Zero Roadmap will involve "reducing our customers' CO2 emissions" and Santos' intention to "work with other companies and industries to capture and store their CO2 in the Moomba CCS project". The ACCR submits that these references do not fairly disclose the extensive reliance on credits and would be understood as reflecting Santos' intention to reduce its Scope 3 emissions. I do not think that is necessarily so. The intention to work with customers and other companies and industries in relation to their CO2 emissions clearly indicates that Santos was not speaking about reduction of emissions in the sense of only its own emissions.
Insofar as the 2021 Climate Change Report refers to CCS at Moomba depending on "an approved methodology for CCS to earn ACCUs" the ACCR accepts that part of the plan does involve physical reductions and is not contested.
Santos submits that the complaint that its reliance on offsets is inconsistent with a "net zero" world is misconceived. To that end, the appropriateness of carbon credits in the context of net zero was canvassed in the joint expert report of Associate Professor Meinshausen, Professor Cook and Mr Snow. The experts "distinguish between the so-called 'transitional use' of offsets and the 'end-point' use" explaining that:

[722]

The ACCR alleges that Santos represented that the "Targets", which I infer to be the 2030 Target and the Net Zero Roadmap, took into account all material sources of emissions of which it was aware over the relevant time period. The conduct relied on by the ACCR is that in announcing the Net Zero Roadmap, Santos stated in the 2021 Climate Change Report that its "planned growth means that our emission will rise over the 2020-2025 period and our emissions reduction initiatives factor this growth into our reductions" and the "2020 emissions baseline" and "[p]roduction growth to 120mmboe" columns in the "waterfall graph" in the 2021 Climate Change Report represented the likely maximum level of CO2e to 2040.
The ACCR submits that at the time Santos made these statements it did not disclose that the 2030 Target and the Net Zero Roadmap did not account for hydrogen production emissions or expected production and/or emissions growth from oil and gas exploration opportunities beyond 2025.
The ACCR submits that the emissions baseline did not include any additional emissions for growth projects that Santos was planning to pursue or the material additional emissions associated with its plans to produce hydrogen. It contends that, insofar as it was an omission, the emissions baseline is the first integer of Santos' 2030 Target and Net Zero Roadmap and Santos chose to disclose the baseline it was adopting. The ACCR submits that any emissions reduction target with any degree of credibility would require that an accurate baseline be disclosed and that the baseline was necessary and material information because, to be able to plan the emissions reductions initiatives required to reduce its emissions by 26-30% and then to ultimately reach "net zero" within the specified time frame, Santos needed to be able to understand, and its audience would need to know, what Santos' forecast emissions would be.
I do not accept that Santos' conduct was misleading or deceptive in the manner alleged. I have addressed the emissions baseline in detail above. But, in any event, once again, the ACCR urge an overly rigid interpretation of the Net Zero Roadmap. There was no representation in the 2021 Climate Change Report or elsewhere that the Targets considered all material sources of emissions of which Santos was aware. The Net Zero Roadmap presented various pathways at Santos' disposal that could, in combination, reduce or offset likely emissions over the relevant period. It was reasonable and consistent with the overall impression conveyed by the Net Zero Roadmap that emissions from Santos' growth projects, including from hydrogen production, could be captured and otherwise offset without requiring those emissions to be expressly referred to in the Net Zero Roadmap.
Moreover, for the reasons already set out above I accept that there was a degree of flexibility in the elements of the Net Zero Roadmap and the method by which the Targets were to be achieved. As Santos submits, focus on single aspects of the Net Zero Roadmap, without regard to the flexibility of the activities, results in the application of an artificial rigidity to what would be regarded by a member of the target audience as an adaptable roadmap designed to achieve the Targets.

At a glance

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Judgment (785 paragraphs)

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Legislation Cited (4)

Cases Cited (20)