Rice history closely tied to energy industry
Just as Stanford University is affiliated with Silicon Valley’s booming tech industry and New York University’s Stern School of Business with Wall Street’s banking and finance, Rice is impacted by its location within Houston’s energy and oil driven economy. The Rincon Oil Field functioned as Rice’s very own Spindletop, heralding an era of economic prosperity that allowed for expansion into the University we know today. The impact of the industry is still prominent on campus, even as students launch environmental career initiatives and a professor calls for a change in perspective to fit the current climate crisis.
By the 1930s, a combination of overcautious endowment investment strategies and the struggling post-Depression economy had landed Rice in a precarious financial position. Edgar Odell Lovett’s founding vision of a “university of extensive proportions” was stifled by Rice’s lack of funds; inflation had caused interest rates to drop to a mere one percent, and the dwindling revenue barely covered operating expenses. With no money leftover for critical expansions, enrollment and capital investments both came to a standstill, as existing facilities became outdated and overcrowded.
Salvation came in the form of the purchase of the Rincon Oil Field, located in the Rio Grande Valley. The transaction, initiated by county judge and alumnus Roy Hofheinz, was spearheaded by contractor and alumnus George R. Brown and oil mogul Harry Wiess. After over a year of discussions and legal negotiations, the $1 million purchase was finalized December 1942.
In a 1944 Houston Chronicle article, the estate’s manager C.A. Dwyer hailed the Rincon transaction.
“The purchase has been one of the most fortunate deals ever made by the institute trustees,” Dwyer said.
By 1944, Rincon’s 148 wells were generating $100,000 in monthly income. Over the course of its operation, the field was estimated to bring $10-20 million net return to the university, approximately doubling Rice’s $13 million endowment at the time of purchase. In fact, the actual return was much higher; by 1978, the Rincon field had earned the university $42 million in net assets.
The Rincon Oil Field acquisition was critical in stabilizing the struggling university’s financial future. It at once allowed Rice to preserve its core model and to return to William Marsh Rice and Edgar Odell Lovett’s initial visions for a major research university. The revenue provided badly needed funds and allowed attendance to remain tuition free for another 20 years.
At the same time, oil revenue ushered in a tangible new era, one of growth and increased academic momentum. From the late 1940s-50s, construction surged across campus. Fondren Library, Anderson Hall, the Abercrombie Engineering Laboratory , Wiess college and the football stadium were all completed between 1949-1950.
It was also during this period that many of what are today considered to be Rice’s fundamental aspects were first instated. The curriculum was remodeled to be more interdisciplinary and a growing faculty and graduate program allowed a greater emphasis on research. Owning oil properties enabled Rice to evolve from a Texas-based undergraduate college to a broadly scoped research university, giving it the capital needed to expand the campus and increase admissions.
A large amount of Rice’s faculty, staff and alumni network have historically been affiliated with the fossil fuel industry. Harry Wiess was a one-time president of Humble Oil, now known as ExxonMobil. George R. Brown developed an oil platform design that earned him the Gold Medal for Distinguished Achievement from the American Petroleum Institute.
In a 1942 Houston Press article, Harry Hanszen, former vice president of Mexican Gulf Oil Company, encouraged further investments in oil royalties.
“Situated as the institute is in the heart of a great oil producing area, [oil] would be one of the most productive sources of revenue now open to [Rice],” Hanszen said.
At first glance, it seems as if little has changed; over 70 years after Hanszen first uttered those words, Chief Investment Officer Allison Thacker echoed his sentiment to the Thresher in an interview for an endowment article on Oct. 4 this year.
“Given our location and our alumni network, we have excellent access to information about natural resource investments,” Thacker said. “This is an area we can strive for excellence in.”
As shown in the annual endowment stewardship update report for fiscal year 2015, investments in energy and natural resources currently account for 10 percent of Rice’s asset class, and investments in timber account for 2 percent, equalling a total of $600 million out of the $5.6 billion endowment. Energy and natural resources include oil, gas and agriculture. More specific data regarding the exact value of fossil fuel investments has been difficult to obtain due to the company’s confidentiality policy.
“The Rice Management Company does not discuss its specific investment strategies publicly,” Thacker said.
According to Thacker, the endowment is critical to Rice’s future.
“The long-term goal of the Rice Management Company is to increase the value of the university’s endowment to ensure that Rice will be able to function and carry out its mission of education, research and public service not just for the students who are currently enrolled, but for the thousands of students who will be coming to Rice throughout its second century, ” Thacker said.
The management team currently has no intentions of shifting investment away from fossil fuels.
“I do not consider blanket divestment to be the solution for sustainability in the future,” Thacker said. “We have a policy stating that Rice does not endorse nor boycott products. We have successfully invested in fossil fuels and natural resources and have collaborated with the energy industry in other ways as well.”
