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Santos Environment Breach Fines Must Deter, Court Told

Santos Ltd. (STO)’s fine for breaching environmental laws in its coal seam gas operations must help deter others, an Australian state attorney told a judge in the first prosecution under a 1991 law.

“Deterrence is of some significance,” Stephen Rushton, the prosecutor, said at a sentencing hearing today in Land and Environment Court of New South Wales in Sydney.

Santos pleaded guilty to failing to report a June 2011 spill of 10,000 liters of coal seam gas waste water and three counts of failing to file accurate environmental reports. The company based in Adelaide, South Australia, is the first to be prosecuted under the Petroleum (Onshore) Act. Four other charges were dropped.

Chief Justice Brian Preston will hand down his ruling at a later date. Each charge carries a maximum fine of A$110,000 ($98,000). Rushton asked Preston to order Santos pay an additional A$110,000 for the costs of the investigation and prosecution.

Santos, Australia’s third biggest oil producer, apologizes to the court and the public for having breached the law, the company’s lawyer Dean Jordan said. He urged the judge to reduce the fine, noting the company voluntarily disclosed the breaches and helped with the investigation.

“It’s perverse they would get a discount for that they were required to do,” Preston said.

Pilliga Forest

Santos fell 0.7 percent to A$13.75 in Sydney while Australia’s benchmark S&P/ASX 200 Index slipped 0.1 percent. The stock has surged 24 percent this year.

Santos NSW Pty, formerly known as Eastern Star Gas, was acquired by Santos Ltd. in July 2011 for A$626 million. Santos NSW operated a water treatment plant in the Pilliga forest, northwest of Sydney. The polluted water spilled into the forest in June 2011, killing 77 percent of the trees in a 1.75 hectare area, according to Rushton.

The company reported the spill after discovering it during an operational review following the takeover, Jordan said. Santos mothballed the water treatment plant at a cost of A$319,000, approved the construction of a A$30 million replacement plant and spent A$1.4 million to rehabilitate the damaged forest, the lawyer said.

The case is Connell v Santos NSW Pty. 13/50435. Land and Environment Court of New South Wales. (Sydney).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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