Supreme Court approves $12.7 billion class action suit against gas industry

Largest lawsuit in Israel’s history claims Tamar natural gas consortium exploits monopoly to rip off Israeli electricity consumers

Sue Surkes is The Times of Israel's environment reporter.

An aerial view of the Ashdod Onshore Terminal, which receives the gas and condensate flow from Tamar. The existing site was adapted to receive offshore natural gas from Tamar. (Courtesy Noble Energy)
An aerial view of the Ashdod Onshore Terminal, which receives the gas and condensate flow from Tamar. The existing site was adapted to receive offshore natural gas from Tamar. (Courtesy Noble Energy)

The Supreme Court on Thursday gave the green light for a NIS 45 billion ($12.7 billion) class action against the private consortium that operates Israel’s only functioning natural gas production complex.

In ruling against the consortium’s appeal to reject the class action bid, the court also ordered it to pay legal costs of NIS 40,000 ($11,300), the Globes financial daily reported.

The petitioner, one Moshe Nazri — who like most Israelis, is a consumer of electricity — claims the companies are exploiting their monopoly over the Tamar gas field to charge the Israel Electric Corporation unfairly high prices.

Among the companies targeted by the suit, the biggest in Israel’s history, are Isramco, Dor Energy, Delek Drilling, Avner Oil & Gas Exploration, the Delek Group and US-based Noble Energy.

On the day he submitted his petition in June 2014, Nazri said the group was exploiting its position to charge the IEC $5.40 for a unit of gas-generated energy (mmbtu) when the real cost was $2.34.

An aerial view of the Tamar gas-processing rig off the southern coastal city of Ashkelon, June 23, 2014. (Moshe Shai/Flash90)

Backed up by a professional opinion from an American expert on the gas economy, Prof. James Smith, Nazri claimed that this would reap for the consortium profits of some NIS 2 billion ($567 million) a year.

Smith claimed, among other things, that the Tamar consortium was making a profit of around 57% a year on its investment.

After failing to convince the Tel Aviv District Court to throw out the request for a class action against it, the consortium appealed to the Supreme Court, which issued its ruling on Thursday.

Nazri’s lawyers Yitzhak Yaari and Gilad Barnea welcomed the court’s decision, saying it “removes one of the most significant legal obstacles on the way to compensating IEC consumers.

“In addition to the District Court, the Supreme Court also rejected the Tamar monopoly and the attorney general’s attempt to prevent a deep and thorough discussion about the fairness of the natural gas prices charged by the Tamar consortium.”

The court clarified that approval of the framework did not signify approval of the price.

Thousands of Israelis protested against a controversial agreement reached between the government and large energy companies over natural gas production, in central Tel Aviv, on November 14, 2015. (Tomer Neuberg/Flash90)

“We are convinced that at the end of the legal process, it will be found that the Tamar monopoly is using its monopolistic power to charge the most excessive price for the natural gas that belongs to every citizen of Israel.”

A statement from the consortium said that despite the two courts’ decisions, they were still confident that Nazri’s attempt was “futile” and destined to fail.

Nazri’s claims were exaggerated, and were cut off from the way the industry set prices and signed contracts for natural gas, the statement said.

The consortium charged that Israel was only now rehabilitating “the considerable damage caused to its reputation” by the long-delayed natural gas industry framework signed by the government.

Referring to last week’s discovery of a fault in an undersea pipeline serving Tamar, which forced temporary closure of the pipe for repairs and forced the IEC to resort to coal, which is costlier than gas, the statement said, “Only in the past week did the citizens of Israel understand how significant the contribution of natural gas is to the reduction of electricity prices and the reduction of air pollution in Israel.”

The Tamar field, which was discovered in 2009 and began production in 2013, has estimated reserves of up to 238 billion cubic meters (8.4 trillion cubic feet).

Leviathan, discovered in 2010 and set to begin production in 2019, is estimated to hold 535 billion cubic meters (18.9 trillion cubic feet) of natural gas, along with 34.1 million barrels of condensate.

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