How a chemicals tycoon shaped Australia’s ‘gas-fired recovery’

Economy

By Charlotte Grieve

Andrew Liveris – the chemicals tycoon and architect of Australia’s gas-led recovery. Credit:Stephen Kiprillis

It was May 1, 2020 in the early stages of the coronavirus pandemic when Australian-American business heavyweight Andrew Liveris was scheduled to attend an important meeting.

Liveris, one of Australia’s most successful global businessmen, was head of the federal government’s manufacturing taskforce at the time. He was responsible for developing policies to support industry in a post-COVID world.

The former boss of US industrial giant Dow Chemicals had a late-morning meeting with the chief executives of the country’s largest ASX-listed cement manufacturers – Adbri, Boral and Cement Australia.

But the start-time of the meeting was pushed back moments before it was due to begin. “Something more important came up and he moved the meeting,” said one person familiar with the situation.“Moving CEOs’ calendars even 15 minutes can be really hard when it’s so close to the meeting.”

Once the meeting eventually got underway, it was regarded as a non-event. Briefings on key issues were delivered but it soon became apparent the taskforce had a single focus – intervening in Australia’s gas market to boost supply and lowering prices.

Four months later, the federal government would release its ‘gas-fired recovery’ policy, which adopted many of the recommendations from Liveris’ taskforce.

“This is about making Australia’s gas work for all Australians,” Prime Minister Scott Morrison said at the time.

More than $400 million has since been allocated to the policy, for spending on infrastructure the private sector has been unwilling to fund, and research to unlock new gas basins that could be reserved for use in Australia.

Gas has not featured prominently at a national level during the current election campaign, which has been dominated by personalities and gaffes.

Yet it remains an issue in key seats where the Liberal Party is under attack from climate focused ‘teal’ independents who oppose subsidies for fossil fuels of any kind.

Energy experts and public integrity advocates argue the process behind the ‘gas fired recovery’ was managed poorly, with conflicts of interest not properly stamped out, while the policy itself won’t achieve its desired aims.

“A gas led recovery makes little sense,” Grattan Institute expert and former Origin executive Tony Wood says. “Gas is a fossil fuel. If we’re going to meet our net zero by 2050 commitment, we can’t keep burning gas. You have to get people to stop using gas. But the government has little appetite for forcing that tissue.”

Wood says if gas was the secret to a booming manufacturing industry in Australia, it would have already happened. “If cheap gas was the answer, we would have been doing it when gas was cheap. It’s not cheap anymore.”

‘Make It In America’

So, how did a global chemicals tycoon come to advise two US presidents and shape Australian energy policy?

Born in Darwin, Liveris studied chemical engineering at the University of Queensland before starting his career at the world’s largest chemical manufacturer, Dow Chemicals, in 1976.

There, he climbed the ranks to become chief executive, a role he stayed in for a decade, and led the company through major transformational change, including its $US130 billion mega-merger with Dupont in 2017.

Liveris’ move from business executive to government adviser started when he authored a book titled Make It In America in 2011, which laments the shuttering of factories and loss of American jobs offshore.

The Dow Chemical Company owns the copyright to the book, which over seven chapters, delivers Liveris’ manifesto including a “national commitment” to increasing gas supply.

Then US president Donald Trump with Andrew Liveris at a rally in 2016. Liveris had helped write manufacturing policy for Barack Obama and Trump, and a similar outcome was arguably possible in Australia.Credit:AP

“This book is a call to action… I will lay out an agenda that, if adopted, could revive the sector and put the US back on track toward economic growth and global dominance,” Liveris wrote.

Over the next decade, Liveris would engage with policymakers on both sides of the aisle to realise this vision. For former US president Barack Obama, then his successor Donald Trump and more recently, Prime Minister Scott Morrison – Liveris has become the go-to adviser for governments wanting to rebuild domestic manufacturing.

Mark Johnson, US Department of Energy director under both Obama and Trump who worked with Liveris, says manufacturing has long been politicised in America.

He says the Obama’s manufacturing effort adopted a “whole of government approach”, where chief executive consultation was one part of the process.

But under Trump, Johnson says Liveris’ ‘Manufacturing Council’ consisted of closed door roundtables between CEOs, lobbyists and communications specialists in the White House – a process not conducive to effective reform.

