Halliburton joins University of Wyoming’s list of energy donors

Halliburton recently joined the list of energy donors at the University of Wyoming with a $3 million gift that officials say underscores the close collaboration between the energy industry, state government, and the university.

Gov. Matt Mead announced the donation in Wyoming’s Capitol rotunda during the last week of the 2014 legislative session. Mead explained that he and University Foundation President Ben Blalock flew to Houston this January to ask for the donation at a dinner meeting with Dave Lesar, CEO of Halliburton.

Halliburton is a global oil and gas services production company with 77,000 employees in 100 countries. Roughly 1,500 of those employees work in Wyoming. Former vice president Dick Cheney, who represented Wyoming in Congress from 1979-1989, served as CEO of Halliburton from 1995-2000. In 2012 the company posted revenue of $28.5 billion and net income of $2.6 billion.

Mead quipped that he initially felt uncertain of how to ask for the $3 million gift. He said he found common ground on learning that Lesar’s wife is from Wyoming, and that Halliburton’s chief operating officer Jeff Miller competed in rodeo events at Cheyenne Frontier Days.

Following Gov. Mead’s visit to Houston, Lesar agreed to donate $2 million from the Halliburton Foundation to fund construction of a “high-bay” research facility at the University of Wyoming, along with $1 million for research into unconventional oil and gas production. The full $3 million donation will be matched dollar-for-dollar through appropriations (taxpayer dollars) from the Wyoming Legislature.

“If it had not been for his [Mead’s] personal intervention and personal selling of this prospect we wouldn’t be standing here today,” Lesar told the audience gathered for the announcement of the donation.

Lesar noted that such collaborations rarely come to fruition in other states. “We struggle with making public-private partnerships work,” he said. “I talk to a lot of folks in a lot of states. We talk to a lot of universities, and generally they never get to anywhere but the discussion stage. Here, you guys get it done.”

In describing the benefits of the donation, Lesar emphasized that the gift will improve research at the university and help attract quality students. “It will establish a center of excellence in some aspects of unconventional research which I believe will be second to none,” he said. “And on a more selfish basis, obviously, it should produce talented students that we can come in and hire and bring into the industry and send to our operations all the way throughout the world.”

In an interview with WyoFile, Lesar said that the $3 million donation is significant for the Halliburton Foundation. “It is a large gift in terms of our foundation, one of the largest we have ever done. It’s also one that I think could have the highest payoff, not only to us, but to the university and the state of Wyoming,” he said.

Lesar has worked at Halliburton since 1995. When former Halliburton CEO Dick Cheney left the company to become vice president of the United States in 2000, Lesar took over as CEO, and he has held the position since then. Like Cheney, Lesar has also become a donor the University of Wyoming, albeit through the Halliburton Foundation. Dick and Lynne Cheney gave more than $2 million to the university for international programs in 2010.

“Game changing” research

Halliburton is not the only energy company to donate to unconventional oil and gas research at the University of Wyoming. In recent years petroleum engineer Dr. Mohammed Piri has attracted donations from Hess Corporation, Ultra Petroleum, and others for his innovative ways of tracking fluid flow through rocks at the nanometer scale.

By examining movements of oil and gas through tiny pore spaces in rocks, companies hope to make extraction more efficient and more lucrative. Producers believe the research will increase their rates of return in unconventional fields that employ fracking and multi-directional drilling.

Such research is highly prized by companies who view the technology as critical for meeting a global increase in oil consumption projected during the next few decades. Companies that can increase their rate of recovery from reservoirs by even a few percentage points will gain a financial advantage over their competitors, allowing them to gain access to resources ahead of less efficient producers.

“The work that is done by Dr. Piri is really good,” said Kumar Ramurthy, a UW petroleum-engineering graduate and head of technology for Halliburton’s Rocky Mountain division. “I think Dr. Piri, what he is doing is exceptional. We are excited about it … If you can improve your rate of return by 5 percent, it’s huge.”

UW Foundation president Ben Blalock was more explicit about the dollar value energy companies see in Piri’s research.

