Has anyone delt with or ran into this clause?

Oil and Gas Leasing Help
1

I have a lease with this clause underneath the tract description:

Notwithstanding any other provisions in this lease or any wording contained herein (such as "this lease", "the lease", "leasehold", or any other analogous terms), each of the separately designated tracts described above shall be treated for all purposes as a separate and distinct lease. All of the provisions contained in this lease form shall be applicable to each such tract and be construed as if a separate lease agreement had been made and executed covering each such tract.

The lease also has "Continuous Operations Clause" My question is will the continuous operations clause hold all lands covered under the lease or only on tracts that are being developed? Who does this benefit? As a Lessor the CO gives the lessee incentive to develop your interest and as a Lessee if gives you opportunity to hold the subject lease as long as you keep drilling, which lets you get maximum use of the leased premises if it is productive. Can anyone shine some light on this for me.

Thanks, Marc

2

Dear Mr. Kaunitz,

This is not an uncommon clause at all. I personally do not like them. I like to issue a lease tract by tract. Makes it easier for me to adminstrate.

The continuous operations clause is a good one. It forces develoment or the lessee could lose acreage. Many have a time credit for accellerated drilling. This clause, like the separate lease clause, is set up to favor the mineral owner.

Depending on whether the clauses conflict each other, continuous operations on one tract will not perpetuate another tract by operations.

3

Mr. Cotten

Thanks for your input. It verified the way I was thinking.

Marc