Let’s start out 2019 with some good news. Last Friday, Bloomberg reported that the endowment fund for The University of Texas has grown to $31 billion, surpassing Yale University as the second largest such fund in the nation, behind Harvard.
As Bloomberg notes, the inflow of funds to the UT endowment – which are derived from the state’s Permanent University Fund – is driven mainly by royalties and lease bonuses stemming from mineral rights related to the more than 2 million acres of land owned by the UT System in the booming Permian Basin of West Texas.
Those who are not from Texas – and sadly, many who are – might ask, what is the Permanent University Fund (PUF)? To answer that question, you must travel back in time to 1876, when the very poor State of Texas (yes, Texas was indeed a very poor state prior to the discovery of the oil beneath its land) was establishing a new state constitution. The PUF was actually created in that constitution as a means of supporting The University of Texas, which was then in its infancy. In establishing the PUF, the people of Texas set aside two million acres of what was thought to be essentially worthless land in West Texas as its initial assets.
https://www.forbes.com/sites/davidb...tion-controversy-threatens-its-energy-future/
Of that initial two million acres, one million consisted of lands that bordered some of the state’s railroad rights of way, and the other million came out of state-owned lands in the region. In 1883, the Texas and Pacific Railroad granted an additional one million acres of land that it had deemed “too worthless to survey” to be combined into the PUF.
While that designation seems laughably absurd today, we have to remember that West Texas is mostly desert country, and in the late 1800s, when oil had yet to be discovered in the state, there were few means of getting any value out of this arid land. What little income the managers of the PUF were able to initially generate from the land came mainly from the leasing of grazing rights.
That all changed in 1923, when The Santa Rita No. 1 well struck oil on University lands in Reagan County, about halfway between Midland and San Angelo. The well produced oil and natural gas for 67 years before being finally plugged and abandoned in 1990. The completion of the well – and the thousands of University lands oil and gas wells that have come since – had such a significant impact on the fortunes of the University of Texas system that, in 1940, the original wooden pumpjack that was used on the Santa Rita #1 was moved to the UT campus in Austin, where it still resides in a place of honor near the school’s football stadium today.
How significant have oil and gas revenues been to UT? So significant that, in 1931, the Texas legislature saw fit to actually split the fund, awarding 1/3rd of its revenues from that point forward to the Texas A&M University system, a split that endures today. So significant that, of all university endowments in America, the UT endowment now ranks second only to that of Harvard University. That significant.
When the drafters of that 1876 Constitution vowed to establish “a University of the first class,” they really had no financial means of achieving that goal. The University of Texas remained a chronically under-funded college whose classes were conducted and students housed in sub-standard buildings until well into the 20th century. The discovery of oil on University lands changed all of that, and today the University of Texas System consists of 8 major university campuses and 6 health science institutions spread across the state. UT Austin regularly finds itself ranked among the top tier of publicly-funded universities in the country.
The best news is that this story does not end with the PUF. There’s also the Permanent School Fund (PSF), which was established by the Texas Legislature in 1854 with an appropriation of $2,000,000 for the express benefit of the public school system in the state. As with the PUF, the 1876 state constitution awarded millions of acres of public lands to the PSF, designating that all income derived from the sale, leasing or use of these lands or the minerals beneath them go to the benefit of the PSF. Similar to the PUF lands, the PSF lands have over time provided tremendous benefits from the production of oil and natural gas.
The PSF was then further enriched when, in 1953, the U.S. Congress passed the Submerged Lands Act which returned to the States the navigable territorial waters that had been historically the property of the States. For most U.S. states, this territory encompassed the first three miles from the coastline. But Texas was able to prove that its territory prior to agreeing to enter the United States in 1845 extended three leagues from the coastline, roughly 10.35 miles. Congress agreed, and as a result, those waters and the minerals that lie beneath them were deeded by the Legislature to the PSF.
As a result of the oil and gas revenues from these lands and waters, as well as certain other investments and income, the endowment for the PSF as of November, 2017 was more than $41 billion, making it the nation’s largest sub-collegiate educational endowment fund.
Revenues from the production of oil and natural gas have provided billions of dollars in funding for schools in other states – Alaska, California, New Mexico, Wyoming and Louisiana notably among them – but no state’s schools have benefitted more extensively from the industry’s productivity than Texas.
And now, as the late, great Paul Harvey liked to say when closing out his radio broadcasts, you know the rrrrrrrrrrest of the story.
