Free Royalty Leasing
A free royalty lease — also called a non-participating royalty interest — covers land in which the state sold the land and reserved a free royalty interest in the minerals. The free royalty interest is treated the same as a non-participating royalty interest. The mineral owner executes the lease and the state only participates if there is production.
The Permanent School Fund gains revenue from a portion of the production, depending on the particular free royalty reservation, which is usually a 1/16 or 1/8th free royalty interest.
Statutes require that a certified copy of the lease be filed in the Land Office and any pooling or communitization of the state's interest requires School Land Board approval. See pooling state leases for the application and procedures to pool the state's free royalty interest.