Energy as 'Hard Power', or: if energy rationing comes to the EU/EEA, it will arrive via an obscure EU Regulation from 2017

From Baumgarten an der March to Brussels--and to your household (if you live in the EU/EEA), all the pieces are set, IF the EU Commission wishes to capitalise on a self-declared 'supply emergency'

Here’s part two of my small brief on since when (pt. 1) and how (this piece), exactly, Russian natural gas makes it to Western Europe. For some historical background, in particular the genesis of the first supply contract between the USSR and Austria, please refer to yesterday’s post:

Energy as 'Soft Power', or: an (A-) Morality Tale About How 'the West' Became Dependent on Russian Hydrocarbons

Today’s post has two segments: at first, we’ll take a brief (virtual) ‘walk’ through the hamlet of Baumgarten an der March, which is where Austria’s state-directed oil administration OMV operates the prosaically-named Central European Gas Hub. This first segment comes to us courtesy of a bespoke item that ran in Der Standard ten days ago, apparently on the anniversary of the first Soviet-Austrian gas deal discussed in yesterday’s post.

In the second segment, we’ll take a brief look at the idiosyncrasies of said Central European Gas Hub, which will be based on a couple of items here and there.

Remember: all translations (in the first segment) as well as all emphases are mine.

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Baumgarten, the most important place you’ve never heard about

There are these small places that sometimes loom larger than life…like Baumgarten an der March, home to one of the most important gas distribution stations in Europe. It is located in this small Lower Austrian village, but hardly anyone lives here.

From Baumgarten, every year around 40 billion cubic metres of natural gas flow to almost every direction on the continent, at least so far. At the same time, only 200 people live here. It is a tiny village on the Austrian-Slovakian border, but also a crossroads of much, much larger importance

On the occasion of the 60th anniversary of the gas distribution station in 2019, a manager of OMV, which was still operating the site at the time, said: ‘People in Russia thought Baumgarten was a huge city.’ In Moscow, she said, they had asked her, ‘whether there was a direct flight to Baumgarten’.

For a long time, all was well with gas from Russia. Even during the Cold War, it always flowed, and people were proud of that, both at the station in Baumgarten and in the government in Vienna. Since the beginning of the Russian military operation in Ukraine, however, the debate has turned around, and some in the EU are calling for an embargo of Russian gas. Chancellor Karl Nehammer (ÖVP) has ruled this out, for Austria is dependent on Russia for 80% of the gas consumed domestically, according to [energy regulator] E-Control.

A Hub of Importance

Baumgarten was once a gas production site. Today, natural gas is mainly compressed and transported onwards. The [hub’s] area measures 18 hectares, and about 50 people work there. The Russian gas arrives in Baumgarten from Siberia via Ukraine and Slovakia. About 20% stays in Austria, and most of the 40 billion cubic metres arriving annually is forwarded to neighbours: to Italy, Hungary, and Germany, as well as via other hubs to France, Slovenia, and Croatia. Baumgarten, in other words, is a hub of European importance, in other words…

What about the natural gas station? ‘You notice when something changes there, but not very intensively’, says Franz Neduchal, former mayor of Baumgarten. The station’s municipal taxes, a low six-figure sum annually, is important for the town. While [steel conglomerate] Voest leaves its mark on Linz, for example, it never was like this with natural gas and Baumgarten. The gas hub never needed that many employees, and they often came from other villages.

Johann Hansi is one of the few Baumgartners who once worked for the gas hub, specifically in the Compensation Division. He negotiated settlements with farmers to compensate them when a gas pipeline was constructed underneath their fields: ‘It was a good deal for the farmers, for OMV, for everyone’, he says.

Things are slowly changing in Baumgarten, too. OMV veteran Hansi no longer concludes contracts with the Marchfeld farmers for pipelines—but for wind turbines. OMV has sold its subsidiary Gas Connect Austria, which operates the gas hub, to the electricity group Verbund in 2020.

Another sign of the times that are a-changin’: the Green Minister for the Environment, Leonore Gewessler, recently signed an agreement with Slovakia on the ‘renaturation of the March [or Morava] river’; in the 20th century, the river had been forced into an artificial bed with stones, and now these stones are taken out again.

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So far, so interesting, eh?

Here’s a bunch of other curious factoids about Russian gas flows to Central Europe, as related by their the Baumgarten Hub’s website:

Our Baumgarten interconnection point in Lower Austria—one of the largest gas hubs in Europe—mainly receives Russian imports, but takes also shipments from Norway and some other countries. These supplies are re-routed to consumption centers in Austria and in Europe via a number of pipeline systems running in various directions. The Baumgarten hub consists of gas reception, metering and testing facilities, and a compressor station.

The below ‘daily flow chart’ is also from their website:

There’s a link to the Austrian energy regulator, E-Control, that noted today (15 June) a ‘slight reduction of gas flows’ and the current storage status of 37.7 TWh.

That site is in German, and there’s a link entitled ‘status update’, or Lagebericht, which informs the casual reader that, as of 30 March 2022, an ‘early warning’ was given, in accordance with EU Regulation 2017/1938, a joint undertaking ‘of the European Parliament and of the Council of 25 October 2017 concerning measures to safeguard the security of gas supply’, as EUR-Lex informs the reader.

You may find the current version here. As this is an EU Regulation ‘with EEA relevance’, it would be good for readers from that other alphabet soup (i.e., Norway, Switzerland, Iceland, and Liechtenstein) to pay attention, too.

