Despite anger, court ruling on gas deal leaves room to push forward

Netanyahu’s dire warnings after judgment on ‘stability clause’ overblown as government can still compensate energy firm or pass new legislation to get gas flowing, analyst says

Prime Minister Benjamin Netanyahu in the assembly hall of the Israeli parliament, March 28, 2016. Yonatan Sindel/Flash90)
Prime Minister Benjamin Netanyahu in the assembly hall of the Israeli parliament, March 28, 2016. Yonatan Sindel/Flash90)

AFP — Prime Minister Benjamin Netanyahu’s bid to turn Israel into a natural gas exporter has hit a major snag over a court ruling, but he still has room to maneuver, analysts say.

The Supreme Court on Sunday struck down a complex agreement intended to lead to the development of a large gas field in the Mediterranean.

The case has been closely watched in Israel, with Netanyahu appearing before the judges himself to make his case.

Justices objected to a clause that guaranteed regulations linked to the gas industry would not change for a decade, arguing that it would limit the authority of future governments.

The court, however, suspended its ruling for a year to give the government time to amend the agreement, allowing the deal that took months to negotiate to be salvaged.

“As a matter of fact, the court approved most of the decisions of the government,” said Barak Medina, a law professor at Hebrew University.

A consortium led by US energy firm Noble sought the 10-year guarantee as it prepares to invest to develop the Leviathan field, considered among the largest recent gas discoveries.

Netanyahu strongly criticized the ruling, saying it “severely threatens the development of the gas reserves of the State of Israel.”

He has also vowed to find other ways to “overcome the severe damage that this curious decision has caused the Israeli economy.”

Medina said he was troubled by Netanyahu’s attack on the court, especially since it had rejected only one part of the agreement.

He said the reaction likely had more to do with politics than the decision itself, with Netanyahu’s opponents strongly against the agreement, which they say overly favors the companies involved.

Noble’s reaction was more measured, while at the same time urging a quick resolution.

“The court’s ruling, while recognizing that timely natural gas development is a matter of strategic national interest for Israel, is disappointing and represents another risk to Leviathan timing,” CEO David Stover said in a statement.

“It is now up to the government of Israel to deliver a solution which at least meets the terms of the framework, and to do so quickly.”

An aerial view of an Israeli offshore gas rig (Albatross Aerial photography/Noble Energy/Flash90/File)
An aerial view of an Israeli offshore gas rig (Albatross Aerial photography/Noble Energy/Flash90/File)

Anti-trust concerns

Israel has been trying to extract offshore gas since the discovery of the Tamar and Leviathan fields in 2009 and 2010.

Production has begun in Tamar, but the far larger Leviathan has been hit by a series of delays.

Noble and its Israeli partner Delek have hoped to bring Leviathan online in 2019, providing Israel with a new, large supply of natural gas and allowing it to export.

Development of the field holds important implications for Israel’s efforts toward energy independence in a country where the high cost of living is a key political issue.

But exports could also affect diplomacy in a turbulent region where Israel is in constant search of allies.

Netanyahu has pushed hard for the deal, and his maneuvering to override anti-trust authorities has led to concern.

He used an obscure clause allowing it to be pushed through by the economy minister — a portfolio he holds.

Netanyahu has not said how he intends to move forward now, though he could seek parliament approval for the deal in a bid to give it more legal standing.

Medina said however that the court’s ruling may allow him to implement necessary changes without parliament.

A way to resolve the issue could be to work out a compensation arrangement for firms involved if regulations change, he said.

It would then return to the court for review.

But while avoiding parliament may be the fastest route, the companies involved may be better off if legislation is passed, said Brenda Shaffer, who has advised the Israeli government on energy issues.

Legislation would prove more durable than a government decision, she said, though Netanyahu’s coalition holds only a slim majority in parliament of 61 seats to the opposition’s 59.

“It might even be better for the companies because (the deal) probably was not very sustainable without parliament approval,” said Shaffer, a visiting professor at Georgetown University in the United States.

“So I think even though the companies are unhappy today, it probably in the long run is in their interest.”

Times of Israel staff contributed to this report.

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