Regulation of natural gas pipeline transportation and storage

Ownership and infrastructure

Describe in general the ownership of natural gas pipeline transportation, and storage infrastructure.

In Market Area East, Gas Connect Austria GmbH (formerly OMV Gas GmbH) and Trans Austria Gasleitung GmbH are the owners and operators of the transmission lines used mainly for the transit of natural gas to other European states. In 2014 Gas Connect Austria GmbH became the 100 per cent shareholder of the former project company Baumgarten-Oberkappel Gasleitungs GmbH for the operation of the WAG running from Baumgarten at the Slovakian-Austrian border to the German-Austrian Border near Oberkappel, which afterwards was merged into Gas Connect Austria GmbH. Also in 2014 the ownership and operations of Trans Austria Gasleitung, the transmission line running from Baumgarten to the Austrian-Italian border near Arnoldstein was transferred from Gas Connect Austria GmbH to Trans Austria Gasleitung GmbH. Three other companies (EVN Netz GmbH, Netz Oberösterreich GmbH and Energienetze Steiermark GmbH) own and operate level one distribution lines, used mainly for domestic consumption. In addition to these companies, there are about 20 distribution network operators. All TSOs and the major DSOs (with a threshold of 50,000 end user connections) are legally unbundled. The transmission system operators have to be certified as effective and efficient unbundled TSOs in accordance with the respective unbundling provisions (sections 108 and following of the Austrian Gas Act 2011). Both Gas Connect Austria GmbH, and Trans Austria Gasleitung GmbH have been certified as ITO.

The level-one distribution lines used for domestic consumption, and for transportation to and from storage and production sites, are administered by the distribution area manager, AGGM Austrian Gas Grid Management AG (third-party access and gas flow management, as well as physical balancing). In addition, since 2017 AGGM Austrian Gas Grid Management AG also acts as market area manager.

The entire storage infrastructure in Austria is owned by OMV AG and RAG, as well as by joint ventures between RAG and astora, Gazprom Export LLC and Uniper Gas Storage GmbH. Owing to the geological conditions, most of the storage facilities are pore storages, since depleted natural gas fields are used for gas storage.

The capacity of the storage infrastructure amounts to 7.4 billion Nm3; therefore, Austria is able to store about its entire current natural gas consumption for one year.

The physical operation of gas storages in depleted gas fields is regulated in the Austrian Mineral Resources Act. Third-party access and legal unbundling of storage undertakings are regulated in the Austrian Gas Act 2011 in accordance with the requirements of the Third Energy Package. Austria chose to apply negotiated access to gas storages.

Regulatory framework

Describe the statutory and regulatory framework and any relevant authorisations applicable to the construction, ownership, operation and interconnection of natural gas transportation pipelines, and storage.

With the Austrian Gas Act 2011, Austria implemented all of the strict unbundling options of the Third Energy Package applicable to natural gas transmission lines, including the ITO option. The major goal of the legislation is to separate the supply from the transportation interests in the natural gas sector. By implementing the ITO option, member states can allow undertakings to ensure the independence of their transmission operators instead of selling the transmission lines.

For the construction and operation of natural gas transportation pipelines, permits primarily in accordance with the Austrian Gas Act 2011 are required. The permits under the Austrian Gas Act are issued by the BMNT as long as the respective pipeline does not require a permit under the Environmental Protection Act, under which the local province is the competent authority. The construction and operation of storage facilities require permits under the Mineral Resources Act. In addition, other permits under different administrative laws, such as the Water Rights Act, the Environmental Protection Acts of the provinces and the Environmental Assessment Act, may be necessary.

A licence issued by E-Control is required to act as a network operator. On 3 March 2011, E-Control was transformed into an institution under public law in accordance with the E-Control Act.

The three bodies of E-Control are the executive board, supervisory board and regulatory commission. The regulatory commission is established as a judicial body comprising five members, including a judge, who are appointed by the government for five-year terms. The main competence of the regulatory commission is tariff setting and decisions in connection with the refusal of third-party access. Some decisions must be issued in the form of individual official decisions, some in the form of general regulations (ordinaries).

