EU lawyers give cautious backing to bid to regulate Russian pipeline

BRUSSELS (Reuters) - EU lawyers gave cautious support this week to a proposal by the bloc’s executive to extend its energy market rules to regulate offshore pipelines including Russia’s planned 9.5-billion euro gas line to Germany.

Pipes are loaded onto a vessel in the northern port of Mukran, on the island of Ruegen, Germany, February 28, 2018. Axel Schmidt/Nord Stream 2 Handout via Reuters

The European Commission was within its rights to draft the amendment, according to the opinion seen by Reuters that contradicts critics who say regulators are overreaching.

It adds to a series of conflicting opinions from EU legislators on whether the bloc should have a say over the Nord Stream 2 project to pump Russian gas under the Baltic Sea to Germany, bypassing traditional routes through Ukraine.

The project is backed by Germany, which approved its construction on Tuesday, and five northern European firms, who seek access to cheap Russian gas to offset declining Dutch production.

Eastern European countries fear the pipeline will increase dependence on Moscow and undercut EU support for Kiev by depriving it of transit fees.

The document from the legal service of the Council of the European Union, the body where EU ministers meet, follows a separate opinion this month that rejected the Commission’s proposal, saying it may breach U.N. law regulating the seas.

The new opinion, dated March 26, said the Commission “has the legal basis to make the proposal” but took issue with some elements of the draft law, now being reviewed by EU member states and the European Parliament.

EU lawyers criticized regulators for not carrying out an impact assessment, saying it was up to member states to decide whether it “is appropriate and does not go beyond what is necessary to achieve the objectives pursued.”

Provisions for exemptions from the new rules for existing offshore pipelines from third countries are not justified or limited in time, it said.

The Commission last year proposed the changes to its gas directive to make all import pipelines subject to rules it says aim to protect the bloc’s security of supply.

The Nord Stream 2 project, fully owned by Russia’s gas export monopoly Gazprom, is far from complying with those rules including that pipelines not be directly owned by gas suppliers and capacity be made available to third parties.

Because the pipeline would begin outside of the bloc’s jurisdiction, EU officials say rules may need to be negotiated with Moscow via an intergovernmental agreement (IGAs).

The legal opinion also says that if the rule change takes effect, member states would have to ensure all existing IGAs comply and the EU would gain powers to conclude such agreements with third countries.

Reporting by Alissa de Carbonnel; Editing by Matthew Mpoke Bigg