Permian Oil and Gas Directly Benefit Texas Students
Where would the University of Texas and Texas A&M University systems be today without revenues from the oil-rich lands in the Permian Basin? Depending on who you ask, you’ll probably get a different answer. But there is no question that both universities receive a large amount of endowment funds from the Permanent University Fund, which obtains its revenues from oil, natural gas, payments on mineral leases, and sales of university lands, allowing for more investment in buildings, capital equipment and library materials , among other purchases.
But first, some quick background.
The Texas Legislature authorized creation of the University of Texas and the Permanent University Fund (PUF) in 1876, an act the voters of Texas approved later that year with a constitutional amendment. The fund is comprised of land grants of approximately 2.1 million acres, largely located in the oil and gas rich Permian Basin. The land chosen for the endowment was selected based on its lack of agricultural use in the late 1800s, and instead intended for grazing leases and a potential future sale. Years after the University of Texas was established, a vast amount of oil was discovered beneath this land and the money started flowing to the University in large quantities very quickly.
They likely didn’t realize it at the time, but this land would eventually become one of the most significant natural resource discoveries in the world, producing over 29 billion barrels of oil and 75 trillion cubic feet of gas. Even more impressive: Industry experts estimate that the basin still contains recoverable oil and natural gas resources exceeding what has been produced over the last 90 years.
According to the University of Texas Investment and Management Company’s (UTIMCO) 2012 Annual Fiscal Report, “PUF assets totaled $13.5 billion and GEF assets totaled $7.1 billion. This represents all-time peaks for the Endowments.” Just a few months later, after continuous growth in oil and natural gas production, the semi-annual UTIMCO report from December 2012 stated “the market value and book value of the PUF was $13.9 billion and $11.9 billion, respectively, exclusive of land acreage.” This means more dollars available to spend on infrastructure, curriculum, and other educational opportunities for more than 180,000 students across the state of Texas.
As shale production in the Permian Basin grows, contributions to education from the PUF grow alongside it. The PUF generated a substantial amount of its funds in the past two years from lease sales: $972 million in 2012, and $950 million in 2011. It’s more than likely the lease sales were all to oil and natural gas companies. According to Jim Benson, Executive Director of University Lands, which manages UT’s PUF lands and minerals, “We made over 3 million barrels a month last December, which was the first time we made three million barrels of oil a month on University Lands since march of 1972.” Benson added: “I think we’ll see, at some point in time, a billion dollar year off of University Lands.”
And he’s right. According to IPAA’s report on the Permian, “Production in the Permian Basin reached about two million barrels per day in the early 1970s, declined to 850,000 barrels per day in 2007, but has since rebounded to 1.3 million barrels per day.” The increased production of oil and natural has in the Permian Basin means great things for Texas, in particular the PUF and, by extension, students all across the state.
Preliminary summary reports from UTIMCO for March 2013 show the net asset value of the PUF at $14.4 billion, which is a significant gain from the annual fiscal report in 2012 – proving once again how the oil and gas industry is consistently contributing to the growth of the fund and the education of Texans.
Almost a century after its creation, oil and natural gas revenues continue to flow to the Permanent University Fund at near-record levels, directly benefitting higher education for tens of thousands of Texans. Knowing the incredible impact the oil and natural gas industry made on the UT community, the school commemorated the industry by placing the original wooden pump jack from the Santa Rita No. 1 – the first well drilled in 1921 – as tribute to the huge role the Permanent University Fund has played in supporting higher education in the state.