Court of Justice of the European Communities (including Court of First Instance Decisions)

Provisional text

OPINION OF ADVOCATE GENERAL

CAMPOS SÁNCHEZ-BORDONA

delivered on 13 June 2019 (1)

Joined Cases C‑364/18 and C‑365/18

Eni SpA

v

Ministero dello Sviluppo Economico,

Ministero dell’Economia e delle Finanze,

interveners:

Autorità di Regolazione per l’Energia, Reti e Ambiente,

Regione Basilicata,

Comune di Viggiano,

Regione Calabria,

Comune di Ravenna,

and Others,

Assomineraria

(Request for a preliminary ruling from the Tribunale amministrativo regionale per la Lombardia (Regional Administrative Court, Lombardy, Italy))

and

Shell Italia E & P SpA

v

Ministero dello Sviluppo Economico,

Ministero dell’Economia e delle Finanze,

Autorità di Regolazione per l’Energia, Reti e Ambiente,

interveners:

Regione Basilicata,

Comune di Viggiano,

Comune di Montemurro,

Comune di Grumento Nova,

Comune di Marisco Nuovo,

Comune di Marsicovetere,

Comune di Calvello,

Assomineraria

(Request for a preliminary ruling from the Tribunale amministrativo regionale per la Lombardia (Regional Administrative Court, Lombardy))

(Reference for a preliminary ruling — Directive 94/22/EC — Energy — Conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons — Royalties due for natural gas licences — Calculation of royalties — QE and PFOR indices — Discriminatory nature)

1.        This reference for a preliminary ruling gives the Court of Justice an opportunity to rule on the application of Directive 94/22/EC (2) to the royalties which Member States may collect from undertakings holding authorisations (3) for the prospection, exploration and production of natural gas. Those royalties are in fact the consideration which undertakings pay to the State for access to, and the exploitation of, State resources such as hydrocarbons in general and natural gas in particular.

2.        More specifically, it falls to be determined now whether Directive 94/22 allows Member States to use one reference index (the ‘QE’ index) to calculate the amount of the royalty rather than another that is consistent with the market price for natural gas.

I.      Legal framework

A.      EU law

1.      Directive 94/22

3.        The fourth, sixth, seventh and eights recitals state:

‘Whereas Member States have sovereignty and sovereign rights over hydrocarbon resources on their territories;

…

Whereas steps must be taken to ensure the non-discriminatory access to and pursuit of activities relating to the prospection, exploration and production of hydrocarbons under conditions which encourage greater competition in this sector and thereby to favour the best prospection, exploration and production of resources in Member States and to reinforce the integration of the internal energy market;

Whereas, for this purpose, it is necessary to set up common rules for ensuring that the procedures for granting authorisations for the prospection, exploration and production of hydrocarbons must be open to all entities possessing the necessary capabilities; whereas authorisations must be granted on the basis of objective, published criteria; whereas the conditions under which authorisations are granted must likewise be known in advance by all entities taking part in the procedure;

Whereas Member States must retain the options to limit the access to and the exercise of these activities for reasons justified by public interest and to subject to the payment of a financial contribution or a contribution in hydrocarbons, the detailed arrangements of the said contribution having to be fixed in such a way as not to interfere in the management of entities; whereas these options must be used in a non-discriminatory way; whereas, with the exception of the obligations related to the use of this option, steps must be taken to avoid imposing on entities, conditions and obligations which are not justified by the need to perform this activity properly; whereas the activities of entities must be monitored only to the extent necessary to ensure their compliance with these obligations and conditions.’

4.        Article 2(1) and (2) provides:

‘1.      Member States retain the right to determine the areas within their territory to be made available for the exercise of the activities of prospecting, exploring for and producing hydrocarbons.

2.      Whenever an area is made available for the exercise of the activities set out in paragraph 1, Member States shall ensure that there is no discrimination between entities as regards access to and exercise of these activities.’

5.        Article 6(1), (2) and (3), first subparagraph, provides:

‘1.      Member States shall ensure that the conditions and requirements referred to in Article 5(2) and the detailed obligations for use of a specific authorisation are justified exclusively by the need to ensure the proper performance of the activities in the area for which an authorisation is requested, by the application of paragraph 2 or by the payment of a financial contribution or a contribution in hydrocarbons.

2.      Member States may, to the extent justified by national security, public safety, public health, security of transport, protection of the environment, protection of biological resources and of national treasures possessing artistic, historic or archaeological value, safety of installations and of workers, planned management of hydrocarbon resources (for example the rate at which hydrocarbons are depleted or the optimisation of their recovery) or the need to secure tax revenues, impose conditions and requirements on the exercise of the activities set out in Article 2(1)2.

3.      The rules for payment of contributions referred to in paragraph 1, including any requirement for State participation, shall be fixed by Member States in such a way as to ensure that the independence of management of entities is maintained.’

