The German regulator Bundesnetzagentur (BNetzA) must come to a decision within the next few weeks on Nord Stream 2’s application for a derogation under the amended EU Gas Directive.
The European Commission has opposed Russia gas monopoly Gazprom’s Nord Stream 2, which will transport up to 55 billion cubic metres of natural gas per year from Russia to Europe across the Baltic Sea, arguing that it will increase the bloc’s reliance on Russia. Under the amended directive, gas pipelines entering the EU from non-EU countries will now be covered by EU law. The US and some European states, which have opposed the pipeline, have applauded the amendment which targets Nord Stream 2.
“I understand that Nord Stream-2 has applied for a derogation from the amended gas directive under Art. 49a, and the regulator is obliged to make a decision by May 24, 2020, at the latest. To be eligible for a derogation Nord Stream 2 would have to be deemed ‘completed’ before May 23, 2019,” Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told New Europe on 26 March, arguing that Nord Stream 2 has a case as the amended German energy act, which transposed the amended gas directive into German law, appears to allow for several interpretations of ‘completed’ thus making it possible for the German regulator to deem Nord Stream 2 being ‘completed’.
“Notably, the German parliament’s report, accompanying the energy act amendment, contains a special declaration, which states that the amended Directive ‘privileges existing investments’ to protect legitimate expectations through derogations under Art. 49a, adding that account must be taken of all the circumstances of the case when determining whether a pipeline in question has been completed before the Directive’s entry into force,” Yafimava said, explaining that it is possible that the German regulator could consider it ‘completed’, given that the investment had been made prior to the amended directive’s entry into force.
“I think it is possible that the German regulator will grant Nord Stream 2 a partial derogation, with some conditions attached, so that the derogation would establish the regulatory regime not too different compared with the regime applicable to Nord Stream 2 at the time of investing, and ensuring that it is not detrimental to competition and the functioning of the internal market,” Yafimava opined.
According the Oxford energy expert, if the regulator does not grant such derogation, the German section of Nord Stream 2 would have to comply with the amended directive’s requirements, with such compliance to be certified by the German regulator, or seek an exemption under Art. 36, where the European Commission will have a final say, potentially resulting in the regulatory framework materially negatively different from that applicable at the time of investing – thus feeding towards ongoing Nord Stream 2 verses European Commission litigation at the Court of Justice of the European Union (CJEU) as well as arbitration.
Asked about Nord Stream 2’s expectations from the German ruling and whether it will affect the completion of the project, Nord Stream 2 EU representative Sebastian Sass told New Europe on March 25 that it would be discriminatory should Nord Stream 2 be excluded from the same protection of investments that is available to all other pipeline investors that made irrevocable commitments of several billion euros long before the changes to the regulatory framework were announced.
“Numerous independent experts have confirmed that such discrimination is a breach of EU law and of the German constitution, and that Nord Stream 2 will strengthen supply security and enhance competition to the benefit of European consumers,” Sass argued, adding that the application for a derogation is not related to the construction works of the pipeline and has therefore no impact on the finalisation of construction.
Nord Stream 2 was expected to be completed by the end of 2019 but US sanctions imposed in December have effectively prevented vessels from laying the final stretch of the pipeline. Now there is no timeline now when the pipeline will be finished.
Meanwhile, asked if the current coronovirus crisis will affect the development of the Nord Stream 2 project, Sass said the natural gas pipeline company has taken precautions in line with the instructions of authorities, such as home office and strict sanitary rules. “We anticipate no impact on the implementation of the project,” he said.
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