Part of Oil Security Toolkit
IEA (2020), Denmark's legislation on oil security, IEA, Paris https://www.iea.org/articles/denmark-s-legislation-on-oil-security
The Danish oil supply emergency regime is primarily governed by three legal instruments: the 2012 Compulsory Storage Obligation Act (CSOA), the 2014 Executive Order on Storage Obligation (ESO) and the 1986 Act on Supply Measures (ASM).
The provisions of the Danish oil supply emergency regime are designed to respond to actual or potential shortages of necessary oil supplies (article 1 ASM and article 1and 19 CSOA).
According to article 1(1) ASM and article 19 CSOA it is the Danish Minister for Energy who possesses the competence to decree the taking of oil supply emergency measures. By default, an order to take emergency measures is subject to approval by the Danish parliament’s standing committee on energy (article 1(1) ASM). However, in urgent situations such approval may be secured retrospectively (article 1(2) ASM).
Danish legislation imposes a stockholding obligation on companied (article 6(1) CSOA, see also article 6 ESO) that import crude oil or oil products, that produce crude oil or products or that facilitate the entry of crude oil or oil products belonging to other companies. Companies that import or produce less than the equivalent of 1000 tonnes of crude oil are exempt from the stockholding obligation (article 6(2) CSOA, see also 6(3) ESO). Detailed rules governing the size of a company’s storage obligation and notification requirements are laid down by regulations of the Minister for Energy, Utilities and Climate (article 6(5) CSOA).
Alongside the stocks held by companies, Danish legislation also envisions that part of the Danish stockholding obligation is met by stocks held by the Danish Central Stockholding Entity (CSE) (see e.g. article 9 CSOA).
Apart from stockholding obligations, both storage companies and the CSE must prepare contingency plans to allow the swift taking of all necessary measures at times of emergency (article 16(1) CSOA).
The Danish Central Stockholding Entity (FDO), supervised by the Danish Ministry for Energy, Utilities and Climate (article 5(1) CSOA), is tasked with acquiring, maintaining, and distributing emergency stocks (article 5(3) CSOA, see also article 4 ESO).
According to article 7(1) ESO, the individual size of a particular stockholder’s emergency stockholding obligation is fixed by the Danish Energy Authority. In principle, Denmark aims to maintain stocks equating to 81 days of oil consumption of which 67 days are accounted for by stocks of the CSE whereas the remaining 24 days are accounted for by stocks held by companies (see also article 13 ESO).
Availability of stocks
According to article 13 CSOA, emergency stocks should always be stored in such a manner so as to ensure that emergency stocks can be distributed to end users and markets within such a time that ensures that the effects of serious supply disruptions can be alleviated (see also article 4(7) CSOA). Additionally, emergency storage facilities must be identifiable and must be checked at all times. Article 38(1) ESO further stipulates that stocks must always meet current quality requirements so that they can always be made available within a reasonable amount of time.
Danish primary legislation does not specify particular storage locations, but allows in principle for the possibility of locating emergency stocks in other EU countries (articles 10-11 CSOA). Article 5(1) ESO further distinguishes two categories of storage facilities. Category A storage facilities are conventional storage facilities (article 5(2) ESO). Category B storage facilities are especially protected emergency storage facilities (article 5(3) ESO).
Sale of excess stocks
A Danish Compulsory Storage Obligation (CSO)-company or the Danish Central Stockholding Entity (The Danish Party) have the option to engage in an international ticket with a foreign company or a foreign Central Stockholding Entity (The Foreign Party). In engaging in an international ticket as described, one party can include excess reserves from the other party in their compulsory stockholding obligation, cf. ESO, art. 32-33. In addition two Danish CSO-companies can engage in a national ticket, where one company can include excess reserves from the other company in their compulsory stockholding obligation, cf. ESO art. 34.
At times of emergency, the Minister for Energy, Utilities and Climate authorises the taking of all measures necessary to alleviate an ongoing supply disruption. Denmark’s primary emergency response measure is the release of emergency stocks. However, demand restraint measures are also envisioned by Danish legislation.
In the event of an oil supply disruption, the Minister for Energy, Utilities and Climate is authorised to order the release of parts or of all emergency stocks to end-users and markets (article 19(2) CSOA).
In the event of an oil supply disruption, the Minister for Energy, Utilities and Climate is authorised to order the taking of certain demand restraint measures (article 19(3) CSOA). These might entail limiting supply to specific user groups (article 19(3) CSOA).
Relaxations of Road Traffic and Transport Laws
Denmark’s emergency regime is monitored and enforced on the domestic, regional and international level. Each will be considered in turn.
Article 12 CSOA stipulates that the CSE shall continuously publish information about the size, geographic location and composition of stocks it maintains (seearticles 14-15 ESO). Likewise, storage facilities, central warehouses and commercial storage companies are obliged to transmit on a monthly basis information concerning the composition and size of their stocks to the Minister for Climate, Energy and Utilities (article 14(1) CSOA, see also articles 17(1-2) CSOA).
The implementation of the Danish emergency regime is supervised by the Minister for Climate, Energy and Utilities (article 17(1) CSOA). In order to verify information provided by the addressees of the Danish stockholding obligation, the Minister for Climate, Energy and Utilities may enlist the help of other public authorities (14(4) CSOA).
Specifically, fines can be imposed on companies for violating a number of provisions under the CSOA, amongst others. the stockholding obligation, the obligation to submit information relating to the stockholding obligation and the obligation to verify this information on a yearly basis and the obligation to inform the Danish Energy Agency about the inclusion as a CSO-company. Rules on liability are established in the CSOA, article 23(1-2) and further in ESO, article 49.
As a Member State of the European Union, Council Directive 2009/119/EC obliges Denmark to maintain a minimum volume of emergency oil stocks corresponding to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. The Directive also imposes strict requirements concerning the composition and location of the emergency oil stocks, so as to guarantee their availability and accessibility in case of need, among other provisions.
Denmark’s compliance with the provisions of the directive is monitored and enforced by the European Commission. If a Member State is deemed not to be compliant with the EU Directive, the Commission might decide to initiate an infringement procedure, which might ultimately lead to refer the case to the Court of Justice of the European Union (articles 258-259, Treaty on the Functioning of the European Union).
Denmark is a member of the IEA and, as such, in principle subject to the stockholding obligations imposed upon members by the International Energy Programme (IEP). However, as a net-exporter of oil, Denmark is not at present required to maintain oil reserves. Nonetheless, Denmark is obliged to submit information concerning its emergency measures to the IEA secretariat (article 32 IEP) on a continuous basis. While the IEA monitors Member countries’ compliance with the IEP, the IEP does not, however, make any provision for the enforcement of any obligations imposed by the IEP.