AUSTIN – Plans to sell some of the University of Texas System's oil and natural gas reserves for about $1 billion have been approved unanimously by the board of regents.

The UT System would be paid up front by an investment bank or oil company in return for agreeing to provide a certain amount of oil and gas from its 2.1 million acres in West Texas during the next 10 years or so. Since 1923, when the system's first well began producing, it has received royalty payments for actual production only, not future production.

It's not clear what effect the forward contract, approved Thursday, would have on tuition and fees. The plan is attractive now because oil prices are high and interest rates are low, said Scott Kelley, the system's executive vice chancellor for business affairs.

Keith Brown, a finance professor at UT who advises the board of directors of the regents' investment arm, said a forward contract essentially locks in today's prices.

Like any mineral revenue from the system's West Texas lands, the money would go into the Permanent University Fund to benefit 18 campuses and six agencies in the UT and Texas A&M University systems.

The transaction would not require legislative or gubernatorial approval but would need the blessing of the Board for Lease of University Lands, which oversees oil and gas leasing on Permanent University Fund lands. Land Commissioner Jerry Patterson is chairman of the board, and the other members are two UT regents and one A&M regent.

"I think it's a great concept," Mr. Patterson said. "With commodities priced so high and interest rates so low, if it's going to be done, now's the time to do it."

Details still must be resolved, including whether the earnings would be taxable. UT System officials also must satisfy themselves that the transaction would not be considered an issuance of debt. The Texas Constitution generally prohibits the state from going into debt.

The money could not be spent immediately. The Permanent University Fund, currently worth $12.2 billion, is intended to supply revenue to campuses on a perpetual basis for construction, bonds and faculty salaries. With a current payout of 5 percent a year from the fund, a $1 billion infusion would increase allocations by $50 million a year.

The Associated Press