* Judge finds Santos did not properly consult Tiwi islanders
* Barossa is Santos' biggest energy project
* Santos to seek expedited appeal at Federal Court
* Santos says project uncertainty is public policy issue
MELBOURNE, Sept 21 (Reuters) - Australia's Federal Court on
Wednesday ruled in favour of an indigenous group's challenge
against a drilling permit for Santos Ltd's Barossa gas
development, in what Santos called a "disappointing" setback for
the $3.6 billion project.
Traditional landowners from the Tiwi Islands led by Dennis
Tipakalippa had asked the court in June to overturn drilling
approval for the Barossa project near the islands off the
northern Australia coastline granted by the industry regulator,
the National Offshore Petroleum Safety and Environmental
Management Authority (NOPSEMA).
The stakes are high for Santos, which announced plans to
seek an expedited appeal soon after the ruling was issued.
Barossa is the company's biggest project, and essential for its
Darwin liquefied natural gas (LNG) plant, which will lose supply
from its foundation gas source, the Bayu Undan field, later this
"Mr Tipakalippa has established that NOPSEMA ... failed, in
accordance with the Regulations, to assess whether the Drilling
EP (environment plan) demonstrated that Santos consulted with
each person that it was required by the Regulations to consult
with," Judge Mordecai Bromberg said in his ruling.
"The acceptance (or permission) given by NOPSEMA was legally
invalid. NOPSEMA's decision to accept the Drilling EP must
therefore be set aside," he said.
Announcing its plans to appeal, Santos said the decision
should be reviewed by the full Federal Court, given the
significance of the decision to the company, its international
joint venture partners and customers.
Santos' partners in the Barossa project are South Korean
energy company SK E&S and Japan's top power generator JERA, a
joint venture between Tokyo Electric Power and Chubu
"This is a disappointing outcome," Santos said in a
statement to the Australian Stock Exchange, adding that the
relevant drilling was to occur at a site in the Timor Sea about
140 kilometres north of the Tiwi Islands.
"Project approval uncertainty is a public policy issue that
should be urgently addressed by Australian governments to reduce
risk for trade and investment in projects around the country,"
NOPSEMA said it noted the verdict and was considering the
implications of the decision. "It is a matter for Santos to
consider what the decision means for the Barossa project," a
NOPSEMA spokesperson said in emailed comments.
Tipakalippa, who filed the challenge, said Santos had not
properly consulted the traditional owners about the drilling,
and told the court that the Barossa project posed a risk to
sacred sites and spiritual connection to Sea Country.
"We are so happy and so relieved. We have won. The most
important thing for us is to protect our Sea Country,"
Tipakalippa said in a statement.
Santos, which had agreed to suspend drilling for the project
pending the court decision, said it had "engaged with"
indigenous representative bodies - the Tiwi Land Council and the
Northern Land Council - about the proposed drilling, and the
regulator had accepted its efforts to consult with Tiwi
Santos was on track to start producing gas from Barossa in
2025 to feed its Darwin liquefied natural gas (LNG) plant.
"The drilling activities are not on the critical path for
the project and we have headroom in the project cost
contingency," Santos said.
Credit Suisse analyst Saul Kavonic said if Santos fails in
its appeal and has to submit a new environmental plan, that
could impact the overall cost and add months or even more than a
year to the project's schedule.
Besides expanding consultations, Kavonic said, there is a
risk that the regulator might broaden any review to include
other considerations, such as looking at emissions, since the
country's carbon emissions targets are tighter now than when the
permit was approved.
(Reporting by Sonali Paul; Editing by Kenneth Maxwell)