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Why should you and I give the gas monopoly NIS 325 million?

Taxpayers are slated to foot half the bill for a new pipeline to carry gas that's already absurdly overpriced. Let's stop it.
View of the Israeli Leviathan gas processing rig as seen from Dor Habonim Beach Nature Reserve, on January 1, 2020 (Flash90)
View of the Israeli Leviathan gas processing rig as seen from Dor Habonim Beach Nature Reserve, on January 1, 2020 (Flash90)

Since 2009, Israel has discovered several large natural gas fields in the deep water off the country’s coast. The two primary fields, Tamar and Leviathan, can supply most of Israel’s energy needs. Both natural gas fields are controlled by the Delek Group-Noble Energy partnership. Delek Group is an Israeli company controlled by the tycoon Yitzhak Tshuva and Noble Energy is a Texas-based energy conglomerate. This partnership was officially declared a monopoly in 2012 by the Israeli Anti-Trust Authority.

The natural gas monopoly has been highly successful in skewing government regulation in their favor. In 2012, the monopoly was ordered to start paying a 50% tax on profits (the “Sheshinski Tax”) but the government has yet to receive a single shekel. The 2012 decision of the Anti-Trust Authority to declare the Delek Group-Noble Energy partnership a monopoly has been effectively overturned by the 2015 “Gas Framework,” a government decision that gave the monopoly several further concessions.

Today the gas monopoly controls 95% of Israel’s natural gas resources, allowing them to charge exorbitant prices for the gas. While gas prices in the US are under $2 per million BTU (British Thermal Unit — an energy unit) and in Europe under $4, the Israel Electric Company pays more than 6$ – for Israeli-produced gas.

Why do Europe and the US enjoy lower prices? The answer is simple. Competition. While Israel’s energy market is controlled by a monopoly, the US market has hundreds of suppliers, and Europe is experiencing record-low gas prices as a result of over-supply.

Meanwhile, the situation in Israel is worsening as government concessions to the monopoly multiply. The Natural Gas Council – a part of the Israeli Energy Ministry – is about to authorize a NIS 325 million grant to the gas monopoly in the form of taxpayer shekels to finance half the cost of an underwater pipeline between Ashdod and Ashkelon.

According to a 2014 decision by the Natural Gas Council, pipelines designed to export gas must be financed solely by the exporter – in this case the Delek Group-Noble Energy partnership. Now the council, as a result of pressure from the gas corporations, is changing its policy: half the cost of the new pipeline (or around NIS 325 million) will be paid by Israel Natural Gas Lines, a state owned corporation, with tax-payer shekels.

The Natural Gas Council is also suggesting new policy guidelines that could permanently exempt exporters from the responsibility to finance their own export pipelines – as long as there’s a chance, however minuscule, that the infrastructure will someday be used to supply the Israeli market. This precedent means that the current gift of NIS 325 million to the gas monopoly is likely the first of many.

How could Israel be considering lavishing such extravagant funds on the monopoly with little public scrutiny? The answer, again, is simple: Because the public has been consistently (and illegally) kept out of the room.

The Natural Gas Council was founded in 2002 by a law that requires it to consist of five members, of which two are representatives of the public. At Lobby 99, we recently discovered that during 11 of the 17 years in which the council has been in operation, it operated without the legally required public representatives.

The public wasn’t represented, but the interests of the gas companies were. On December 12, 2019, the council met with representatives of Delek and Noble to discuss the new pipeline. We don’t know exactly what was discussed in the meeting, but after the meeting the council reaffirmed its commitment to use taxpayer shekels to cover half the cost of the pipeline even though the benefits from the expenditure will go almost entirely to the corporations.

On February 23, our organization, a crowd-funded nonprofit lobby dedicated to promoting the public interest on economic issues, petitioned the High Court of Justice against the Gas Council’s failure to appoint the required public representatives. We further demanded that no decision on the pipeline be finalized until this happens. We argued it was unacceptable that decisions affecting billions of shekels be made without public representation.

Lobby 99 is committed to promoting the public interest. Our over 6,000 members are committed to ensuring the public’s interest isn’t elbowed out of the room by the corporate interests in the halls of power. We are committed to increasing competition in the natural gas sector, the only sure way to reduce prices and confer on Israelis real benefit from their own natural resources.

Join us.

About the Author
Ariel Paz-Sawicki is head of research in Lobby 99, a crowd-funded lobby dedicated to promoting the public interest focusing on economic issues. American-Israeli, 10 years in the IDF, and a recent graduate from Johns Hopkins School of Advanced International Studies (SAIS).
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