7 Minimum stocks of crude oil and/or
petroleum products
| (30192)
15910/08
+ ADDs 1-2
COM(08) 775
| Draft Council Directive imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products
|
| Legal base | Article 100EC; QMV
|
| Document originated | 13 November 2008
|
| Deposited in Parliament | 24 November 2008
|
| Department | Energy and Climate Change
|
| Basis of consideration | EM of 9 December 2008
|
| Previous Committee Report | None, but see footnotes 43 and 44
|
| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
|
Background
7.1 In 2002, a Commission Communication[43]
noted that the Community's undue reliance on imports made it vulnerable
to external factors. It also pointed out that, although rules
for the maintenance of stocks of crude oil and petroleum products
were laid down by both the International Energy Agency (IEA) and
the Community itself, these were no longer suited to present circumstances,
and it highlighted the lack of any Community decision-making power
to dispose of oil stocks on the market. It therefore suggested
that a more coordinated approach was required, based upon predefined
mechanisms.
7.2 The Communication was accompanied by two specific
legislative proposals, one of which addressed the organisation
and coordinated use of oil stocks. It proposed that all Member
States should set up a public body to hold such stocks; that the
Commission itself, assisted by a committee made up of Member States'
representatives, should adopt the measures needed to respond to
any actual or expected disruption of supplies; and that the minimum
volume of stocks to be held by Member States should be increased
from 90 to 120 days consumption.
7.3 As our predecessors noted, most notably in their
Report of 20 November 2002, the UK opposed the proposal, on the
grounds that existing IEA and Community arrangements for holding
stocks already provided sufficient cover for supply disruptions;
that emergency plans were needed to cover key world players, which
only the IEA was in a position to do; and that individual countries,
acting as members of the IEA, were best placed to respond to an
international oil emergency. They therefore concluded that these
were potentially highly significant proposals, not least in terms
of the fundamental difference between the UK and the Commission
over the extent to which action of this kind should be taken by
the Community as opposed to individual Member States. In view
of this, and the Government's reservations over the legal base
proposed, they recommended the document for debate in European
Standing Committee C. That debate took place on 8 April 2003.
The current document
7.4 The Commission has now put forward this new proposal
as part of the Second Strategic Energy Review.[44]
In doing so, it points out that the European
Council
in March 2007 underlined the need to enhance the security of supply
for the Community
as a whole (and for each Member State) by developing more effective
crisis response mechanisms, and that it had also highlighted the
need to review Community
oil stocks mechanisms, particularly in the event of a crisis.
The Commission says that this confirms its own view that the weaknesses
of the present system need to be addressed, adding that oil is
the most important energy source within the Community,
and that its economy is crucially dependent on a continuous, reliable
and affordable supply at a time when the risk of disruption has
grown for a number of reasons. It adds that experience has shown
that the release of emergency stocks is the easiest and fastest
way of making large volumes of additional supplies available,
and that the overall aim of this proposal
is to strengthen the present system in relation both to the arrangements
within the Community
and to those applying internationally through the IEA.
7.5 Having considered various options, the Commission
says that its preferred approach would be to create dedicated
Community emergency stocks, but that, since it recognises this
would not be acceptable at present, it is instead proposing the
establishment of a centralised Community system with mandatory
state/public ownership of emergency stocks. More specifically,
this would:
- require Member States to establish
emergency stocks equivalent at all times to at least 90 days of
net imports or 70 days of consumption,[45]
whichever is the greater;
- enable them to undertake to maintain a minimum
level of "dedicated" stocks in terms of days' consumption,
though it would be for any Member State choosing to do so to specify
what that level would be; and
- enable them to set up a non-profit making central
stockholding entity (which would become an obligation if they
place stockholding obligations on economic operators), with the
task of acquiring, maintaining and selling oil stocks within the
Member State in question, it being the only body able to operate
in this way so far as dedicated stocks are concerned.
