Force Majeure Clauses in Oil Leases

My FM clause has an “other act of nature beyond Lessee’s reasonable control.” Some FM clauses specifically discuss viruses. Mine seems vague there. My clause specifically excludes market conditions.

Force majeure. This lease shall not terminate nor shall Lessee be liable in damages for Lessee’s failure to perform its obligations under this lease if the failure to perform is caused by (i) fire, storm, flood or other act of nature beyond Lessee’s reasonable control, or (ii) law, rule, regulation or order of governmental authority. …“Unavailability of rigs, equipment, labor or material are not grounds for invoking this Section 12, nor are general marketconditions or Lessee’s financial condition. This Section 12 also does not apply to or excuse any obligation to pay royalty, shut-in royalty or any other sum of money due under this lease.”

You may recall that I contested the invoking of FM to extend the primary term on our Caddo County lease for which there has been neither exploration nor production during the primary term, 3 years. I now have a letter in which the lessee is talking about how bad the market is and essentially asking for us to “cooperate” with our neighbors to extend the lease by 1, 2 or 3 years in order to “enhance our value and promote the development” of our minerals. I am not terribly impressed because they have held our lease for three years with no exploration to this point. I wonder if any other forum members are faced with this.

Based on your post, it seems that this request is not accompanied by an offer of a lease bonus. I am not sure that simply being under lease enhances the value of your minerals. As you already know, it is not a guarantee of drilling. Has your lessee drilled wells nearby and are they good wells? Is it likely that your lessee will flip the leasehold? At the least, this is an opportunity to ask for better lease terms, such as an increase to 25% if your rate is lower, cost-free royalty clause that is in compliance with recent court decisions, etc. Your attorney can help you with this.

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That’s a poor me letter. Tell them you are willing to negotiate a new lease.

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