Though Rice Environmental Club President Jordan Bulanda said she recognizes the important fiscal role oil revenues play at Rice, she voiced disappointment with the overall apathy toward the environmental repercussions of these investment choices.
“I think in an ideal world Rice would completely cut oil and gas out of the university's investments,” Bulanda, a Duncan College senior, said. “It’s almost corrupt to invest in these companies … but turn a blind eye to the environmental atrocities they’re committing.”
Bulanda said she would like to see a change in attitude among not only the endowment team but the university as a whole.
“Yes, oil and gas companies have a lot of money, but we need to stop idolizing them,” Bulanda said.
In 2014, a fossil fuel divestment movement at Rice, a subset of a national movement involving many private universities, failed to gain traction among the student body.
Environmental Club member Su Chen Teh said Rice’s lukewarm response to the movement could be because some students deliberately choose Rice for its numerous affiliations with the industry.
In addition to the contributing to the endowment, the fossil fuel industry provides students with internships, research opportunities with the Shell Center for Sustainability and jobs, showcased by the prominence of energy giants at the yearly Career and Internship Expo.
Jessica Campbell, associate director of employer relations at the Center for Career Development, said around 15 percent of the companies attending the Expo this September were from the oil and gas industry. Campbell said these companies’ high recruitment rates and ability to forecast hiring needs in advance make it an efficient process for both the companies and the students.
“Given our location in the energy capital of the world and the talent of Rice students across majors, it’s not surprising that oil and gas companies are eager to hire our students,” Campbell said. “[These] job opportunities ... aren’t just for engineers. There are careers in business, finance, marketing, technology, human resources.”
Teh, a Martel College freshman, said part of the lack of concern could be attributed to a larger trend, however.
“I don’t think apathy is just a Rice problem, it’s happening with everyone,” Teh said. “Climate change [discussion] is generally becoming just plain rhetoric, which is pretty sad.”
In 2007, Rice President David Leebron signed the American College and University Presidents Climate Commitment, a pledge to eliminate greenhouse gas emissions and to accelerate the research and education needed to end global warming. Rice’s climate action plan set a goal for Rice to be climate-neutral by 2038.
The commitment was a part of many long term sustainability initiatives, including hiring Richard Johnson as sustainability director in 2004 and constructing environmentally sustainable buildings across campus.
However, Jim Blackburn, a professor in the practice of environmental law, does not think Rice is doing enough.
“Climate change and the carbon dioxide emission issue are excellent teaching tools in numerous respects that we seem to be ignoring,” Blackburn said. “In my opinion, these issues represent a rare opportunity that is being wasted.”
Blackburn raised the issue in his Advanced Sustainable Design (CEVE 323) class of whether Rice should be held accountable for its investment related emissions as part of the Climate Commitment Act.
Blackburn said he disagrees with Rice Management Company’s policy of confidentiality, calling for greater transparency.
“Full disclosure of the oil and gas and coal holdings of the investment portfolio seems to be a reasonable starting point for understanding the tons of carbon dioxide emissions that Rice University investments support,” Blackburn said.
“We talk a lot about leadership at Rice, but I think we have to ask: What are we doing, as an institution, about this key issue for the future?” Blackburn said. “Leadership is about addressing difficult problems head on with a willingness to change if necessary.”
“Rice should be a leader in understanding the impacts of the changing climate and what it means to future generations and a leader in identifying options and methods to solve this problem,” Blackburn said.
So far, most of the leadership in this area stems not from the administration but instead from students.
On Oct. 27, a green jobs workshop at Huff House focused on professional networking skills garnered an attendance of around 35 students. Student Association Senator Sara Meadow worked with the SA and CCD to organize the seminar after repeatedly hearing friends talk about wanting to go into an environmental job but only seeing oil and gas represented at career fairs.
Campbell said environmental companies can be relatively difficult to include in fairs due to their unpredictability as compared to more established sectors.
“As with any emerging industry, hiring needs for renewable energy are less likely to align with the traditional recruiting cycle,” Campbell said.
“A sizable number of students now want to go into sustainability and are looking for career advice and resources at Rice,” Meadow, a Sid Richardson College sophomore, said.
Meadow said the administration and faculty, particularly the CCD and Johnson, have been very supportive of this shift. Meadow is currently working with the Rice Environmental Society to plan their first Sustainability Conference, an environmentally oriented networking alternative to the career fair.
The green jobs fair and Sustainability Conference represent recent increased interest among Rice students and the university in alternative energy, while the present day investment portfolio reveals Rice’s tradition of funding development through investment in the key resource which has expanded the endowment since the 1930s: oil.
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