Dead Sea - Michal Fattal - January 2012
The Dead Sea. Photo by Michal Fattal
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The Justice Ministry has told other key ministries to push for laws requiring companies to pay royalties on energy production from shale oil and Red Sea salt. The ministry says this reflects a commitment to social justice in the allocation of the country's natural resources.

Israel currently has no laws on shale oil and salt, and royalties could affect the operations of Salt Industries, controlled by the Arison Group, and IEI, an American company that has won a concession to consider the feasibility of extracting oil shale in the Negev.

"It is highly important to develop overall policies on natural resources," the Justice Ministry said in a position paper, adding that it was legitimate for the state to demand a greater share from the exploitation of natural resources through royalties and other special taxes.

The ministry said such a move would ensure that the benefits from the resources "are the lot of the entire public and not just a narrow stratum [of society]."

The Justice Ministry has thus instructed the Energy and Water Resources Ministry to cooperate with the finance and environmental protection ministries to craft an amendment to mining provisions. The idea would be to reexamine the public's share in the exploitation of natural resources. The Justice Ministry wants the energy ministry to work with the Finance Ministry on a uniform royalty system for oil shale exploitation, too.

The ministries are also being told to consider developing legislation allowing royalties on salt from Red Sea water pumped to evaporation pools at Eilat. A policy will be forged after discussions with agencies including the Water Authority. Currently no royalty is imposed on Red Sea salt.

Provisions apply differently depending on which material is extracted. The regulations currently cover a range of substances, including asphalt, natural gas, chalk, flint, marble and gravel. Meanwhile, the provisions apply a range of royalty rates, depending on the material involved. Mining of low-value substances only requires a 2% royalty, which is based on the going market value of the substance, unless there is no market price.

The Justice Ministry says the royalties paid to the state on such minerals are low and should be rethought. This follows a reexamination of royalties on resources such as natural gas and oil, as well as the Dead Sea's mineral resources.

Regarding royalties on the extraction of more valuable minerals and on mining not covered by current legislation, the ministry proposes that the law be updated to reflect a commitment to social justice.

Regarding the country's mineral water, the authorities have already ordered a a rethink of the fee structure as part of a plan on water resources in Israel. Mineral-water companies currently pay a production tax but no formal royalty on the extraction of mineral water.