On 19 November 2024, the European Commission published a Q&A document (the "Q&A Guidance") setting out further guidance on obligations imposed on importers under Regulation (EU) 2024/1787 (the "Methane Regulation"). The guidance set out by the Commission is not legally binding but is likely to be viewed as persuasive by national regulatory authorities, and is subject to change from time to time.
The Methane Regulation came into force on 4 August 2024 and inter alia imposes requirements on importers into the EU of crude oil, natural gas or coal originating from third countries ("In-Scope Product") in relation to the measurement, reporting and verification ("MRV") of methane emissions. We have previously covered the key requirements of the Methane Regulation on our blog here.
Many of the requirements imposed on importers under the Methane Regulation were seen as unclear and onerous, prompting a surge of queries for the Commission from industry members as to their intended operation. The Q&A Guidance is intended to address some of the key areas of uncertainty identified by industry members in relation to the importer requirements under the Methane Regulation, and follows on the back of public workshops held by the Commission in October as a means of engaging with industry and wider stakeholders.
Key takeaways
The Q&A Guidance comprises answers to 35 questions put to the Commission by industry members and stakeholders, covering the following areas:
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difficulties in complying with the Methane Regulation due to the complexity of global supply chains of In-Scope Product;
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obligations relating to import contracts entered into prior to and following the commencement date (4 August 2024);
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EU recognition of equivalence of MRV measures implemented by exporters and third countries; and
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reporting requirements under the Methane Regulation; and
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clarification regarding terms and definitions used in the Methane Regulation.
The most notable clarifications given by the Commission in the Q&A Guidance are set out in the table below.
|
Area |
Issue |
Q&A Guidance clarification |
|---|---|---|
|
Commingled Product |
Many industry members noted that the Methane Regulation does not make specific provision for commingled or blended In-Scope Product, in respect of which it may be difficult to obtain relevant information or ensure that producers of all constituent product have implemented relevant MRV measures. |
The Commission confirmed that the import requirements apply equally to commingled/blended In-Scope Product as to that sourced from a single supplier. Accordingly, importers are expected to engage with their direct contractual counterparties to ensure that relevant product is compliant with requirements imposed under the Methane Regulation. |
|
Renewal of contracts |
A number of obligations under the Methane Regulation are tied to the date of entry into or 'renewal' of a contract. The Commission was asked to clarify what would constitute 'renewal' of a contract. |
The Commission clarified that an existing contract would be considered to be 'renewed' if one of its essential elements is new, including in particular provisions relating to (i) pricing, (ii) duration/term, and (iii) volume, although substantial revisions to several other elements such as contracting parties and product scope/specification, damages/limitation regimes and the dispute settlement regime might also constitute 'renewal' rather than mere amendment of an existing contract. Contracts which are 'tacitly' renewed (i.e. automatically extended) would also qualify as 'renewed' contracts. |
|
MRV compliance of In-Scope Product |
The Commission was asked to clarify whether, for the purposes of Article 28(1), In-Scope Product imported under contracts entered into or renewed on or after 4 August 2024 would have to be subject to relevant MRV measures from 1 January 2027 or 4 August 2024. |
The Commission clarified that In-Scope Product imported under contracts entered into or renewed on or after 4 August 2024 would only be required to be subject to relevant MRV measures from 1 January 2027. |
|
Definition of 'importer' |
The Commission was asked to clarify the definition of 'importer' under the Methane Regulation. |
The Commission clarified that the 'importer' for the purposes of the Methane Regulation is the entity designated as the importer on the customs declaration relating to the relevant Product.
Non-EU entities are required to appoint a customs agent to discharge the relevant obligations on their behalf. |
Comment
Industry participants and wider stakeholders will welcome publication of the Q&A Guidance by the Commission, following many months of uncertainty with respect to many of the obligations imposed on importers under the Methane Regulation. The clarification that the obligation to ensure that In-Scope Product imported under contracts entered into or renewed on or after 4 August 2024 will only be required to be subject to relevant MRV measures from 1 January 2027 will be particularly welcome. Nonetheless, given that currently very few (if any) producers of In-Scope Product apply the relevant MRV measures (i.e. level 5 of OGMP 2.0), it remains to be seen how successful the EU is going to be in engaging with its trading partners to ensure implementation of the requisite measures over the next two years, particularly in view of the signalled intention of the incoming Trump administration to deregulate the US oil & gas sector.
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The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.