Shareholder Resolution

ACCR Shareholder Resolutions to Santos Ltd on climate-related lobbying & decommissioning

The Australasian Centre for Corporate Responsibility (ACCR) has filed shareholder resolutions asking Santos (ASX:STO) to cease advocacy of its industry associations and disclose decommissioning liabilities.

The resolutions will be voted on at Santos Ltd's 2022 AGM on 3 May 2022.


  1. Resolution 1

  2. Resolution 2

  3. Resolution 3

Resolution 1

Special resolution to amend our company’s constitution

To insert into our company’s constitution the following new clause 32A:

Member resolutions at general meeting

The Members in general meeting may by ordinary resolution express an opinion or request information about the way in which a power of the company partially or exclusively vested in the directors has been or should be exercised. However, such a resolution must relate to an issue of material relevance to the company or the company’s business and cannot either advocate action which would violate any law or relate to any personal claim or grievance. Such a resolution is advisory only and does not bind the directors or the company.

Supporting statement to Resolution 1 (557 words including footnotes)

Shareholder resolutions are a healthy part of corporate democracy in many jurisdictions. As a shareholder, the Australasian Centre for Corporate Responsibility (ACCR) favours policies and practices that protect and enhance the value of our investments.

The Constitution of our company is not conducive to the right of shareholders to place ordinary resolutions on the agenda of the annual general meeting (AGM). In our view, this is contrary to the long-term interests of our company, our company’s Board, and all shareholders in our company.

Australian legislation and its interpretation in case law means that Australian shareholders are unable to directly propose ordinary resolutions for consideration at Australian companies’ AGMs. In Australia, the Corporations Act 2001 provides that 100 shareholders or those with at least 5% of the votes that may be cast at an AGM with the right to propose a resolution.[1] However, section 198A specifically provides that management powers in a company reside with the Board.[2]

Case law in Australia has determined that these provisions, together with the common law, mean that shareholders cannot by resolution either direct that the company take a course of action, or express an opinion as to how a power vested by the company’s constitution in the directors should be exercised.

Australian shareholders wishing to have a resolution considered at an AGM have dealt with this limitation by proposing two part resolutions, with the first being a ‘special resolution,’ such as this one, that amends the company’s constitution to allow ordinary resolutions to be placed on the agenda at a company’s AGM. Such a resolution requires 75% support to be effective, and as no resolution of this kind has ever been supported by management or any institutional investors, none have succeeded.

It is open to our company’s Board to simply permit the filing of ordinary resolutions, without the need for a special resolution. We would welcome this. Permitting the raising of advisory resolutions by ordinary resolution at a company’s AGM is global best practice, and this right is enjoyed by shareholders in any listed company in the UK, US, Canada or New Zealand.

We note that the drafting of this resolution limits the scope of permissible advisory resolutions to those related to “an issue of material relevance to the company or the company's business as identified by the company” and that recruiting 100 individual shareholders in a company to support a resolution is by no means an easy or straightforward task. Both of these factors act as powerful safeguards against ‘opening the floodgates’ to a large number of frivolous resolutions.

ACCR urges shareholders to vote for this proposal.

Resolution 2

Ordinary resolution on climate-related lobbying

Shareholders request that our company cease all private and public advocacy, both direct and indirect, that contradicts the conclusions of the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) on 1.5°C alignment, including advocacy relating to the development of new oil and gas fields.

Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.

Supporting statement to Resolution 2 (915 words including footnotes)

ACCR acknowledges our company’s support for the objectives of the Paris Agreement and its commitment to reach net-zero operational emissions by 2040.[3]

The International Energy Agency’s (IEA) ‘Net zero by 2050’ scenario[4] concluded that no new coal, gas or oil developments can proceed beyond 2021, in order to limit global warming to 1.5°C. The IPCC’s Special Report on Global Warming of 1.5°C concluded that in the absence of, or with only a limited use of carbon capture and storage (CCS), the share of primary energy provided by gas must decline by 20-25% by 2030, and by 53-74% by 2050 (relative to 2010).[5]

Yet our company and its industry associations continue to advocate for the development of new and expanded oil and gas projects.

