The Times Australia
The Times World News

.
The Times Real Estate

.

Santos just copped a large fine. What did the oil and gas company do?

  • Written by Samantha Hepburn, Professor, Deakin Law School, Deakin University
Santos just copped a large fine. What did the oil and gas company do?

South Australian oil and gas company Santos has been hit with a A$2.75 million fine for breaching its record-keeping obligations.

The Federal Court ordered the fine[1] for Santos Direct, a wholly owned subsidiary, for over 4,700 breaches of the National Gas Rules. The fine follows proceedings brought by the Australian Energy Regulator.

It’s not the first energy company the regulator has pursued recently for breaches to the gas rules. Last year, energy retailer EnergyAustralia and chemical company Incitec Pivot paid $406,000 and $223,000, respectively, for alleged infringements[2]. Energy distributor Jemena also paid an infringement[3].

So what are these rules? Why do the breaches matter?

Of gas rules and record-keeping

The breaches themselves sound dense. They concerned the non-reporting of what are known as “renominations” for uncontracted gas in day ahead auctions, which are conducted to determine if there’s excess capacity in pipelines which can be sold.

The fossil gas used in homes and industries is transported around Australia largely by pipeline. To boost competition in the east coast gas market, Australian state and federal governments introduced the day ahead auction in 2019 to let companies bid for access to unused capacity in these pipelines.

Day-ahead nominations determine the transportation capacity available in gas pipelines available for auction. To make this auction possible, companies that have existing entitlements to capacity have to make a nomination a day in advance of when they intend to move gas from one location to another, specifying how much capacity they intend to use the next day. Any spare capacity is then made available in the auction.

Renominations occur after the cut-off times on a gas day and they vary an earlier nomination for the use of transportation capacity.

Renominations can only be made in limited circumstances for specific reasons. Recording renominations is important because variations can affect auction prices if, for example, there ends up being less capacity so that participants pay more than they needed to.

Santos admitted it failed to make contemporaneous records for material gas renominations across six different gas auction facilities in breach of the National Gas Rules.

The Federal Court held that while the breach was not intentional and arose from inadequate internal compliance mechanisms, the significant penalty was necessary. It took account of the multiple reporting breaches, as well as the size and financial position of Santos, whose net profit from 2019 to 2022 ranged between $720 and $894 million per year.

Justice Penelope Neskovcin noted compliant record keeping is a critical part of ensuring the integrity and capacity of the auction. Proper records allow the regulator to understand the nature and frequency of renominations, and in so doing, ensure it is able to properly monitor the market.

While no actual loss occurred, the court focused on the potential damage that could have occurred given this action could have meant participants paid more in the auction.

gas pipeline
Gas pipeline capacity is sold at auction. huyangshu/Shutterstock[4]

Why did the AER pursue this?

As the regulator states in its media release:

timely and accurate record keeping is crucial in allowing the AER to effectively monitor the compliance of participants in the capacity auction.

In particular, the AER’s role of investigating and enforcing provisions […] [prohibiting] participants from making false or misleading day ahead nominations may be significantly hampered without the benefit of compliant records of material renominations.

In her judgement, Neskovcin said the penalty should be a “deterrent” against such conduct. She separately stated:

[t]he failure to comply with [the rule], which has a substantive role in protecting the proper functioning of the capacity auction, heightens the need for deterrence in respect of this conduct

The court emphasised the public interest underpinning clear, transparent and compliant reporting in accordance with the requirements of the National Gas Laws. It noted that Santos, as a major Australian gas and oil exploration and production company making hundreds of millions of dollars in profits over the relevant period, had to take full responsibility for its contraventions.

References

  1. ^ ordered the fine (www.judgments.fedcourt.gov.au)
  2. ^ alleged infringements (www.aer.gov.au)
  3. ^ an infringement (www.aer.gov.au)
  4. ^ huyangshu/Shutterstock (www.shutterstock.com)

Read more https://theconversation.com/santos-just-copped-a-large-fine-what-did-the-oil-and-gas-company-do-231680

The Times Features

Why Regional Small Businesses in Bendigo Deserve Better Access to Finance in 2025

In the heart of regional Victoria, Bendigo has long stood as a beacon of innovation, resilience and community spirit. As we step further into 2025, the importance of nurturing sm...

Is It Time for a Deep Cleaning? Signs You Shouldn’t Ignore

Most people know they should visit the dentist for a regular check-up and cleaning every six months. But sometimes, a standard cleaning isn’t enough. When plaque and tartar build...

The Hidden Meaning Behind Popular Engagement Ring Cuts

When it comes to engagement rings, the cut of the diamond is not just about aesthetics. Each shape carries its own symbolism and significance, making it an important decision for...

Annual Health Exams in the Office: How They Can Reduce Sick Days and Healthcare Costs

Regular health check-ups, especially annual health exams in the office, can significantly impact the overall well-being of your workforce. A proactive approach to employee health...

Best Deals on Home Furniture Online

Key Highlights Discover the best deals on high-quality outdoor furniture online. Transform your outdoor space into a stylish and comfortable oasis. Explore a wide range of d...

Discover the Best Women's Jumpers for Every Season

Key Highlights Explore lightweight jumpers for spring and summer, ensuring breathability and ease. Wrap up warm with cozy wool jumpers for the chilly autumn and winter season...

Times Magazine

The Essential Guide to Transforming Office Spaces for Maximum Efficiency

Why Office Fitouts MatterA well-designed office can make all the difference in productivity, employee satisfaction, and client impressions. Businesses of all sizes are investing in updated office spaces to create environments that foster collaborat...

The A/B Testing Revolution: How AI Optimized Landing Pages Without Human Input

A/B testing was always integral to the web-based marketing world. Was there a button that converted better? Marketing could pit one against the other and see which option worked better. This was always through human observation, and over time, as d...

Using Countdown Timers in Email: Do They Really Increase Conversions?

In a world that's always on, where marketers are attempting to entice a subscriber and get them to convert on the same screen with one email, the power of urgency is sometimes the essential element needed. One of the most popular ways to create urg...

Types of Software Consultants

In today's technology-driven world, businesses often seek the expertise of software consultants to navigate complex software needs. There are several types of software consultants, including solution architects, project managers, and user experienc...

CWU Assistive Tech Hub is Changing Lives: Win a Free Rollator Walker This Easter!

🌟 Mobility. Independence. Community. All in One. This Easter, the CWU Assistive Tech Hub is pleased to support the Banyule community by giving away a rollator walker. The giveaway will take place during the Macleod Village Easter Egg Hunt & Ma...

"Eternal Nurture" by Cara Barilla: A Timeless Collection of Wisdom and Healing

Renowned Sydney-born author and educator Cara Barilla has released her latest book, Eternal Nurture, a profound collection of inspirational quotes designed to support mindfulness, emotional healing, and personal growth. With a deep commitment to ...

LayBy Shopping