American Oil and Gas Reporter - October 2015 - 31

lands has "earned record levels of
revenue from mineral leasing,
amounting to more than $1 billion in
value." ❒

IPAA Study Attacks
Divestment Plans

WASHINGTON-Universities continue
to weigh divesting their endowment funds
from oil and natural gas companies, but
the Independent Petroleum Association
of America warns those actions come
with financial costs.
According to a study of five universities
commissioned by IPAA, the schools-
Harvard, Yale, Massachusetts Institute
of Technology, Columbia and New York
University-collectively could lose more
than $195 million a year if they sold
their fossil-fuel equities. Bradford Cornell,
a visiting professor at Caltech, led the
research.
"The fact that divestment has the potential to generate lower returns for schools
and other institutions isn't particularly
earth-shattering news," Cornell says.
The critical findings, and what schools
would be smart to evaluate as part of any
discussion on divestment moving forward,
are that the projected shortfalls associated
with divestment are significant and universal, he adds.
Consistent with basic financial economic principals, the report warns that
divestment almost always generates longterm investment shortfalls because of reduced diversification, and those shortfalls
typically are substantial, given the size
and importance of the energy sector being
divested.
According to the study, the mean riskadjusted shortfall attributable to divestment
each year for a weighted average across
the five universities is 0.23 percent annually. It says this deficit varies across
the universities: Harvard has a 0.30 percent
decline, followed by Yale (0.21 percent),
Columbia (0.16 percent), MIT (0.14 percent) and NYU (0.12 percent). As applied
to the school's endowments, the study
projects annual reductions of $107.81
million for Harvard, $51.09 million at
Yale, $17.75 million for MIT, $14.43
million at Columbia and $4.16 million at
NYU.
Looking out 50 years, Cornell projects
the endowment funds will be reduced by
12.07 percent on a weighted average
across the five universities. On an individual basis, he concludes Harvard would
see a 15.94 percent drop in its endowment
fund, followed by Yale (11.27 percent),
Columbia (8.13 percent), MIT (7.40 per-

cent) and NYU (6.12 percent).
Jeff Eshelman, IPAA's senior vice president for operations and policy, says the
report adds to the growing body of research
showing that "divestment is a bad policy
based on a bad premise, with the potential
to reduce really bad outcomes for the
schools and institutions that adopt it."
The Cornell report builds off research
by University of Chicago Law School
professor Daniel Fischel that analyzed
the performance over 50 years of two investment portfolios-one including energy-related stocks and the other that did
not. IPAA says Fischel's study finds that
fully diversified portfolios generated average, absolute returns 0.7 percentage
points greater than portfolios that excluded
energy stocks, meaning the divested portfolio lost 70 basis points relative to the
optimal scenario each year the portfolios
were active. ❒

Gas Storage Levels
Increase By 345 Bcf

WASHINGTON-Underground
natural gas storage in the United States
stood at 3.538 trillion cubic feet on
Sept. 25, 4.5 percent above the five-year
average, according to the U.S. Energy
Information Administration. That was
up 345 billion cubic feet from the 3.193
Tcf reported by EIA on Aug. 28, which
was 4.0 percent above the five-year
average. The Sept. 25 storage number
was 454 Bcf more than a year ago,
when storage stood at 3.084 Tcf.
EIA reports gas storage in the
producing region stood at 1.232 Tcf on
Sept. 25, 15.4 percent above the fiveyear average and 102 Bcf more than the
1.130 Tcf reported in storage on Aug.
28, which was 14.5 percent above the
five-year average. The Sept. 25 storage
number for the producing region was up
304 Bcf from a year ago.
In the eastern region, EIA reports,
gas storage on Sept. 25 was 1.804 Tcf,
1.4 percent below the five-year average,
but up 223 Bcf from the 1.581 Tcf
reported in storage on Aug. 28, which
was 2.3 percent below the five-year
average. The Sept. 25 storage number
for the eastern region was up 100 Bcf,
compared with a year earlier.
In the western region, EIA reports,
storage levels on Sept. 25 were 502 Bcf,
2.9 percent above the five-year average
and up 20 Bcf from the 482 Bcf reported
on Aug. 28, which was 3.9 percent
above the five-year average. The Sept.
25 storage number in the western region
was up 50 Bcf from a year ago. r



American Oil and Gas Reporter - October 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - October 2015

Contents
American Oil and Gas Reporter - October 2015 - Cover1
American Oil and Gas Reporter - October 2015 - Cover2
American Oil and Gas Reporter - October 2015 - 3
American Oil and Gas Reporter - October 2015 - 4
American Oil and Gas Reporter - October 2015 - Contents
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American Oil and Gas Reporter - October 2015 - Cover3
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