The main decision-making body within E-Control is the executive board, which must take most of the decisions of the regulatory authority. The executive board consists of two members appointed by the BMNT for five-year terms. Normally, the decisions of the executive board are final and can only be challenged before the Administrative or the Constitutional Courts, while certain decisions may be challenged in front of the Regulatory Commission and some others in front of the BMNT. Decisions of the Regulatory Commission in the form of individual official decrees may only be challenged before the administrative courts or the Constitutional Court of Austria. General regulations of the Regulatory Commission may only be challenged before the Constitutional Court on very limited grounds. Since tariffs are set by general regulation, the decisions by the Regulatory Commission are, in effect, not examined in a material way, but only on formal grounds. The costs of the network operators that form the basis of the tariff regulations are now separately determined with decrees by the executive board of E-Control.

The Austrian Gas Act 2011 stipulates in its section 159 et seq several administrative penalties. In the event E-Control suspects misbehaviour, which could be subject to an administrative penalty, it must give notice to the general competent administrative authority to initiate a proceeding. In the event of a possible discrimination against network users and other severe infringements of regulatory obligations, E-Control must give notice to the cartel court to start a procedure (see in detail section 164 Austrian Gas Act 2011).

Land rights

How does a company obtain the land rights to construct a natural gas transportation or storage facility? Is the method for obtaining land rights to construct natural gas distribution network infrastructure broadly similar?

Generally, civil law contracts entailing the right of way or easement with the landowner are concluded. Subject to certain requirements, expropriation is allowed for if the project is in the public interest in relation to transmission or distribution lines under the Austrian Gas Act 2011, as well as production lines under the Mineral Resources Act.

Access

How is access to the natural gas transportation system and storage facilities arranged? How are tolls and tariffs established?

Transmission pipelines and storage facilities are only established within Market Area East. Within the market areas of Tyrol and Vorarlberg, only distribution pipeline systems exist. See question 18 regarding the distribution systems in the market areas of Tyrol and Vorarlberg.

In accordance with the Austrian Gas Act 2011, storage entities must provide third-party access to gas storage on the basis of non-discriminatory published general terms and conditions. Storage entities are obliged to agree with third parties on storage charges that comply with the general terms and conditions and the principles of equal treatment. If necessary, the BMNT would be entitled to implement regulated access by way of ordinance. If the storage charges published by storage entities exceed the storage charges of comparable services in EU member states by more than 20 per cent, E-Control is entitled to determine the cost basis that underlines the charges.

With the introduction of the new model for third-party access in Austria, as of 1 January 2013, independent requests for entry and exit capacities in and out of the Market Area East are possible. After entry into the market area, all gas volumes have access to the VTP established on the transmission level. For distribution of gas to end consumers within the market area, no additional separate booking of capacity into the distribution area with the distribution area manager is required. All shippers must register themselves as balancing groups with the market area manager in different categories for transit or supply to end consumers.

The Austrian Gas Act 2011 empowers E-Control to set the market rules applicable to the gas sector by way of an ordinance. Regarding Market Area East, this ordinance (GMMO-VO 2012) includes regulations for access to the distribution network and to the transmission network, and rules for balance within Market Area East. Since the market areas of Tyrol and Vorarlberg have no direct interconnection to Market Area East, and only connects upstream to the German gas pipeline system, different rules were set for these market areas with the objective to enable easy access from the NetConnect (NCG) market area in Germany.

In accordance with section 6 of the GMMO-VO 2012, since 1 April 2013, the allocation of entry/exit capacities is conducted by auction. At the auctions, the TSOs have to provide capacity products in accordance with the CAM Network Code. The two transmission system operators Gas Connect Austria GmbH and Trans Austria Gasleitung GmbH are shareholders of the European capacity platform, PRISMA, which opened on 1 April 2013 and offer their capacities over PRISMA.

The use-it-or-lose-it mechanism for day-ahead capacities came into force on 1 October 2013, while such mechanism came into force for long-term capacities on 1 January 2013. According to the respective provisions of the GMMO-VO 2012, network users shall offer unused capacities on the online platform as secondary capacity. If a network user does not provide its unused capacities on the online platform, the operator must revoke the unused capacities from the network user and provide this capacity as primary capacity. System users are entitled to sell their entry/exit capacity to other system users only over CEGH, the operator of the VTP in Market Area East.

