Nord Stream 2 - When is a Pipeline Really Built?

The Nord Stream 2 - saga continues. The German energy regulator Bundesnetzagentur rejected an application of the Nord Stream 2 operating consortium to obtain an exemption from EU unbundling rules after the Gas Directive was amended in 2019. The argumentation of the regulator strikes at a crucial point - is a pipeline already built when 160 kilometres are still missing?
The development of the project has been discussed earlier on this blog at various points. 

In 2017 the European Commission decided to alter the EU Gas Directive. On 8 November 2017 the European Commission issued a proposal for a Directive amending Directive 2009/73/EC concerning common rules for the internal market in
natural gas COM(2017) 660 final. The main aim of the amendment was to make the Gas Directive in its entirety applicable to gas pipelines that are connecting a third state with a EU state, like the envisaged Russian-German Nord Stream 2 pipeline.

The amendment has been controversial. Discussion focussed on the definition of the word `interconnector´ of article 2 (17) EU Gas Directive. All mechanisms of the Gas Directive like third-party access, tariff regulation, ownership unbundling and transparency not only apply to gas pipelines running from one  EU member state to another (previous legal situation), but also to pipelines coming from third countries into the EU. Gazprom is viewed by the EU as a company that does not fulfil the EU`s standards on unbundling in the energy sector and the EU repeatedly tried to bar Gazprom from operating in the EU (see for instance the so called `Gazprom clause` in art. 11 Gas Directive).

The European Commission says that the amendments seeks to implement key objectives of the Energy Union, especially in the dimension of energy security. The then  president of the European Council Donald Tusk, repeatedly said that Nord Stream 2 would contradict EU energy security interests. He also left no doubt that the amendment is designed with the sole purpose of stopping Nord Stream 2, even urging Member States in a letter to speed up the legislative process to resolve the proposal  before the Nord Stream project is completed.

This now turns out to be the crucial point of the legal debate. The background is the fact that, if the project is completed before the new legislation is moving into place, Germany could issue an extension from the unbundling rules under art. 36 Gas Directive 2009/73/EC and Nord Stream 2 would, if approved, not have to comply with these rules. § 28 b) of the GErman Energiewirtschaftsgesetz, which transposes article 36 of the Gas Directive into Germna law, makes clear that the Nord Stream 2 consortium would obtain the desired exemption from unbundling rules if they can prove that the pipeline has been completed before 23 May 2019 and is relevant for the countries`energy security. The Nord Stream 2 consortium applied for this exemption to the German energy regulator Bundesnetzagentur, which now rejected the application.

The argument of the regulator: the pipeline was not completely built in may 2019, nor is it now. The question whether or not Nord Stream 2 actually contributes to Germany`s energy security does not even have to be discussed. The Nord Stream 2 consortium, however, argued that the project is completed in an economic sense, since all relevant permits have been issued, money has been made available, etc. They argue that physical completion (pipes in the ground) is not necessary as long as there is `economic´ completion. 

The Bundesnetzagentur rejected this argument in its decision. The decision may now be appealed against in front of German courts. The Nord Stream 2 consortium already pledged to do just that. the saga, thus, continues.