North Dakota Mineral Leases Delay Rentals Clause

North Dakota Mineral Leases
Delay Rentals Clause

If the lessee is unable to commence drilling activities during the early months of the lease, the lessee can delay the start of drilling by making delay rental payments during the primary term – if the lease so allows.

Often, the amount of any delay rental payment is nominal – such as $1.00 per mineral acre.

However, many leases do not provide for any delay rental payments, either because:

• they claim to be “prepaid” or “paid-up“, having paid any delay rental payments in advance,
  or
• have a primary term which is so short (e.g., 1 to 3 years) as not to require any delay rental payments.

North Dakota Mineral Leases Delay Rentals Clause – 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 “Paid Up Delay Rental Clause“:

This is a PAID-UP LEASE. In consideration of the down cash payment, Lessor agrees that Lessee shall not be obligated, except as otherwise provided herein, to commence or continue any operations during the primary term.

By reason of such a provision, no delay rentals would paid to the lessor.

North Dakota Mineral Leases Delay Rentals Clause – 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 “Delay Rental Clause“:

If no well be commenced on said land on or before the __th day of ____________, 1983, this lease shall terminate as to both parties, unless the lessee on or before that date shall:

• pay or tender to the lessor or to the lessor’s credit in the First National Bank at Minot, North Dakota  58701, or its successor or successors, or any bank with which it may be merged, or consolidated, or which succeeds to its business or assets or any part thereof, by purchase or otherwise, which shall continue as the depository regardless of changes in the ownership of the said land,
• the sum of ________________ Dollars which shall operate as a rental and cover the privilege of deferring the commencement of a well for twelve months from said date.

In like manner and upon like payments or tenders the commencement of a well may be further deferred for like periods of the same number of months successively.

And it is understood and agreed that the consideration first recited herein, the down payment, covers not only the privileges granted to the date when said first rental is payable as aforesaid, but also the lessee’s option of extending that period as aforesaid, and any and all other rights conferred.

Rentals may be paid by check or draft and may be remitted by mail.

Mailing of rental on or before the rental-paying date shall be deemed a timely tender thereof and shall preclude termination of this lease.

Notwithstanding the death of the lessor, or his successor in interest, the payment or tender of rentals in the manner provided above shall be binding on the heirs, devisees, executors and administrators of such person.

North Dakota Mineral Leases Delay Rentals Clause – 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 “Delay Rental Clause“:

If operations for drilling are not commenced on said land or on land pooled therewith on or before one (1) year from the date, this lease shall terminate as to both parties, unless:

• on or before one (1) year from this date
• lessee shall pay or tender to the lessor a rental of $________, which shall cover the privilege of deferring commencement of such operations for a period of 12 months.

In like manner and upon like payments or tenders, annually, the commencement of said operations may be further deferred for successive periods of the same number of months, each during the primary term.

Payment or tender may be made to the lessor or to the First National Bank of Minot, ND, which bank, or any successor thereof, shall continue to be the agent for the lessor and lessor’s successors, heirs and assigns.

If such bank (or any successor bank) shall fail, liquidate, or be succeeded by another bank, or for any reason fail or refuse to accept rental, lessee shall not be held in default until thirty (30) days after lessor shall deliver to lessee a recordable instrument making provision for another method of payment or tender, and any depository charge is a liability of the lessor.

The payment or tender of rental may be made by check or draft of lessee, mailed or delivered to said bank or lessor, or either lessor if more than one, on or before the rental paying date.

Notwithstanding the death of the lessor or his successors in interest, the payment or tender of rentals in the manner provided herein shall be binding on the heirs, devisees, executors and administrators of the lessor and his successors in interest.

North Dakota Mineral Leases Delay Rentals Clause – Comparison of Lease Terms

As can be seen from the above lease provisions, when a mineral lease does provide for delay rental payments, there can be a significant difference in the terms of the Delay Rental Clauses used in mineral leases.

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.