Europe’s security of gas supply legislation – a short legal history and latest developments

Abstract

The security of Europe’s gas supply has been the subject of much debate. The focus, however, is often on technical or economical considerations. This article is the first to provide a comprehensive overview and analysis of legislative aspects of the security of gas supply to Europe. It uses the three core components of energy security – availability, reliability and affordability – as a tool to shed light on the historical development of gas security legislation in Europe. Starting with the late 1960s, the article distinguishes three broad phases of legislative activities over the last several decades, namely an early phase, a consolidation phase and a third phase of increasing Europeanisation and oversight. The article concludes with some recommendations, amongst them an increased focus of future legislative activities in the field on affordability of the gas supply for all European consumers.

Keywords:

• gas supply
• energy security
• security of gas supply
• Europe
• regulation

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 For more details see Ruven Fleming, ‘A Legal Perspective on Gas Solidarity’ (2019) 124 Energy Policy 102, at 102–103

2 Jonathan Stern, The Russian–Ukraine Gas Crisis of January 2006 (Oxford Institute for Energy Studies 2006) 9, 14; Simon Pirani, Jonathan Stern, and Katja Yafimava, The Russo–Ukrainian Gas Dispute of January 2009: A Comprehensive Assessment (Oxford Institute for Energy Studies 2008) 8, 19–25, 55; Matthias Neumann, Heiko Pleines, and Henning Schröder, ‘Russland Analysen Erdgaskonflikt mit der Ukraine’ [2009] No 176 Forschungsstelle Osteuropa an der Universität Bremen <www.laender-analysen.de/russland/pdf/Russlandanalysen176.pdf> accessed 18 July 2022, 4/5

3 Recognising, however, that there are many more facets to energy security that could be named, such as socio-economic acceptability or environmental sustainability of supply. The concept as defined here is based on the fundamental work of Barton, Redgwell, Rønne and Zillman. For more details see B Barton and others (eds) Energy Security: Managing Risk in a Dynamic Legal and Regulatory Environment (1st edn, Oxford University Press 2004) 9

4 For more details see ibid and Ruven Fleming, ‘The Energy Trilemma’ in MM Roggenkamp, KJ de Graaf, and R Fleming (eds), Energy Law, Climate Change and the Environment (Edward Elgar Publishing 2021)

5 Benjamin K Sovacool, ‘Introduction: Defining, Measuring and Exploring Energy Security’ in Benjamin K Sovacool (ed), The Routledge Handbook of Energy Security (Routledge Publishing 2013) 9

6 Ibid

7 Ibid, 9

8 John Paterson and Ruven Fleming, ‘The International Energy Agency’ in Martha M Roggenkamp, Kars J de Graaf, and Ruven C Fleming (eds), Energy Law, Climate Change and the Environment (Edward Elgar Publishing 2021) 80

9 Agreement on an International Energy Program (adopted 18 November 1974, entered into force 19 January 1976) 1040 UNTS 271 (IEP)

10 Paterson and Fleming (n 8), 81

11 More can be found in Hans Vedder et al., ‘EU Energy Law’ in Martha M Roggenkamp et al. (eds), Energy Law in Europe (3rd edn, Oxford University Press 2016)

12 Ibid at paragraph 4.1 and following

13 Council Directive (EC) 67/2004 concerning measures to safeguard security of natural gas supply [2004] OJ L127/92, Recital 3

14 art 3 of Council Directive (EC) 67/2004 concerning measures to safeguard security of natural gas supply [2004] OJ L127/92 [hereinafter: Council Directive 2004/67/EC]

15 Ibid, art 3 Council Directive 2004/67/EC

16 art 8 Council Directive 2004/67/EC

17 art 4(1) Council Directive 2004/67/EC

18 art 4(5) Council Directive 2004/67/EC

19 art 1 and art 5 Council Directive 2004/67/EC

20 art 5(b) and (c) Council Directive 2004/67/EC

21 art 7 Council Directive 2004/67/EC

22 European Commission, ‘Register of Commission Expert Groups and Other Similar Entities’ <https://ec.europa.eu/transparency/expert-groups-register/screen/home?lang=en> accessed 16 August 2022

