Barossa Project paused due to Federal Court setting aside NOPSEMA decision

Articles Written by Samantha Daly (Partner), John Keeves (Partner), Grace Black (Associate)

Executive summary

On 21 September 2022, Justice Bromberg of the Federal Court handed down his decision in Tipakalippa v National Offshore Petroleum Safety and Environmental Management Authority (No 2) [2022] FCA 1121 finding that the National Offshore Petroleum Safety and Environmental Management Authority’s (NOPSEMA) decision (Decision) to accept Santos’ Development Drilling and Completions Environment Plan (Drilling EP) relating to the Barossa offshore gas project should be set aside because NOPSEMA was not lawfully satisfied that the Drilling EP demonstrated that Santos consulted with each person that it was legally required to consult with. Therefore a necessary precondition of the acceptance of the Drilling EP by NOPSEMA did not exist and the acceptance given by NOPSEMA was legally invalid.

It should be noted that this was a judicial review of a decision made by NOPSEMA. The Court did not find as an objective fact, Santos NA Barossa Pty Ltd (Santos) failed to consult each relevant person in the course of preparing the Drilling EP in accordance with reg 11A(1) of the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009 (Cth) (Regulations). Justice Bromberg observed that much of the evidence led by the Applicant was relevant only to whether Santos had failed to consult each relevant person, which did not arise for determination. Notwithstanding this, proponents of offshore oil and gas projects under NOPSEMA’s jurisdiction should take particular note of the findings of the Court relating to the requirements for proponents to adequately demonstrate the methodology, process and rationale behind their consultation decisions and actions in any environment plans to ensure the validity of the regulator’s decision. As Bromberg J held, the exercise of identifying relevant persons is “foundational to carrying out the obligation to consult”, but the relevant regulatory requirements raise “substantial complexity in the exercise of identifying each and every person”.

To the extent that a project may have an impact on sea country, and should the Federal Court decision stand following an appeal, we can expect to see greater scrutiny by NOPSEMA of the nature and extent of consultation with those persons whose country may be impacted by proposed offshore petroleum activities.

Facts and regulatory framework

NOPSEMA regulates offshore petroleum activities in Australian waters and its functions relevantly include accepting environment plans pursuant to reg 10(1)(a) of the Regulations. By the Decision purportedly made under reg 10(1)(a), NOPSEMA accepted the Drilling EP submitted by Santos.

The legal effect of NOPSEMA’s acceptance of the Drilling EP, assuming it to be valid, was that Santos was permitted to carry out the petroleum activity detailed by the Drilling EP (Activity).

The Activity under the Drilling EP is part of the Barossa Project, the focus of which is an offshore gas-condensate field in the Timor Sea known as the Barossa Field, referred to in the Drilling EP as the “operational area” located approximately 300 km north of Darwin and 138 km north of the Tiwi Islands (Operational Area). The Barossa Project aims to provide a new source of natural gas for approximately 20 years to Santos’ existing onshore Darwin Liquefied Natural Gas facility at Wickham Point.

The Tiwi Islands are located in the Timor Sea, approximately 80 km north of Darwin. The traditional owners of the Tiwi Islands are comprised of eight clans, one of which is the Munupi clan. The applicant, Dennis Murphy Tipakalippa, is an elder, senior law man and traditional owner of the Munupi clan. Mr Tipakalippa claimed that he and other traditional owners of the Tiwi Islands, have “sea country” in the Timor Sea to the north of the Tiwi Islands extending to and beyond the Operational Area and that those interests and activities were referred to in the Drilling EP. In circumstances where the Drilling EP did not show that Mr Tipakalippa or others of the Munupi clan were consulted, Mr Tipakalippa claimed that NOPSEMA could not have been “reasonably satisfied” (as required by regs 10(1),10A(g) and 11A) that the Drilling EP “demonstrated” that Santos “had carried out the consultations” required by reg 11A.       

