Gas deal still stuck despite Knesset approval

Netanyahu confident he can overcome last obstacle - circumventing antitrust commissioner's opposition - which the coalition twice failed to approve.

By LAHAV HARKOV
Updated: SEPTEMBER 8, 2015 00:03
Prime Minister Benjamin Netanyahu (photo credit: KOBY GIDEON/GPO)
Prime Minister Benjamin Netanyahu
(photo credit: KOBY GIDEON/GPO)
The Knesset voted in favor of the government’s natural gas outline 59-51 on Monday, but it cannot move forward because the coalition could not get a majority on a critical vote to transfer Economy Minister Arye Deri’s authority on the matter to the full cabinet.
“This is a big day for the State of Israel,” Prime Minister Benjamin Netanyahu said following the vote. “This will bring tens of billions of dollars to education, welfare, and health and tens of billions of dollars in new investments in Israel.”
The gas outline is not a bill, and as such the vote in the Knesset was not necessary, although the approval would elevate its public standing.
However, the gas plan still cannot be implemented, because opposition from the former antitrust commissioner and Deri’s refusal to use Article 52 of the Antitrust Law, allowing him to approve a deal despite that opposition if it is a matter of national security or foreign relations.
Throughout the day, the coalition tried to garner a majority in the Knesset in favor of transferring Deri’s authority to the full cabinet, which it had previously failed to do in July. The pro-con balance on the vote on the outline itself was different from that on the transferral of authority to the cabinet necessary to implement it, due to Yisrael Beytenu’s refusal to vote for the transference even though four of its MKs voted in favor of the deal.
After hours of efforts by coalition leadership, a 55-55 tie – seven MKs were absent and Finance Minister Moshe Kahlon, Construction Minister Yoav Galant and Welfare and Social Services Minister Haim Katz avoided the vote because of conflicts of interest – remained between them and the opposition, none of whose MKs could be convinced to skip the vote.
Still, Netanyahu did not admit defeat, citing the eightseat margin by which the outline was approved despite the one-seat difference in the coalition and opposition’s numbers, and expressing confidence that he could get past the problem with Article 52.
“There’s still an obstacle, but you know that when I want something, I get it,” he said.
“I want this for the citizens of Israel, to lower the cost of living.
We need energy security and we will get it, step by step, obstacle by obstacle... I want the gas plan because it is the right thing to do for Israel’s economy.”
The prime minister did not answer questions as to how he will overcome the last obstacle, except to deny, when asked, that he is considering firing Deri.
Deri refuses to be the first minister to ever use Article 52, saying he would rather wait for a new antitrust commissioner to be appointed, after commissoner David Gilo’s resignation took effect last week, and approve the deal, which could take as long as a year.
However, since in the past Deri said he would use the article if the Knesset approved the gas deal, some in the coalition hope that he would return to that statement.
Still, after the vote passed, Deri said: “I did not think and today I still do not think that one minister should take [Article 52] upon himself, which is an unprecedented act, and therefore I asked the full cabinet to take the authority.... Today we passed the gas outline and I believe that we will soon get a majority in the Knesset to take these authorities from me.”
In addition, coalition sources said the vote was important to show the companies with which the government made the deal – Noble Energy and Delek Group – that some progress was being made.
Describing the Knesset decision as “democratic,” a joint statement from Delek Group subsidiaries Delek Drilling and Avner Oil Exploration praised the MKs for “saying ‘yes’ today to promoting the natural gas sector in Israel.”
“Now the path has been cleared for making the huge investments required for the development of the Leviathan reservoir and the expansion of the Tamar project, in a way that will ensure Israel’s energy independence and take advantage of the geopolitical window of opportunity for exporting gas to neighboring countries,” the statement said.
The Delek subsidiaries stressed how the gas reservoirs will provide “an engine of growth for the Israeli economy,” generating hundreds of billions of shekels for the country and creating new jobs and industries.
“The State of Israel has lost precious years because of political and regulatory delays, but today the Knesset decided unequivocally to act immediately to develop the reservoirs,” the Delek statement added. “We must not waste time with other political delays – we must complete the required procedures and set out on a new path.”
Houston-based Noble Energy likewise reacted favorably to the vote, urging the government to now implement the outline as soon as possible so that the development of Leviathan can move forward.
“After the final approval of the outline, we can advance and bring about the closure of necessary export deals, rebuild project work teams, close necessary contracts with suppliers – including local suppliers – and mobilize the required external financing,” the Noble Energy statement said. “All of these things can lead to a final investment decision on the Leviathan project.”
In a follow-up statement “for the avoidance of doubt,” Noble Energy stressed the company’s commitment to the outline, estimating that it would be possible to reach a final investment decision in 2016 – subject to the signing of contracts.
“Completion of the project will take three to four years from the date of a final investment decision,” the company added.
While the current outline focuses on a number of issues, some of its main elements include establishing pricing schemes, developing the Leviathan reservoir and ensuring stability. The outline sets a gas price for electricity producers that would be about $4.70 per mmBtu (million British thermal units), with linkage to market changes. While both Noble Energy and the Delek Group subsidiaries would need to sell their shares of small reservoirs Karish and Tanin, Noble would be able to maintain a scaleddown presence in the Tamar reservoir and the Delek firms would need to exit entirely. In exchange for demonstrating a $1.5 billion financial commitment in the Leviathan reservoir within two years – and $4b.
