Santos Accused of Record-keeping Violations

A case has been initiated in the Federal Court by The Australian Energy Regulator (AER) against Santos, alleging the oil and gas producer breached auction record-keeping rules between March 2019 and June 2021.

The AER alleges that on 4,701 occasions between March 2019 and June 2021, Santos Direct failed to keep the required records of its material renominations across six different auction facilities, contravening Rule 666(1) of the National Gas Rules.

The AER is seeking declarations, pecuniary penalties, an order requiring the implementation of a compliance program, and costs.

The case relates to Day Ahead Auctions, where companies that have existing entitlements to capacity 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.

A renomination is a request made, after the nomination cut-off time, to vary an earlier nomination for the use of transportation capacity. Renominations can only be made in limited circumstances and transportation facility users, such as Santos Direct, are required to make contemporaneous records of material renominations in order to clearly state the reason for each renomination, when the event giving rise to each renomination occurred and when the transportation facility user became aware of this event.

Santos claims the alleged record-keeping issues had no impact on supply or price in the east coast domestic gas market.

“Santos always acted and will continue to act in good faith in respect of nomination and renomination behaviour in the domestic gas market, and there are no allegations otherwise,” it said in a statement.

It also noted, “The National Gas Rules were introduced on 1 March 2019. The process to update compliance systems is complex and in recognition of this the AER issued a discussion paper on guidance for record-keeping under the rules in April 2023.

“Despite recognising this complexity, the AER instituted a policy of strict compliance from day one (1 March 2019). This is contrary to the approach taken for other gas market regulations. Santos is disappointed proceedings have been instituted.

“The conduct alleged arises from record keeping of nominations and renominations over a period of around 27 months. The number of occasions alleged by the AER is of limited relevance to the outcome of these proceedings.

“Factors which will be relevant include the fact that there has been no impact on pricing or supply and the steps Santos has taken to put in place robust and best practice compliance systems that have been operating effectively since June 2021. Santos continuously reviews and improves our business systems and processes to comply with the National Gas Rules and other regulations that apply to our domestic gas activities, and we are confident we have a robust and effective compliance management program in place. The AER has acknowledged this.”