Ignoble Treatment: The Tax Increase on Noble Energy's Interests in the Massive Israeli Gas Strikes

After decades of relatively sparse oil and gas finds, recent developments have transformed Israel from being energy dependent into a probable energy exporter with its own sovereign wealth fund. In 2009 and 2010, United States based Noble Energy ("NBL") and its Israeli corporate partners, made two giant gas strikes. One field, "Tamar," was the largest gas find in 2009 and the second, "Leviathan," was among the largest strikes in a decade. NBL had undertaken the costly and risky explorations relying upon a long-existing regulatory structure which resulted in a modest royalty rate in addition to the ordinary corporate income tax rate.

However, following the gas discoveries, the Israeli government amended the regulatory structure in 2011 with the enactment of a new windfall energy profits law which sharply increased the tax rate. The new tax law contains no grandfather clause and includes all prior discoveries such as NBL's prior gas strikes.