Gas compromise clears another hurdle

Netanyahu says he is "determined to promote a realistic solution that will bring gas to the Israeli market."

A man points as he stands on a tanker carrying liquified natural gas, ten miles off the coast from Hadera (photo credit: REUTERS)
A man points as he stands on a tanker carrying liquified natural gas, ten miles off the coast from Hadera
(photo credit: REUTERS)
Following up a pivotal security cabinet decision on natural gas, the full cabinet on Sunday morning voted to transfer to the government’s hands authority to invoke a legal clause that could deem the resource’s development a matter of national security.
“I am determined to promote a realistic solution that will bring gas to the Israeli market,” said Prime Minister Benjamin Netanyahu at the cabinet meeting.
“I will not capitulate to populist proposals that will leave the gas deep underground. We have already seen enough countries that succumbed to these pressures and the gas has remained in the ground. This cannot be allowed to happen here.”
With one vote against and three abstentions, the government approved the transfer of Article 52 of the 1988 Restrictive Trade Practices Law (the Antitrust Law) from the hands of Economy Minister Arye Deri to those of the government.
Through this clause, which has never before been used in Israel’s history, an antitrust commissioner can be prevented from interfering in a “restrictive agreement” due to reasons of foreign policy or national security.
While this step still requires Knesset approval on Monday, the decision paves the way for the advancement of a compromise outline among government officials and gas companies aimed at settling six months of clashes in the sector.
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 constitutes an illegal “restrictive agreement.”
“The outline that has been formulated breaks up the monopoly,” Netanyahu said.
“In the coming decades it will put hundreds of billions of shekels into education, culture, health and many other things for the benefit of all Israeli citizens.
After years of discussions, the time has come to decide so that the gas will emerge from the ground and reach the Israeli economy and the citizens of Israel.”
Although the Antitrust Law’s Article 52 enables an economy minister to directly exercise his authority to invoke the clause, Deri transferred his powers on the issue to the hands of the government in Thursday’day before, he had warned Netanyahu that he would not act as a “rubber stamp” on the approval of what has become a divisive issue among politicians and industry stakeholders.
Because Deri waived his authority on the issue, Article 31a. and b. of the country’s Basic Law: The Government mandates that the transfer of powers receive Knesset approval as well.
At Sunday’s cabinet meeting, Environmental Protection Minister Avi Gabai (Kulanu) voted against the transfer, while two officials from the same party, Finance Minister Moshe Kahlon and Construction Minister Yoav Galant abstained from the vote, as did Welfare and Social Services Minister Haim Katz (Likud), according to media reports.
In May, Kahlon had recused himself from involvement in the gas sector due to the conflict of interest posed by his friendship with Koby Maimon, a shareholder in the Tamar gas field as chairman of Isramco. Meanwhile, Galant previously served as chairman of businessman Beny Steinmetz’s gas drilling firm, while Katz holds stock shares of Isramco, media reports said.
After the cabinet’s vote on the Article 52 transfer on Sunday, the Prime Minister’s Office stressed that the decision does not constitute an approval of the forthcoming compromise outline. Rather, the outline will be submitted for public comment in the coming days and subsequently be discussed by the cabinet.
The question remained on Sunday whether the transfer of authorities would garner enough votes at Monday’s Knesset session.
In what might serve as the tipping point in a close decision, Yisrael Beytenu indicated its willingness to vote for the transfer’s passage, initially in a report by business newspaper Calcalist. Responding to a query from The Jerusalem Post as to whether the party’s MKs did intend to support the transfer, a spokesman said, “In principle, yes.”
“We said that we will be a businesslike opposition and our stance remains as it was previously when we were in the government, and we followed the line delineated by Uzi Landau, who was infrastructure minister and opposed Sheshinski,” he added.
The spokesman was referring to the Sheshinski Committee, whose recommendations received Knesset approval in March 2011, determining a new taxation method for the exploitation of Israeli hydrocarbons.
Ahead of Monday’s Knesset vote, Economic Affairs Committee Chairman Eitan Cabel (Zionist Union) wrote an urgent letter to the attorney-general as well as the Knesset’s legal adviser, demanding an investigation of the conflicts of interests that exist among various MKs on the gas issue.
Cabel wrote that “in light of the failure of the finance minister and the construction minister to be involved with and certainly to vote on the gas agreement issue, and in light of media reports regarding potential conflicts of interests of Knesset members on dealing with the gas issue, I request an emergency examination on the conflicts of interests of Knesset members before the issue is brought to a vote in the Knesset.”
Knesset Legal Adviser Eyal Yinon responded to Cabel, saying there is no rule that an MK has to recuse himself from a vote on a matter in which he or she has a conflict of interest, though lawmakers may choose to do so of their own volition. Should an MK decide to vote despite a conflict of interest, he or she must declare the conflict to the Knesset Ethics Committee and before the plenum.
The advancement of Israel’s natural gas sector has been largely frozen since the antitrust commissioner’s December announcement – a situation that Netanyahu and his supporters are aiming to solve through the decisions of the past few days and a forthcoming vote on the terms of a compromise outline.
Although gas from the 282 billion cubic meter Tamar reservoir, located about 80 km.
off the coast of Haifa, has been flowing into Israel since March 2013, work on the neighboring 621 Leviathan basin has been unable to proceed as a result of the ongoing disagreements.
Intending to end the development freeze, an interministerial team – from the Finance Ministry, the National Economic Council and the National Infrastructure, Energy and Water Ministry – presented Delek Group and Noble Energy with versions of a compromise outline on February 18 and again on May 6.
While government officials said the companies responded favorably to the second outline, Gilo announced on May 25 that he would resign effective in August because of his differences with other officials on the outline’s terms.
If the government approves the latest version of the outline, Delek Group’s subsidiaries Delek Drilling and Avner Oil Exploration will be forced to exit the Tamar reservoir, 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 Group subsidiaries and Noble Energy would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin. Those sales must take place within 14 months, with the possibility of operating them for a further four months under the supervision of a trustee.
In the Leviathan reservoir, the current outline would allow the companies to conduct joint sales of gas to Israeli consumers for the first 10 years of operation, potentially introducing a competitive, separate marketing structure thereafter.
Lahav Harkov and Niv Elis contributed to this report