Oil and Gas Lease Law and Legal Definition
Oil and gas lease is a contractual agreement between owners of a mineral(lessor) and the producer (lessee) whereby the lessor grants the right to develop deposits of mineral to a producer (the lessee). Generally, oil and gas leases include force majure clause and relieves a lessee from liability for breach, if the lessee’s act was impeded as the result of a natural cause that could not have been anticipated or prevented. An oil and gas lease gives a lessee a property interest in the mineral. These lease agreements should be recorded at the Recorder of Deeds office of the county where the leased tract is located.
The following is an example of a case law defining oil and gas lease:
Oil and gas lease refers to a production in such quantity as will pay a profit to the lessee over and above the cost of operating the well and marketing the product, although the cost of drilling and equipping the well may never be repaid and the operation of the well may eventually, considering the cost of drilling and equipment, result in a loss to the lessee; any requirement of mutual benefit to the parties is satisfied if the lessor receives royalties and the lessee operates at a profit.[West v. Russell, 12 Cal. App. 3d 638 (Cal. App. 2d Dist. 1970)]
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