NOPSEMA may only accept an environment plan it if is “reasonably satisfied” that the plan meets the criteria specified in the Regulations, including that the plan demonstrates that the titleholder (in this case Santos) has carried out the consultations required by the Regulations. Of particular relevance is:

  • reg 11A(1) that defines “relevant person” and in particular, para (d) that provides that “in the course of preparing an environment plan, or a revision of an environment plan, a titleholder must consult… a person or organisation whose functions, interests or activities may be affected by the activities to be carried out under the environment plan, or the revision of the environment plan” (Relevant Person);
  • reg 11(2) that provides that a “titleholder must give each relevant person sufficient information to allow the relevant person to make an informed assessment of the possible consequences of the activity on the functions, interests or activities of the relevant person”; and
  • regs 13(1) and (2) that provide that an environment plan must contain a “comprehensive description of the activity” as well as “describe the existing environment that may be affected by the activity…and include details of the particular relevant values and sensitivities (if any) of that environment”.

Applicant’s grounds

Mr Tipakalippa made the following claims:

  • NOPSEMA did not have jurisdiction to make the Decision because NOPSEMA could not have been reasonably satisfied that the Drilling EP demonstrated that the consultations required by reg 11A were carried out (First Ground); and
  • Santos submitted the Drilling EP without having carried out the consultations required by regs 10A and 11A (Second Ground).

First Ground

The First Ground raised the question of whether a precondition to the valid acceptance of the Drilling EP was infected by legal error. The relevant precondition was that NOPSEMA was “reasonably satisfied” that the Drilling EP met the criteria set out in regs 10A and 11A.   

Justice Bromberg broke the First Ground down into the following two considerations:

  • whether Santos’ methodology for identifying each Relevant Person was flawed; and
  • whether a failure by NOPSEMA to consider certain “sea country material” in the Drilling EP and the interests and activities of traditional owners was demonstrative of a flawed inquiry. 

Santos’ methodology

As noted above, all Relevant Persons must be identified because to comply with reg 11A(1), the titleholder must consult all Relevant Persons. There must be sufficient information provided in the submitted environment plan as to the method by which Relevant Persons are identified, to allow NOPSEMA to be satisfied that all Relevant Persons have been consulted.

Justice Bromberg noted that the exercise of identifying Relevant Persons is capable of being described person by person, category by category or by the titleholder describing the methodology used in terms which demonstrate an understanding of the considerations that have to be considered, and which were taken into account in order for the exercise to be faithfully consistent with the description of Relevant Person in reg 11A(1)(d). A critical aspect is the identification of the totality of the sensitivities and values considered relevant and how each is evaluated to discover their possible intersection with the functions, interests and activities of particular people or organisations.

Justice Bromberg found the sections of the Drilling EP dealing with stakeholder consultation did not demonstrate that the process of identifying Relevant Persons was carried out in accordance with reg 11A(1) because the values and sensitivities considered by Santos to have been relevant were not given and the means by which each was assessed for the presence of Relevant Persons was not provided. This issue was recognised by NOPSEMA at an early stage in its review process and sought to be addressed, but ultimately NOPSEMA proceeded to its state of satisfaction despite the continued absence of the necessary information. During the review process, NOPSEMA had specifically noted that the Drilling EP did not describe a reasonable basis for determining who has been considered to be Relevant Persons or identified Relevant Persons.  His Honour held that Relevant Persons were identified through an incomplete methodological approach. The Drilling EP did little more than identify the data or other sources of information that Santos looked into in identifying Relevant Persons. For instance, the extent of the physical environment assessed by Santos for values and sensitives that could give rise to the existence of Relevant Persons was not made clear in the Drilling EP. Nor was it clear whether the environment considered extended to sea country or how the users of the marine environment consulted were identified and assessed.

Justice Bromberg concluded that NOPSEMA reached its state of satisfaction in the absence of the information required to demonstrate that each person who met the description in reg 11A(1)(d) was identified as a Relevant Person in the Drilling EP. Therefore, NOPSEMA could not lawfully have arrived at the state of satisfaction required by the Regulations.

