Monday

23rd Oct 2017

Opinion

Deliberate misconceptions about Nord Stream 2?

  • Pipeline segment being tested for Nord Stream (Photo: Nord Stream AG)

In his most recent article on Nord Stream 2, Alan Riley continues to make misleading claims about the legal framework for gas import pipelines.

His statements squarely contradict European Commission vice-president Maros Sefcovic, energy commissioner Miguel Arias Canete, the legal services of both the EU Commission and the Council, national regulators of EU countries, and long-standing regulatory practice.

In contrast to all of these authorities, Riley claims that the 2009 EU Gas Directive (part of the so-called 'Third Energy Package') is applicable to offshore pipelines that import gas from a third country outside the EU's internal market.

Here he contradicts both Sefcovic and Canete, who explicitly confirmed by letter of 12 September 2017 to the European Parliament that "by not providing specific rules on pipelines from third countries such as Nord Stream 2, the legislator did not intend the rules to apply".

This is because "none of the above-mentioned rules (…) expressly provide for their application to an offshore import pipeline connecting a member state with a third country".

There are currently five pipelines of this kind in Europe (Green Stream, Maghreb Pipeline, Medgaz, Transmed, Nord Stream) and two more are currently planned (Galsi, Nord Stream 2).

The Commission's position could not be any clearer: the Gas Directive does not apply in these cases. To this end, already more than a year ago, the EU Commission's legal service drew the same conclusion in its note to the Commission's energy department: "the legislator has not foreseen the application of the [Gas] Directive to a pipeline crossing an external border".

And by letter of 3 March 2017, the German regulator Bundesnetzagentur confirmed to the EU Commission that "offshore interconnections from third countries to the European Union are not subject to the provisions of the third internal energy market package". The regulator also warned that it could amount to a "discriminatory practice if other requirements were to apply to Nord Stream 2" compared to comparable import pipelines from third countries, like Green Stream and Medgaz.

2009 Gas Directive

Finally, even the legal service of the Council confirmed in its opinion of 27 September 2017 that the Gas Directive "does not apply to the Nord Stream 2 pipeline". So despite the overwhelming evidence and clarity of these conclusions, Riley claims to know that all these authorities are wrong. Perhaps his role as adviser to Naftogaz can explain his persistence against overwhelming evidence.

The Commission launched an initiative to negotiate a "specific regulatory regime" with Russia for Nord Stream 2 precisely because the Gas Directive does not apply. In its request to the Council for a negotiation mandate the Commission states: "Neither the EU nor its member states could claim to have jurisdiction on the part of an offshore pipeline outside their territory" for applying the 2009 Gas Directive.

It is obvious that if EU energy law is directly applicable to pipelines like Nord Stream 2, the Commission would not feel the need to propose negotiations to apply the "fundamental principles of EU law on energy".

Whatever one thinks of such negotiations, it is worth noting that Riley seems to oppose them because he demands that the Gas Directive should be applied directly. Or maybe he just picks any opinion that seems to complicate the implementation of Nord Stream 2, whether or not this is consistent with his earlier statements?

Furthermore, Riley inexplicably equates the Yamal onshore pipeline in Poland to Nord Stream 2. The differences are obvious, but maybe Riley simply forgot that the Yamal-Europe pipeline – unlike Nord Stream 2 – does not stop at the EU border but continues for some 680 kilometres, feeding both the Polish market and transporting gas onwards within the EU.

That is why the Gas Directive covers the part of the Yamal pipeline within the EU internal market, and only that part. In this respect, the Commission's opinion about the certification of the Polish section of the pipeline is also very clear.

Belarus is not in the EU

In fact, this comparison proves the very opposite of what Riley is claiming: of course a pipeline in an EU member state is subject to EU energy laws. This applies also to the connecting pipelines of Nord Stream 2 onshore in Germany. But the part of Yamal outside the EU's internal market, in Belarus, is not subject to the EU's internal market laws because it lies outside the internal market. This principle applies to any import pipeline outside the EU's internal market, such as Nord Stream 2.

There is a further problem: Riley's claim that the EU Commission "instituted infringement proceedings against Bulgaria for failing to apply the 2009 directive to the South Stream pipeline" is simply untrue. He again confuses the onshore and offshore sections of the pipeline systems. The procedure was related only to the onshore section inside the EU.

Furthermore, Riley wrongly claims that the infringement procedure related to non-compliance with the Gas Directive. In reality, the proceedings were not at all about energy law, as clearly stated in the formal letter to Bulgaria dated 3 June 2014 by Internal Market Commissioner Barnier.

Barnier's opinion

Barnier even stated that his letter is "without prejudice to the assessment concerning compliance with (…) the Third Energy Package", so this question was explicitly excluded from the infringement procedure. Hence, the response of the Bulgarian government only referred to the onshore pipeline "on Bulgarian territory" and made no reference to the offshore pipeline or EU energy law.

No offshore pipeline from a third country outside the EU's internal market bringing gas to the external border of the EU has ever been made subject to the rules of the Third Energy Package. EU regulation must not be applied in a discriminatory manner, purely based on political interests rather than the rule of law. Equal application of legislation is not only a key pillar of the rule of law, but also a prerequisite for much-needed commercial investment in the energy sector.

Sebastian Sass, LLM EU Law, is advisor and EU representative of Nord Stream 2.

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