“Manufacturing policy is not done by CEOs golfing and rubbing elbows with the president,” Johnson tells The Age and Sydney Morning Herald over video-link from South Carolina.

The approach attracted the attention of US accountability watchdog, Citizens for Responsibility and Ethics, which wrote to the White House in February 2017 raising concerns about the lack of oversight on the committee.

The administration had used “magic words”, executive director Noah Bookbinder claimed, to define the role of Liveris’ council to evade laws that force government advisers to disclose committee documents, issue public notices for meetings and record minutes.

“Americans are entitled to know who outside of government is influencing and helping in the formulation of administration policy on issues that directly affect them,” the letter, seen by this masthead, stated.

President of the Alliance for American Manufacturing, Scott Paul, was one of two dozen chief executives who formed part of Trump’s Manufacturing Council, chaired by Liveris.

Paul says Liveris showed a “genuine commitment” to improving manufacturing and praised his ability to bring together union officials and CEOs of innovative companies including Tesla and Dell.

But the lack of transparency and unbridled access to the administration made him uncomfortable. “It was certainly a place where CEOs could give a wishlist to the president about tax changes, and certainly, they had some success,” Paul says. “I don’t think it was best practice.”

The council was disbanded months after it was set up after the Trump said there were “very fine people on both sides” of the Charlottesville riots, now-infamous comments which caused almost half the CEOs to resign.

‘Like-minded souls’

When Liveris retired from Dow in 2018, he walked away with more than $US80 million ($102 million) in cash and shares and returned to his homeland, where he made no secret of his ambitions to influence government policy.

“I am very interested in the intersection of business and public policy. There’s a lot that can be done on that and I will be active in Australia,” he told The Australian Financial Review.

His opportunity came during the height of the pandemic.

Morrison established the National COVID-19 Commission in March 2020, bringing together top business leaders and bureaucrats to assist in managing the pandemic response.

Each of the commissioners was given extraordinary access to sensitive cabinet information and focused on solving logistical challenges, from masks and ventilators to wage subsidies and vaccines.

Veteran public servant Peter Harris AO was responsible for managing conflicts of interest and made each commissioner disclose any assets or dealings that could compromise them in statements sent to the Prime Ministers’ department and scrutinised by staffers.

But not long after the commission was set up, it was given responsibility for Liveris’ already established manufacturing taskforce, which had been working quietly under the Department of Industry.

Like with Trump, Liveris was considered a “special adviser” and therefore not required to undergo Harris’ vetting process. He voluntarily signed a conflict disclosure statement but the rest of his team did not. During a parliamentary committee, Liveris’ seven-person team was listed as including gas executives, APA Group director James Fazzino and Viva Energy chief executive Scott Wyatt, as well as three industry and union representatives.

However, one team member who was not named was Nicholas Lipscombe – the manager of Liveris Family Office.

Lipscombe has managed the finances of the country’s richest families for more than a decade, starting as National Australia Bank executive for ultra-high net worth clients in 2011, before working for the Myer family and joining Perpetual as the head of family office.

Lipscombe has overseen Liveris’ personal wealth since 2018 but when contacted by this masthead for comment, this reference was deleted from his profile. A Perpetual spokesman said he could not be reached.

‘Bit wobbly’

In May 2020 as the manufacturing taskforce ramped up, Boston Consulting Group partners, including Monika Saunders, hit the phones – calling dozens of the country’s largest manufacturers to ask about the challenges the pandemic created.

Manufacturers say rising energy costs were a major concern but also called for assistance on supply chain blockages, lack of access to skilled labour and workforce shortages from COVID-19 infections and lockdowns.

Despite the range of problems, sources say the taskforce became fixated on boosting Australian gas supply.

The aim was to reduce gas prices to $4 per gigajoule (more than half current prices) through subsidies and a national reservation scheme – which would give Australian manufacturers first dibs on locally produced gas.

“This is where both major parties let us down”

Among the business owners surveyed, there was a mix of opinions on reservation – supported by some as a necessary no-brainer but rejected by others as setting a dangerous precedent of protectionism.

