Texas Pulls Plug on Oil Institute After 3 Years, $12.8M

March 14, 2018

The University of Texas System pumped $12.8 million in endowment proceeds into the Texas Oil and Gas Institute but has now decided to shut down the operation after about three years, making it the latest in a series of institutes started and quickly shuttered by the system’s Board of Regents.

In 2014, regents unanimously voted to establish the institute, according to the Austin American-Statesman. Officials at the time talked about “at least a 10-year plan,” and they went on to hire a prominent industry figure, Jeffrey Spath, as its executive director in September 2015. But shortly afterward, officials began reining in the institute’s mission. By last November they had decided to shut it down, and it will officially close by the end of this month.

Spath alone received a total of $7.1 million in compensation for working 28 months, although officials argued his pay was reasonable given lofty goals originally assigned to the institute. Spath told the American-Statesman he had support from the board when he was hired, but the support dropped over time.

“I fought uphill battles from day one on staffing and performing research,” he told the newspaper. “It just kept getting smaller and smaller in scope.”

Research had been listed as an essential function for Spath’s position, but he was soon told the institute would not be allowed to conduct research. The Texas Constitution does not allow the UT system to use proceeds from the Permanent University Fund for research. Spath also said he received “pushback” from the system when he wanted to travel and meet with energy ministers and CEOs around the world in attempts to sell data analysis services to companies.

It didn’t make sense for the institute to conduct research because other departments at Texas public universities were doing similar work, administrators said. Still, they argued the institute had accomplishments, including a considerable internship program and financial benefits.

The institute more than paid for itself by analyzing previously collected data, they said. The analysis helped to increase revenue from millions of acres of land in West Texas that is rich in oil and gas and is owned by the university system. The system leases the land to oil and gas companies in exchange for payments that are deposited into the Permanent University Fund, which benefits the UT and A&M systems.

Previously, the UT System has launched other initiatives using money from the Permanent University Fund, only to soon close them. Last month it closed an Institute for Transformational Learning, on which it spent $75 million since 2012. A year ago it ended plans for a data science institute in Houston despite already having spent more than $200 million to acquire roughly 300 acres of land.

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