Sea Country Material

Mr Tipakalippa pointed to a range of material in the Drilling EP that he contended showed that the functions, interests or activities of the traditional owners of the Tiwi Islands may be affected by the Activity. This material fell into the following two categories:

  • material which directly referred to traditional owners or their traditional activities or culture and suggests that they may have a “function, interest or activity” which may be affected by the Activity; and
  • material that showed that the Tiwi Islands may be affected by the Activity and from which it could be inferred that the functions, interests and activities of the traditional owners of the Tiwi Islands may be affected,

(Sea Country Material).

Although the case was not decided on the point of whether a failure by NOPSEMA to consider the Sea Country Material in the Drilling EP and the interests and activities of traditional owners was demonstrative of a flawed inquiry, Justice Bromberg considered whether NOPSEMA was required to consider the Sea Country Material in carrying out its Relevant Persons inquiry. In doing so, Justice Bromberg stated that NOPSEMA need not have considered each and every piece of information in the Drilling EP, but in considering whether it demonstrated that each and every Relevant Person had been consulted, NOPSEMA was bound to consider material which was probative of that consideration.

The question was then whether the Sea Country Material was probative material on the issue of whether or not the Drilling EP demonstrated that each and every Relevant Person was consulted. The more probative, the more relevant and thus the higher the requisite level of consideration required by NOPSEMA. Justice Bromberg was of the view that the Sea Country Material was probative for the following reasons:

  • material required to be included in an environment plan is likely to be probative of whether all persons who fall within the description in reg 11A(1)(d) have been properly recognised as Relevant Persons; and
  • it suggests the existence of values or sensitivities which may be “functions, interests or activities” of traditional owners (including those of the of the Tiwi Islands) that may be affected by the Activity. 

It follows that NOPSEMA was bound to consider the Sea Country Material at least to the extent of having evaluated and understood the material sufficiently to appreciate its relevance to the inquiry NOPSEMA was bound to undertake.  In light of the absence of any such record, together with the evidence of the global, process-focussed approach taken to that inquiry, the Court was not satisfied that the relevance of the Sea Country Material was appreciated by NOPSEMA in the Relevant Persons inquiry it had to conduct. 

Justice Bromberg stated that not only did NOPSEMA miss a piece or two of probative information in circumstances where NOPSEMA well understood that in the performance of that task it was required to consider information of that kind, it demonstrated a misconception by NOPSEMA of what that task required.

Mr Tipakalippa therefore succeeded on the First Ground and the Court ordered that the Decision be set aside. 

Second Ground

The Second Ground of Mr Tipakalippa’s application was rejected on the basis that his construction of the Regulations was misconceived and he was unable to identify any procedure that was required by law to be observed by NOPSEMA that was not observed in connection with the making of the Decision. In essence, he contended that the Regulations manifest an intention that if the titleholder does not comply with the consultation requirement in reg 11A, a decision to accept the environment plan which is affected by that non-compliance is invalid. Justice Bromberg did not accept that the requirement in reg 11A is relevantly distinct from the state of satisfaction that NOPSEMA is required to have under regs 10 and 10A.

What next?

Before judgement was delivered, Santos gave an undertaking to the Court that, in carrying out drilling activities for the Barossa Project, it would not, prior to 17 September 2022:

  • cause any well to intersect with the Barossa reservoir; or
  • commence drilling any new well or wells in accordance with the Drilling EP.

As part of its judgement, the Court ordered that this undertaking be extended to align with the date that its orders take effect.

In an ASX announcement of 21 September, following the delivery of the Court’s judgement, Santos stated that as a result of the judgement, the drilling in respect of the Barossa Project activities will be suspended pending a favourable appeal outcome or the approval of a fresh environment plan. Santos announced that it will be seeking to expedite these processes. Once the Court’s orders take effect and the decision to accept the drilling environment plan is set aside, Santos must suspend all drilling activities authorised by the Drilling EP, not just those subject to its earlier undertaking.

It is also interesting to note that Justice Bromberg stated that the position may well have been different if it had been the case that it was necessary to determine whether there was, as an objective fact (i.e. a fact that the Court rather than NOPSEMA has to be satisfied of), non-compliance with the consultation obligation upon Santos to consult each Relevant Person.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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