For the purposes of this resolution, 'direct advocacy' refers to activities conducted by company employees or board members. 'Indirect advocacy' refers to activities conducted by agents of the board or company, including but not limited to industry associations, registered lobbyists,[6] consultants and advertising/marketing agencies.

Direct advocacy

In September 2021, InfluenceMap found that our company was the most active company in Australia on climate and energy policy between 2018-21, scoring it D- (scale A-F) for its opposition to Paris-aligned climate policy.[7]

Throughout 2021, our company lobbied to: ensure carbon capture and storage could justify fossil fuel expansion; entrench hydrogen made from fossil gas in Australia’s energy system; weaken the methods used to estimate fugitive methane emissions.[8]

Our company’s advocacy in 2021 included CEO Kevin Gallagher's attendance at COP26 in Glasgow, alongside Australia’s Minister for Industry, Energy and Emissions Reduction, Angus Taylor.[9] At COP26, the Australian government was widely criticised for its close relationship with fossil fuel companies,[10] and for claiming without evidence that Australia’s LNG exports are “reducing emissions in our customer countries”.[11] Our company’s influence over the Australian government was further demonstrated by our company’s branding and presentation of a carbon capture and storage diorama at the Australian pavilion in Glasgow.[12]

In August 2021, it was reported that CEO Kevin Gallagher was the most prolific CEO in Australian media coverage on sustainability, with 145 mentions over 12 months.[13] Often that media coverage promoted fossil gas as a solution to climate change,[14] or justified further oil and gas expansion through the use of carbon capture and storage.[15]

Indirect advocacy

In December 2021, our company published its second industry association review.[16] Industry associations were determined to be “aligned” if they:[17]

  • Recognise the scientific consensus of climate change;
  • Support the goals of the Paris Agreement;
  • Support net zero emissions by 2050 (or sooner).

The review failed to assess industry associations’ advocacy for new oil and gas developments, subsidies for new oil and gas infrastructure, or advocacy on emissions reduction policies.
Our company remains a member of at least five industry associations with climate lobbying practices that are misaligned with the Paris Agreement (ranked D+ or below):[18]

Industry association

Industry associationInfluenceMap rating
Australian Industry Greenhouse Network (AIGN)D
Australian Petroleum Production and Exploration Association (APPEA)E+
Australian Pipelines and Gas Association (APGA)D+
Chamber of Mines and Energy Western Australia (CMEWA)E
South Australian Chamber of Mines and Energy (SACOME)D+

Each of these industry associations supports and advocates for the continued development of new or expanded oil and gas projects.

Australia’s lack of climate policy

In February 2021, Bloomberg ranked Australia’s climate policies as the weakest of the largest developed economies.[19] In June 2021, Australia received the lowest score awarded to any of the 193 UN member states for climate action.[20] In November 2021, Australia was ranked last out of more than 60 countries on climate policy by German thinktank Climate Change Performance Index.[21]

Since September 2020,[22] the Australian government has implemented a suite of policies designed to accelerate the development of multiple new gas basins, known as the “gas-fired recovery”. It includes substantial subsidies for exploration and new infrastructure and pipelines, which will incentivise our company to pursue new fossil gas developments, particularly in the Beetaloo Basin.[23]

Throughout 2020-21, APPEA actively lobbied for the “gas-fired recovery”, through a series of reports[24] and media engagements that advocated for the development of multiple new gas basins. APPEA has supported public subsidies for pipelines and infrastructure to connect new gas basins.[25]

Our company’s CEO Kevin Gallagher served a two-year term as the Chair of APPEA until late 2021. Throughout that term, Gallagher oversaw a six-fold increase in expenditure on social licence advertising,[26] and a significant escalation of APPEA’s engagement on climate and energy policy.[27]

Other misaligned advocacy

Like APPEA, APGA[28] has consistently promoted the long-term use of fossil gas in Australia’s energy mix. In a jointly published report in late 2020, APGA and APPEA argued for fossil hydrogen to be introduced into domestic gas networks, and opposed the electrification of domestic cooking and heating.[29] The Australian government subsequently announced significant subsidies for fossil hydrogen development.[30]

Despite several years of shareholder concern around the advocacy of our company and its industry associations on climate and energy policy, there is little evidence to suggest that our company has attempted to affect change. Our company and its industry associations continue to advocate for the development of new and expanded oil and gas projects that are inconsistent with a 1.5°C pathway.

