North Dakota Force Majeure Provisions

Lease Extension “Savings” Clauses: North Dakota Force Majeure Provisions

Since most lessees will not actually covenant – make a promise – to drill for oil and gas, the mineral lease will generally:

• provide the lessee with an option to drill or search for minerals during the primary lease term,
  and
• allow the lessee to continue the lease past the primary term upon the occurrence of certain events (a “savings event“).

Therefore, even though the primary term of a mineral lease may be relatively short, the full duration of the lease may be significantly longer by reason of its extension into a secondary term due to the application of one or more of the following savings clauses:

1. drilling operations provisions,
2. cessation of production provisions,
3. shut-in provisions,
4. dry hole provisions,
   and
5. force majeure clauses.

Force majeure provisions with be addressed in this section.

North Dakota Force Majeure Provisions

A force majeure will generally extend the lease term whenever some unforeseeable event not caused by the lessee – such as governmental action, catastrophic weather, war, rebellion, or riot – makes the lessee’s performance under the lease impossible.

• A lessor would want any force majeure clause to extend the lease term only:
• when no other lease savings clause is applicable, and
• when the conditions claimed for a force majeure extension are not due to the lessee’s fault, negligence, ornon-compliance with a legitimate government regulation or rule.

Therefore, the lease should require the lessee to give the lessor:

• notice of the event claimed to qualify as a force majeure, and
• full explanation as to why the event made it impossible for the lessee to otherwise extend the lease,

and should also require the lessee to diligently attempt to overcome the force-majeure event as soon as possible.

A force majeure provision should never allow the lessor to avoid making any financial payment obligation for royalties relating to oil and gas production that has already occurred.

North Dakota Force Majeure Provisions – Modern Lease

An oil and gas lease proposed to be used in North Dakota in the last few years by one oil company contained the following “force majeure provision“:

When drilling or other operations are delayed or interrupted

• by storm, flood or other act of God, fire, war, rebellion, insurrection, riot, strikes, differences with workmen, unavailability of material or equipment, failure of carriers to transport or furnish facilities for transportation, some order, requisition or necessity of the government
  or
• as a result of any cause whatsoever beyond the control of the Lessee,

the time of such delay or interruption shall not be counted against Lessee, anything in this lease to the contrary notwithstanding.

Note that the above provisions provide very broad protection to the lessee, and have no limitation on the duration of the lease extension for such matters.

North Dakota Force Majeure Provisions – 1981 Lease

For comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1981 by an oil company in the business of oil exploration contained the following “force majeure provision“:

Compliance

• with any now or hereafter existing act, bill, or statute purporting to be enacted by any Federal or State legislative authority,
  or
• with orders, judgments, dresses, rules, regulations made or promulgated by State or Federal courts, State or Federal offices, boards, commissions or committees purporting to be made under authority of any such act, bill or statute,

shall not constitute a violation of any of the terms of this lease or be considered a branch of any clause, obligation, covenant, undertaking, condition or stipulation contained herein, nor shall it be or constitute a cause for the termination, forfeiture, reversion or revesting of any estate or interest herein and hereby created and set out, nor shall any such compliance confer any right of entry or become the basis of any action for damages or suit for the forfeiture or cancellation hereof;
and
while any such purport to be in force and effect they shall, when complied with by lessee or assigns, to the extent of such compliance operate as modifications of the terms and conditions of this lease where inconsistent therewith.

Note that under the 1981 lease, the force majeure provisions relate exclusively to the lessee’s compliance with governmental mandates.

North Dakota Force Majeure Provisions – 1977 Lease

For further comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1977 by an oil company in the business of oil exploration contained the following “force majeure provision“:

When drilling or other operations are delayed or interrupted as a result of any cause whatsoever beyond the control of the lessee, the time of such delay or interruption shall not be counted against lessee, anything in this lease to the contrary notwithstanding.
All express or implied covenants of this lease shall be subject to all Federal and State laws, Executive orders, rules, or regulations and this lease shall not be terminated, in whole or in part, nor lessee held liable in damages for failure to comply therewith if compliance is prevented by, or if such failure is the result of, any such law, order, rule or regulation.

Note that under the 1977 lease, the force majeure provisions are generally broad, but also specifically relate to the lessee’s compliance with governmental mandates.

In addition, such provisions identify no limitation on the duration of any lease extension for such matters.

North Dakota Force Majeure Provisions – Comparison of Lease Terms

There are significant differences between the terms of the three force majeure provisions identified above.

North Dakota Force Majeure Provisions

Topics of Interest – North Dakota Ancillary Probate

Topics of Interest – North Dakota Mineral Rights.

Topics of Interest – North Dakota Transfer on Death Deeds

Topics of Interest – North Dakota Affidavits of Heirship

Topics of Interest – North Dakota Intestate Succession.

Topics of Interest – North Dakota Informal Probate

Topics of Interest – North Dakota Intestate Succession.