Allegations of "greenwashing" will hang over Santos until at least next year in a landmark case that questions the gas giant's claims of becoming carbon neutral by pumping emissions underground.
The nub is whether investors have been misled by emissions reduction plans that would involve the company not emitting less but still achieving its net-zero target, the Federal Court heard on Friday.
Santos plans to use various carbon offsets, including disused wells at Moomba in South Australia as a "carbon sink" to permanently store emissions while still expanding gas production.
It is on track for a first injection of the depleted reservoirs by 2024, in a new industry it says will help the country achieve net-zero emissions and put Santos on track to be net-zero by 2040.
Shareholder activists from the Australasian Centre for Corporate Responsibility (ACCR) began the proceedings against Santos in 2021, making it the first case in the world to challenge the truth of a company's net-zero emissions target.
ACCR alleges Santos breached corporations and consumer law by engaging in misleading or deceptive conduct over "clean energy" claims as the extraction and use of gas is a major contributor to climate change and global warming.
Santos' net-zero road map is alleged to be bogus rather than "clear and credible" because it relies on so-called "blue hydrogen" which is made using gas and carbon capture and storage.
Nor did the net-zero plan account for expected production and emissions growth from oil and gas exploration beyond 2025, ACCR alleges.
Santos told AAP it was defending the allegations but it would be inappropriate to comment about matters before court.
"Santos is committed to transparent, accurate and compliant reporting," a company spokesperson said.
Since 2018, Santos has published annual climate change reports it says align with the international framework on climate-related financial disclosures.
Its climate transition strategy and action plan is to become a net-zero emissions energy and fuels business by 2040, in step with the goal of the United Nations Paris Agreement on climate change, according to the company's 2023 plan.
The case is being closely watched by investors, regulators and the gas industry.
Companies - and more recently directors - are starting to be pursued for alleged greenwashing, or exaggerated claims about green credentials, as investors increasingly seek to hold them to account.
Insurers are also on alert for implications over future fines and penalties, and the risk of climate-related class actions.
Lawyers expect a decision in the landmark case to guide future court rulings on greenwashing and board accountability for falsely promoting sustainable products.
Another case management hearing will be held on December 18, leaving determination of the issues at trial until 2024 at the earliest.
