Cessation-of-Production Clause Law and Legal Definition
Cessation of production clause is a provision in oil and gas leases which specifies what the lessee must do to maintain the lease if production stops. Such clauses extend or preserve the lease while the lessee resumes operations designed to restore production. Usually, such provision takes the form of a temporary cessation of production clause. This is a provision in the lease that states that the lease will be maintained so long as production does not cease for more than an agreed period of time. So long as agreed period of time does not elapse without operations on the property, the lease will not terminate even though there is no production.
The cessation-of-production clause applies only if a well holding the lease ceases to be capable of producing gas. [ Hunthauser Holdings, LLC v. Loesch, 2003 U.S. Dist. LEXIS 14423 (D. Kan. June 10, 2003)]
The following is an example of cessation of production clause appearing in a oil and gas lease:
“If after the expiration of the primary term of this lease, production on the leased premises shall cease from any cause, this lease shall not terminate provided lessee resumes operations for drilling a well within sixty (60) days from such cessation, and this lease shall remain in force during the prosecution of such operations and, if production results therefrom, then as long as production continues.”
