The Oil and Gas Lease—Major Problems

I. Introduction II. Who May Lease … A. Guardians and Trustees … B. Divided Ownership … (1) Cotenancy … (2) Life Tenancy … (3) Interest in Minerals Only III. Duration of Lease … A. Habendum Clause … B. Delay Rental Clause … (1) “Or” Lease … (2) “Unless” Lease … C. Drilling a Dry Hole … D. Amount of Rental … E. Production Requirements … F. Effect of Adverse Marketing Conditions … G. Surrender Provisions … H. Removal of Equipment IV. Development, Operation, and Royalty Provisions … A. Implied Covenants … (1) Duty of Exploration … (2) Duty of Further Development … (3) Duty of Diligent Operation … (4) Duty to Protect against Drainage … B. Standard Testing Implied Covenants … C. Remedies for Breach of Implied Covenants … D. Royalties … (1) “Lesser Interest” Clause … (2) Entirety Clause V. Transferability of Lease Rights and Obligations VI. Pooling and Unitization VII. Remedial and Judicial Ascertainment Clauses VIII. Clauses Designed to Cure Problems Arising from Separation of the Lease by Horizontal Assignments or by Partial Pooling or Unitizatio