The federal hydrogen act passes constitutional muster: will momentum start reverberating?

Reiterating that the federal government is competent for (non-local) transport of energy (B.6.3) and refusing to accept that hydrogen should (primarily) be understood as feedstock (rather than as an energy carrier) (B.7.2), the court first considered that the federal government (adapting the initial bill) had already emphasised the link between the Hydrogen Act’s scope and the purpose of transporting hydrogen. The court accepted, by and large relying on reasoning developed in the context of assessing the distinction with respect to closed distribution systems (CC 98/2013), that distribution is to be distinguished from transport “taking into account the objective of the grid activity. If the grid activity aims to serve final customers, the activity will qualify as public gas distribution” (B.10.3), whereby it does not matter which customers are served. The ‘pressure level’ can hence not serve as an allocating criterium (contrary to, for instance, electricity regulations where the voltage level is indeed the competence allocating criterion), but by limiting the scope of the Hydrogen Act to pipelines exceeding 16 bar, the federal government did not encroach upon regional competences, but simply limited the scope of the Hydrogen Act (B.10.4).

With respect to ‘goals’ identified (to delineate the scope), i.e. transport from and towards the categories identified above (sub (a) in fine), the court considered that the fact that a transport grid may directly serve some final customers, does not imply that the main function of the grid is not transport, insofar as this serving is incidental as well as justified by efficiency gains or by proximity considerations (B.12.3). In this interpretation, the Court accepts that the federal government could thus define the scope of the Hydrogen Act. However, the court refused to accept that any pipeline connected to a (large) hydrogen production or storage facility (meeting the other conditions) would qualify as a transport pipeline and would thus be subject to federal regulation. If such (large) hydrogen production or storage facility would be connected to a grid aiming to distribute hydrogen, only the Regions are competent to regulate (B.13-B.14). Since the federal government did not succeed in showing that expanding the scope of the Hydrogen Act to ‘transport’ from and towards production and/or storage facilities complied with the aforementioned objective, the court nullified the provisions in the federal Hydrogen Act thus delineating its scope (B.15).

The fact that the Hydrogen Act defined the concept of 'hydrogen distribution' was not found to be problematic according to the court. After all, a definition on its own, does not have any normative bearing or implications (B.18.1-B.18.2). Moreover, the Flemish Region’s challenge of the definition of an ‘existing hydrogen grids’ also failed, since the operators of these grids have been granted transport licenses under the 1965 Federal Gas Act but such existing grids are anyway limited to those grids serving a transport function (B.23.3). Finally, the Flemish Region’s challenged of the definition of a hydrogen storage facility, arguing that this concept goes beyond the federal government’s competence with respect to large storage infrastructure (Art. 6, § 1, VII (2) c) of the 1980 Special Act on Institutional Reform), which was argued to be limited to any infrastructure that can significantly contribute to the security of supply (excluding other infrastructure). The court, however, shied away from evaluating this argument and limited itself to underscoring that a definition – the only provision challenged by the Flemish Government in this case – does not bring about normative consequences and cannot in and of itself encroach upon other consequences.

1. This dispute over the allocation of competences did not help Belgium (or Flanders) in realising its ambitions to gain competitive advantages in creating early regulation for the emerging hydrogen market, to facilitate its role as import and transport (if not distribution) hub. Of course, there was an overall slowdown in the development of the hydrogen market (not just in Belgium), as illustrated and explained in the Special Report by the European Court of Auditor’s on the EU’s industrial policy on renewable hydrogen, which is attributable to a number of factors. But the federal government’s objective to be an early mover in the hydrogen market (the exact reason why the Hydrogen Act was adopted prior to the adoption of the Gas and Decarbonization Package) was certainly undercut by these proceedings before the Constitutional Court. The Court is to be commended for having adjudicated this question in less than eleven months following the Flemish petition for annulment.
2. The Court’s judgment indelibly emphasises the need for cooperation. That may sound counter-intuitive, as one could easily reproduce excerpts from the Court’s ruling underscoring the exclusive competences of the Flemish region with respect to public gas distribution. These exclusive competences, of course, must be respected. However, by, on the one hand, (re-)emphasizing that the allocating criterion depends on the goal served by the regulation and, on the other hand, acknowledging that the constitutional allocation of competences allows a legislature, while pursuing such goals, to incidentally regulate offtake (thus understood that this can define the scope of the transport legislation), the Court creates a situation where cooperation (or at least due alignment) becomes inevitable. From a practical and pragmatic point of view, this is even more important, considering the goals set forth in the Renewable Energy Directive (for renewable hydrogen) and the current state of affairs: a full value chain must be unlocked and in order to do just that, due regulation must be in place to create sufficient legal certainty. Needless to say that this regulatory framework, if it needs to be attractive and provide sufficient levels of certainty, requires due alignment between the competent legislatures, especially if the lines governing the allocation of competences may be thin, opaque or flexible indeed.
3. For constitutional scholars or those seeking to bring arguments before the Constitutional Court: do not challenge definitions, without explaining in sufficient detail how they play out in practice. Definitions can have a crucial impact, also from the viewpoint of the rules governing the allocation of competences – as the Court for instance illustrated in its recent judgment on the definition of natural gas (in the 1965 Gas Act) (CC 103/2024) – but a constitutional challenge requires more flesh on the bones. That being said, the Hydrogen Act is a good example of what’s probably an overuse of definitions which do not all figure or play an important role in the norms adopted by the Hydrogen Act (another illustration being the definition of hydrogen terminals, which are not (directly) regulated by the Hydrogen Act). Moreover, the Hydrogen Act will likely require a (definitional) update following the adaptation of the recent Gas and Decarbonisation Package at EU level, which sets forth several definitions which are not fully compliant with the ‘Belgian’ definition.