AUSTIN—The University of Texas System board of regents has unanimously approved a plan to sell some of the oil and natural gas reserves beneath the system’s vast West Texas lands for about $1 billion.

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 during the next 10 years or so.

Since 1923, when the system’s first well began producing, it has received royalty payments only for actual production, not future production.

“We may look back on this as a historic move for this board and this system,” H. Scott Caven Jr., chairman of the UT System Board of Regents, said after Thursday’s vote.

It’s unclear what effect the so-called forward contract would have on tuition and fees, the Austin American-Statesman reported.

Such a transaction 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 amounts to price insurance—or locking in today’s prices.

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

System officials said they had briefed the offices of Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Tom Craddick and detected no opposition. Perry spokeswoman Allison Castle said the governor would support the plan.

Such a transaction would not require legislative or gubernatorial approval but would need the blessing of the Board for Lease of University Lands, a little-known agency that 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,” 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.”

He said he looked into employing the same strategy on Permanent School Fund lands administered by his office but decided it might not be worthwhile because those lands are richer in natural gas, which hasn’t risen in price as much as oil.

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.