Set against the backdrop of the war in Ukraine and the existing reliance on coal, oil, gas and uranium from Russian production, further expansion and substantial investment in renewable energies is absolutely imperative. Nevertheless, fossil fuels - especially natural gas - are indispensable for a secure energy supply for a transitional period. Germany is committed to reducing its dependence on Russian energy sources as quickly as possible and finding alternative ways to secure its energy supply. The wider public and the Federal Ministry for Economic Affairs and Climate Action (BMWK) are increasingly focussing on liquefied natural gas (LNG) as an energy option. On 19 May 2022, the Bundestag passed the LNG Acceleration Act (LNGG), which is intended to simplify the licensing procedures for liquefied natural gas terminals and associated facilities and the procurement law for LNG projects. Following approval by the Bundesrat on 20 May 2022, the Act came into force on 1 June 2022 but will expire on 30 June 2025.
Question: Why is the topic of LNG now gaining momentum amongst the public, industry and politics after years of stagnation?
Answer: The BMWK's Second Energy Security Progress Report shows that Germany has been able to reduce its energy dependence on Russia since the start of the Ukraine war. This applies in particular to its reliance on oil and coal. There is now an import ban on Russian coal and oil at EU level ( see also our Insight on the EU Russia sanctions). The dependence on Russian gas has been reduced from 55 per cent to about 35 per cent; around 35 per cent of the national gas demand is covered by Russian imports. A further reduction is urgently needed, not least to prevent a supply crisis. In this context, LNG, or more precisely the procurement of liquefied natural gas from other producing countries, plays a central role. For example, LNG from countries such as the USA or Qatar is to be transported to Germany by ship, landed there, regasified and forwarded. Direct natural gas deliveries by pipeline cannot be expanded in the short term. As early as February, established suppliers such as Norway and the Netherlands indicated that a substantial expansion of supply volumes is not possible.
Question: What challenges are associated with a supply of LNG?
Answer: In order to actually be able to land, regasify and forward LNG in Germany, there is insufficient infrastructure within the country. There are 37 LNG terminals in Europe so far, 26 of which are in EU Member States. However, not a single one of them is located in Germany. This means that LNG has to be procured mainly via terminals in Belgium (Zeebrugge), France (Dunkirk) and the Netherlands. In order to reduce dependence on Russian natural gas as quickly as possible, the German government is now planning the construction of German terminals and, in particular, floating facilities. The floating facilities are to have a combined capacity of up to 27 billion cubic metres of gas which would replace about half of the current Russian supplies.
Question: What role does the LNG Acceleration Act play in this context, which project locations does it affect and what are the essential components?
Answer: The LNGG amends regulations on the authorisation of corresponding terminals and facilitates the award procedures for public contracts relating to their construction (Section 1 LNGG). The LNGG (Section 2 LNGG) applies to
- waterside and landside sections of an LNG terminal (stationary floating facilities and stationary land-based facilities for the import, offloading, storage and regasification of liquefied natural gas),
- pipelines to connect an LNG terminal to the general gas grid,
- necessary watercourse extensions and watercourse uses for the construction or operation of the water-side and land-side facilities.
- steam and hot water pipelines for the operation of the LNG terminal's waterside and landside facilities.
The Annex to the LNGG mentions plants and pipelines in Brunsbüttel (Schleswig-Holstein), Wilhelmshaven and Stade / Bützfleth (Niedersachsen), Hamburg / Moorburg, Rostock / Port and Lubmin (Mecklenburg-Vorpommern) as project locations. The LNGG applies exclusively to these facilities.
The LNGG's central objective of accelerating LNG projects in Germany is to be achieved primarily through procedural simplifications, such as aspects of the environmental impact assessment, the BImSchG, the BNatSchG and the WHG as well as the EnWG. Some central facilitations regarding procedure concern the following areas:
- Facilitation of the review procedure by the authority (Sections 3 and 7 LNGG): Section 3 establishes an overriding public interest in the projects listed in the Annex to the LNGG. The projects are also certified as being necessary in the interest of public safety. As a result, decisions should be made in favour of the construction of such projects and thus contribute to accelerated decisions. Section 7 No. 4 of the LNGG also contributes to accelerating the procedure with a provision concerning the withdrawal and reintroduction of water for the purpose of regasification of the liquefied natural gas.