B.      Italian law

1.      Legislative Decree No 625/96

6.        In accordance with Article 19(1), (5) and (5 bis) of Legislative Decree No 625/96: (4)

‘1.      In the case of production obtained on or after 1 January 1997, the holder of each extraction licence shall contribute annually to the State the value of a share of the product of extraction equal to 7% of the quantity of liquid and gaseous hydrocarbons extracted onshore, and 7% (5) of the quantity of gaseous hydrocarbons and 4% of the liquid hydrocarbons extracted at sea.

…

5.      The unit values of the share for each production licence shall be determined, in the case of each licence holder, as the weighted average of the sales prices invoiced by the licence holder in the reference year.

5 bis      In the case of production obtained on or after 1 January 2002 … the unit values of the share of production shall be determined:

…

(b)      as regards gas, in the case of all licences and all licence holders, on the basis of the arithmetic mean for the reference year of the QE index, the energy share of the cost of the raw material gas, expressed in EUR per MJ (megajoule), determined by the [Supervisory] Authority for Electricity and Gas pursuant to Decision No 52/88 of 22 April 1999, published in Gazzetta Ufficiale (Official Gazette) No 100 of 30 April 1999, as subsequently amended, on the assumption of a fixed equivalence of 1 SM3 (standard cubic metre) to 38.52 MJ. From 1 January 2003, the updating of that index shall, for the sole purposes of this article, be carried out by the [Supervisory] Authority for Electricity and Gas on the basis of the parameters set out in that decision.’

2.      Decree-Law No 7 of 31 January 2007, converted into Law No 40 of 2 April 2007

7.        Article 11(1) of that Decree-Law (6) provided that production licence holders were to dispose of the shares of product owed to the State on the regulated capacity market, in accordance with the detailed rules set out in Decree of the Minister for Economic Development, following consultation of the Autorità di Regolazione per l’Energia, Reti e Ambiente (Supervisory Authority for Energy, Networks and the Environment, Italy; ‘the Supervisory Authority’).

8.        That provision was implemented by the Ministerial Decree of 6 August 2010, (7) which, in so far as is relevant here, stated that ‘the procedures for trading in the shares shall be carried out by auction’ (Article 4(1); ‘bids below the QE index shall not be accepted …’ (Article 4(3)); and ‘if no sale is made, the gas lot offered shall remain at the disposal of the licence holder, who shall contribute to the State the equivalent of the QE index referred to in paragraph 3’ (Article 4(4)).

3.      Decree-Law No 1/2012 of 24 January 2012, converted, with amendments, into Law No 27 of 24 March 2012

9.        Article 13 of Decree-Law No 1/2012 (8) (‘Measures to reduce the price of natural gas for vulnerable consumers’) states:

‘From the first quarter following the entry into force of this Decree, the [Supervisory] Authority for Electricity and Gas, for the purposes of adapting the reference prices of natural gas for vulnerable customers within the meaning of Article 22 of Legislative Decree No 164 of 23 May 2000, as subsequently amended, to European values, shall, in determining the variable contributions to cover the costs of supplying natural gas, progressively introduce into the parameters forming the basis of the updating the reference also, in the case of a gradually increasing share, to gas prices observed on the market. Pending the launch of the natural gas market referred to in Article 30(1) of Law No 99 of 23 July 2009, the reference markets to be considered shall be the European markets identified pursuant to Article 9(5) of Legislative Decree No 130 of 13 August 2010.’

4.      Later provisions

10.      By Decision 196/2013/R/gas, (9) the Supervisory Authority, with effect from 1 October 2013, permanently abandoned the QE index as a parameter for determining the cost of gas for the purposes of the conditions governing supply to vulnerable customers on the protected market.

11.      The component to cover the costs of supplying natural gas on the wholesale markets is now made up of the CMEM (average efficient market cost) index, which is defined exclusively by reference to the short-term market for natural gas, in accordance with Article 1(c) of the operative part of the aforementioned decision.

12.      The CMEM is the sum of various elements, including the PFOR index.

13.      According to Article 6(2)(d) of the ‘Consolidated text of [provisions governing] activities connected with the retail sale of natural gas and gases other than natural gas distributed by means of urban networks’ (TIVG), as amended by Decision 196/2013/R/gas, the PFOR index, ‘expressed in EUR/GJ (gigajoule), to cover the costs of supplying natural gas, is to be equal to the arithmetic average of the quarterly OTC (over-the-counter) forward prices for the t-th gas quarter, at the TTF hub, (10) recorded by Platts (11) in relation to the second calendar month prior to the t-th quarter’.

II.    Dispute in the main proceedings and question referred for a preliminary ruling

14.      Eni SpA (‘Eni’) and Shell Italia E&P Spa (‘Shell’) are two companies which hold licences to extract natural gas in Italy, (12) and are also present on the wholesale and retail markets for the distribution and sale of gas in that Member State.

15.      Both companies have challenged the Italian authorities (13) on the amount of the royalties for 2015 which they are required to pay to the State for their licences. More specifically, they seek the annulment of the Notice of the Direzione generale per la sicurezza dell’approvvigionamento e le infrastrutture energetiche (Directorate General for Security of Supply and Energy Infrastructure) of 24 March 2016 concerning ‘Legislative Decree No 625/1996 (Article 19(5 bis), relating the 2015 QE [Energy Share] index, the energy share of the cost of raw material gas for 2015)’, (14) as well as the provisions and decisions on which it is based.