“That makes me a bit wobbly. Is that what we want to do in the longer term? End up being a protected economy?” said one senior executive from an industry that could benefit from lower gas prices.

Manufacturing Australia, which represents 500 facilities, expressed support for gas reservation in its submission to a government inquiry, claiming manufacturers in eastern Australia pay, on average, 150 per cent more for gas than they did a decade ago.

“As a consequence, plants have closed, manufacturing jobs have been lost and Australia has missed investment opportunities by both Australian and international manufacturers,” it said.

However, whether reservation will actually lead to lower prices is fiercely contested in policy circles.

For its part, the gas industry argues it will not. Efforts to curb exports will crimp investment in exploration and production, leading to tighter supply, leading explorers and producers say.

‘Liveris plan’

By-late May 2020, internal tensions around the manufacturing taskforce’s gas-focus had spilled into the public domain. A draft plan was leaked to The Guardian, which revealed recommendations such as a government-guaranteed floor to gas prices and slashed environmental regulations for new projects.

The recommendations resemble a 42-page report issued by Dow in 2012, which called on the Australian government to fund gas pipelines and preserve resources for local manufacturers.

The leaked report created a firestorm of accusations of conflicts of interest. The head of the COVID Commission Neville Power became the target, given his shareholdings in ASX-listed gas companies and position as chair of oil and gas explorer Strike Energy.

“Nev accidentally became the public face of the gas-led strategy. He wasn’t opposed to it but it was a Liveris plan from the start,” said one senior source from the commission.

In the months that followed, Greg Combet, a former Gillard government minister and ALP heavyweight and David Thodey, the former Telstra chief executive and current CSIRO chairman both resigned, moves which multiple sources attributed to the commission’s focus on gas. Combet declined interviews for this story. Thodey wouldn’t be drawn on the claims but said it was “privilege” to work as part of the large team that navigated Australia “through a difficult period”.

Liveris was asked to respond to a range of matters included in this story, including concerns over the taskforce’s gas-focus and potential conflicts with Lipscombe’s involvement.

“Your assertions appear to be one of conflict of interest. There are no conflicts of interest, despite the inferences,” he said.

“My views on manufacturing and energy are public and well known. I wrote a book on the subject and advised multiple governments around the world. They are consistent with my efforts in the US and Australia.”

‘Nothing happened’

Almost two years after Liveris’ draft plan was leaked, the Morrison government remains committed to the ‘gas-fired recovery’.

“Gas is critically important to Australia’s economy which is why the Morrison government is continuing to back the gas-fired recovery with more than $400 million committed to unlock gas basins, back critical infrastructure and empower consumers,” a spokesperson for Energy Minister Angus Taylor said in a statement.

In March, an additional $50 million was allocated to accelerating seven priority gas infrastructure projects, four of which are run by APA Group. A spokesman for Energy Minister Angus Taylor says increasing supply will reduce gas prices.

Federal Energy Minister Angus Taylor at a development in the Beetaloo basin in the Northern Territory.

But the government’s inquiry into gas reservation, fiercely opposed by major gas companies but enthusiastically supported by the chemicals industry, now sits idle.

Some stakeholders who gave feedback to the taskforce are disappointed by the policy’s progress. “From our perspective, nothing happened. The gas prices are higher now than they were two years back,” said the head of one mid-sized Australian manufacturer.

It isn’t fully clear how things would change if Labor wins power following the next election. Labor’s shadow minister for industry Ed Husic called the gas-led recovery an “economic nirvana” while shadow energy minister Chris Bowen said Labor recognised the role of gas but criticised the Coalition’s policy.

“The Morrison-Joyce Government thinks Australia’s entire economic future rests on gas – but their so-called ‘gas-fired recovery’ is yet to create a single job,” Bowen said.

But if the ‘teal’ candidates do end up with power, the issue might not go away. Independent MP Zali Steggal describes the gas fired recovery as a “fake plan” with an “uneconomic focus” that showed the failure of the major parties.

“This is where both major parties let us down. Labor backed the Coalition’s support for fracking in the Beetaloo basin and sided with the Coalition when it comes to many of these projects.”

She signals support for a probe into the COVID-19 commission it was ultimately borne from. “You had these unelected officials handpicked by government with a murky mandate and no public accountability,” she says.

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