Money received for settlements of past royalties due is placed in the Budget Reserve Fund. Some leases receive royalty rate reductions for new discoveries or economic considerations. Royalty is paid based on the agreed value of the oil or gas removed from the lease, the volume removed and the lease s royalty rate. Lease owners have agreements with the state as to what expenses can be deducted before calculating royalty due. The RIK is then sold by the state.
Some older leases require a minimum royalty payment if the lease is capable of producing.
If the lease s royalty payments do not meet the minimum royalty due, an additional payment must be made. All lease owners must prepay an annual rent for the lease. If the royalty due is less than the rent already paid then no additional royalty is due. Royalty payments are made the month after the production has occurred. Reporting royalty information must follow established regulations and procedures.