On 12 June, the Energy Council reached a political agreement on a directive requiring Member States to maintain minimum stocks of oil or petroleum products. The Council will formally adopt the text without debate at a forthcoming meeting. The directive will enter into force after its publication in the Official Journal. Member States are required to transpose the Directive into national law by 31 December 2012.
The EU legislation goes back to 1968 when it has imposed on Member States the obligation to maintain minimum stocks of oil. It should be recalled that in 2002, the European Commission proposed a directive to increase the volume of stocks to be held in each Member State from 90 to 120 days and to enable the EU to decide how these stocks are used. The European Parliament and the Council did not support the proposal which was therefore withdrawn. The UK opposed the proposal as existing International Energy Agency (IEA) and Community arrangements for holding stocks provided sufficient cover for supply disruptions.
Last November, the European Commission has proposed, within the framework of its second Strategic Energy Review, a revision in the EU's strategic oil stocks legislation. The Commission has pointed out that not all EU Member States are members of the IEA, which has a mandate to tackle global disruptions. According to the Commission “(…) full EU participation in an IEA action can be guaranteed only through an EU mechanism involving Member States that are not members of the IEA.”
The Minister of State at the Department of Energy and Climate Change, Mike O’Brien, has explained to the European Scrutiny Committee that the Government backs the Commission’s view that coordination at Community level is necessary to keep a high level of security of oil supply through transparent mechanisms based upon solidarity between Member States. However, the Government believes that the subsidiarity principle should apply as regards how Member States choose to carry out their oil stocking obligations.
The EU Member States will be required to hold emergency reserves equivalent to at least 90 days of average daily net imports or 61 days of average daily inland consumption. Moreover, all Member States will be obliged to hold at least 30 days of stocks or a third of their stockholding obligation in the form of refined products.
The draft Directive was revised last February and “dedicated stocks” were renamed as “specific stocks.” The Community or IEA Member State is required to maintain emergency stocks which are the oil stocks necessary to meet their national stocking obligation and can be held as crude oil or finished petroleum products. Specific stocks are a new concept introduced in the proposal to encourage the voluntary holding of finished petroleum product stocks.
Member States would be required to ensure that emergency stocks and specific stocks held within their national territory are accessible and can be verified at all time.
The Commission has proposed the establishment of a centralised Community system with mandatory public ownership of emergency stocks. Under the draft proposal Member States may set up a non-profit making central stockholding entity however this would be an obligation if Member States place stockholding obligations on economic operators. The majority of the EU Member States raised concerns regarding the creation of central stockholding entities. According to Mike O’Brien “if legislation is adopted which prescribes a compulsorily owned system of Government-owned oil stocks, there would be significant implications for the public purse."
The Energy Council has removed from the draft directive the requirement for compulsory central stocking entity. According to the minister “This has been a key UK negotiation objective and allows the UK to retain the flexibility to design and operate an emergency stocking regime best suited to our national conditions.”
Member States may set up central stockholding entities which would have the task of acquiring, maintaining and selling oil stocks within the Member State in question.
The draft proposal introduces increased monitoring requirements. Member States would be required to keep detailed registers of all emergency and dedicated stocks which must contain the information needed to establish their location, the quantities involved, the owner of the stocks and their exact nature. Moreover, Member States would be required to send to the Commission a copy of the stock registers.
The Commission has proposed to amend the rules for the preparation and submission of statistical summaries in order to enhance security of supply. Initially, the Commission proposed an obligation for Member States to report on the level of commercial oil stocks on a weekly basis. The UK as well as the majority of the EU Member States raised concerns regarding the obligation of weekly reporting on the aggregated level of emergency and commercial stocks held by oil companies. The Energy Council has amended the Commission’s proposal and Member States will be required to send to the Commission a monthly statistical summary of the levels of commercial stocks held within their national territory.
However, to please the Commission, the provisions on reporting, including the periodicity, can be modified through comitology. Hence, the new text would allow the change to weekly reporting to be made through the comitology procedure.
The Commission has pointed out that there might be discrepancies in the summaries submitted to the Commission therefore the Commission’s employees or authorised agents would be able to verify the existence of the stocks and the documents used by the Member State’s authorities. Member States would have to grant the right to the Commission’s employees or authorized agents to consult all documents and registers relating to emergency and specific stocks and to ensure that they have right of access to all sites on which they are held.
The Commission has proposed to set up a consultative body. The Coordination Group will analyse the situation within the Community with regard to security of supply for oil products and facilitate the coordination and implementation of measures in that area.
In case of an effective international decision to release stocks, Member States may use their emergency or specific stocks to fulfil their international obligations but they must notify the Commission immediately. The Commission may also require Member States to release some or all of these stocks, after consulting the Coordination Group. The Commission has insisted on having the right to "require" all Member States to comply with IEA decisions to release stocks in an emergency. However, this was opposed by a majority of the EU Member States, referring to their sovereign right to decide to release stocks in order to comply with their obligations under the IEA membership. Hence, under the new text, the Commission should only "recommend" and will not have the right to "require" Member States to release stocks in the event of an IEA decision.
The Commission has proposed to review the Directive’s implementation soon after its entry into force with the view of considering whether Member States shall be required to hold a compulsory minimum level of specific stocks. This review clause was also an issue to the UK government. The EU ministers agreed to remove from the proposal such clause. Hence, the Commission will review the implementation of the directive within three years of the transposition date but there is no requirement to consider whether Member States shall be obliged to hold a compulsory minimum level of specific stocks.