Member States would have take any measures necessary
to enable their competent authorities to release some or all of
their emergency stocks and dedicated stocks in the event of a
major supply disruption. They would also have to impose restrictions
on consumption in line with the estimated shortages (including
the allocation of petroleum products to priority users), and they
would need to have in place contingency plans. In the event of
an effective international decision to release stocks, Member
States may use their emergency or dedicated stocks to fulfil their
obligations, and the Commission may, after due consultation, require
Member States to release some or all of these stocks
7.6 In addition, Member States would have to ensure
that the emergency and dedicated stocks held within their own
national territory are accessible, and can be verified, at any
time; and, insofar as these form part of stocks held by economic
operators, they would have to be accounted for separately and
not encumbered by any financial or legal charges. Member States
would also have to keep (and send to the Commission) registers
of all emergency and dedicated stocks, containing the information
needed to establish their location, the quantities involved, their
ownership and exact nature: the Directive would also set out a
number of provisions governing the terms on which the tasks in
question may be delegated by a central stockholding entity to
commercial operators, and on which they may in turn delegate these
obligations to others.
7.7 Other provisions include an obligation on Member
States to provide information to the Commission each month on
the levels of emergency and dedicated stocks, and each week on
the levels of commercial stocks held on their territory; the establishment
of a Coordination Group for oil and petroleum products, made up
of Member States' representatives, and tasked with analysing the
security of supply situation within the Community and coordinating
and implementing the necessary measures; and a power for the Commission
to carry out checks on the levels of emergency and dedicated stocks
in the Member States.
7.8 The proposal also provides for the Commission
to review the implementation of the Directive within three years
of it coming into force, looking in particular at whether Member
States should be required to hold a compulsory minimum level of
dedicated stocks.
The Government's view
7.9 In his Explanatory Memorandum
of 9 December 2008, the Minister of State at the Department of
Energy and Climate Change (Mr Mike O'Brien) accepts the Commission's
view that Community level coordination is necessary to maintain
a high level of security of oil supply through reliable and transparent
mechanisms based upon solidarity between Member States, but adds
that the subsidiarity principle should apply in relation to how
they choose to fulfil their oil stocking obligations. He also
points out that the UK has consistently complied with its existing
Community
obligation, and that, by imposing obligations on economic operators,
ensures turnover of product and closeness to consumers.
7.10 He notes that this proposal would harmonise
standards, increase transparency, clarify and simplify measures
and procedures, and increase coherence with the arrangements operated
by the IEA, but says that the UK would be concerned at the potential
impact of any compulsion for a central stockholding entity, adding
that further work is needed on this, and on delegation for economic
operators. Other potentially significant issues would be the review
clause with its emphasis on minimum dedicated stocks, and the
proposal that the Community should publish weekly the aggregated
level of emergency and commercial stocks held by oil companies,
which the Government would wish to see subjected to a thorough
impact assessment before any such decision were taken. It has
not, however, produced an Impact Assessment itself, and simply
says that "if legislation is adopted which prescribes a compulsorily
owned system of Government-owned oil stocks, there would be significant
implications for the public purse".
Conclusion
7.11 This is clearly a proposal of some potential
importance, which we are drawing to the attention of the House.
Whilst we have noted the Minister's comments on it, there are
a number of aspects on which we would welcome further information.
7.12 It is not clear to us the distinction to
be drawn between emergency and dedicated stocks; it would be helpful
to have an indication of the synergies between what is proposed
and the arrangements operated under the International Energy Agency;
and, to the extent that this proposal is more acceptable to the
UK than the one put forward in 2002, we would be interested to
know which changes make this so, particularly in relation to subsidiarity.
In addition, we note that there could well be significant implications
for the public purse, and, before considering the document further,
we would like to have both a clearer indication of what these
might be, and an Impact Assessment.
7.13 In the meantime, we are holding the document
under scrutiny.
43 (23825) 12228/02: see in particular HC 63-i (2002-03),
chapter 1 (20 November 2002). Back
44
(30198) 15944/08: see HC 19-iii (2008-09), chapter 2 (14 January
2009). Back
45
These would be calculated in accordance with the methodologies
set out in Annexes to the draft Directive. Back
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