Drill or Pay Lease Law and Legal Definition

A ‘drill or pay’ lease is an oil and gas lease which requires the lessee to drill well on the leased premises within a specified period. If the well is not drilled within the specified time, the lessee must pay delay rentals to the lessor. Generally, such lease is not forfeited or terminated by the failure to comply with its terms. However, on the failure to drill or commence drilling as required, the obligation to pay rental becomes absolute as an alternative requirement.