Commission proposal to amend the Gas Directive

10 November 2017
by eub2 -- last modified 10 November 2017

To improve the functioning of the EU internal energy market and enhance solidarity between Member States, the Commission today proposed to amend the EU Gas Directive.

1. Why is the Commission amending the Gas Directive of the Third Energy Package?

President Juncker announced in the context of his State of the European Union Speech on 13 September, that following up to the solidarity aspect of the Energy Union, the Commission will propose common rules for gas pipelines entering the European internal gas market.

The Commission wants to ensure that all major pipelines in the EU and entering the EU territory are operated under the same degree of transparency, are accessible to other operators and are operated efficiently. The Third Energy package aims at maximising competition between gas companies, avoiding conflict of interests between infrastructure operators and shippers and finally, to provide security of supply.

The Legal Services of the Commission and of the Council have recently concluded that the Gas Directive (Directive 2009/73/EC) does not set out a comprehensive framework for gas pipelines to and from third countries. This lack of a regulatory framework on the EU' territory is detrimental to the functioning of the internal energy market and the security of supply in the Union. The present proposal will establish the applicability of the Gas Directive to gas pipelines to and from third countries and thereby provide legal certainty for all stakeholders.

2. Are you forcing EU law onto third countries?

The proposal clarifies that EU law applies in EU jurisdictions. There is therefore no extraterritorial application.

Nevertheless, the Commission recognises that in the case of cross-border pipelines it is not practical to have different regulatory regimes apply to the two ends of the same pipeline. In such a situation of "conflict of laws" it is customary to initiate international negotiations to agree on the operational principles of the pipeline in question. The EU stands ready to work out such agreements with third-countries, if requested.

 3. Will the proposal apply to existing pipelines to and from third countries?

The modified Gas Directive will be applicable to all existing and potential future pipelines equally.

However, in order to take into account the legitimate expectations of existing operators and the previous lack of specific Union rules applicable to gas pipelines to and from third countries, Member States will be able to grant derogations for existing pipelines from certain key requirements of the Gas Directive 2009/73/EC. This would include unbundling, third-party access and tariff regulation, provided that the derogation would not be detrimental to competition, the functioning of the market and security of supply in the Union.

4. Which existing pipelines are affected?

In principle, the proposal renders the Gas Directive applicable to all pipelines to and from third countries. In practice, a change in the legal situation will currently only be experienced by pipelines crossing into the EU jurisdiction across a sea border.

Existing gas pipelines impacted by this proposal enter the Union from Norway, Algeria, Libya, Tunisia, Morocco and Russia. The proposal may also have an impact – post-Brexit – on pipelines connecting the UK with EU Member States.

5. What would be the precise mechanism for granting the derogation for existing pipelines by Member States? In particular, which Member States would be responsible in the case of Nord Stream 1 to grant the derogation?

Member States would have to adopt a decision granting such derogation. The procedure would follow the respective administrative law of the Member State in question.

For existing pipelines which cross multiple Member States (such as Nord Stream 1), it will be the Member State where the first interconnection point is located that shall decide on a derogation. This will ensure a coherent regulatory framework for each pipeline.

6. Why does the proposal not include a Commission decision on granting the derogation for existing pipelines?

The Commission proposal on derogations concerns gas pipelines already in operation. The logic of the derogation is therefore very different than the one used in exemption procedure under Article 36 of the Gas Directive, which aims at exempting pipelines which would not be built otherwise and which bring competitive and security of supply benefits. In view of the above, such a procedure would not be useful and in addition would create significant additional administrative burden.

7. What is the impact of the proposal on pipelines to and from EEA countries or Energy Community Contracting Parties?

In EEA countries and Energy Community Contracting Parties, rules which are similar to the Third Energy Package are already applicable or will become applicable in the future. Given the parallel regulatory regime, there appears to be no need to grant derogations for pipeline connections between the Union and such countries. If necessary, Member States would still be able to grant derogations in these cases, provided that the derogation would not be detrimental to competition, market functioning and the security of supply in the Union.

8. Is this about Nord Stream 2? Will the proposal prevent Nord Stream 2?

The proposal concerns all gas pipelines to and from third countries and is not aimed at preventing the construction of any new gas pipelines.

The recent legal and public debate concerning Nord Stream 2 only underscores the value of providing legal clarity on this issue across the EU. The Gas Directive sets out a clear regulatory framework for the operation of gas pipelines inside and on the borders of the EU. These rules will apply to Nord Stream 2 the same way as to all other projects. Project promoters should welcome the legal certainty this proposal would create.

9. What is the impact of the proposal on the negotiation mandate on Nord Stream 2 requested earlier this year?

This proposal is complementary to the Nord Stream 2 mandate. Given that Union law cannot be directly applied in third countries an agreement with Russia remains the best instrument to establish a clear, coherent and stable regulatory framework for the operation of Nord Stream 2.

The Commission considers this modification of the Gas Directive a priority since it will create legal clarity for all third-country projects, by filling a legal gap. Nevertheless, the Commission remains available to engage in negotiations on the operating conditions of Nord Stream 2. The Commission will therefore not withdraw its proposal for a negotiation mandate and awaits the Council's decision on its earlier recommendation to authorise negotiations with Russia.

10. Which other new pipeline projects would be affected by the proposal?

Other than Nord Stream 2, only the Trans-Adriatic pipeline (TAP) project is similarly advanced. However, TAP already has an exemption pursuant to Article 36 Gas Directive, and would, hence, not be affected by this legal change. Other potential new pipeline projects, e.g. from Russia to Bulgaria, or in the Mediterranean, would be covered by the proposal and thus subject to the requirements set out in the Gas Directive.

The proposal establishes a clear regulatory framework and thereby contributes to legal certainty for all stakeholders. New pipeline projects to and from third countries can apply for an exemption for new infrastructure pursuant to Article 36 of the Gas Directive (subject to the conditions set out in this Article).

11. What is the Commission's position on the Nord Stream 2 project?

The Commission position on Nord Stream 2 is well known. Pipelines in the EU area must be built and operated in accordance with all applicable legislation. Nord Stream 2 cannot happen in legal void or exclusively according to the law of a third country. If built, this pipeline would need a legal framework that takes into account the key principles of EU energy market rules.

This Commission is committed to all the Energy Union objectives, including energy security and in creating a well-diversified and competitive gas market.

Our diversification strategy develops around priorities such as the implementation of the Southern Gas Corridor, the development of a liquid gas hub in the Mediterranean and through promoting access to Liquefied Natural Gas (LNG) and gas storage for which the Commission adopted a strategy in February 2016.

Our preference is a strong regional cooperation and it is delivering concrete results: key gas infrastructures in the Baltic region are being implemented. We have financially supported the construction of the Gas Interconnectors between Poland and Lithuania and the Balticconnector between Finland and Estonia. We have approved state aid for the Klaipeda LNG terminal in Lithuania and we are actively facilitating the establishment of a new northern corridor linking Norway to Poland through Denmark.

Gas imports to the EU are expected to remain stable by 2030, due to declining domestic production and consumption. With the existing well-developed import infrastructures and the expected competitiveness of LNG supplies after 2020, the Commission sees no need for new infrastructure of the magnitude of Nord Stream 2.

In addition, the EU will continue supporting Russian gas imports transiting through Ukraine.

Source: European Commission