The state receives a royalty share of oil and gas produced from the land the state has leased to the oil producers. By statute, regulation, and the terms of the oil and gas leases the state has the choice to take its royalty "in-kind" or "in-value." When it takes its royalty in-kind, the state takes possession of its royalty share of the oil and gas produced by the lessee and sells it. When the state takes its royalty in-value, the lessee takes possession of the royalty share and pays the state for it. The conditions for the sale of royalty in kind must adhere to state regulation and statutes.
The Decision Process for the Sale of State Royalty Oil