Harvard’s status as wealthiest school faces oil-rich contender in the University of Texas

Every day, the University of Texas System makes about $6 million off a mineral-rich swath of land it manages in the US’s largest oil field. Crude and natural gas, not fundraising or investing prowess, have positioned the school’s endowment to overtake Harvard University’s as the richest in US higher education. The University of Texas oversees 2.1 million acres—almost the size of Delaware and Rhode Island combined—in the Permian Basin. While other universities are shedding their fossil fuel holdings in the name of eco-consciousness, the Texas college system is leasing its land to drillers including ConocoPhillips, Continental Resources, Inc. and nearly 250 other operators. Land operated by the University of Texas System is on track to post its best-ever annual revenue in fiscal 2022 because of soaring oil prices and production on its property in the Permian Basin.

Oil reached a high of $120 a barrel earlier this year as a result of a war-induced energy crunch. The revenue is expected to help narrow the gap between the Texas system’s $42.9 billion endowment and Harvard’s $53.2 billion as of June 2021. “The University of Texas has a cash windfall when everyone is looking at a potential cash crunch,” said William Goetzmann, a professor of finance and management studies at Yale University’s School of Management. “Adjusting your portfolio for social concerns is not costless.” The oil and gas revenue will help insulate the University of Texas System from all that. It’ll stem concerns about liquidity and help investment managers hunting deals in a down market. It also represents hard cash, instead of gains tied up in investments like private equity and venture capital, which is more typical for the richest college endowments and drove record returns in the prior year. Meanwhile, even if the Texas system shows negative investment returns, the revenue could help protect the endowment value.