The decision by Professor David Gilo, Director of the Israel Antitrust Authority, to reconsider the consent decree that would have allowed Delek Group and Noble Energy to retain ownership and control over the massive Tamar and Leviathan natural gas fields, which represent almost all of Israel’s proven natural gas reserves, has stirred up quite a bit of controversy.

Few would argue that the agreement that was reached, which would have had Delek and Noble dispose of their holdings in a few smaller fields, was optimal. Holding less than 10% of proven reserves, it is unclear that these smaller fields, Tanin and Karish, will be developed anytime soon, so their sale to new owners would do little if anything to promote competition and prevent a gas monopoly within Israel. But one can also empathize with Delek’s and Noble’s objections to the rolling back of what they had thought was a done deal. Upstream gas development projects require substantial capital outlays, and are premised on very long-term plans and forecasts. Abrupt shifts in policy do little to provide the climate of fiscal and regulatory certainty that supports such investments.

It is necessary to understand, however, that antitrust regulation is just one component of the fiscal and regulatory environment. And it is only fair to acknowledge that Israel’s government has made tremendous strides in defining almost every other fiscal and regulatory policy needed by the natural gas industry, within an extremely compressed timeframe. Since Tamar’s discovery in 2009, Israel has adopted a comprehensive tax framework, determined export quotas, defined a transfer pricing policy, assigned distribution licenses and moved forward on a host of other fiscal and regulatory issues of concern to Israel’s natural gas industry, including standards for natural gas vehicles and fueling stations. In other words, Israel’s government has put into place, within a handful of years, the legal, fiscal and regulatory framework that most countries have required decades to develop.

Given the pace and scale of these efforts, it was only to be expected that certain policies and decisions would need to be revisited. The agreement that Delek and Noble struck with the Antitrust Authority unfortunately falls within this category, and it has become clear that there is no quick fix for the situation. But while the divestiture of the small fields did not represent a viable path toward a competitive natural gas market, neither do some of the new solutions currently being discussed.

The forced divestiture of Tamar, for example, would not remedy the situation, since most or all of the production capacity available to the local market from that field has already been sold under long-term contracts. Therefore, a new owner would not promote competitive pricing and access to new supply within Israel’s domestic market. Nor would the sale of interests in Leviathan have the desired effect, since operational constraints and shared interests severely limit the extent to which multiple owners of a single field can act independently of one another.

Given this reality, where the vast majority of uncontracted natural gas still available to the local Israeli market resides in a single offshore field (i.e., Leviathan), there is a need for creative ideas that reflect Israel’s unique circumstances, and do not merely try to impose the “go-to” remedy (i.e., divestment) for market power that has been used within other industries and markets. Nor should Israel revert to price controls or other harmful interventions that are certain to achieve suboptimal results for all of the stakeholders involved, especially the Israeli public.

In this spirit, I believe that Professor Eytan Sheshinski’s recent suggestion that local gas prices could be tied to a basket of international markets represents the type of creative thinking that is needed. I believe that this idea is promising, but special care would be needed in its implementation, especially with regard to the selection of appropriate benchmarks. The natural gas markets included in the price basket should represent nations that are either net exporters of or are self-sufficient in the commodity, and they should have free, competitive markets. The US and Canada come to mind as two candidates to consider, along with several others.

Professor Sheshinski’s price basket idea does not, however, directly address an issue that is as or more critical than ensuring competitive pricing. Allowing those who control Leviathan to have the power to decide who can gain access to natural gas supplies within Israel and who cannot is perhaps the greatest single energy-related threat to Israel’s economy and the public interest.

Let’s take transportation as just one example. A number of energy analysts, myself included, expect that a substantial portion of Israel’s transportation sector will transition to natural gas-fueled vehicles (NGVs) in the coming years, as have a number of other countries with sizeable gas resources and relatively high petroleum prices. But this forecast relies on the assumption that natural gas will be available to new businesses in the NGV fueling sector, which may not be the case.

Delek would be in competition with these businesses, either through their own compressed natural gas (CNG) fueling stations, which they are now developing, or through their 250 conventional fueling stations, since converted NGV’s are capable of using either CNG or petroleum fuel. Either way, it would not be in Delek’s interest to provide a direct competitor to one of its core businesses with the most favorable natural gas contract terms, or with any supply at all. Given Delek’s extensive interests throughout Israel, this is just one of a number of industry sectors that may be harmed by concentrated control over Israel’s natural gas supplies.

Therefore, I believe that another approach that should be considered is an open access auction for available supplies. All Israeli companies meeting reasonable financial and other qualifications would have an equal opportunity to bid for available gas supplies from Leviathan. Delek and Noble would determine the quantities of natural gas available for different timeframes (e.g., day ahead, month-ahead, and years ahead), and bidders would specify the maximum price they would be willing to pay for a portion of the available supply. The bids would reflect the domestic market’s natural gas demand curve. When combined with what is a very inelastic supply curve, the resulting auction clearing price would provide a good approximation for the market clearing price that would be expected under a competitive market. The regulators’ job would be to oversee the process to ensure that the auction market operates fairly and freely.

Israel’s government could also reduce the risk of monopoly pricing and control over the domestic natural gas market through actions that enhance the competitiveness of liquefied natural gas (LNG) imports. After Egypt cut off its gas exports to Israel in 2011, Israel commissioned an LNG buoy off the coast of Hadera and a floating storage and regasification terminal (FSRU), through which Israel Electric was able to import substantial quantities of LNG to reduce the impact of lost Egyptian supply until Tamar started production. While the prices charged by suppliers were quite high, global LNG prices have since plummeted, and may soon be competitive with local prices from the Leviathan partners.

By doing what it can in terms of tax and other policy measures to ensure that LNG provides a viable alternative, Israel’s government will allow global LNG prices to serve as a market-based cap on the prices that can be charged to local consumers. Israel can facilitate a regular tender process where international LNG suppliers can offer cargos to large local consumers (e.g., Israel Electric Corp.) and aggregators. Not only would LNG imports introduce price competition, they would also help to ensure access to supply by providing an independent, alternative source of natural gas.

As a case in point, Lithuania’s gas supplier Litgas was recently able to reduce the market power and control that Russia-based Gazprom had over its local gas supply and prices by setting up an LNG regasification terminal. Litgas was then able to purchase substantial quantities of LNG from Norway’s Statoil at prices below those being charged by Gazprom for pipeline gas, and this led immediately to Gazprom reducing its prices to Litgas for new supplies.

Israel excels at finding creative solutions to the most challenging of problems, and this case should be no different. There are market-based approaches that can protect and advance the interests and objectives of all the stakeholders in Israel’s natural gas market, and the sides should be working together to implement them.