Israel supreme court strikes down landmark gas deal

TEL AVIV — Israel's top court on Sunday struck down a landmark deal regulating exploitation of Mediterranean gas reserves, in a major defeat for Prime Minister Benjamin Netanyahu who called the ruling "mystifying".

A panel of supreme court justices said in their ruling that a clause in the plan that prevented it from being changed for a decade was unacceptable.

"We have decided to cancel the gas deal because of the stability clause that would have barred future governments from altering the deal,” they said.

The court however suspended the ruling for a year to enable the parliament to amend the agreement.

Critics of the deal between the Israeli government and a consortium, including US firm Noble Energy, praised the ruling while Netanyahu said it threatened the development of Israel's gas reserves.

Israel's development of its Mediterranean reserves hold serious implications for the country's efforts towards energy independence.

It could also have an impact on regional diplomacy since Israel is expected to export some of its gas.  

Netanyahu, who pushed forward the deal and even appeared at the court to defend it, used an obscure clause to override the anti-trust authorities.

That allowed it to move forward with the approval of the economy minister, a portfolio he holds after the previous one resigned over the gas deal.

'Mystifying ruling'

The court ruling was praised by members of the opposition parties, some of whom were part of the petition against the deal.

Opposition leader and Labour head Isaac Herzog called the court's decision "correct and courageous".

"The government can't bind its hands and judgement," he said on Twitter of the so-called stability clause.

Netanyahu disagreed, saying the decision posed a "severe threat to the development of Israel's gas reserves".

"Israel is perceived as a country with exaggerated legal intervention, in which it is hard to do business," he said in a statement. "Nobody has reason to celebrate the fact the gas might remain in the depth of the sea, and hundreds of billions of shekels won't reach Israeli citizens." 

"We'll find other ways to overcome the severe damage to Israel's economy following this mystifying ruling," the prime minister added.

Justice Minister Ayelet Shaked called the ruling a "crude and unnecessary intervention in a government decision".

"It is unacceptable that the government holds the responsibility to the economy and prosperity of the state, but remains without the necessary authority to take action," she said in a statement.

The deal would now have to return to parliament, where its supporters would face fierce opposition and a narrow majority that might not ensure its passing in a similar format.

The Leviathan consortium, however, remained upbeat on the possibility of moving ahead with the planned development of the reservoir.

"The court in its ruling accepted the entire gas deal except for the stability clause," they said in a statement. "The judges also realise the necessity of regulatory stability and creating conditions to enable the necessary investments to seek and develop gas reservoirs." 

"We call upon the government to swiftly regulate the stability conditions so we can meet the deal's goals, first and foremost developing Leviathan by 2019," it added.

The deal, signed in December with Noble and its Israeli partner Delek, would have regulated the development of the Leviathan field in the eastern Mediterranean, one of the biggest recent natural gas discoveries, in addition to other issues.

The consortium is said to have agreed to invest $1.5 billion to develop the Leviathan field over the next two years. 

Failing to meet the requirement would have allowed the government to back out of a commitment not to alter fiscal and regulatory terms for the gas industry until 2025.

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.

The size of the Leviathan field is estimated at 18.9 trillion cubic feet (535 billion cubic metres, or bcm) of natural gas, along with 34.1 million barrels of condensate.

Noble and Delek also control Tamar, which holds 250 bcm of natural gas, and lies 80 kilometres west of the Israeli port of Haifa. 

Israeli and American energy companies expressed disappointment on Monday over Israel's Supreme Court decision.

David Stover, the chairman of Houston-based Noble Energy, said the ruling was "disappointing".

Critics said the deal gave too much profit to corporations at the public's expense.

After the court scuttled the deal, Netanyahu resolved to "seek other ways to overcome the severe damage that this curious decision has caused the Israeli economy."

Eli Groner, director-general of Netanyahu's office, warned on Army Radio that "we are telling the world that Israel is a place where it is difficult to do business."

Thousands of Israelis have turned out for weekly protests against the gas deal.

On Monday, opposition lawmaker Shelly Yachimovich, a leading critic of Israel's deal with the gas companies, called the court decision "historic and dramatic", and proof that "a smart, aware public can cause justice to prevail".

The Israeli Delek Group called Monday on the government to rework the agreement quickly. In a conference call with investors, a Delek representative said "we don't intend to put things on hold".