Opposition MKs, gov’t officials, gas companies spar over controversial outline

A Knesset Economic Affairs Committee discussion on Monday devolved numerous times into a shouting match among opposition MKs, government officials and gas company representatives.

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July 6, 2015 21:00
Israeli Knesset

Israeli Knesset members arguing in parliament.. (photo credit: KNESSET CHANNEL)

 
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A Knesset Economic Affairs Committee discussion on Monday regarding the recently published natural gas outline devolved numerous times into a shouting match among opposition MKs, government officials and gas company representatives.

Committee chairman Eitan Cabel (Zionist Union) convened the session in order to initiate public debate on the outline, which was released by National Infrastructure, Energy and Water Minister Yuval Steinitz last Tuesday. Steinitz published the terms of the outline ahead of forthcoming cabinet discussions on the subject, following six months of disagreements among government officials and natural gas companies that have largely frozen the sector’s advancement.

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The disputes 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.

At the beginning of Monday’s meeting, Morris Dorfman, deputy head of the National Economic Council in the Prime Minister’s Office presented participants with key elements of the outline, stressing the importance of “developing the reservoirs as quickly as possible” and ensuring “competition among the reservoirs.”

"At the moment we are dependent on one reservoir, one pipeline," Dorfman said. "We are all working for the benefit of the citizens. We have no other goal."

While the 282-billion cubic meter Tamar reservoir, located about 80 km. west of Haifa, has been flowing to Israel since March 2013, development of the 621-b.cu.m. Leviathan reservoir – another 50 km. west – has failed to proceed due to the disagreements. Meanwhile, only one intake pipeline from the Tamar reservoir currently exists.

Amid continued interruptions from opposition MKs, Dorfman discussed the outline’s terms, among which would involve Delek subsidiaries Delek Drilling and Avner Oil Exploration exiting Tamar within six years. Houston-based Noble Energy would be able to remain the basin’s operator, needing to dilute its ownership from the current 36 percent share to 25% within the same time frame.

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The Delek subsidiaries and Noble Energy would need to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin, within 14 months. The companies would be able to retain their current stakes the much larger Leviathan reservoir, though the government would reserve the right to demand separate marketing within 10 years or less if competition does not begin.

Until a competitive market is achieved, a price ceiling with linkage to market changes – at this point, $5.40 per mmBtu – would be enforced. If a company ended up exporting gas at a price that is lower than its sales price in the domestic market, the firms would need to sell its gas in Israel at the lower price.

Opposition MKs as well as many NGO leaders remain vehemently against the terms of the deal, arguing that the outline would fail to ensure competition and demanding gas price supervision.

During Dorfman’s presentation, MK Shelly Yachimovich (Zionist Union) interrupted him to tell him that “with government officials like you, the gas companies do not need lobbyists.” MK Yoav Kish (Likud) quickly came to Dorfman’s defense, criticizing Yachimovich for calling him a lobbyist.

"It's a great shame that there is decisive coordination among the tycoons and the government," Yachimovich later added, in her own address to the committee. 

Attorney Gilad Barnea, who said he is representing the public interest, slammed the government for only giving Israeli citizens 21 days to respond to the published outline.

"The outline is the rotten fruit of an illegal process to circumvent the Antitrust Tribunal," added attorney Nili Even-Chen, from the Movement for Quality Government.

Antitrust Commissioner Gilo also addressed the committee session, emphasizing how he and the other government officials simply “arrived at different professional conclusions.” With Noble Energy maintaining a 25% stake in Tamar and a nearly 40% share of Leviathan, he explained that he does not believe that competition can be achieved.

"Unfortunately, the outline that was submitted will not lead to competition in my opinion and I therefore could not sign on to it,” Gilo said.

Prior to the Economic Affairs Committee meeting, dozens of students gathered to protest the gas deal outside government buildings in Tel Aviv on Monday morning.
The students invited those passing by to join them in drawing dollar signs on gas filled balloons and send them up into the air above the government buildings. Their protest followed a National Union of Israeli Students meeting last Friday in which members decided to work toward lowering the gas prices.

"We are because we cannot accept the price and the current lack of supervision, we must work ensure that the cost of living is reduced," said Limay Barzelay Oren, head of Student Union at the Kibbutzim College of Education.

Meanwhile, back at the Knesset committee session, Environmental Protection Ministry officials presented a risk analysis on plans to accelerate exports from the Tamar reservoir, in comparison to preserving these resources for local use. They calculated that such a transition could amount to a loss of market benefits equivalent to NIS 62 billion over the next 15-20 years.

Rather than expediting exports from Tamar, using the gas from this reservoir locally could benefit the national economy, as well as reduce mortality and morbidity due to changeovers to natural gas use in factories, the officials said.

In 2013, the cabinet decided to cap exports at 40% of the country’s total natural gas production, also establishing that 540 b.cu.m would be maintained for domestic usage. Although previous decisions had determined exports from Tamar would need to wait for the development of Leviathan to conclude, stipulations in the new outline would enable those from Tamar – particularly to Union Fenosa’s liquefied natural gas facility in Egypt – to move forward without such a wait.

"The government must ensure the acceleration and expansion of the domestic use of gas and the reliability and supply surplus to the market due to fears of glitches in a single pipeline that has no backup," said Or Goldfarb, deputy director-general for economy and technology at the Environment Ministry.

Executives from the natural gas companies also attended the Economic Affairs Committee session, expressing their dissatisfaction with the government’s handling of natural gas regulations and its treatment of the companies over the years. Bini Zomer, Israel country manager for Noble Energy, spoke of “distortions, in fact, lies, spread by those who prefer hurting the entrepreneurs over helping the Israeli public.”

"It cannot be that the only foreign company that was willing to work in Israel is now considered an enemy of the state and of the public," Zomer said.

These comments launched a screaming match among MK Tamar Zandberg (Meretz), who has been particularly vocal against the gas deal, and others at the meeting, leading the committee chairman Cabel to intervene. Cabel expressed support for Zomer's right to speak, but demanded that continued comments stick to practical and professional references. 

Although the gas outline's terms have been published, bringing the document to the cabinet for approval still faces a hurdle that the government had expected to overcome last Monday. That evening, the coalition chose to postpone a Knesset vote on a legal matter that would have allowed the government to disregard Antitrust Commissioner Gilo’s objections to 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.

Because Economy Ministry Arye Deri declined to exercise his authority to invoke the an article of the Antitrust Law that would allow for this circumvention, such powers needed to be transferred to the hands of the government – a move that would require both cabinet and Knesset authorization.

While the transfer received cabinet approval last 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.

At the end of the Economic Affairs Committee session, Cabel said that such a transfer of powers cannot occur without the consultation of the Economic Affairs Committee chairman. He also promised to hold an additional discussion on the gas outline next week.

"I demand that the government hold a real public hearing and not simply check this off," he said. "If it does not pass through me, it will not pass."

Hayah Eichler contributed to this report.

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