ACCR urges shareholders to vote for this proposal.

Resolution 3

Ordinary resolution on decommissioning

Shareholders request that the Board disclose annually from 2023:

  1. A list of all onshore and offshore oil and gas infrastructure which may be decommissioned over the medium-term;
  2. Audited asset-level provisions for the decommissioning of this infrastructure and restoration of sites, along with the major assumptions underpinning these provisions;
  3. Analysis of the useful life of all assets using different oil and gas demand scenarios, including the IEA Net Zero by 2050 scenario.

Nothing in this resolution should be read as limiting the Board’s discretion to take decisions in the best interests of our company.

Supporting statement to Resolution 3 (968 words including footnotes)

As Australia's oil and gas industry matures, decommissioning obligations and associated liabilities are increasing. In 2020, Wood Mackenzie estimated the cost of Australia's onshore and offshore decommissioning at more than US$49 billion (A$60 billion) over the next 30 years.[31] For the offshore oil and gas industry alone, decommissioning over the next 50 years has been estimated at USD$40.5 billion ($56 billion), with 51% of activities likely to occur before 2030.[32]

The national offshore regulator, NOPSEMA, warns that the task ahead is significant - expensive, complex, and high-risk.[33] As decommissioning is in its infancy in Australia, high-level cost estimates have not been reconciled to actual costs yet.[34] Internationally, remediation costs have often exceeded provisioning.[35] A 2021 study of oil and gas offshore platform decommissioning projects in the North Sea found the average actual cost was 76% more than estimated.[36] NOPSEMA is concerned that industry is not valuing assets on the basis of full removal, and at times failing to maintain equipment to a standard which would enable full removal.[37]

Operators are facing an increasing legislative burden. Triggered by Woodside’s mismanagement of the Northern Endeavour FPSO, the federal government has introduced: strengthened trailing liability provisions; increased oversight of company control; stricter financial assurance requirements; strengthened remedial directions powers; and new transparency measures.[38] A non-deductible levy, estimated by APPEA to generate up to $3.4 billion (~USD 2.4 billion),[39] must now be paid by all offshore producers.

Simultaneously, regulatory pressure is increasing. Regulator NOPSEMA has warned that 'some titleholders (are) not develop(ing) appropriate decommissioning plans in a timely manner, potentially increasing risk exposure to people and the environment',[40] and has introduced a suite of new policies.[41] NOPSEMA has asserted that ageing assets and life extension risk must be managed proactively, and at a senior level.[42] New regulatory timelines stipulate that from 2025, all structures, equipment and property must be removed fully within five years.[43] NOPSEMA is now issuing more directions, prohibition notices and improvement notices, and has stressed its willingness to prosecute maintenance failures.[44]

Company decommissioning provisions are calculated using information about assets (age, condition, complexity), and assumptions about removal requirements and future costs. These assumptions may be moderated by legislation (climate, environment, safety, taxation), regulatory settings, and commodity prices, among other factors. Consequently, decommissioning is increasingly viewed as relevant to climate risk reporting.[45]

Company provisions for decommissioning

In its 2020 Annual Report,[46] our company disclosed restoration provisions of US$3,021 million, an increase of US$739 million from 2019. This increase was attributed to “the acquisition of ConocoPhillips’ northern Australia assets, change in discount rates, unfavourable exchange differences and revised restoration cost estimates.”[47] Our company states that the estimate of provisions requires “management to make judgements regarding the removal date, future environmental legislation, and the extent of restoration activities required.”[48]

Since the 2020 Annual Report our company has merged with Oil Search and inherited the decommissioning and site restoration obligations within its portfolio. The 2020 Oil Search Annual Report disclosed a consolidated site restoration provision of US$841 million.[49]

(ex Oil Search)
Oil SearchCombined entity
Market Cap (USD bn @ 9 Feb 2022, assuming 0.6725 share offering to OSH holders)[50]11.16.918.0
Restoration Provision (USD bn)

There is no disclosure by our company of the specific assumptions driving its estimated provisions.

Considering the 2021 North Sea study found decommissioning provisions were underestimated by an average of 76% (range 21-189%),[51] greater transparency on the major assumptions informing these liabilities is a modest request from shareholders.

