4Common Rules for EU Internal Gas Market
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Committee’s assessment |
Politically important |
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Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee |
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Document details |
Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/73/EC concerning common rules for the internal gas market |
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Legal base |
Article 194(2) TFEU; Ordinary Legislative Procedure; QMV |
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Department |
Business, Energy and Industrial Strategy |
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Document Number |
(39220), 14204/17 + ADD 1, COM(17) 660 |
Summary and Committee’s conclusions
4.1The EU’s internal gas market aims to guarantee security of gas supply in EU by ensuring that gas can flow freely between Member States to where it is needed most and at a fair price. The interconnection of gas networks between Member States, and non-discriminatory access to these networks, are the basis for the market to function efficiently. It is also a prerequisite for gas deliveries during emergencies, both between Member States and with neighbouring third countries. While the EU is to a large extent dependent on gas imports from third countries, the Gas Directive42 (Directive 2009/73/EC) does not explicitly set out a legal framework for gas pipelines to and from third countries. This means that such pipelines are subject to an array of differing national rules, including different rules between those EU countries through which a pipeline passes. The Commission proposes through this proposal to rectify that anomaly.
4.2With the proposed amendments, the Gas Directive in its entirety will become applicable to pipelines to and from third countries, including existing and future pipelines, up to the border of EU jurisdiction. This includes the respective provisions on third-party access, tariff regulation, ownership unbundling and transparency. The Commission acknowledges that, as a consequence, pipelines to and from third countries would consequently be subject to at least two different regulatory frameworks. Where this results in legally complex situations, the appropriate instrument for ensuring a coherent regulatory framework for the entire pipeline will often be an international agreement with the third country or third countries concerned.
4.3The Minister for Energy and Industry (Richard Harrington) signals the Government’s support for the proposal as it will increase legal clarity. He notes that the catalyst for the proposal was the proposed Nord Stream 2 pipeline from Russia to Germany.
4.4On EU exit, the Minister adds that the proposed amendment would apply to gas pipelines between the EU and the UK post-Brexit. The Minister considers that the amendment would benefit the UK by making it clear that Member States must apply the EU rules to interconnectors with the UK. It would therefore provide a framework for agreeing a post-EU exit regulatory regime applicable to both existing and future gas interconnectors, enabling the efficient flow of gas between the UK and the EU.
4.5This proposed amendment appears welcome and uncontentious. Especially helpful, as the Minister notes, is the establishment of a regulatory regime that would apply to gas flows between the UK and the EU post-Brexit. We note that the text includes an obligation on EU regulatory authorities to consult and cooperate with the relevant third country authorities in relation to the operation of gas pipelines to and from those third countries with a view to ensuring that the provisions of the Directive are applied consistently up to the EU’s border. We ask the Minister to explain whether this would extend to consultation on potential future changes to the Directive, or related legal acts such as network codes, so that third countries are fully involved in the development of new EU rules affecting them.
4.6In terms of future UK regulatory autonomy, to what extent would this Directive bind the UK to existing EU rules, and future EU changes to them? Should the UK wish to diverge in the future, how satisfied is the Government that the Directive as drafted provides sufficient guarantees for flexibility in that circumstance?
4.7The recent EU-UK Joint report on progress during phase 1 of the UK’s EU withdrawal negotiations included specific commitments in relation to Ireland and Northern Ireland, including those to be met in the absence of agreed solutions. Would the Government consider rules on the gas market to fall within the category of rules to which the UK has committed to retaining full alignment in order to support North-South cooperation, the all-island economy and the protection of the 1998 agreement? What degree of divergence in gas market rules would be possible while meeting those commitments?
4.8The Minister notes that the negotiations have already begun and will continue during the Bulgarian Presidency during the first half of 2018. We would welcome an update on the progress of negotiations, as well as a summary of the views of other Member States. We note that some, including Bulgaria, are particularly dependent on third country gas supplies. It would also be helpful if the Minister could set out any views that have been expressed by affected third countries.
4.9The proposal remains under scrutiny. We consider it to be of political importance and to be of particular interest to the House due to its relevance to the future relationship between the EU and the UK. We draw the document to the attention of the Business, Energy and Industrial Strategy Committee.
Full details of the documents
Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/73/EC concerning common rules for the internal gas market: (39220), 14204/17 + ADD 1, COM(17) 660.
Background
4.10This proposal amends the definition of “interconnector” and other relevant provisions in the Gas Directive in order to clarify the regulatory framework applicable to gas pipelines connecting Member States with third countries. The definition of “interconnector”, which currently means a pipeline which crosses or spans a border between Member States, is changed so that it will mean “a transmission line which crosses or spans a border between Member States or between Member States and third countries up to the border of Union jurisdiction”. The proposed amendment will make it clear that the Gas Directive (as well as the related legal acts such as the Gas Regulation, network codes and guidelines, unless otherwise specified in these acts) will be applicable to existing and future pipelines to and from third countries, up to the border of EU jurisdiction.
4.11The proposal also includes amendments to other provisions in the Gas Directive which are applicable to pipelines from third countries, namely on: unbundling (independence of the system operator from supply and production); derogations from certain provisions of the Directive; and consultation with the authorities of third countries in order to ensure consistent application of this Directive up to the border of EU jurisdiction.
The Minister’s Explanatory Memorandum of 27 November 201743
4.12The Government supports the proposal as it will increase legal clarity as regards the regulatory framework applicable to gas pipelines connecting Member States with third countries and will ensure that EU rules apply up to the border of EU territory (including territorial waters). The Minister observes that this is similar to the approach proposed for electricity interconnectors in the revised Electricity Directive 2009/72/EC which is currently being negotiated as part of the Commission’s Clean Energy Package.
4.13The catalyst for this proposal, notes the Minister, is the proposed Nord Stream 2 pipeline (NS2) which would double the capacity of the current pipeline from Russia to Germany and raises questions of wider energy security—but to which the internal energy legislation would not currently apply effectively.
4.14On the relevance to the UK’s withdrawal from the EU, the Minister says:
“If agreed, the proposed amendment would apply to gas pipelines between the UK and the EU after EU exit. The Government’s view is that amending the Gas Directive in this way would benefit the UK as a third country by making it clear that Member States must apply the EU rules to interconnectors with us. It would therefore provide a ready framework for agreeing a post-EU exit regulatory regime applicable to both existing and future gas interconnectors which will enable the efficient flow of gas between the UK and our neighbours to continue.”
Previous Committee Reports
None.
42 Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas.
43 Explanatory Memorandum of 27 November 2017.
22 December 2017