- Exemptions from the environmental impact assessment (Section 4 (1) LNGG): In the case of the construction of an LNG terminal, the competent authority shall waive an environmental impact assessment (EIA) if accelerated approval of the specific project is likely to make a relevant contribution to overcoming or averting a crisis in gas supply. A quantitatively relevant contribution can be assumed if the project reaches or exceeds an annual regasification capacity of at least 5 billion m³. The exemption from carrying out an EIA applies to floating storage and regasification units (FSRUs), pipelines, waterway extensions and uses, and steam and hot water pipelines, but not to land-based installations.
- Shortening of the periods for public comments, objections and public hearings (Section 5 LNGG): Approval procedures are generally very time-consuming, not least due to the involvement of the public in the entire process. The LNGG shortens the time limits for public participation regularly specified in the Federal Immission Control Act (BImSchG) from one month to one week for the public to submit comments and from two weeks to one week for objections. In addition, Section 5 (1) No. 3 LNGG places the holding of public hearings for the approval of floating installations (FSRU) at the discretion of the competent authority. The provision in Section 5 (1) No. 4 according to which BImSchG permits for stationary floating and land-based facilities are to be limited until 31 December 2043 is also essential. Continued operation can only be approved if the plant is operated with climate-neutral hydrogen and corresponding derivatives.
- Compensation and replacement measures only after the granting of approval (Section 6 LNGG): While interferences in nature and the landscape normally have to be compensated for through compensation and replacement measures under the BNatSchG and set down by the competent authority during the approval process, the establishment of such measures can now take place up to two years after approval has been granted, in deviation from the requirements of the BNatSchG. Once the measures have been established, the body responsible for the project has a further three years to implement them. This requirement does not apply to land-based terminals.
- Modified application of the Federal Water Act (WHG) and the Energy Industry Act (EnWG) (Sections 7 and 8): Above all, the interpretation and disclosure periods specified in the WHG are modified (one week in each case). A hearing date is again at the discretion of the competent authority. With regard to the application of the EnWG, modified interpretation and objection periods of one week also apply. A public hearing will only take place if the authority deems it necessary.
Question: What are the core elements of the facilitated public procurement procedure for the construction of LNG terminals?
Answer: The LNGG contains a number of regulations that are intended to speed up award procedures for the construction of LNG terminals. The most important aspects are listed below:
- The obligation of public contracting authorities to give priority to the interests of small and medium-sized enterprises does not apply (Section 9 (1) No. 1 LNGG).
- Services do not have to be divided in quantity and awarded separately according to type or field; lots may be omitted (Section 9 (1) No. 2 LNGG).
- The award procedure may be conducted as a negotiated procedure without a competitive bidding process and only one enterprise may be invited to submit a bid, provided that this enterprise is the only one capable of fulfilling the contract within the technical and time constraints imposed by the extreme urgency (Section 9 (1) no. 9 LNGG).
- The consequence of the ineffectiveness of public contracts in the event of violations of the law pursuant to Section 135 GWB is restricted (Section 9 (1) Nos. 4, 5 LNGG)
Other key aspects for acceleration also concern the handling of review procedures and the shortening of deadlines throughout the procedure.
Question: What happens next?
Answer: In addition to the development of an LNG infrastructure that is also compatible with green hydrogen, a comprehensive expansion of renewable energies and thus a significantly accelerated energy transition is still essential. The financial resources needed for a comprehensive and rapid expansion of the LNG infrastructure, not only in Germany, are also an enormous challenge, despite EU support under the RePowerEU plan.
Irrespective of this, LNGG shows that procedural accelerations in infrastructure projects are possible. The rapid realisation of the projects mentioned in the Annex of the LNGG will show how practical the LNGG is.
Accelerating the award of public contracts and concessions could also serve as a blueprint for further energy transition projects in Germany and send a positive signal to investors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.