EU investigates subsidy for Bavarian pipeline

Brussel – The European Commission has launched an in-depth investigation to establish whether the €70 million grant the Land of Bavaria intends to give for the construction of an ethylene pipeline is compatible with the EU Treaty rules on state aid (Article 87). The Commission considers that there is a risk that the grant may distort competition, even if the pipeline may be of strategic importance for the chemical industry in the region. Interested parties are invited to submit their comments within one month of publication in the EU’s Official Journal of the decision.

EU Competition Commissioner Neelie Kroes said: “The aid for the Bavarian pipeline may have significant negative effects on competitors elsewhere in Europe. I am therefore eager to learn the views of competitors and other interested parties to see whether the aid strikes the right balance”.

Germany notified the intention of the Land of Bavaria to grant €70 million out of a total construction cost of €140 million for the construction of a 357km long pipeline for the transport of ethylene between Ludwigshafen (Baden-Württemberg) to Münchsmünster (Bavaria). Ethylene is derived from petroleum and used for the production of polymers, which are then used to produce plastics.

The pipeline would operate according to the principles of ‘common carrier’, ‘open access’, ‘non-discriminatory fees’ and ‘minimum profit’. Any producer and user of ethylene would have access to use the pipeline under the same conditions.

The beneficiary of the grant would be Ethylene Pipeline Süd GmbH & Co. KG, a consortium of BASF AG, Borealis Polymere GmbH, Clariant GmbH, OMV Deutschland GmbH, Ruhr Oel GmbH, Vinnolit Gmbh&Co KG and Wacker Chemie GmbH.

In its preliminary assessment, the Commission considers that the support from the German authorities constitutes state aid and not a general infrastructure measure. The Commission doubts whether the aid can be considered compatible with the common market. As there is currently no transport of ethylene between the places the proposed pipeline would link, the benefits in terms of environmental protection, transport safety and road congestion appear to be uncertain. The pipeline may be of strategic importance for the chemical industry in the region but the aid may significantly distort competition in the chemical industry in the EU as a whole and so harm the overall competitiveness of the sector.

Germany maintains that the pipeline will be a part of a wider network of pipelines for olefins. It is not clear whether this argument would justify the high aid intensity, in particular as quite some parts of the network seem still to be uncertain and other parts are not operated in accordance with the open access principles mentioned above.