Entry capacities must be booked by suppliers and traders and entitle them to feed natural gas into the pipeline system of a market area and to transfer this natural gas to the VTP. Capacities at the exit point entitle the owner to transport from the VTP to the respective exit point, and to feed out the respective amount of natural gas. The VTP itself is no physical entry/exit point but enables market participants to trade natural gas without booking transport capacity.

The Austrian Gas Act 2011 also obliges every market participant either to form its own balance group or to join an existing one. Therefore, the old system of balance groups, which previously had only applied to the distribution area, now applies to the whole market area, including the transit network. Registration of balance groups and the management of these balance groups are the responsibility of the market area manager. The balance group coordinator handles the management of energy balancing. Balance group representatives must nominate the gas volumes to be transported within the scope of booked capacities.

While the market area manager is responsible for ex ante balancing of the nominated gas volumes and informing balance group representatives about imbalances, balancing on distribution level (ex post balancing) lies with the clearing and settlement agent. Balancing energy shall be primarily purchased at the VTP. If the balance group representatives fail to renominate, gas will be purchased at the VTP on behalf and for the account of the balance group representatives. Extra charges have to be paid for balancing energy purchased.

There is no difference between cross-border transports and domestic transports on the transmission level. Costs of distribution network operators are determined by the regulatory authority by way of a formal decision, which might be separately appealed. The same applies to the approval of calculation methods for transmission operators. Tariffs for transportation customers and end consumers are set by the regulatory authority on the basis of the approved costs and methods by separate ordinance. In Austria, natural gas from domestic production and from import is high calorific gas within a certain quality range set out by the provisions of the GMMO-VO 2012. An adjustment to different gas qualities is generally not necessary.

Interconnection and expansion

Can customers, other natural gas suppliers or an authority require a pipeline or storage facilities owner or operator to expand its facilities to accommodate new customers? If so, who bears the costs of interconnection or expansion?

Under the Austrian Gas Act 2011 or the Mineral Resources Act, storage entities are not required to enlarge their facilities. Network operators have the responsibility to expand their system, if needed, as specified in any approved long-term plan (distribution level) or network development plan (transmission level).

In addition, DSOs have the duty to expand the distribution network to physically connect a customer to the pipeline network, if economically feasible. The costs are to be paid by the customer. For domestic transportation, one of the tasks of the distribution area manager is to undertake long-term planning and propose a suitable adaptation to level-one distribution pipelines to ensure that enough transportation capacity is available. Suppliers and customers can file an application for the expansion of transportation capacity if their respective initial application for third-party access has been denied because of capacity constraints. If no network operator makes the necessary expansions, the regulatory authority can initiate a tender procedure for the proposed measures. The cost of the expansion has to be included by the regulatory authority in the calculation of the transportation tariff. This means that the investor is entitled to reimbursement of the necessary costs plus a reasonable margin as determined by the regulatory authority.

For the transmission level, a similar system was established with the Austrian Gas Act 2011, tasking the market area manager with coordinating a ten-year network development plan with the TSOs and the distribution area manager.

In the event that network operators do not comply with the investment requirements set out in such plan, the regulatory authority will have several possibilities to ensure that the investments are realised.

Processing

Describe any statutory and regulatory requirements applicable to the processing of natural gas to extract liquids and to prepare it for pipeline transportation.

Any user of a transportation system in Austria must ensure that the gas delivered to the system operator for transportation complies with certain quality specifications. The general terms and conditions for pipeline access either refer to the relevant provisions for gas quality in the GMMO-VO 2012 and the respective Austrian Association for Gas and Water Directive or contain their own provisions regarding gas quality that the user of the transportation system must comply with. This applies to domestic production, stored gas and imported gas. Therefore, the processing of gas lies outside of the transportation service of the network operator. Nevertheless, network operators have facilities, namely dehydration plants, for cases where off-specification gas is delivered. If off-specification gas is delivered, network operators have the right to refuse acceptance of this gas.

Contracts

Describe the contractual regime for transportation and storage.

See question 12.