Also known as: or lease
Written by attorneys · grounded in primary & secondary sources — see below
An oil and gas lease containing a delay-rental clause that imposes on the lessee a continuing obligation throughout the primary term to drill, pay delay rentals, or surrender the lease. Failure to perform any of the three alternatives exposes the lessee to a suit for the rental payment rather than automatic termination of the lease.
Octavia Okonkwo holds an oil and gas lease on land owned by Overland Transport. When the primary term begins, she neither drills nor surrenders the lease. Instead she tenders the delay rental to the lessor. The lessor accepts the payment and the lease remains in force for another period.
Otis Olsen acquires an “or” lease from Osprey Aviation. During the primary term he neither drills a well nor pays the required delay rental and does not surrender the lease. Osprey Aviation sues Olsen for the unpaid rental rather than declaring the lease terminated.
Select any source to read its text and confirm it supports the definition.
An “or” lease gives the lessee the choice to drill, pay, or surrender and keeps the lease alive unless the lessor sues for the rental. An “unless” lease automatically terminates if the lessee fails to drill or pay on time.
The lessor may sue the lessee for the unpaid delay rental. The lease does not terminate automatically.
As leases have become more valuable, drafters prefer the “or” form because it avoids automatic termination and reduces the risk that a court will find the clause unconscionable.
…West Field, prohibit the drilling of a well nearer than 660 feet to any other well and nearer than 330 feet to any property line or lease line. The rules allow the Railroad Commission to grant drilling permits as an exception to the spacing regulation. These exceptions are commonly referred to as Rule 37 permits. This rule…