Gas bombshell: Netanyahu's policy struck down by High Court

By
March 27, 2016 17:47

Government to be given one year to fix the problematic aspects of the gas deal, which was declared unconstitutional.




Israel’s natural gas

Israel’s natural gas. (photo credit:MARC ISRAEL SELLEM/THE JERUSALEM POST)

The High Court of Justice on Sunday struck down Prime Minister Benjamin Netanyahu’s flagship natural gas policy, but suspended formally striking the law for a year so he and the Knesset can adjust the 10-year freeze on the gas price and some other items.

The surprise ruling sent the political class into an all-out war of words, alternately presenting the ruling as disastrous for the economy or representing a historic redemption of democratic rule.

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“The Supreme Court’s decision is a grave threat to the development of Israel’s gas reserves,” Netanyahu said in a statement issued some two hours after the ruling.

“Israel is seen as a country with exaggerated judicial involvement in which it is difficult to do business.

Certainly, no one should celebrate that the gas may remain deep under the sea and that hundreds of billions of dollars will not reach Israel’s citizens,” he said.

Ways will be sought to “overcome the considerable damage caused to the Israeli economy by this puzzling judgment,” the prime minister added.

Energy, Infrastructures and Water Resources Minister Yuval Steinitz called the ruling a step backward.

“After years of delays... I formulated this framework for the sake of Israeli citizens,” he said, expressing disappointment that the decision happened “just as Leviathan’s development was getting started.”

Still, he expressed hope the main parts of the deal could be saved “for the sake of the State of Israel.”

MK Shelly Yacimovich (Zionist Union), who has been a leader of the fight against the natural gas framework, however, applauded the decision.

“There are judges in Jerusalem. The High Court’s decision was historic and dramatic. The stability clause that Netanyahu cooked up for the gas companies was ugly and empty of logic from the start,” she said.

Along similar lines, Meretz Party chairwoman Zehava Gal-On said the court “defended the public and its money from this awful action called ‘the gas deal,’” adding that the ruling prevented the government from turning Israel into a third-world country.

On one hand, the High Court’s 4-1 decision, with Deputy Supreme Court President Elyakim Rubinstein and Justices Esther Hayot, Uzi Vogelman and Salim Joubran voting in the majority against Justice Noam Sohlberg, invalidated the 10-year rule, which means that the gas reservoir developers cannot freeze their desired price.

On the other hand, by a 4-1 majority, with only Joubran dissenting, the justices upheld most of the other aspects of the framework deal, including the prime minister’s power to override and circumvent objections by the Antitrust Authority on the grounds of national security.

Perhaps most important, by a 3-2 vote, with Rubinstein and Joubran in the minority, the justices ruled that Netanyahu is not obligated to redo the entire policy in the Knesset, but still may do so.

This means that if Netanyahu either reaches an agreement with the gas developers to adjust the 10-year rule freezing terms on details such as price, or institutes a limited change, he should be able to get past any further High Court petitions.

In explaining that Netanyahu’s 10-year rule is unconstitutional, Rubinstein said: “The government has illegally departed from [the boundaries] of its discretion.”

Rubinstein also wrote disapprovingly of the prime minister’s unwillingness to consider any legislative changes as a further handcuffing of the current and future governments.

He also said that even if individual aspects of the natural gas policy could be implemented without a clear law and signal from the Knesset, the overall impact of the policy’s many provisions required clearer Knesset action than has been taken to date – though Rubinstein’s view did not receive majority support from the justices on that issue.

NGOs opposed to the gas framework lauded the court decision.

A joint statement from Adam Teva V’Din, the Movement for Quality Government in Israel and the Israel Energy Forum praised the ruling, saying the court took a “brave but essential step for Israeli democracy.”

“We are definitely ecstatic about this decision,” said Leehee Goldenberg, director of the economy and natural resources department at Adam Teva V’Din – Israel Union for Environmental Defense. “It’s a historic moment.”

Student movement Green Course, meanwhile, expressed hope that the ruling, combined with the public’s opposition, would spell the end for the current gas framework.

“Natural gas does not belong to the gas barons. It belongs to Israeli citizens who live here,” said director Mor Gilboa.

The decision, she said, renewed belief that the citizens were the country’s top priority.

Yossi Dorfman, head of the Gas Campaign group at Green Course, said the ruling was a success for the public, especially those concerned about the ties between politicians and “gas monopoly tycoons,” and called it a “final barrier” against attempts to bypass the law. It will prevent Israel from becoming “like third-world countries where corporations are above the law,” Dorfman added.

A spokeswoman for the consortium developing the Leviathan reservoir said the group respects the High Court’s decisions and will continue to work with the government to meet the objective of having natural gas flowing by the end of 2019.

Noam Pinko, a senior analyst at investment firm Psagot, said he expects some sort of regulation to pass eventually, but that the stock values of the gas companies would take a beating as a result of the interim uncertainty.

“At this moment, it’s not clear if the [offshore gas development] partnership will continue with the proceedings. If they don’t, we can expect a delay in the development of [the] Leviathan [reservoir], which was supposed to be developed by 2020, so that clearly damages the present value of the reserves today at a rate of 12%-13% a year,” he said.

Leader Capital Market’s Yehonatan Shohat said the glass was a quarter full. Though calling the decision bad for the Leviathan partnership and saying it would likely delay the extraction of gas, he noted that the court hadn’t touched the main points of the framework or the use of Article 52 of the Restrictive Trade Practices Law (1988) allowing the prime minister to override the Antitrust Authority.

In other words, he said, once the stability clause mechanism is worked out, the rest of the plan can stand.

Because a legislative solution is unlikely, Shohat said, the decision would likely send the government back to the negotiating table with the gas companies, where the government would find a way to sweeten a deal soured by the prospect of further changes.

“The interest of the state and the gas partnership is to allow the expansion of [the] Tamar [reservoir], including exports, and a quick development of Leviathan. In our view, some change or another on the stability clause will be possible while providing some sort of compensation to the partnership,” Shohat said.

Last month, Netanyahu became the first serving prime minister to appear before the High Court as he defended his natural gas policy against five petitions filed by the Zionist Union, Meretz and various NGOs.

Netanyahu spoke bluntly, telling the expanded five-justice panel, presided over by Rubinstein: “We are in the 90th [last] minute in terms of our ability to realize the potential of the State of Israel’s gas... every additional delay... could lead to grave results and it is doubtful if we could recover from them.”

The main purpose of the affidavit and then the personal appearance was to justify Netanyahu’s first-ever use of the power of the economy minister (a role he recently took over) to bypass the Antitrust Authority’s objections to the proposed framework for the natural gas industry.

Noting that 50 percent of the country’s electricity is now generated using natural gas, the prime minister said that having only one reservoir running, Tamar, which is always at risk of threat of attack, leaves the country too exposed from a national security perspective.

The framework – a comprehensive accord aimed at settling disagreements between gas developers and the government – received cabinet approval in August and was officially activated on December 17 after Netanyahu invoked Article 52.

As part of the process of employing this article, Netanyahu was required to conduct consultations with the Knesset Economic Affairs Committee, chaired by MK Eitan Cabel (Zionist Union). While committee members voted against recommending the use of the clause, their conclusions were in no way legally binding and Netanyahu moved ahead without their approval.

Lahav Harkov contributed to this story.

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