Members of the public can submit reactions to gas outline until July 21

Knesset votes down probe of gas plan

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July 1, 2015 22:03
The Knesset

The Knesset . (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

 
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Members of the Israeli public have three weeks to file their reactions regarding the gas compromise outline published on Tuesday, the National Infrastructure, Energy and Water Ministry announced on Wednesday. The day after National Infrastructure, Energy and Water Minister Yuval Steinitz presented the terms of the outline, ministry officials invited the public to email their commentary, questions and concerns to gastv@energy.gov.il by July 21. All positions filed must be concise, not exceeding 10 pages, but can include attached documents and appendices, the ministry said.

Members of the public must include all of their personal details clearly, but the ministry is not obliged to respond to submissions. If necessary, ministry officials can summon an individual to appear before them, use the content of submitted documents for formulate final recommendations and publish any materials received, rules on the ministry's website said.

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While a version of the compromise outline is not currently available in English, the precise details of the submission rules and copies of the outline itself in Hebrew are available on the ministry's website, at energy.gov.il. At a Health Ministry even on Wednesday morning, Prime Minister Benjamin Netanyahu spoke in favor of the terms of the outline.

"We cannot talk about investments without investors. We cannot talk about competition without competitors. We cannot talk about gas without gas," Netanyahu said. "We have the ability to remove it from the sea, and therefore we are bringing forth this balanced and correct outline." The prime minister explained that gas is a vital source of electricity, and the development of multiple fields and intake pipelines.

"We have gas, but we have many more sources of gas, many more," Netanyahu said. "We can promote what is right for the Israeli economy and the electricity needs of the State of Israel, and also enable investors to invest here and attract new investors." After six months of disagreements among government officials and natural gas companies that have largely frozen the sector’s development, Steinitz released the outline’s final terms for public commentary, which will precede cabinet discussions on the subject. The disputes in the natural gas sector are the result of Antitrust Commissioner David Gilo’s December announcement that he would review whether the market dominance of the Delek Group and Noble Energy constituted an illegal “restrictive agreement.” Since then, members of an interministerial team have formulated several drafts of a compromise outline to settle the issue, the final version of which was released on Tuesday.

Among the goals of the outline, Steinitz explained that day, was the swift development of Leviathan, requiring the companies to do so by the end of July 2019.

Under the outline, Delek subsidiaries Delek Drilling and Avner Oil Exploration would have to exit the 282-b.cu.m. Tamar reservoir, whose gas began flowing to Israel in March 2013, selling their assets there within six years. Houston-based Noble Energy could remain the basin’s operator, needing to dilute its ownership from the current 36 percent share to 25%.



The Delek subsidiaries and Noble Energy would need to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin, within 14 months. Because the buyer would be required to sell gas only to Israel, export allocations intended for these reservoirs would be transferred to Leviathan, according to the outline.

In 2013, the cabinet decided to cap exports at 40% of production.

The outline says the Karish and Tanin buyer would be required to provide “skin in the game,” a phrase meaning that buyers must demonstrate that they have undertaken serious monetary risk through their investment. As an incentive for a quick transaction, the government would allow for Delek and Noble to receive up to 9% of royalties from Karish and Tanin gas sales if they sold the reservoirs within eight months, and up to 7% if they sold within 14.

When negotiating prices with Israeli firms, gas companies will have two options, according to the terms of the outline. The first will involve a formula that takes into account revenues from gas sales made during the previous quarter, divided by the cumulative amount of natural gas in million British Thermal Units (mmBtu). At the beginning of each quarter, the base price will be updated.

The second option is to calculate sales prices based on the best existing consumer contracts in the market, taking into account current prices for benchmark Brent crude oil. If a company exports gas at a price that is lower than the price on the domestic market, it will need to sell its gas in Israel at the lower price, Steinitz stressed.

Until a competitive market is achieved, a price ceiling with linkage to market changes – at this point, $5.40 per mmBtu – would be enforced, Prof. Eugene Kandel, head of the National Economic Council in the Prime Minister’s Office, explained.

With regard to infrastructure, pipelines designated for export will not be entitled to tax benefits guaranteed to local pipelines, as mandated by the Sheshinski Committee, whose recommendations on hydrocarbon taxation became law in 2013. Although the compromise outline has been published, bringing the document to the cabinet for approval still faces a hurdle that the government had expected to overcome on Monday. That evening, the coalition chose to postpone a Knesset vote on a legal matter that would have allowed the government to circumvent Antitrust Commissioner Gilo’s objections to the compromise deal. Gilo has made clear that he would not support the outline and went so far as to announce on May 26 his resignation, effective in August.

To sidestep the antitrust commissioner’s authority, Prime Minister Benjamin Netanyahu and other proponents of the compromise deal promoted invoking Article 52 of the 1988 Restrictive Trade Practices Law (the Antitrust Law), through which an antitrust commissioner can be prevented from interfering in a “restrictive agreement” due to reasons of foreign policy or national security.

Because Economy Ministry Arye Deri declined to exercise his authority to invoke the article, transferring his powers to the government required both cabinet and Knesset authorization. While the transfer received cabinet approval on Sunday, the Knesset vote was eventually postponed, after too many coalition MKs refused to participate, leaving the opposition with a majority.

It remains unclear when a new vote on the matter will take place.

On Wednesday, however, Knesset members decided that they would not be forming a commission of inquiry into the way the government made decisions related to natural gas, voting down Meretz MK Tamar Zandberg's proposal 37-55 .

Zandberg called the gas deal undemocratic, both because the antitrust commissioner is being stripped of his authority to oppose it and because the Knesset will not be able to change it for the next decade.

"The wealthy can smile with their cigars," she said. "We need a parliamentary commission of inquiry so that we can have a transparent discussion about the gas in the Knesset." Steinitz said on Wednesday that years ago, he saw Zandberg portray him in a play at a protest of gas-related decisions and said that, back then, she did a good job, but is now misrepresenting him.

"Just as I acted as finance minister against the energy companies and in the public's favor, that is how I behave today," Steinitz said. "Energy companies had to accept the most difficult conditions of all [gas-producing] OECD countries." Steinitz lamented "populism, distortion and incitement" by the gas plan's opponents.

The bill was rejected, even though on Monday the coalition did not have enough votes on its side for the Article 52 motion, because Yisrael Beytenu voted against Zandberg's initiative and Yesh Atid MKs were absent from the plenum during the vote.

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