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Current Problems Involving Delay Rental and Royalty Clauses

Norman Hanson, Proceedings of 4th Annual Rocky Mountain Mineral Law Institute (1958)

DELAY RENTAL CLAUSE

After an oil and gas lease has been obtained, care must be taken to maintain it in force and effect in accordance with its terms and provisions.

Almost invariably, one of the lease conditions is the payment of periodic delay rentals in the event drilling is not commenced on the leased premises within a designated space of time.

This discussion will be limited to a consideration of the typical unless oil and gas lease. A common delay rental clause in such leases is as follows:

If no well be commenced on said land on or before one year from the date hereof, this lease shall terminate as to both parties unless the lessee on or [346] before that date shall pay or tender to the lessor or to the lessor's credit in the ............... Bank at .........., or its successors, which shall continue as the depository regardless of changes in the ownership of said land, the sum of .......... dollars, which shall operate as a rental and cover the privilege of deferring the commencement of a well for twelve months from said date. In like manner and upon like payments or tenders the commencement of a well may be further deferred for like periods of the same number of months successively. All payments or tenders may be made by check or draft of lessee or any assignee thereof, mailed or delivered on or before the rental paying date. It is u