23 Several measures were only suggested to and not required from member states art 4 Council Directive 2004/67/EC

24 Fleming, ‘A Legal Perspective on Gas Solidarity’ (n 1), 102

25 Marie-Claire Aoun and Daan Rutten, ‘EU Security of Gas Supplies: Solidarity Runs Through the Pipelines’ (IFRI – CIEP, 30 March 2016) <www.ifri.org/sites/default/files/atoms/files/hors-ifri_eu_security_gas_supplies_aoun.pdf> accessed 8 May 2022, 2

26 Fleming, ‘A Legal Perspective on Gas Solidarity’ (n 1), 102

27 European Commission, ‘Third Energy Package’ <https://energy.ec.europa/topics/markets-and-consumers/market-legislation/third-energy-package_en> accessed 20 June 2023

28 Directive 2009/73/EC of the European Parliament and of the Council of July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (hereinafter: Directive 2009/73/EC)

29 art 36(1) Directive 2009/73/EC

30 Regulation (EU) 994/2010 of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC [2010] OJ L 295/1 (hereinafter: Regulation (EU) 994/2010)

31 European Commission, Commission Staff Working Document accompanying the Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC, ‘The January 2009 Gas Supply Disruption to the EU: An Assessment’ COM (2009) 977 final, 7

32 art 3(1) Regulation (EU) 994/2010; for a more detailed analysis of the Regulation see Silke Muter Goldberg, ‘Chapter IV Regulation 994/2010: A Measure to Improve the Security of Gas Supply in The EU?’ in Martha M Roggenkamp and Ulf Hammer (eds), European Energy Law Report VIII (Intersentia 2011) 61–92; Silke Muter Goldberg ‘Security of Supply in the Context of European Energy Market Liberalisation – A Brief Overview’ (2011) 4 International Business Law Journal 433 in particular 438 and following

33 art 3(1) Regulation (EU) 994/2010

34 art 3(4) Regulation (EU) 994/2010

35 art 1 Regulation (EU) 994/2010

36 art 9(1) (a) to (e) Regulation (EU) 994/2010

37 art 9(4) (a) to (e) Regulation (EU) 994/2010

38 art 4(1) Regulation (EU) 994/2010

39 art 5(1) Regulation (EU) 994/2010

40 art 5(1) (b) and (c) Regulation (EU) 994/2010

41 art 4(1)(a) Regulation (EU) 994/2010

42 art 10 Regulation (EU) 994/2010

43 Annex II of the Regulation (EU) 994/2010 contains an indicative list of market-based measures, which are to be adopted and applied by natural gas undertakings and based on economic incentive, focusing on the supply side or demand side

44 Annex III of the Regulation (EU) 994/2010 contains an indicative list of non-market-based measures, based on non-economic incentive, which are to be adopted and applied by the competent authority or the member state. They are to be used after exhaustion of the market-based measures as they have a greater distorting effect on competition and the internal gas market

45 art 10(3) Regulation (EU) 994/2010

46 art 4(3) Regulation (EU) 994/2010

47 art 2(1) Regulation (EU) 994/2010

48 Provided they are connected to a gas network, and district heating installations if they deliver the previously quoted categories and are not able to switch to other fuels than gas, ibid

49 art 8(1) Regulation (EU) 994/2010

50 art 8(2) Regulation (EU) 994/2010

51 art 6(1) Regulation (EU) 994/2010; a definition and calculation method of the N-1 formula is also provided in the Annex I of the Regulation (EU) 994/2010

52 art 6(2) Regulation (EU) 994/2010

53 art 6(5) Regulation (EU) 994/2010, the Commission refers to bi-direction capacity as ‘reverse-flow’ in art 7(1)(a) Regulation (EU) 994/2010

54 art 6(5) Regulation (EU) 994/2010

55 Friedbert Pflüger, ‘A European View: Europe, Nord Stream 2, and Diversification’ (Atlantic Council 15 March 2019) <www.atlanticcouncil.org/blogs/energysource/a-european-view-europe-nord-stream-2-and-diversification/> accessed 27 June 2022

56 Such as potential geopolitical tensions between the EU and Russia

57 Ruven Fleming, ‘Security of Gas Supply: The New European Approach’ in Martha Roggenkamp and Catherine Banet (eds), European Energy Law Report XII (Intersentia 2018) 284

