UT looks for ways to enhance monetary return on oil in Permian Basin

The University of Texas is looking for new ways to cash in on 2.1 million acres of prime oil assets obtained through land grants more than a century ago.

What is now viewed as some of the richest oil land in the world was initially seen as a money maker from cattle grazing. After 1923, when petroleum was discovered in the Permian Basin, a wave of wildcatters descended on the state university seeking leases. By 2014, the annual royalties from about 200 drillers had exploded past $1 billion.

Now, the school is taking steps to change the equation again. It’s beefed up its geological expertise and wants to adjust how payments are figured, based on cheaper ways to tap into multiple pancaked layers of oil-soaked rock underground. Success could mean as much as a tripling in land value and a new leasing model that might extend to other shale regions across the U.S.

"In the new scheme of things, not only do we have 2 million acres of land, but if there are two to four plays based on various depths in the shale formations, we might have the equivalent of 6 to 8 million acres of land," said Scott Kelley, who oversees the University Lands office as executive vice chancellor for business affairs.
When Texas joined the union, the federal government turned down a deal to own this land and other Republic owned sites in return for assuming about a million dollars of Texas national debt.  Their refusal turned out to be a great deal for Texas and its education expenditures.

At the Time UT was formed, A&M was given some farmland by the then rural-dominated legislature and UT was given what looked to be West Texas desert.  The Permian Basin proved to be a much more valuable property and provided the University with one of the largest endowments in the country.


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