16.      The applicants submit that it is against the law to maintain the QE index as a parameter for calculating royalties for 2015. In their view, that calculation must be made on the basis of the PFOR index (pegged to the price of gas on the short-term market) rather than on the QE index (pegged to the longer-term listed prices for oil and other fuels).

17.      They maintain that the QE index has in fact been permanently abandoned as a means of regulating prices on the protected market and should not therefore be used to calculate royalties either. They therefore advocate the use of the new PFOR index, which the Supervisory Authority introduced specifically in order to reflect the market price for gas.

18.      The referring court explains that, under the current calculation mechanism, the shares of product that fall to the State are initially offered on the regulated capacity market at a price equivalent to the price derived from the QE index. Where, as in most cases, those shares do not sell, the licensed undertaking keeps that quantity of natural gas but pays the State the equivalent of the price for it as calculated in accordance with the QE index, which is usually higher than the market price. The referring court infers from this that licence holders are obliged to purchase shares of natural gas at an appreciably higher price than the market price, and are thus adversely affected by comparison with other operators in the sector, their competitors, who are not subject to that obligation.

19.      By judgment No 290/2018 of 18 January 2018, the Consiglio di Stato (Council of State, Italy) set aside a number of judgments given by the referring court in June 2016 and confirmed the lawfulness of decisions whereby the Italian authorities had applied the QE index.

20.      The referring court nonetheless continues to be of the view that the holders of licences for the production of natural gas may be the subject of discrimination and asks whether the interpretation of the domestic legislation as endorsed by the judgment of the Consiglio di Stato (Council of State) of 18 January 2018 might be at odds with the principles of Directive 94/22.

21.      It is in those circumstances that the Tribunale amministrativo regionale per la Lombardia (Regional Administrative Court, Lombardia, Italy) has referred the following question to the Court of Justice for a preliminary ruling:

‘Do Article 6(1) and the sixth recital of Directive 94/22/EC preclude national legislation, in particular Article 19(5 bis) of Legislative Decree No 625 of 1996, which, by reason of the interpretation provided by the Consiglio di Stato in judgment No 290/2018, allows the imposition, in the context of the payment of royalties, of the QE (energy share) parameter, based on the listed prices of oil and other fuels, rather than on the basis of the PFOR index, which is pegged to the price of gas on the short-term market?’

22.      Written observations have been submitted by Eni, Shell, Assomineraria, the Comune di Viggiano (Municipality of Viggiano, Italy), the Italian Government and the Commission. The hearing held on 4 April 2019 was attended by all of those parties except the Municipality of Viggiano.

III. Answer to the question referred

23.      Those who have taken part in the preliminary ruling proceedings are in disagreement as to the answer to be given to the referring court.

–        In the view of Eni, Shell and Assomineraria, the method of calculating royalties on the basis of the QE index gives rise to discrimination and adversely affects entities in possession of licences to extract natural gas by comparison with those that simply pursue activities relating to the distribution and sale of that product. Since the QE index takes into account the price of oil and other hydrocarbons, which is higher than that of natural gas, the royalties for gas licences are higher than the market selling price for the quantities of gas proceeds from the sale of which have to be paid in royalties.

–        The Italian Government, the Municipality of Viggiano and the Commission consider that Directive 94/22 gives Member States the freedom to set the amount of royalties by applying an index such as the QE index. In their opinion, Directive 94/22 imposes no obligation on Member States to calculate those royalties by reference to the market price for natural gas.

24.      In order to settle this dispute, it seems to me to be necessary to look first of all at the method of calculating royalties for gas operations that is used in Italy.

A.      Calculation of royalties for gas operations in Italy

25.      As from the entry into force of Law No 6/1957, (15) Italy obliged extraction undertakings to pay royalties for gas operations conducted within its territory. Initially, those royalties could be paid in kind (a share of the gas extracted) or in cash. The final amount was the same in both cases, since payment in cash was fixed by reference to the average selling price for gas which the licensed undertaking had charged during a given year.

26.      Following the transposition of Directive 94/22 into Italian law by Legislative Decree 625/96, that position remained the same. Licensed undertakings continued to pay a royalty in kind (equivalent to a share of the gas extracted) or in cash (equal to the market value of that quantity of gas).

27.      The reform of Article 19 of Legislative Decree 625/96 that was carried out under Law No 239 of 23 April 2004 changed the rules governing royalties.

28.      Thus, the new wording of Article 19 of Legislative Decree 625/96 required that, with effect from 1 January 2002, payment be made in cash only. As from 1 January 2003, the royalty consisted in a share of the product extracted (16) multiplied by the price of gas according to the QE index. That index was defined as the energy share of the cost of the raw material gas, expressed in EUR per MJ (megajoule), and was to be determined by the Supervisory Authority in accordance with the parameters set out in its Decision No 52/99.