From the text of the regulation (as always, with my emphases):

Art. 1: This Regulation establishes provisions aiming to safeguard the security of gas supply in the Union by ensuring the proper and continuous functioning of the internal market in natural gas (‘gas’), by allowing for exceptional measures to be implemented when the market can no longer deliver the gas supplies required, including solidarity measure of a last resort, and by providing for the clear definition and attribution of responsibilities among natural gas undertakings, the Member States and the Union regarding both preventive action and the reaction to concrete disruptions of gas supply. This Regulation also establishes transparent mechanisms concerning, in a spirit of solidarity, the coordination of planning for, and response to, emergencies at national, regional and Union level.

Translation: much like the German government’s white paper discussed a while ago (which, incidentally, also included eerily reminiscent ‘contingencies’ with respect to ‘emergencies’ and ‘market failure’), said EU Regulation empowers ‘the Union’ to plan, prepare, and, if deemed necessary, act upon ‘emergencies at national, regional, and Union level’. In other words: EU Regulation—which is to say: secondary legislation empowering the executive unaccountable to any regional/ state or even national parliament—overrides member states’ sovereignty (again).

Art. 2 provides definitions and Art. 3 provides the ‘meat’:

The security of gas supply shall be the shared responsibility of…Member States, in particular through their competent authorities, and the Commission.

Art. 9 (3): The preventive action plan shall be based primarily on market-based measures and shall not put an undue burden on natural gas undertakings, or negatively impact on the functioning of the internal market in gas.

Translation: no changes to our policies, but if push comes to shove, ‘no undue burden on natural gas undertakings’ means: bail-outs by either the EU and/or national governments.

Art. 9 (7) c further explains that any ‘potential impact’ must take into account ‘the security of gas supply of neighbouring Member States, in particular for those measures that could reduce the liquidity in regional markets or restrict flows to neighbouring Member States’.

Translation: there is the need for an non-member-state arbiter to ensure ‘transparecny’ and ‘fairness’ in any kind of emergency response, or: another stab in the back of national sovereignty.

The most inane absurdities, however, are contained in Art. 11, which establishes ‘three crisis levels’: early warning (we’re at that right now), alert level, and emergency level.

As regards the early warning level, here’s how the EU ‘thinks’ (sic) about this:

Art. 11 (1) a: where there is concrete, serious and reliable information that an event which is likely to result in significant deterioration of the gas supply situation may occur and is likely to lead to the alert or the emergency level being triggered

We’re coming, again, full circle: EU leadership, in its apparent infinite wisdom, has declared an embargo on Russian hydrocarbons, hence it allows the same EU leaders to determine that there’s a ‘likely…significant deterioration of the gas supply’.

This isn’t rocket science, EU Commission—it’s like you’re shooting yourself in the foot and claim that ‘Putin did this’.

Also, now that we’re at the early warning threat level, it is therefore (sic) ‘likely to lead to the alert or the emergency level’, which means, among other things, as per Art. 10

(1) g the designation of ‘a crisis manager’

(1) i identification of ‘the contribution of non-market-based measures planned or to be implemented for the emergency level, and assess the degree to which the use of such non-market-based measures is necessary to cope with a crisis’

There’s, of course, much more to this, but the bottom line is this: (still from Art. 10 (1)

In order to prevent undue gas consumption during an emergency, as referred to in point (l) of the first subparagraph, or during the application of the measures referred to in Article 11(3) and Article 13, the competent authority of the Member State concerned shall inform customers who are not protected customers that they are required to cease or reduce their gas consumption without creating technically unsafe situations.

It’s the ‘backdoor’ to the entirely unaccountable-to-the-sovereign people imposition of rationing.

Oh, by the way, lest you’re wondering who has the ‘competence’ to declare such an emergency, here’s Art. 12 (1):

The Commission may declare a regional or Union emergency at the request of a competent authority that has declared an emergency…

The Commission shall declare, as appropriate, a regional or Union emergency at the request of at least two competent authorities that have declared an emergency

So, there you have it: the EU Commission ‘may declare’ something, if one member-state declares an emergency.

Yet, the Commission ‘shall declare’—i.e., will do it—if two or more member-states declare an emergency.

Bottom Line: What Could Go Wrong?

To try to find answers to this question, let’s just consider the following pipelines that are connected to the Baumgarten Hub (source: here)

• The Trans Austria Gasleitung (TAG) leads southwards

• The West-Austria-Gasleitung (WAG) runs westwards

• The March-Baumgarten-Gasleitung (MAB) travels in a northeasterly direction

• The Hungaria-Austria-Gasleitung (HAG) and Kittsee-Petrzalka-Pipeline (KIP) take southeastward routes

The Gas Connect Austria transit network also includes the Penta-West pipeline (PW) and the Süd-Ost-Leitung (SOL). A system of branch and transfer points along the state-of-the-art network enable optimal management of gas transits for our customers.

The above mentioned pipelines serve the following countries:

• TAG and SOL: Italy, Slovenia and Croatia

• HAG: Hungary

• MAB and KIP: Slovakia

• WAG and PW: Germany and France, and from west to east, CEE via Austria

The TAG and WAG supply gas within Austria and to neighbouring countries. Distribution to customers in Austria is overseen by our Sales Distribution Department.

Gas Connect Austria operates one of Europe’s most advanced dispatch centers to handle these large transit volumes. The center maintains ongoing contact with counterparts in Berlin, Essen, Kassel, Milan, Moscow, Nitra, Paris, Stavanger and other locations.

Gas Connect Austria operates the WAG, HAG, KIP, SOL, PW and MAB pipeline and sells the capacity for the decisive points Baumgarten GCA, Baumgarten WAG, Oberkappel, Mosonmagyaróvár, Petrzalka, Murfeld and Überackern on the primary market.

Remember: all it takes for the EU Commission to trigger an ‘emergency’ is—two member-states saying ‘Brussels, we’ve got a problem’.