within five years – the companies would gain 10 years of guaranteed governmental stability.
Before the plan was approved, the Knesset held a passionate and loud five-hour debate, over an hour of which was dominated by National Infrastructure, Energy and Water Minister Yuval Steinitz’s defense of the gas outline, peppered with shouts from the opposition.
“Without developing the Leviathan [gas field], we will be a Chelm state that missed an opportunity,” he said, referring to folk tales of a shtetl filled with fools.
Steinitz said tens of millions of shekels could have entered the state’s coffers if the Leviathan gas field’s development had not been delayed for five years and three months.
“Everyone agrees that the current situation is unhealthy,” he continued. “We have one field, one group and one monopoly.
International companies stopped looking for gas in Israel.
Some were here and we chased them away. If we were attractive and the outline had been approved years ago, then just like in Egypt, Cyprus and Canada, people would be drilling for our gas.... International companies invest where it’s worthwhile; whoever ignores that is ignoring reality.”
Steinitz said that, while Israel already is using gas from the Tamar field, it is important to develop Leviathan because of energy security, because a problem in one of the pipelines could take months to fix and this way there would be another.
The deal would require that Leviathan be developed within four years.
In addition, the minister said that the outline changes the structure of the gas companies’ holdings in the fields, requiring Delek to sell its shares in Tamar within six years and encouraging new investors to search for more fields.
“According to studies we have, there are great quantities of gas and certainly oil, as well, that are waiting to be discovered in our economic waters,” he stated, adding that additional investors finding them “would be the best in terms of [avoiding a] monopoly and our energy security.”
In connection to the price, Steinitz explained that it is not regulated, but that there are three elements limiting it and making sure it will cost less than the OECD average.
“The proposed outline does not give gas companies an easy time,” he said. “We are the country that has the most limitations on [gas] companies in the Western world.”
Responding to questions from MKs Shelly Yacimovich (Zionist Union) and Zehava Gal-On (Meretz) about the recent discovery of a major gas field in Egypt, Steinitz said the Israeli government did not know about it in advance, but he credited the find with the current Egyptian government creating a more investor-friendly regulatory environment.
“If we keep waiting and there are additional revelations in Egypt and Cyprus, they may not need Israeli gas in Egypt and Jordan anymore, and we will have lost a diplomatic, economic and energetic opportunity,” he warned.
Yacimovich, one of the gas deal’s most vocal and consistent critics, accused the government of lying to and betraying the public in the service of “big money.”
“You stole the biggest chance to lower the cost of living,” she said. “I am embarrassed for Steinitz after his speech here....
No other leader of a country worked so hard for a monopoly [like Netanyahu].”
The Zionist Union MK saved some of her sharpest barbs for Kahlon, calling him a disappointment.
“Kulanu acted like they’re deliberating, and then we hear their praise for the outline. It’s clear that there is a deal between the finance minister and the prime minister, a rotten deal that stinks. We know that you promised him the amount of votes he’ll need! You had the last chance to show who you work for – the tycoons or the wider public?” she asked.
During the discussion, rumors that the Joint List would skip the vote in exchange for increased funding to Arab municipalities Netanyahu promised last month – which ended up being untrue, as every single member of the faction voted against the gas deal – came up again and again.
Joint List chairman Ayman Odeh emphatically denied the reports: “These are malicious rumors. Whoever is spreading it is trying to create a false image as if the Arab public is an extortionist sector, motivated by foreign interests, whose representatives in the Knesset can be bribed and bought.”
As for the outline itself, Odeh said it is “scandalous, antisocial and anti-democratic.”
A speech by Joint List MK Jamal Zahalka during the debate, in which he accused Labor Zionism of racism, went viral.
Zahalka’s ire was especially piqued by MK Stav Shaffir (Zionist Union), who sent a letter to Attorney-General Yehuda Weinstein demanding that he investigate if Netanyahu promised funds in exchange for votes, and by the Zionist Union’s voting in favor of the anti-terrorism law, among other legislation the Joint List perceived as anti-Arab.
“Miss Social Justice Stav Shaffir has never said a word to me.
She’s never even said hello to me! I am transparent to her.
Arabs do not exist! Racist! Racist of silence! Racism of ignoring; I will tell you what that is! Ignoring the existence of a person! Since you are in the Knesset you have never spoken to me! You don’t say hello to me! I try and you don’t say hello back! Racist!” Zahalka exclaimed.
“What a lie,” Shaffir shouted back at him.
Zahalka continued, calling the Labor Party, which makes up most of the Zionist Union, the “mother and father of racism.”
“You invented racism,” he said. “The people who took our land, who expelled us, weren’t the ones who chant ‘death to Arabs.’ They’re the ones who said ‘we’re bringing peace to you.’ Shame! You should be embarrassed by the racism and discrimination!... You are condescending, wealthy, comfortable Ashkenazim! Give us back the land you took from us... in the name of universal values!” “Who harmed us more, the Likud or Labor? Labor, of course.
Likud built settlements next to Arab residents. You built your kibbutzim and your socialism on the ruins of our towns. Your faces are ug-ly, ug-ly, ug-ly,” Zahalka chanted.
“And you said we’re leftwing,” Deputy Knesset Speaker Yoel Hasson (Zionist Union) quipped to Science, Technology and Space Minister Ophir Akunis.
Several hours later, Shaffir wrote on Twitter: “Hello everyone! Just making sure you saw.”
Sharon Udasin contributed to this report.


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