29.      According to the information provided by the parties to the proceedings, the Supervisory Authority calculated the QE index every two months by reference to a basket of energy products, (17) in particular the average listed prices for oil and other fuels as derived from multiannual wholesale contracts. At that time, the QE reflected the real market value of natural gas, as the parties to the proceedings recognise. (18)

30.      Subsequently, a reform introduced in 2007 and set out in a Decree of the Ministry of Economic Development of 6 August 2010, allowed licensed undertakings to sell shares of gas owed to the State by auctioning them on the ‘regulated capacity and gas market’ (PSV) (19) and then transferring the proceeds to the State as royalties. That PSV virtual hub is the wholesale market where all natural gas transactions in Italy are carried out.

31.      That legislation nonetheless provided that bids at prices below the QE index were to be rejected. Where that was the case, the gas lots offered would remain at the disposal of the licensed undertaking, which would have to pay the State a royalty equivalent to those lots and valued at an amount equal to the QE index.

32.      It would seem that, with the QE index gradually falling out of alignment with the price of natural gas on the markets, undertakings licensed to operate gas installations in Italy were unable to sell shares of gas on the regulated market.

33.      The imbalance between the QE index and the market price for natural gas was confirmed when the Supervisory Authority adopted Decision 196/2013/R/gas, whereby, with effect from 1 October 2013, the QE index was permanently abandoned as the parameter for determining the cost of gas for the purposes of the conditions governing supply to customers on the protected market. (20)

34.      Decision 196/2013/R/gas determined the cost of gas by reference to the PFOR index, which reflects the quarterly listed prices for natural gas on the Netherlands gas exchange (the TTF hub), as recorded by Platts.

35.      The Italian authorities, however, have continued to use the QE index to set the price of natural gas for the purposes of royalties. The licensed undertakings submit that, since they were unable to sell the gas shares making up those royalties by auctioning them on the PSV market in 2015, the amounts they have had to pay the State in royalties are higher than would have been the case if the short-term market price for natural gas had been used (that is to say, the price based on the PFOR index).

36.      The documents before the Court show that:

–        The QE index values, expressed in EUR/GJ, (21) for the four quarters of 2015 were 7.976985; 6.940217; 6.194914; and 5.573671. The average QE index price for calculating royalties in 2015 was therefore 6.671447. (22)

–        The PFOR index values in EUR/GJ for the four quarters of 2015 were 6.553299; 5.984375; 5.665388; and 5.564236. The average PFOR index price was 5.9418245. (23)

37.      Those data support the inference that, in 2015, the QE index values were higher than the PFOR index values. As a result, licensed operators of gas installations paid higher royalties (24) than would have been due if the market value had been applied to the natural gas consignments in question.

B.      Interpretation of Directive 94/22

38.      Directive 94/22 carries out a non-exhaustive harmonisation of activities relating to the prospection, exploration and production of hydrocarbons in the European Union. (25)

39.      That harmonisation of minimum standards is founded on the premiss that Member States hold sovereignty over the hydrocarbons on their territories, (26) which are natural resources at their disposal. Directive 94/22 confines itself to establishing a procedure for access to and pursuit of those activities with a view to encouraging greater competition in this sector, contributing towards the best prospection, exploration and production of those resources and reinforcing the integration of the internal energy market. (27)

40.      In particular, that directive provides that procedures for granting the corresponding authorisations must be open to all entities in the European Union that possess the necessary capabilities on the basis of ‘objective criteria’ and in accordance with conditions which are known in advance by all entities taking part in those procedures. (28)

41.      Directive 94/22 authorises Member States to limit access to and pursuit of those activities ‘for reasons justified by public interest’, and to subject them to the payment of a financial contribution (royalty). (29)

42.      The eighth recital and Article 6(1) of Directive 94/22 leave Member States free to choose between a royalty consisting in a financial contribution (payment in cash) or in hydrocarbons (payment in kind). Consequently, national legislation such as that at issue here, which has opted for payment of a royalty in the form of a financial contribution, is compatible with Directive 94/22.

43.      The key question in this dispute is whether Directive 94/22 contains conditions relating to the amount of royalties and the procedure for calculating them. I should say here and now that, in my opinion, that directive leaves Member States a very wide margin for manoeuvre when it comes to determining the method for calculating royalties.

44.      It is nonetheless true that Member States must exercise the options in connection with the setting of royalties in a non-discriminatory way (eighth recital of Directive 94/22), with the result that, so far as concerns access to, and pursuit of, activities relating to the prospection, exploration and exploitation of hydrocarbons, undertakings are on an equal footing (Article 2(2)). (30)

45.      That said, the directive does not impose any restrictions on Member States in relation to either the method for setting the royalty or its amount. The licensed undertakings which have submitted observations (Eni, Shell and the Assomineraria association) recognise that a State is entitled to do as Italy did and raise the royalty from 7% to 10% of the quantities of gas extracted.

46.      Those undertakings argue, however, that the royalty must be calculated using a formula that reflects the selling price of gas on the market, which the QE index does not currently do. They go on to say that the use of that index is harmful (discriminatory) to them because they are compelled to buy the share of natural gas making up the royalty at a price higher than the market price (which is now pegged to the PFOR index).