David Blackmon is an independent energy analyst/consultant based in Mansfield, TX.
As Bloomberg notes, the inflow of funds to the UT endowment – which are derived from the state’s Permanent University Fund – is driven mainly by royalties and lease bonuses stemming from mineral rights related to the more than 2 million acres of land owned by the UT System in the booming Permian Basin of West Texas.
Those who are not from Texas – and sadly, many who are – might ask, what is the Permanent University Fund (PUF)? To answer that question, you must travel back in time to 1876, when the very poor State of Texas (yes, Texas was indeed a very poor state prior to the discovery of the oil beneath its land) was establishing a new state constitution. The PUF was actually created in that constitution as a means of supporting The University of Texas, which was then in its infancy. In establishing the PUF, the people of Texas set aside two million acres of what was thought to be essentially worthless land in West Texas as its initial assets.
https://www.forbes.com/sites/davidb...tion-controversy-threatens-its-energy-future/
Of that initial two million acres, one million consisted of lands that bordered some of the state’s railroad rights of way, and the other million came out of state-owned lands in the region. In 1883, the Texas and Pacific Railroad granted an additional one million acres of land that it had deemed “too worthless to survey” to be combined into the PUF.
While that designation seems laughably absurd today, we have to remember that West Texas is mostly desert country, and in the late 1800s, when oil had yet to be discovered in the state, there were few means of getting any value out of this arid land. What little income the managers of the PUF were able to initially generate from the land came mainly from the leasing of grazing rights.
That all changed in 1923, when The Santa Rita No. 1 well struck oil on University lands in Reagan County, about halfway between Midland and San Angelo. The well produced oil and natural gas for 67 years before being finally plugged and abandoned in 1990. The completion of the well – and the thousands of University lands oil and gas wells that have come since – had such a significant impact on the fortunes of the University of Texas system that, in 1940, the original wooden pumpjack that was used on the Santa Rita #1 was moved to the UT campus in Austin, where it still resides in a place of honor near the school’s football stadium today.
How significant have oil and gas revenues been to UT? So significant that, in 1931, the Texas legislature saw fit to actually split the fund, awarding 1/3rd of its revenues from that point forward to the Texas A&M University system, a split that endures today. So significant that, of all university endowments in America, the UT endowment now ranks second only to that of Harvard University. That significant.
When the drafters of that 1876 Constitution vowed to establish “a University of the first class,” they really had no financial means of achieving that goal. The University of Texas remained a chronically under-funded college whose classes were conducted and students housed in sub-standard buildings until well into the 20th century. The discovery of oil on University lands changed all of that, and today the University of Texas System consists of 8 major university campuses and 6 health science institutions spread across the state. UT Austin regularly finds itself ranked among the top tier of publicly-funded universities in the country.
The best news is that this story does not end with the PUF. There’s also the Permanent School Fund (PSF), which was established by the Texas Legislature in 1854 with an appropriation of $2,000,000 for the express benefit of the public school system in the state. As with the PUF, the 1876 state constitution awarded millions of acres of public lands to the PSF, designating that all income derived from the sale, leasing or use of these lands or the minerals beneath them go to the benefit of the PSF. Similar to the PUF lands, the PSF lands have over time provided tremendous benefits from the production of oil and natural gas.
The PSF was then further enriched when, in 1953, the U.S. Congress passed the Submerged Lands Act which returned to the States the navigable territorial waters that had been historically the property of the States. For most U.S. states, this territory encompassed the first three miles from the coastline. But Texas was able to prove that its territory prior to agreeing to enter the United States in 1845 extended three leagues from the coastline, roughly 10.35 miles. Congress agreed, and as a result, those waters and the minerals that lie beneath them were deeded by the Legislature to the PSF.
As a result of the oil and gas revenues from these lands and waters, as well as certain other investments and income, the endowment for the PSF as of November, 2017 was more than $41 billion, making it the nation’s largest sub-collegiate educational endowment fund.
Revenues from the production of oil and natural gas have provided billions of dollars in funding for schools in other states – Alaska, California, New Mexico, Wyoming and Louisiana notably among them – but no state’s schools have benefitted more extensively from the industry’s productivity than Texas.
And now, as the late, great Paul Harvey liked to say when closing out his radio broadcasts, you know the rrrrrrrrrrest of the story.
David Blackmon is an independent energy analyst/consultant based in Mansfield, TX.
