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Common Sense Gas Decision a Triumph for Israel

Like most democracies but only more so, Israel’s political system is a confusing and often frustrating mess. So when the country began to develop the enormous reserves of offshore natural gas in recent years, the only impediment to the nation becoming an unlikely energy giant came from within, not from without. The legacy of the socialist economics practiced by it’s Labor Party founders and the cumbersome bureaucracy they created that existed more to regulate and retard development rather than speed stands as an ever-present threat to its ability to remain the world’s Start-Up Nation. The only obstacle to Israel successfully exploiting the seemingly miraculous discovery of vast reserves of gas within its grasp was always the government itself. Unfortunately, that fear was realized last December when an anti-trust regulator ruled that the Noble Energy and its Israeli partners, the Delek Group, were acting as a monopoly, putting an effective freeze on development of the Tamar and Leviathan fields. But after six months of inaction and negotiation, the Netanyahu government has invoked a never-before-used legal clause that allows the Security Cabinet to override an anti-trust commissioner by reason of national security. The result is that Israel’s progress towards becoming a major player in the energy field is back on track.

As Arthur Herman wrote in the March 2014 issue of COMMENTARY:

Israel is poised not only for future energy independence, but for becoming a major regional energy player—maybe even, if it uses its resources wisely, the next energy superpower. The looming question, however, is not whether the world is ready for Israel to be the next Texas. It’s whether the Israelis are ready.

Herman wrote that Noble Energy, a Houston-based company with expertise in deep water drilling, braved a possible Arab boycott (a not unreasonable fear in an industry dominated by companies that invariably do business in the Arab and Muslim worlds) responded to an Israeli offer to work on their offshore fields and to make some money while helping the Jewish state. But despite the obvious benefits of a nation without natural resources becoming rich in gas, there were plenty of critics of the project. Some objected on environmentalist grounds. Others feared that oil wealth would change the nature of the country. Still others worried about an oil boom that would be exploited too quickly and then leave the country’s economy worse off than it had been in the first place.

But it turned out the biggest obstacle to development came from a regulator who decided that the risky arrangement that Noble undertook was a restraint of free trade rather than a necessary deal without which the gas would stay in the ground.

Fortunately, the government has now ended this logjam and, after negotiations, resulted in a deal that will force Noble and Delek to give up control of smaller fields to competitors and dilute their hold on the two big ones that are under development. But it will still leave Noble with enough of a share that will justify their investment and risk.

For all of the pessimism that is often heard about Israel’s future from naysayers who lament the lack of peace with the Palestinians and the country’s internal divisions, natural gas offers the Jewish state and the region unprecedented opportunities for both development and cooperation. If properly exploited and managed, the Israeli natural gas fields will give the country energy independence as well as make it a significant exporter of energy to European markets that are currently dependent on Russia. It also offers the potential of cooperative economic relationships with both the Palestinians and neighboring Arab countries, assuming they are capable of holding up their ends of the bargain or of being willing to do business with Israel.

Neither natural gas nor the reserves of shale oil also awaiting development that have been discovered in Israel offer a panacea to the question of peace. A prosperous Israel is no more tolerable to those who wish to destroy it than a poor Jewish state. But these natural resources (in a country that once joked about Moses foolishly leading the Children of Israel to the one place in the region without oil) do give Israel the means to strengthen itself immeasurably and ensure that the Start-Up Nation remains a First World economy and democracy in a sea of Third World poverty and tyranny.

Prime Minister Netanyahu deserves credit for taking the bull by the horns and doing what needed to be done to get this project going again. It will be up to him and his government to see that nothing stops it again.



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