47.      I do not share that point of view. I am of the opinion, on the contrary, that the use of the QE index does not discriminate against licensed operators of gas installation in a manner contrary to Directive 94/22. The type of discrimination which that legislation prohibits is that which a Member State might perpetrate as between authorised undertakings (for example, on grounds of nationality, place of establishment (31) or origin of share capital, among others) in relation to the determination of royalties. This would be the case if undertakings with share capital from other Member States had to pay a higher royalty than that payable by undertakings with Italian share capital.

48.      The approach taken by Eni and Shell emphasises the discrimination which, in their view, takes place as between licensed undertakings and those that operate on the market for the distribution and sale of natural gas without exploiting a deposit. That approach points up the fact that:

–        Licensees would be forced to buy the natural gas making up the share of their production which they are required to pay as a royalty at a price higher than the market price if the QE index were used as the point of reference for the sale of those gas lots at auction on the PSV market. (32)

–        Undertakings which, although not in possession of an exploitation licence, operate on the natural gas market in Italy are not obliged to make such purchases or to pay royalties to the Italian State.

49.      Now, Directive 94/22 confines itself to preventing discrimination between undertakings in possession of licences (more correctly, authorisations) to operate gas installations, but does not prohibit disparities in treatment as between these undertakings and those that act only as intermediaries and sellers of natural gas on the PSV regulated wholesale market or on the retail market for protected customers.

50.      From the point of view of the payment of royalties, undertakings in possession of exploitation licences and companies distributing and selling natural gas on the Italian markets are not in comparable situations, (33) since the latter, I would reiterate, do not have to pay any kind of extraction royalty to the Italian State. It is for this reason that I am minded that the alleged discrimination does not exist.

51.      The discrimination which the licensed undertakings thus allege to operate against them as compared with undertakings that market natural gas only in Italy is capable of materialising only when the market price for gas is low. If that price rises in relation to the price of oil and the other hydrocarbons used for the QE index, the converse situation arises: the auctions are not deserted and licensed undertakings sell natural gas at a price higher than that arrived at by applying the QE index. According to the data supplied by the Italian Government, which have not been refuted by the licensees, that situation arose in 2016 and 2017, in which financial years licensees sold natural gas at auction at a price higher than that arrived at by applying the QE index (32% in 2016 and 36.7% in 2017) and the PFOR index (46.3% in 2016 and 52.1% in 2017). On those occasions, licensees did not have to buy back extracted natural gas at a price higher than that arising from the application of the QE index.

52.      Directive 94/22 sets other, not particularly precise, limits to curb the broad discretion afforded to Member States in connection with the quantification of this type of contribution and the method for calculating it. In particular:

–        Article 6(1) requires that royalties be ‘justified exclusively by the need to ensure the proper performance of the activities in the area for which an authorisation is requested’.

–        Article 6(3) provides that ‘the rules for the payment of contributions … shall be fixed by Member States in such a way as to ensure that the independence of management of entities is maintained’.

53.      Neither the referring court nor the undertakings required to pay royalties have argued that the Italian legislation exceeds those limits.

54.      Those same undertakings maintain, however, that it makes no sense to use the QE index to calculate royalties because that index takes into account not the market price for natural gas but the price applicable in long-term contracts for oil and other hydrocarbons. In their submission, Directive 94/22 precludes that option and requires the use of an index pegged to the market price for natural gas (such as the PFOR index, which has been used on the Italian market for protected customers since 2013).

55.      To that effect, Eni argues that the use of the QE index could lead to the absurd situation of the value of the royalty being higher than the price of the natural gas extracted by the licensed undertaking, if the market price for oil and other hydrocarbons were to increase substantially by comparison with the market price for gas.

56.      That argument, which appears to have convinced the referring court, is based on a hypothesis (a differential increase as between one index and the other) which is far removed from the events that occurred in 2015, to which the contested decision of the Supervisory Authority refers. As I have already made clear, since there was not much of a difference between the QE index and the PFOR during that financial year, (34) the amount of the royalties did not increase so significantly as to jeopardise the viability of licensees’ gas operations. Furthermore, as we saw earlier, in 2016 and 2017, the situation was reversed, inasmuch as the market price for natural gas was higher than that arrived at by applying the QE and PFOR indices.

57.      In any event, the choice of one index or another may be informed by considerations of individual preference and political expediency, depending on whether there is a desire to make royalty rates more or less onerous for licensed undertakings (and, correspondingly, more or less favourable to the public coffers).

58.      There may indeed be some sense in using an index which reflects the short-term market price for gas (the PFOR index). It is not unreasonable, however, to use another index dictated by the medium- or long-term price for oil and other hydrocarbons, such as the QE index. In fact, the choice of a less volatile indicator may be one that the legislature legitimately considers as a means of lending greater stability and predictability to the public income to be derived from the extraction of hydrocarbons.

59.      Finally, it is not disputed that the Italian State could, equally legitimately, raise the amount of the royalties in question by increasing the share of natural gas used to pay those contributions (a royalty of 15% of the gas extracted instead of 10%, for example), and thereby achieve a similar result.

