The primary purpose of leasing state lands is to provide for oil and gas development and the subsequent economic benefits for the state and its residents. The Royalty Accounting Section oversees the accounting, analysis, and audit of all oil and gas royalties received through Alaska oil and gas production. The remainder goes to the General Fund and the School Fund. 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.