Pomona College sold its mineral rights for an undisclosed amount on March 18. The holdings were accumulated roughly over the past 50 years and were located across 14 states in the U.S.
The college’s current policy is to sell any assets left to Pomona in people’s wills and use the proceeds for various college operations. However, in recent decades, there was a peculiar caveat to the policy — Pomona sold everything above ground while retaining the underground mineral rights.
Owning mineral rights allows for the exploitation of any natural resources that may be found beneath the land. Over time, the college accumulated a large number of mineral rights as well as mineral royalties bequeathed to Pomona by donors, according to Dave Wallace, the chief investment officer at Pomona College.
“The primary rationale [of the March sale] was to relieve the administrative burden associated with these assets,” Wallace told TSL via email, adding that the rights had to be regularly tracked and required numerous, time-consuming filings for property taxes.
The U.S. has a unique system of rights ownership governed by “severability,” meaning that surface rights, mineral rights and royalty rights of the same land can be owned by separate entities. In most other countries, mineral rights belong to the state or the individual landowner. In the United Kingdom, mineral rights for oil, gas, coal, gold and silver are owned by the state, according to Investopedia.
In order to attract a buyer, Pomona’s Investments Office bundled the mineral interests together.
“The rights were sold to a group that aggregates these types of mineral interests,” Wallace said. The proceeds of the sale will go to college operations including faculty salaries and financial aid.
Mineral aggregators, many of which are backed by private equity players, have become increasingly active in the past decade. These companies consolidate mineral rights for exploration by oil and gas companies and reinvest their earnings into the acquisition of more property.
But while there is already some extraction activity and production at sites the college sold, Wallace said that Pomona officials “do not believe the sale of our mineral rights will enable more fossil fuel extraction.”
“The parcels we sold are too small to be used for extraction on their own,” he said. “Typically, a company interested in extraction would lease hundreds of acres.”
The sale has been criticized by members of Divest Claremont Colleges, including in a recent opinion piece in TSL, as a greenwashing effort that has the potential to increase fossil fuel production. Divest 5Cs is a student movement at the 5Cs pushing the colleges to divest their endowments from fossil fuels and fight the climate crisis.
“Rather than selling it to an aggregator out to make a quick buck on extraction, why didn’t Pomona find a way to ensure that the land wouldn’t be exploited?”
“Rather than selling it to an aggregator out to make a quick buck on extraction, why didn’t Pomona find a way to ensure that the land wouldn’t be exploited? There are ways of removing an administrative burden without potentially contributing to the climate crisis,” Ethan Vitaz PZ ’22, the author of the opinion piece and a member of Divest Claremont Colleges, said in an interview.
Aurora Strauss-Reeves PZ ’23, another member of Divest Claremont Colleges, expressed skepticism about Pomona’s claim that the parcels will not be used for further extraction.
“I’ve had meetings with the Pomona administration and I know they think we’re young environmental radicals who don’t know what we’re talking about. But wealthy colleges like Pomona need to be doing everything they can to prevent future emissions and to put planetary health over profits,” Strauss-Reeves said. “There is a lack of trust between students and the administration over divestment and this is just another betrayal.”
“There is a lack of trust between students and the administration over divestment and this is just another betrayal.”
Additionally, mineral rights become more valuable when oil prices are high and unconventional methods of oil extraction can become economical, according to Investopedia. Oil prices in the US are currently skyrocketing.
In response to student concerns, Wallace told TSL that the college was unlikely to find a non-financial buyer willing to also take on the assets with no current or future value.
“The sale included both producing and non-producing interests,” Wallace said. “To eliminate the administrative burden associated with these interests Pomona insisted that the buyer take all of the interests, even those with no future value. The buyer hopes to make a profit from the producing interests that they purchased.”
He clarified that the college does not have the ability to stop any ongoing production because the agreements that permitted production were in place before the mineral rights were donated to Pomona.
In response to student concerns that the sale was not announced or conducted transparently, Wallace said that the college regularly receives non-cash donations, including stock and real estate.
“Given the high volume of these transactions, especially stock gifts, we don’t disclose each asset sale,” Wallace said.
College policy is to sell these assets and use the cash to fund college operations or fulfill the donors’ request, he added.