60.      What matters, so far as the answer to the question referred for a preliminary ruling is concerned, is that the use of an index such as the QE should not breach any of the limits laid down in Article 6 of Directive 94/22, to which I referred earlier. And it does not, in my opinion, since:

–        First, ‘the need to secure tax revenues’ (Article 6(2)) justifies the use of the QE index, inasmuch as applying that index to the share of gas which licensed undertakings must earmark for the payment of royalties (currently 10%) enables the Italian State to collect more tax.

–        Secondly, the need to ensure the proper performance of the activities in the area for which an authorisation is requested (Article 6(1)) or to ensure that the independence of management of undertakings is maintained (Article 6(3)) are not jeopardised by the use of the QE index, at least not at the rates applied in 2015.

61.      In any event, it is for the national courts, which have all the matters of fact before them, to assess whether using an index such as the QE, which is not pegged to the market price for gas, to calculate the royalties payable on a gas licence gave rise in a particular year to effects incompatible with the limits which Article 6 of Directive 94/22 attaches to the calculation of such royalties.

62.      Although the referring court does not raise this question in its order, I would add that it also falls to the national courts to ascertain, by means of an overall assessment of all the relevant circumstances of fact and law, whether the national legislation at issue in the main proceedings satisfies the requirements of the principle of proportionality, (35) it being for the Court of Justice to provide the national court with such information on the interpretation of EU law as will enable it to give a ruling. (36)

63.      That particular assessment has already been carried out by the Consiglio di Stato (Council of State) in judgment No 290/2018, as mentioned by the referring court. In order for the latter court to depart from the ruling given by the highest court in the Italian administrative justice system, which has the last word on the application of Italian domestic law, it would in my opinion have to have very sound reasons that unequivocally disprove that assessment.

64.       Those reservations having been expressed, I take the view that there are at least two additional factors which militate in favour of the compatibility with EU law of the method for setting royalties that was adopted by the Italian authorities.

65.      The first is that both Article 6(1) and the eighth recital of Directive 94/22 allow Member States to opt for either a contribution in kind or a contribution in cash. Member States are thus given the choice between two alternatives that are unconnected. It does not follow from the directive, therefore, that the royalty, be it in cash or in the form of a financial contribution, must be equal or linked to the market value of the share of gas extracted.

66.      The second is that a Member State does not necessarily infringe the principle of proportionality in setting the cash amount of the royalty by applying an index, such as the QE, which does not ensure equivalence between the market value of the share of gas making up the royalty and the financial amount of that royalty. Such equivalence, I would reiterate, is not an objective pursued by Directive 94/22. The principle of proportionality does not therefore compel Member States to use reference indices such as the PFOR.

67.      National legislation implementing Directive 94/22 might be incompatible with the principle of proportionality if the procedure for determining their amount led to the imposition of royalties so high as to render activities relating to the prospection, exploration and production of natural gas unviable in practice. It does not appear from the data contained in the documents before the Court that that is the situation created by the Italian legislation making it compulsory to use the QE index.

68.      A possibility different from the foregoing is that the application of the QE index might to a greater or lesser extent distort the financial balance initially provided for in the respective licences. If that problem were to arise (as it might either as a result of a change in the indices or following an increase in the share represented by the royalty), the solution to it would be found in the domestic rules governing the balance under the licences rather than in Directive 94/22. (37)

69.      Finally, the allegation that the QE index constitutes an unjustified restriction of the right to property protected by Article 17 of the Charter of Fundamental Rights of the European Union can be dismissed without further justification. The hydrocarbons in question were originally the property of the Italian State and, if that State decides to authorise their being granted to an undertaking for the purposes of extraction, it is entitled to make that assignment of public resources subject to the payment of a contribution to the State coffers by the undertaking exploiting them.

IV.    Conclusion

70.      In the light of the foregoing, I propose that the answer to be given to the Tribunale amministrativo regionale per la Lombardia (Regional Administrative Court, Lombardy, Italy) should be as follows:

Article 6(1)(2) and (3) and the eighth recital of Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons do not preclude national legislation which sets the amount of the royalties payable by undertakings holding authorisations to exploit gas according to an index (such as the QE index) based on the medium- and long-term listed prices for oil and other hydrocarbons rather than using another index (such as the PFOR index) pegged to the price of gas on the short-term market.

1      Original language: Spanish.

2      Directive of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (OJ 1994 L 164, p. 3).

3      Article 1(3) of Directive 94/22 uses the term ‘authorisation’ in an all-encompassing sense (‘any law, regulation, administrative or contractual provision or instrument issued thereunder by which the competent authorities of a Member State entitle an entity to exercise, on its own behalf and at its own risk, the exclusive right to prospect or explore for or produce hydrocarbons in a geographical area’). According to the information before the Court, in Italy, those authorisations take the legal form of licences (‘concessioni’) (more specifically, public property licences) and their holders are called licensees (‘concessionari’). I shall use both terms in this Opinion.

