Oil and Gas royalties refer to funds received from the production of oil or gas, free of costs, except taxes. Oil and gas royalties are also the cash value paid by a lessee to a lessor or to one who has acquired possession of royalty rights, based on a percentage of gross production from the property, free and clear of all costs.
The following is an example of a case law defining oil and gas royalty:
The word "royalty," as used in connection with oil and gas leases, conveyances, and reservations, has a definite meaning in its popular sense. It means a share of the products, or proceeds therefrom, reserved to the owner of land for permitting another to use the property.[McCullough v. Almach, 188 Okla. 434 (Okla. 1941)]