“They see the potential is billions beyond billions, tens of billions, and hundreds of billions,” Blalock said. “It’s a game changer for the industry. … The energy industry knows its future is very dependent on this type of technology. The ultimate return is there.”

“Giving gifts like this is fun. But we don’t do it just because they’re fun. We do it because we see a benefit,” Lesar said. “We see a benefit to the state, a benefit to the university and, ultimately, a benefit to U.S. energy production.”

On a practical level, the state’s support of the university’s “high-bay” research facility and other associated engineering projects is partially an effort to shore up the energy industry and the severance taxes and royalties it provides for Wyoming government. The state of Wyoming derives roughly 70 percent of its revenue from activities associated with energy production.

State lawmakers are concerned that severance taxes and Federal Mineral Royalties will decrease over the long term because of decreases in production volumes. In 2015-2016, the state projects it will collect $1.2 billion in severance taxes from oil and gas production, which will fund a significant portion of its $8 billion budget for state government, schools, and permanent savings. Federal Mineral Royalties, which includes royalties from coal production, will generate about $1.6 billion.

Though it wasn’t mentioned in the announcement of Halliburton’s donation, lawmakers recognize that producing more energy out of existing fields would bolster Wyoming’s revenue.

That, plus the increased opportunities for Wyoming engineering students, may help explain why the state has backed $10 million in matching funds for the “high-bay” facility, plus $5 million for an endowed chair in petroleum engineering. Halliburton’s $2 million donation will match out of the $10 million pot of state money, while it’s $1 million donation for research will be matched out of a fund for the School of Energy Resources.

During the announcement of the donation, Gov. Mead pointed out to Lesar the legislature’s stance toward the energy industry. “Dave (Lesar), we’ve got a legislature that absolutely supports the mineral industry, and is completely behind this,” Mead said.

Tom Botts, formerly the head of Shell Oil’s operations in Europe, also spoke about the coordination he’s seen since joining the governor’s task force to bring engineering education at UW to “tier-1” status.

“In my view what makes the tier 1 effort unique is that the planets have aligned here, unlike, I think, anywhere else in the nation,” Botts said. “The planets have aligned between the governor, between the state of Wyoming, between the legislature, between the university, between our university partners. Everybody is pulling in the same direction.”

At the same time, some observers around the state and on campus have concerns about the increased presence and influence of energy donors at UW.

“I’m worried about the effects of this collaboration on academic freedom at the university of Wyoming,” Pete Jorgensen, a former university trustee and state representative, said in an interview with WyoFile. “I’m waiting for the president and the trustees to speak out on that issue.”

University of Wyoming President Dick McGinity, himself a former executive in a Canadian energy company, has expressed his support for university collaborations with industry. During the Halliburton donation announcement, he said such partnerships are necessary to achieve his three goals for the university. Those goals include preparing students to succeed in a global environment, improving research areas important to Wyoming, and interacting more closely with the constituents of the state.

“UW cannot achieve the goals that I’ve outlined to you, or meet its responsibilities, without meaningful and mutually beneficial partnerships with the state of Wyoming and key industries that make Wyoming’s economy go,” McGinity said.

Jorgensen responded to McGinity’s statement by saying students need a broad education that excels in many areas to compete globally. “Even the engineers ought to know something about politics and diplomacy or they are going to be worthless citizens,” he said. “I don’t mean to criticize Halliburton and what they do, or any energy company that gives money to the university. What’s important to the University of Wyoming is balance. … I think the scale is a little tilted right now.”

In Lesar’s closing comments, he encouraged Wyoming and the university to pursue more energy partnerships. “This is going to work. My advice is go bigger, go for more of these,” he told the group of lawmakers, lobbyists, and reporters who gathered for the press conference.

“I was just telling the governor that the word is out on this model,” Lesar said. “I have had discussions with the governor of North Dakota and some of the other states, and they see this as something they want to do. So you are already out front [with the] first mover advantage. Go for it.”

— Gregory Nickerson is the government and policy reporter for WyoFile. He writes the Capitol Beat blog. Contact him at greg@wyofile.com.