4      Decreto Legislativo 25 novembre 1996, n. 625 — Attuazione della direttiva 94/22/CEE relativa alle condizioni di rilascio e di esercizio delle autorizzazioni alla prospezione, ricerca e coltivazione di idrocarburi (Legislative Decree No 625 — Implementation of Directive 94/22 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons) of 25 November 1996 (GURI No 293 of 14 December 1996; ‘Legislative Decree 625/96’).

5      That share was subsequently raised to 10% pursuant to Article 45(1) of Law No 99 of 23 July 2009.

6      Legge 2 aprile 2007, n. 40, Conversione in legge, con modificazioni, del decreto-legge 31 gennaio 2007, n. 7, recante misure urgenti per la tutela dei consumatori, la promozione della concorrenza, lo sviluppo di attività economiche e la nascita di nuove imprese (Law No 40 converting, with amendments, Decree-Law No 7 of 31 January 2007 on urgent measures to protect the consumer, promote competition, develop economic activities and create new businesses) of 2 April 2007 (GURI No 77 of 2 April 2007).

7      Decreto ministeriale 6 agosto 2010 — Decreto per la vendita delle aliquote di prodotto della produzione di gas nel territorio nazionale, royalties, destinate allo stato (Ministerial Decree — Decree for the sale of shares of the product of gas production in national territory (royalties) that are earmarked for the State), of 6 August 2010 (GURI No 200 of 27 August 2010).

8      Legge 24 marzo 2012, n. 27 — Disposizioni urgenti per la concorrenza, lo sviluppo delle infrastrutture e la competitività (Law No 27 — Urgent provisions on competition, infrastructure development and competitiveness) of 24 March 2012 (GURI No 71 of 12 March 2012).

9      Deliberazione 9 maggio 2013 196/2013/R/gas, seconda fase della riforma delle condizioni economiche applicate ai clienti finali del servizio di tutela nel mercato del gas naturale a partire dall’ 1 ottobre 2013. Modifiche al TIVG (Decision 196/2013/R/gas of 9 May 2013 concerning the second stage of reform of the economic conditions applied to end customers of the service for protection in the market for natural gas as from 1 October 2013. Amendments to the TIVG). See https://www.arera.it/allegati/docs/13/196-13.pdf.

10      The TTF (Title Transfer Facility) hub is the trading point for gas in the Netherlands. See https://www.gasunietransportservices.nl/en/shippers/products-and-services/ttf.

11      Platts was a division of the multinational McGraw-Hill, which acted as the leading company in the financial market for futures and options on derivative products traded on home markets in energy products across the world. In 2016, McGraw Hill Financial became S&P Global and Platts became S&P Global Platts and continues to be the independent provider of information, reference prices and analysis on the commodities and energy products markets. See https://www.spglobal.com/platts/en/about.

12      Eni has gas exploitation installations both on land and in the marine subsoil. Shell, only on land, in the Basilicata region.

13      In particular, the Ministero dello Sviluppo Economico (Ministry of Economic Development, Italy), the Ministero dell’Economia e delle Finanze (Ministry of Economic Affairs and Finance, Italy) and the Supervisory Authority.

14      Comunicato del 24 marzo 2016 — Indice QE 2015. Quota energetica costo materia prima del gas naturale per l’anno 2015, available at https://www.mise.gov.it/index.php/it/98-normativa/altri-atti-amministrativi/2034303-comunicato-del-24-marzo-2016-indice-qe-2015-quota-energetica-costo-materia-prima-del-gas-naturale-per-l-anno-2015.

15      Legge 11 gennaio 1957, n. 6, Ricerca e coltivazione degli idrocarburi liquidi e gassosi (Law No 6 of 11 January 1957 on the exploration for and production of liquid and gaseous hydrocarbons) (GURI No 25 of 29 January 1957).

16      That share was 7% of the quantity of liquid and geaseous hydrocarbons extracted on land; 7% of the quantity of geaseous hydrocarbons extracted at sea (although that figure went up to 10% under Article 45(1) of Law No 99 of 23 July 2009); and 4% of the amount of liquid hydrocarbons extracted at sea.

17      Deliberazione 28 maggio 2009 — ARG/gas 64/09 Approvazione del Testo integrato delle attività di vendita al dettaglio di gas naturale e gas diversi da gas naturale distribuiti a mezzo di reti urbane (TIVG), en https://www.arera.it/it/docs/09/064-09arg.htm. According to Article 6(2) of that decision of the Supervisory Authority, the QE index was to be established on the basis of the listed prices for Brent oil, gas oil and low-sulphur fuel oil.

18      It must be borne in mind that the activities of prospecting and exploration for and extraction of oil and natural gas are subject to similar conditions and must therefore be covered by a common framework separate from the arrangements for downstream activities. This point is made in the explanatory memorandum to the Proposal for a Council Directive on the conditions for granting and using authorisations for the prospection, exploration and extraction of hydrocarbons, COM (92) 110 final, of 11 May 1992 (OJ 1992 C 139, p. 12).

19      Snam Rete Gas manages the PSV (‘Punto di Scambio Virtuale’ (Virtual Trading Point)) hub where the bilateral transfers and exchanges of gas injected into the Italian national pipeline network take place every day. The Supervisory Authority has granted the PSV the status of ‘regulated capacity and gas market’. See http://www.snam.it/en/transportation/Online_Processes/PSV/.