58 art 7(1)(b) Regulation (EU) 994/2010

59 art 7(4)(b) Regulation (EU) 994/2010

60 Nuria Rodríguez-Gómez, Nicola Zaccarelli, and Ricardo Bolado-Lavin, ‘Is the Gas N-1 Standard of the EU Regulation a Good Indicator of the Security of Gas Supply of a Country?’ (Pipeline Technology Conference Berlin 12 March 2018) DG Joint Research Center <www.pipeline-conference.com/abstracts/gas-n-1-standard-eu-regulation-good-indicator-securitygassupplycountry?fbclid=IwAR2Xm3BxjAspgQ3Dc8UHW_ayAZ0FRgU2R7ogSleYcIqrdmuXckY41jJJToQ> accessed 27 June 2022, 3

61 Ibid; ‘Position Paper on the Revision of the Security of Gas Supply Regulation’ (Bundesverband der Energie und Wasserwirtschaft, 19 April 2016) <www.bdew.de/media/documents/Stn_20160419_Erdgas-SoS-VO-EN.pdf> accessed 25 April 2022, 14; see also ‘Security of Gas Supply in the Internal Market’ (European Financial Congress) <www.efcongress.com/wp-content/uploads/2020/03/analizy-eng__efcs_position_on_security_of_gas_supply_in_the_eu.pdf> accessed 26 June 2022, 4

62 S McClay and L Oertmans, ‘Physical Gas Flows Across Europe and Security and Diversity of Gas Supply in 2010’ (DECC – December 2011)

63 Commission, ‘Communication from the Commission to the European Parliament and the Council – European Energy Security Strategy’ COM(2014) 330 final, 3

64 Ibid

65 ENTSO-G is the European Network for Transmission System Operators of Gas; see <www.entsog.eu/> accessed 3 November 2022

66 Commission, ‘Communication from the Commission to the European Parliament and the Council on the short-term resilience of the European gas system – Preparedness for a possible disruption of supplies from the East during the fall and winter of 2014/2015’ COM (2014) 654 final, 2

67 Commission Staff Working Document, ‘Report on the implementation of Regulation (EU) 994/2010 and its contribution to solidarity and preparedness for gas disruptions in the EU’ SWD (2014) 325 final

68 Ibid, 6

69 Commission, ‘Communication to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank – A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’ COM (2015 80 final, 4

70 Commission, ‘Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard the security of supply and repealing Regulation (EU) 994/2010’ COM (2016) 52 final

71 art 3(1) Regulation 2017/1938

72 The share of interconnectors presenting a reverse-flow capacity had increased from 24% in 2009 to 40% in 2014. Commission Staff Working Document, ‘Report on the Implementation of Regulation (EU) 994/2010 and its Contribution to Solidarity and Preparedness for Gas Disruptions in the EU’ SWD(2014) 325 final; see also Fleming, ‘Security of Gas Supply’ (n 57) 283

73 art 5(4) and (5) Regulation (EU) 2017/1938

74 art 5(9) Regulation (EU) 2017/1938

75 Annex III Regulation (EU) 2017/1938

76 art 3(7) Regulation (EU) 2017/1938

77 Recital 12 Regulation (EU) 2017/1938

78 art 3(7) Regulation (EU) 2017/1938

79 Fleming, ‘Security of Gas Supply’ (n 57), 276

80 Annex I Regulation (EU) 2017/1938

81 art 8(3) Regulation (EU) 2017/1938

82 art 7(5) and art 8(5) Regulation (EU) 2017/1938; see also Annexes IV, VI and VII of the Regulation (EU) 2017/1938

83 Commission Staff Working Document, ‘Report on the implementation of Regulation (EU) 994/2010 and its contribution to solidarity and preparedness for gas disruptions in the EU’ SWD (2014) 325 final, 6

84 With the exception of the reverse-flow obligation included in the infrastructure standard, although it is an indirect application of this principle

85 art 13(3) Regulation (EU) 2017/1938

86 The notion of solidarity protected customers is defined in article 2(6) Regulation (EU) 2017/1938

87 art 13(4) Regulation (EU) 2017/1938

88 Fleming, ‘Security of Gas Supply’ (n 57), 290 and 291

89 art 13(8) Regulation (EU) 2017/1938

90 Ibid; if member states cannot agree on a compensation mechanism to include in the arrangement, the Commission will propose a solution that both member states should take ‘utmost account’ of, pursuant to art 13(13) Regulation (EU) 2017/1938

