here are a couple of explainations of the terms used in todays...

here are a couple of explainations of the terms used in todays ann regarding royalties. may help


Glossary of terms

Oil and gas terms have well-known definitions which we first set forth to aid in our discussion and analysis of the issues before us.

An overriding royalty interest is "a royalty interest carved out of the working interest created by an oil and gas lease. It is an interest in oil and gas produced at the surface free of the expense of production and its outstanding characteristic is that its duration is limited by the duration of the lease under which it is created." Campbell v. Nako Corporation, 195 Kan. 66, Syl. ¶ 2, 402 P.2d 771 (1965).

A working interest is the operating interest under an oil and gas lease. The owner of the working interest has the exclusive right to export the minerals on the land. It is an interest in oil and gas that is burdened by the cost of development and operation of the property. Williams and Meyers, Manual of Oil and Gas Terms 839, 1377 (8th ed. 1991).

A top lease is an oil and gas lease granted by a landowner during the existence of a recorded mineral lease which is to become effective if and when the existing lease expires or is terminated. Williams and Meyers, Manual of Oil and Gas Terms 1285 (8th ed. 1991).

A washout is the "[e]limination of an overriding royalty or other share of the working interest by the surrender of a lease by a sublessee or assignee and subsequent reacquisition of a lease on the same land free of such interest." Williams and Meyers, Manual of Oil and Gas Terms 1340 (8th ed. 1991).

An extension and renewal clause is a clause included in an instrument which creates an overriding royalty or oil payment out of the working interest to protect against a washout. In effect, the clause provides that the interest shall apply and be a part of all future renewals or extensions of the lease. Williams and Meyers, Manual of Oil and Gas Terms, 431 (8th ed. 1991).