20      That market was the subject of the judgment of 20 April 2010, Federutility and Others (C‑265/08, EU:C:2010:205). A ‘protected customer’ is a domestic customer connected to a gas distribution network whose supply must be ensured, in accordance with Article 2(5) of Regulation (EU) 2017/1938 of the European Parliament and of the Council of 25 October 2017 concerning measures to safeguard the security of gas supply and repealing Regulation (EU) No 994/2010 (OJ 2017 L 280, p. 1).

21      A gigajoule (GJ) is equal to 10⁹ joules (J), the joule being a derived unit in the International System of Units that is used to measure energy, work and heat. As a unit of energy and work, the joule is defined as the amount of work done when a constant force of one newton acts on an object through a distance of one metre in the same direction as the force.

22      Comunicato del 24 marzo 2016 — Indice QE 2015. Quota energetica costo materia prima del gas naturale per l’anno 2015, available at https://www.mise.gov.it/index.php/it/98-normativa/altri-atti-amministrativi/2034303-comunicato-del-24-marzo-2016-indice-qe-2015-quota-energetica-costo-materia-prima-del-gas-naturale-per-l-anno-2015.

23      These data can be found on the Supervisory Authority’s portal at: https://www.arera.it/it/che_cosa/presentazione.htm.

24      At the hearing, Shell stated that it had sustained a loss of EUR 1 237 538 euros and Eni a loss of EUR 8 114 895 in the 2015 financial year.

25      Directive 94/22 has generated very little litigation, just one action for failure to fulfil obligations brought against Poland for incorrect transposition, which was disposed of by judgment of 27 June 2013, Commission v Poland, C‑569/10, EU:C:2013:425.

26      Fourth recital: ‘whereas Member States have sovereignty and sovereign rights over hydrocarbon resources on their territories’.

27      See in particular the sixth recital and Article 3 of Directive 94/22.

28      See in particular the seventh recital and Article 5 of Directive 94/22.

29      See in particular the eighth recital and Article 6 of Directive 94/22.

30      ‘Under Article 2(2) of Directive 94/22, Member States are to ensure that there is no discrimination between entities as regards access to and pursuit of activities relating to the prospection, exploration and extraction of hydrocarbons in the areas made available for the pursuit of those activities’ (judgment of 27 June 2013, Commission v Poland, C‑569/10, EU:C:2013:425, paragraph 50).

31      According to the Court of Justice, Article 18(1)(2b) of the Geological and Mining Law required an economic operator established in another Member State that wished to obtain a concession for the prospection, exploration or extraction of hydrocarbons in Poland to have an office or establishment on Polish territory before the concession could even be granted. That provision was declared incompatible with Article 2(2) of Directive 94/22 (judgment of 27 June 2013, Commission v Poland, C‑569/10, EU:C:2013:425, paragraphs 51 and 52) because it made access to the activity of exploiting hydrocarbons more difficult for foreign operators than for operators established principally in Poland.

32      Licensed undertakings have to buy their gas lots at auction on the PSV wholesale market at the price indicated by the QE index and to pay that price to the State as a royalty. They then have to sell that gas at the lowest going price on the PSV wholesale market and on the protected retail market for vulnerable customers, on which the PFOR index is used to determine the selling price of natural gas, which is lower than the QE index.

33      According to settled case-law, the principle of equal treatment, as a general principle of EU law, requires that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified (judgment of 28 November 2018, Solvay Chimica Italia and Others, C‑262/17, C‑263/17 y C‑273/18, EU:C:2018:961, paragraph 66; and of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 23).

34      See point 36 of this Opinion.

35      ‘It is for the referring court, taking account of the indications given by the Court of Justice, to verify, in an overall assessment of the circumstances surrounding the grant of the new licences, whether the restrictions imposed by the Member State concerned satisfy the conditions laid down in the Court’s case-law concerning their proportionality’ (judgments of 12 June 2014, Digibet and Albers, C‑156/13, EU:C:2014:1756, paragraph 40, and of 28 January 2016, Laezza, C‑375/14, EU:C:2016:60, paragraph 37).

36      The principle of proportionality is applicable to the Member States where they implement and apply EU law, and obliges them to ensure that their actions are suitable for attaining the objectives pursued and do not go beyond what is necessary to achieve them. See, inter alia, the judgments of 12 July 2018, Spika and Others (C-540/16, EU:C:2018:565), paragraphs 45 and 46; of 20 December 2017, Global Starnet (C-322/16, EU:C:2017:985), paragraph 52; and of 26 March 2015, Macikowski (C-499/13, EU:C:2015:201), paragraphs 47 and 48.

37      Once again, it is judgment No 290/2018 of the Consiglio di Stato (Council of State) which, in paragraph 66 in fine, addresses this issue. In order to decide whether there had been ‘any imbalance in the conditions comprising the [gas] licences themselves’, it would be necessary to carry out ‘a full examination of all the terms [of those licences] and of the … burdens and advantages arising from them’, which examination fell outside the scope of the dispute pending before that court.

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