Oil And Gas Lease Terms

Front 1

An oil and gas lease savings clause that specifies what the lessee must do to maintain the lease in the event that production ceases. The purpose is to make more certain

Back 1

Cessation-of-Production Clause

Front 2

The rule that an oil and gas lease term “for so long thereafter as oil and gas are produced” will not terminate once production is attained unless the cessation of production is for an unreasonable” length of time, taking into account all of the facts and circumstances. See also Cessation-of-Production

Back 2

Temporary-Cessation-of-Production Clause

Front 3

An oil and gas lease clause specifying what notice must be given by the lessor or its assignee to the lessee of changes in ownership to bind the lessee to recognize them. The purpose of the clause is to protect a lessee against the consequences of making an improper payment under the lease. Sometimes called an Assignment clause.

Back 3

Change-of-Ownership Clause

Front 4

Another name for the change-of-ownership clause

Back 4

Assignment Clause

Front 5

Another name for a Mother Hubbard clause

Back 5

Cover-All Clause

Front 6

A lease clause to protect the lessee against errors in description of property by providing that the lease covers all the land owned by the lessor in the area. Sometimes called a cover-all” clause

Back 6

Mother Hubbard Clause

Front 7

The clause in an oil and gas lease that defines how long the interest granted to the lessee will extend. Modern oil and gas leases typically provide for a primary term, a fixed number of years during which the lessee has no obligation to develop the premises and a secondary term for as long thereafter as oil and gas produced” once development takes place.

Back 7

Habendum Clause

Front 8

A provision in an oil and gas lease specifying what a lessee must do to maintain the lease for the remainder of the primary term after drilling an unproductive well. A dry-hole clause is intended to make clear that the lease may be maintained by payment of delay rentals for the remainder of the primary term.

Back 8

Dry-hole Clause

Front 9

A clause found in most leases that grants the lessee the power to combine part or all of the leased acreage with other properties for development or operation

Back 9

Pooling Clause or Unitization Clause

Front 10

A lease clause (called a Freestone Rider in Texas) that modifies the effect of most lease pooling clauses by severing pooled portions of the lease so that drilling or production on a pooled portion will not maintain the lease as to unpooled portions

Back 10

Pugh Clause

Front 11

A lease clause that imposes a duty on the lessee to pay the lessor or the surface owner for damage. usually of a specified type. to the surface. Often such clauses are limited to growing crops.’ In the absence of a damages clause the oil and gas lessee ha no legal obligation to pay for “reasonable” damage to the surface necessary to obtain oil and gas: the lessee has an implied right to use the surface for oil and gas operations.

Back 11

Damages Clause

Front 12

A provision in an oil and gas lease specifying what a lessee must do to maintain the lease for the remainder of the primary term after drilling an unproductive well. A dry-hole clause is intended to make clear that the lease may be maintained by payment of delay rentals for the remainder of the primary term.

Back 12

Drilling-Delay Rental Clause

Front 13

A rule of title interpretation developed to deal with the frequent problem of over conveyances of fractional interests. Summarized as follows: Where full effect cannot be given to the granted interest because of a previous outstanding interest, priority will be given to the granted interest (rather than to the reserved interest) until full effect is given to the granted interest

Back 13

Duhig Rule

Front 14

A payment to induce the lessor to execute the lease

Back 14

Bonus

Front 15

A payment from the lessee to the lessor to maintain the lease from period to period during the primary term without drilling. See also Drilling-Delay Rental Clause. “Unless” Lease, “Or” Lease, and Paid-Up Lease

Back 15

Delay Rental

Front 16

Same as buyer and lessee and can be found in the Indirect or Reverse Indexes. Grantor Same as seller and lessor and can be found in the Direct Indexes.

Back 16

Grantee

Front 17

A share of production or production revenues, paid at the well free of costs of production. provided for the lessor in the royalty clause of the oil and gas lease

Back 17

Landowner’s Royalty

Front 18

The oil company, in the case of an oil and gas lease

Back 18

Lessee

Front 19

The mineral owner, in the case of an oil and gas lease

Back 19

Lessor

Front 20

The abbreviation for one thousand cubic feet. One of the standard units of measurement for natural gas.

Back 20

MCF

Front 21

The full mineral interest in one acre of land

Back 21

Mineral Acre

Front 22

The right to search for, develop and produce oil and gas (and other minerals) from the land. as well as (in some states) the right to present possession of the oil and gas in place. It is the mineral interest that is granted by the oil and gas lease

Back 22

Mineral Interest

Front 23

a share of production. or the value or proceeds of production. free of the costs of production. carved out of the mineral interest. A nonparticipating royalty holder is entitled to the stated share of production or cash without regard to the terms of any lease. Nonparticipating royalties are often retained by mineral interest owners who sell their rights.

Back 23

Nonparticipating Royalty (NPRI)

Front 24

Bringing together either by voluntary agreement (voluntary pooling) or by order of an administrative agency (compulsory or forced pooling), small tracts or fractional interests to drill a well. Pooling is usually undertaken to comply with well spacing requirements established by state law or regulation. Pooling is usually associated with drilling a single well and operating that well by primary production techniques. In the oil and gas industry, the term is used interchangeably with unitization

Back 24

Pooling

Front 25

Bringing together either by voluntary agreement (voluntary pooling) or by order of an administrative agency (compulsory or forced pooling), small tracts or fractional interests to drill a well. Pooling is usually undertaken to comply with well spacing requirements established by state law or regulation. Pooling is usually associated with drilling a single well and operating that well by primary production techniques. In the oil and gas industry, the term is used interchangeably with unitization

Back 25

Primary Term

Front 26

A share of production, or the value or proceeds of production, when and if there is production; usually expressed as a fraction e.g. 1/6. A royalty interest has no right to operate the property. Therefore, a royalty owner has no right to lease or to share in bonus or delay rental, unless given it by lease terms. In some states a royalty owner has the rights of ingress and egress to take the royalty production. There is a split of authority over what costs are costs of production

Back 26

Royalty Interest

Front 27

The term of the oil and gas lease after production has been established. typically “as long thereafter as oil and gas is produced from the premises.” See also Habendum Clause and Primary term.

Back 27

Secondary Term

Front 28

A term used to describe a transfer or reservation of a part of the bundle of rights that make up property ownership from the whole. Mineral rights are frequently “severed” from property that may contain oil and gas or other minerals

Back 28

Severance

Front 29

All rights to property other than the mineral interest. The surface interest has the right to the surface subject to the right of the mineral interest owner to use the surface. The surface interest is entitled to all substances found in or under the soil that are not defined as “minerals.”

Back 29

Surface Interest

Front 30

A mineral interest or royalty interest that is not perpetual. A term interest may be for a fixed term (e.g.. for 25 years) or defeasible (e.g.. for 25 years and so long thereafter as there is production from the premises).

Back 30

Term Interest

Front 31

A lease granted on property already subject to an oil and gas lease. Generally. a top lease grants rights if and when the existing lease expires.

Back 31

Top Lease

Front 32

The rights to the mineral interest granted by an oil and gas lease. so- called because the lessee acquires the right to work on the leased property to search, develop and produce oil and gas (and the obligation to pay all costs).

Back 32

Working Interest

Front 33

A lease with a drilling-delay rental clause that permits the primary term to be extended indefinitely by payment of delay rentals: no-term leases were common at the end of the 19th Century.

Back 33

No-Term Lease

Front 34

A form of operations clause.

Back 34

Continuous-Operations Clause

Front 35

Another name for a support agreement

Back 35

Contribution Agreement

Front 36

Defines what rights the Lessee is acquiring in which lands.

Back 36

Granting Clause