91 art 13(8) Regulation (EU) 2017/1938; pursuant to art 13(11) Regulation (EU) 2017/1938, a member state that can cover the gas consumption for its solidarity-protected customers from its own production is exempted from the obligation to conclude solidarity arrangements, albeit this does not affect its obligation to provide solidarity

92 Pursuant to the definition of solidarity protected customers, article 2(6) Regulation (EU) 2017/1938

93 German Economic Ministry, ‘Germany and Austria Sign Agreement on Solidarity Gas Deliveries’ (2 December 2021) <www.bmwk.de/Redaktion/EN/Pressemitteilungen/2021/12/20211202-germany-and-austria-sign-agreement-on-solidarity-gas-deliveries.html> accessed 25 April 2022

94 A free rider is a type of market failure that occurs when those who benefit from resources, public goods or services do not pay for them, or underpay – as defined by William Baumol, ‘Welfare Economics and the Theory of State’ in CK Rowley and F Schneiders (eds), The Encyclopedia of Public Choice (Springer, New York 2004)

95 Fleming, ‘Security of Gas Supply’ (n 57), 287

96 Ibid, see also art 13(7) Regulation (EU) 2017/1938

97 art 13(7) Regulation (EU) 2017/1938

98 Commission, ‘Communication from the Commission to the European Parliament and the Council on the short-term resilience of the European gas system’ (n 66), 6

99 Ibid, 11

100 Commission, Explanatory Memorandum of the ‘Proposal for a Regulation of the European parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen’ COM (2021) 804 final

101 Yana Popkostova, ‘Europe’s Energy Crisis Conundrum’ (European Union Institute for Security Studies) <www.iss.europa.eu/content/europes-energy-crisis-conundrum#:~:text=The%20steep%2017.4%20%25%20rise%20in,than%20in%202019%20(12)> accessed 26 June 2022, 3

102 Commission, ‘Communication to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the regions – Tackling energy prices: a toolbox for action and support’ COM (2021) 660 final

103 art 67 ‘Amendments to Regulation (EU) 2017/1938’ Proposal for a Regulation of the European parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen’ COM (2021) 804 final

104 Commission, Explanatory Memorandum of the ‘Proposal for a Regulation of the European parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen’ COM (2021) 804 final

105 Commission, ‘Evaluation report accompanying the Proposal for a Regulation of the European Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen’ COM (2021) 804 final, 52

106 Amended art 13, within art 67 of Proposal 2021

107 Amended art 13(3)(c) within art 67 of Proposal 2021

108 Amended art (14), within art 67 of Proposal 2021

109 The amount of the compensation ‘shall be subject to ex-post control by the Regulatory Authority and/or the Competition Authority of the Providing Member-State, within three months of the lifting of the emergency’, Amended art 13(5)(c) Regulation (EU) 2017/1938, within art 67 of Proposal 2021

110 Ibid

111 Pursuant to the Amended art 14(3) Regulation (EU) 2017/1938, within art 67 of Proposal 2021, any member states that sought the application of the solidarity mechanism to provide the Commission with a detailed description of the circumstances that led to the request and the conditions of application of the mechanism of the emergency and effectiveness of the measures implemented

112 As explained in the previous part describing the solidarity mechanism of Regulation (EU) 2017/1938

113 In decreasing order of capacity: Germany, Italy, France, the Netherlands, and Austria. Max Munchmeyer, ‘Regulating Gas Storage: Enhancing European Security of Supply Through Solidarity?’ (Florence School of Regulation, 21 April 2022) <https://fsr.eui.eu/regulating-gas-storage-enhancing-european-security-of-supply-through-solidarity/> accessed 2 May 2022

114 Proposed art 7b, within art 67 of Proposal 2021

115 More precisely, the common risk assessment should include

an analysis of the adequacy of the capacity of storage facilities available in the region, on the functioning of the storage capacities and their contribution to security of supply of the Union, including risks related to control of storage infrastructure relevant for the security of gas supply by third-country entities Proposed Article 7b (3), within Article 67 of the Proposal 2021

