Alternative Pipeline Facts
According to the Commission the EU remains well on track to reach its 2020 targets for reducing greenhouse gas emissions, energy efficiency and renewables. It is, however, high time the European Commission lives up to its responsibility as guardian of the Treaties and provides for an encompassing assessment of the implications of Nord Stream 2 in legal, environmental and economic terms. Nord Stream 2 is 100% controlled by Gazprom.
On February 1, 2017 the European Commission released its second ‘State of the Energy Union'. According to the Commission the EU remains well on track to reach its 2020 targets for reducing greenhouse gas emissions, energy efficiency and renewables. In the area of security of supply, the Commission highlighted achievements in building natural gas interconnectors, the fact that new LNG terminals entered into operation and that work has begun on parts of the Southern Gas Corridor. Notwithstanding this evident progress, the State of the Energy Union fails to make a single mention of the biggest elephant in the room that threatens to derail much of the work: the planned Nord Stream 2 natural gas pipeline between Russia and Germany.
The politically controversial nature of the project – planned at a time of a tense stand-off with Russia over Ukraine – is a likely explanation for the silence. Proponents of the project go to great lengths in explaining why the project should be built. In doing so, however, they frequently venture into the world of alternative pipeline facts.
According to Nord Stream 2 there are five major energy companies from four EU countries involved that have publicly committed to supporting the project. Yes, originally that was certainly the case, but the consortium fails to make any mention of the fact that after an objection lodged by the Polish competition authority the proposed joint venture collapsed. Right now it remains unclear as to how these other companies will contribute to the project. Giving ‘support' has no legal or financial bearing on the project, meaning that for the moment Nord Stream 2 is 100% controlled by Gazprom.
Compliance with EU law
Which brings me to alternative pipeline fact number 2: compliance with EU law. According to a lobbyist for Nord Stream 2 it is beyond question that Nord Stream 2 will comply with all applicable EU laws. Interestingly, Mr. Jens Müller – a PR professional working for Nord Stream 2 – earlier appears to have argued that EU law was not applicable to the Nord Stream 2 pipeline. This apparent change in view is something I wholeheartedly welcome.
How precisely Nord Stream 2 intends to comply with the law is easily brushed over however. Never an explanation is given as to how Nord Stream 2 intends to do that beyond pointing to the presence of a "comprehensive regulatory framework consisting of international conventions, EU laws and national legislation and the high standards of governance, transparency and environmental responsibility of the countries along the route of the pipeline".
Problematic for Nord Stream 2 is that under Article 9(1) of the Gas Directive all new infrastructure can only be certified if the ownership of the pipeline is ‘unbundled'. In other words, the transmission system operator has to own the network and cannot also be an undertaking involved in the production or supply of natural gas. Now that Gazprom is the sole owner of the pipeline it is difficult to see how this can comply with the Directive when – as sole owner of the pipeline – Gazprom would still be in the position that it was both owner of the pipeline via Nord Stream 2 and a producer and supplier of natural gas.
Towards a low carbon future
Defenders of the Nord Stream 2 pipeline consistently point to falling production levels of natural gas in Europe as a rationale for the project. These falling production levels are beyond doubt.
However, on the demand side, things are by no means certain. Compared to a decade ago, gas demand in Europe is in decline and achievements in renewable energy and energy efficiency hold significance.
When looking at the discussions currently taking place in my own country, the Netherlands, every political party wants to decrease our dependency on natural gas.
Importantly, these discussions are not only about reducing the production levels in the province of Groningen, due to the presence of earthquakes. Rather, discussions are on how to phase out natural gas in our energy supply altogether, in an accelerated manner.
If the Energy Union's aim is to propel the EU towards a low-carbon economy and diversify sources of supply, then these are the kinds of discussions that should be taking place.
This does not mean that natural gas will not have any role to play in the future. On the contrary, gas can still have a role to play in Europe, but much more as a back-up power source to compensate the intermittent nature of renewable energy or to connect markets that bring in alternative suppliers in situations where markets suffer from a lack of competition, such as in Southeastern Europe.
Interestingly, Nord Stream 2's lobbyist in Brussels suggests that my comments on the project give priority to unsubstantiated allegations and political motivations. This, coming from a lobbyist who has a material interest in the project and who works for a company that hired former German chancellor Gerhard Schroeder as chairman of its board, is somewhat ironic. Last time I checked, Schroeder did not have a PhD in pipeline engineering.
Personally, I am not the least bit interested in the Nord Stream 2 pipeline, nor am I in any way politically affiliated, nor do I stand to gain should the project fail.
What I care about is that the rules and regulations underpinning the rule of law in the EU are complied with in the interest of our common energy security and that we base our choices for our future energy supply on solid reasoning instead of alternative pipeline facts.
For that reason, rather than beating around the bush, it is high time the European Commission lives up to its responsibility as guardian of the Treaties and provides for an encompassing assessment of the implications of Nord Stream 2 in legal, environmental and economic terms.
Dr. Sijbren de Jong is a Strategic Analyst at The Hague Centre for Strategic Studies specialized in EU energy security and relations with countries belonging to the former Soviet Union.