Current and future decommissioning works

The regulators overseeing the decommissioning regime of our company’s assets and infrastructure vary according to jurisdiction. They include NOPSEMA for offshore Australian waters, the Department of Mines, Industry Regulation and Safety (DMIRS) for assets onshore and offshore Western Australia (WA) and the Autoridade Nacional do Petróleo e Minerais (ANPM) for the Timor Sea.

Limited and inconsistent data complicates efforts to understand the scope and timing of our company’s decommissioning obligations. Based upon publicly available information, an indicative list of sites where our company has current or imminent decommissioning obligations includes:

  • Barrow Island and Thevenard Island, WA[52]
  • Legacy oil assets Mutineer-Exeter FPSO, Fletcher, Finucane, Airlie and Legendre, WA[53]
  • Harriet Joint Venture, WA - including three platforms[54]
  • Varanus Island Hub platforms, WA - Sinbad and Campbell platforms[55]
  • Bayu-Undan offshore pipeline and platform in the Timor Sea. It is noted that our company is testing the “viability of repurposing”[56] the site for Carbon Capture and Storage (CCS). It will be important for shareholders to obtain timely updates on the feasibility of the CCS project, due to the direct implications for decommissioning liabilities.
  • It is also assumed that ongoing works are occurring to plug and remediate onshore wells in the Cooper (SA), Surat (QLD) and Bowen (QLD) basins.

Some works at these sites have already commenced. It is understood our company is under investigation by DMIRS for an incident that had “high potential for multiple fatalities”[57] when “inadequate engineering work”[58] was undertaken to remove part of the Sinbad fixed platform off Varanus Island (WA).

A recent industry report questioned the preparedness of operators “of all sizes” for Australia's upcoming decommissioning exercise.[59] The issue of operator ill-preparedness was also addressed in the Walker Review, which noted that proper management of ageing assets hinges upon the operator/owners' detailed knowledge of the whole asset, and “effective, rigorous and consistent” risk management.[60]

Decommissioning is an evolving, material issue that intersects with a broad range of risk areas, including financial, regulatory, safety, environmental and climate change. These escalating risks call for improvements to company disclosures.

ACCR urges shareholders to vote for this proposal.

  1. Sections 249D and 249N of the Corporations Act 2001 (Cth). ↩︎

  2. S198A provides that “[t]he business of a company is to be managed by or under the direction of the directors”, and that “[t]he directors may exercise all the powers of the company except any powers that this Act or the company’s constitution (if any) requires the company to exercise in general meeting.” ↩︎

  3. ↩︎

  4. ↩︎

  5. ↩︎

  6. For example, see the Australian Government’s Register of Lobbyists ↩︎

  7. ↩︎

  8. ↩︎

  9. ↩︎

  10. ↩︎

  11. ↩︎

  12. ↩︎

  13. ↩︎

  14. ↩︎

  15. ↩︎

  16. ↩︎

  17. ibid. ↩︎

  18. ↩︎

  19. ↩︎

  20. ↩︎

  21. ↩︎

  22. ↩︎

  23. ↩︎

  24. ↩︎

  25. ↩︎

  26. APPEA Ltd, Annual Reports 2018-20 ↩︎

  27. ↩︎

  28. ↩︎

  29. ↩︎

  30. ↩︎

  31.; ↩︎

  32. ↩︎

  33. - Decommissioning Compliance Strategy.pdf ↩︎

  34. ↩︎

  35. ↩︎

  36. ↩︎

  37. ↩︎

  38. ↩︎

  39.;db=COMMITTEES;id=committees%2Fcommsen%2F25290%2F0003;query=Id%3A"committees%2Fcommsen%2F25290%2F0000" ↩︎

  40. ↩︎

  41. ↩︎

  42. ↩︎

  43. - Decommissioning Compliance Strategy.pdf ↩︎

  44. - Decommissioning Compliance Strategy.pdf ↩︎

  45. ↩︎

  46. ↩︎

  47. ↩︎

  48. ↩︎

  49. ↩︎

  50. ↩︎

  51. ↩︎

  52. ↩︎

  53. ↩︎

  54. ↩︎

  55. ↩︎

  56. ↩︎

  57. ↩︎

  58. ↩︎

  59. ↩︎

  60. ↩︎

Our work