116 Ibid; such measures can include tendering and auctions, minimum filling obligations or the creation of strategic stocks of gas and should be financed following a joint financing scheme

117 Ibid

118 As it is the case for Greece, Ireland, Cyprus, Luxembourg, Slovenia, Lithuania, Estonia, and Finland ‘Infographic – What Is the EU’s Gas Storage Capacity?’ (European Council), <www.consilium.europa.eu/en/infographics/gas-storagecapacity/#:~:text=Cyprus%2C%20Estonia%2C%20Finland%2C%20Greece,to%20secure%20their%20gas%20reserves> accessed 26 June 2022

119 Proposed art 7d, within art 67 of Proposal 2021

120 Amended art 2 Regulation (EU) 2017/1938, within art 67 of Proposal 2021

121 Recital 71 Proposal 2021

122 Proposed art 7d (1), within art 67 of Proposal 2021

123 Christian Egenhofer and Francesco Gazzoletti, ‘Joint Gas Purchasing Could Be a Breakthrough’ (Euractiv, 25 March 2022) <www.euractiv.com/section/energy/opinion/joint-gas-purchasing-could-be-a-breakthough/> accessed 4 May 2022

124 Commission, ‘Communication to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the regions REPowerEU: Joint European Action for more affordable, secure and sustainable energy’ COM (2022) 108 final

125 Ibid, 1

126 Commission, Explanatory Memorandum of the

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2017/1938 of the European parliament and of the Council concerning measures to safeguard the security of gas supply and Regulation (EC) 715/2009 of the European Parliament and of the Council on conditions for access to natural gas transmission networks. [COM (2022) 135 final, 1]

127 Ibid, 2

128 ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2017/1938 of the European Parliament and of the Council concerning measures to safeguard the security of gas supply and Regulation (EC) no. 715/2009 of the European Parliament and of the Council on conditions for access to natural gas transmission networks’ COM (2022) 135 final; (hereafter: Proposal 2022). See also European Commission, ‘Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, Security of supply and affordable energy prices: Options for immediate measures and preparing for next winter’ COM (2022)138 final

129 art 6a (2) Proposal 2022

130 Ibid

131 art 6b (1) (a) to (f) Proposal 2022

132 art 6a (8) Proposal 2022

133 art 6d (1) Proposal 2022

134 Release of the Council of the European Union, ‘Gas Storage: Council and Parliament Reach a Provisional Agreement’ (19 May 2022) <www.consilium.europa.eu/en/press/press-releases/2022/05/19/gas-storage-council-and-parliamentreachaprovisionalagreement/#:~:text=The%20co%2Dlegislators%20agreed%20during,before%20the%20following%20winter%20periods> accessed 26 June 2022. The document still needs to be formally approved by the Commission and the European Council. See also Council of the European Union ‘Provisional Political Agreement’ 2022/0090(COD) <https://data.consilium.europa.eu/doc/document/ST-9228-2022-INIT/x/pdf> accessed 26 June 2022

135 art 6a (2)(d) Proposal 2022

136 art 6c Proposal 2022

137 art 6c (1) Proposal 2022

138 art 6c (2) Proposal 2022

139 Euractiv, ‘Gas Price Cap Ready “This Winter” If Countries Agree, Says EU Energy Chief’ <www.euractiv.com/section/energy-environment/news/gas-price-cap-ready-this-winter-if-countries-agree-says-eu-energy-chief/> accessed 3 November 2022

140 arts 4–11 of Proposal for à Council Regulation, ‘Enhancing solidarity through better coordination of gas purchases, exchanges of gas across borders and reliable price benchmarks’ (2022) COM/549 final

141 Y Popkostova, ‘Europe’s Energy Crisis Conundrum’ (European Union Institute for Security Studies) <www.iss.europa.eu/content/europes-energy-crisis-conundrum#:~:text=The%20steep%2017.4%20%25%20rise%20in,than%20in%202019%20(12)> accessed 26 June 2022, 5

142 The three components are energy security, competition and environmental protection, Ruven Fleming, ‘The Energy Trilemma’ in MM Roggenkamp, KJ de Graaf, and R Fleming (eds), Energy Law, Climate Change and the Environment (Edward Elgar 2021) 31