The oil price crash that has hammered the U.S. shale industry is now threatening to put the squeeze on one of America’s biggest university endowments.

The University of Texas and Texas A&M University systems have amassed one of the largest college endowments in the U.S. through their economic interest in swaths of land, just over half of which is leased to oil and gas producers.

The companies hand over a share of their revenues to University Lands, which manages about 2.1 million acres of territory in West Texas for the educational institutions. Over the past 10 years, the Permanent University Fund (PUF) has reaped $8.2 billion from the arrangement, helping to push its assets to $24 billion by the end of 2019.

But as the economic upheaval unleashed by the coronavirus pandemic has sent the oil price tumbling, the universities have been forced to rip up their forecasts. The royalties the PUF will receive are expected to drop to $500 million for the year ending August 2021, according to a spokeswoman for the University of Texas system.

“Obviously the royalty flow is not going to be $1 billion this year,” said Dale Craymer, president of the Texas Taxpayers and Research Association. “We’re probably going to see much slower growth of the corpus as a result of the oil price drop.”

Mark Houser, CEO of University Lands, told state regulators last month that oil drilled on its land had to be sold for at least $30/bbl to $60/bbl to make economic sense. “To sell at these [current] prices is just not acceptable,” he said.

The universities had forecast that their total investable asset pool—made of the PUF, other endowments and well as shorter-term funds—would grow to $91 billion by 2029, fueled by investment returns and an $11 billion windfall from its Texas lands. The projections for the land returns were based on oil trading at between $55/bbl and $60/bbl.

WTI, the U.S. oil benchmark, closed at just under $20/bbl last week and has fallen 67% this year.

Top tier universities in Texas are not the only institutions facing pain from the oil market’s turmoil.

Alaska’s $60 billion permanent fund, which pays out an annual dividend to its residents as well as helping to fund public services, expects to generate $316 million revenues from oil royalties in the year to June, down 18% from the previous financial year.

Angela Rodell, the CEO of the Alaska Permanent Fund Corp., said the fund has already received a significant share of the royalties for the current financial year. However, the next financial year is “where you can really see the extended price drop.”

The fund expects the windfall from oil royalties to drop to $213 million in its next financial year, which begins in July. Alaska’s permanent fund and the endowment for the Texas universities were also hit by the fall in markets during the first quarter.

However, University Lands and UTIMCO, the body responsible for investing the funds, expect the oil price to recover once the pandemic is over, according to the spokeswoman for the University of Texas system.

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