Research list
Oil and Gas Lease Clauses: 15 Clauses Explained With the Cases Behind Them
Oil and gas lease clauses decide how long a lease lasts, what royalty is paid on and how much land production holds. Here are fifteen of them, each with what it does, what to check, and a court decision that reads it, quoted from the opinion.
Where to look first
An oil and gas lease is a deed of a kind: most of its value to the owner sits in a handful of clauses that decide how long it lasts, what royalty is paid on, and what land it holds. Each clause below is shown with a court decision that reads it, because courts, not the forms, decide what the words mean.
| Your question | Read |
|---|---|
| How long does my lease last? | The habendum clause (2), with the savings (10) and continuous operations (7) clauses |
| What is my royalty worth? | The royalty clause (3), and AMR’s royalty deductions list for your state |
| Can production elsewhere hold my land? | The pooling clause (8), limited by a Pugh clause (5) and a retained acreage clause (6) |
| What if the land is later divided? | The entireties clause (11) |
| What if no well is drilled? | The delay rental clause (9) in an unless lease |
How we checked
Every authority below was read in full text on October 5, 2026, from the Caselaw Access Project’s published files and Cornell’s Legal Information Institute, and each quotation was checked word for word. Most leading cases are from Texas, North Dakota and Pennsylvania, so read your own state’s cases before relying on one; a lease is read on its own words, and this is reference, not legal advice.
The clauses at a glance
| Clause | What it does | Authority |
|---|---|---|
| Granting clause | Transfers to the lessee the right to explore for, drill and produce oil and gas from the described land | T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261 (Pa. 2012) |
| Habendum clause | Sets how long the lease lasts: a fixed primary term, then a secondary term that runs only as long as oil or gas is produced. | Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002) |
| Royalty clause | Sets the owner&rsquo | Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) |
| Shut-in royalty clause | Lets the lessee keep the lease alive without selling anything by paying a set sum while a well that can produce is shut in. | Gulf Oil Corp. v. Reid, 337 S.W.2d 267 (Tex. 1960) |
| Pugh clause | Stops production from a pooled unit from holding the lease acreage outside that unit after the primary term. | Egeland v. Continental Resources, Inc., 2000 ND 169, 616 N.W.2d 861 |
| Depth or retained acreage clause | At the end of the primary term or of continuous development, releases all land and depths except a defined block around each producing well. | Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., 554 S.W.3d 586 (Tex. 2018) |
| Continuous operations clause | Keeps the lease alive past the primary term without production, as long as the lessee keeps drilling or reworking with no gap longer than the clause allows. | Rogers v. Osborn, 261 S.W.2d 311 (Tex. 1953) |
| Pooling clause | Lets the lessee combine the tract with neighbors into one unit, so production anywhere in the unit counts for every tract and royalty is shared by acreage. | Southeastern Pipe Line Co. v. Tichacek, 997 S.W.2d 166 (Tex. 1999) |
| Delay rental clause | In an &ldquo | Serhienko v. Kiker, 392 N.W.2d 808 (N.D. 1986) |
| Dry hole and cessation of production clause | Keeps the lease alive for a stated number of days after a dry hole or after production stops, if new drilling or reworking starts within that window. | Samano v. Sun Oil Co., 621 S.W.2d 580 (Tex. 1981) |
| Entireties clause | If the leased land is later split among owners, royalty from any well on it is shared by all of them by acreage, not only by the owner of the well tract. | Thomas Gilcrease Foundation v. Stanolind Oil & Gas Co., 266 S.W.2d 850 (Tex. 1954) |
| Mother Hubbard clause | Extends the lease to small strips or gaps of the lessor&rsquo | Sun Oil Co. v. Bennett, 84 S.W.2d 447 (Tex. Comm’n App. 1935) |
| Assignment clause | Lets either side transfer its interest and sets who stays liable after the transfer | 30 U.S.C. 187a (Mineral Leasing Act, federal leases) |
| Warranty clause | The lessor promises it owns the title it leases and will defend it, and usually lets the lessee pay off taxes or liens and recover the cost. | Navarro Oil Co. v. Cross, 162 S.W.2d 677 (Tex. Comm’n App. 1942) |
| Force majeure clause | Excuses the lessee&rsquo | Perlman v. Pioneer Ltd. Partnership, 918 F.2d 1244 (5th Cir. 1990), applying Wyoming law |
1. Granting clause
Transfers to the lessee the right to explore for, drill and produce oil and gas from the described land; its wording sets which substances and uses the lease covers.
- What to check
- Which substances (watch for “other minerals”), which depths, and which side uses such as storage or disposal the grant includes.
“the granting clause, which initially conveys to the lessee the right to drill for and produce oil or gas from the property”
T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261 (Pa. 2012)
Read on October 5, 2026 in full text: static.case.law
2. Habendum clause
Sets how long the lease lasts: a fixed primary term, then a secondary term that runs only as long as oil or gas is produced.
- What to check
- The length of the primary term, and whether the secondary term needs actual production or only a well capable of producing.
“In Texas, such a habendum clause requires actual production in paying quantities.”
Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002)
Read on October 5, 2026 in full text: static.case.law
3. Royalty clause
Sets the owner’s share of production or its value, and the point where that value is measured, which decides whether post-production costs come out of the owner’s share.
- What to check
- The valuation point: “at the well”, “amount realized” or a point downstream. Texas courts have since read other wordings differently, as AMR’s royalty deductions list sets out.
“the commonly accepted meaning of the ‘royalty’ and ‘market value at the well’ terms renders the post-production clause in each lease surplusage as a matter of law”
Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996)
Read on October 5, 2026 in full text: static.case.law
4. Shut-in royalty clause
Lets the lessee keep the lease alive without selling anything by paying a set sum while a well that can produce is shut in.
- What to check
- The amount, the deadline to pay after shut in, and any limit on how long payments can hold the lease; a late payment ended the lease in Reid.
“they have been construed to deny a reasonable time within which to pay ‘shut-in’ royalty after the ‘shut-in’ has taken place”
Gulf Oil Corp. v. Reid, 337 S.W.2d 267 (Tex. 1960)
Read on October 5, 2026 in full text: static.case.law
5. Pugh clause
Stops production from a pooled unit from holding the lease acreage outside that unit after the primary term.
- What to check
- That it releases unpooled acreage and depths, and whether drilling elsewhere can still hold that acreage, as it did in Egeland.
“The word ‘ONLY’ limits the lands held by production from a given well, not the methods for extending the lease.”
Egeland v. Continental Resources, Inc., 2000 ND 169, 616 N.W.2d 861
Read on October 5, 2026 in full text: static.case.law
6. Depth or retained acreage clause
At the end of the primary term or of continuous development, releases all land and depths except a defined block around each producing well.
- What to check
- How the retained block is measured: fixed acres, a proration unit, or a depth below the deepest producing formation.
“a retained-acreage clause typically divides the leased acreage such that production or development will preserve the lease only as to a specified portion of the leased acreage”
Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., 554 S.W.3d 586 (Tex. 2018)
Read on October 5, 2026 in full text: static.case.law
7. Continuous operations clause
Keeps the lease alive past the primary term without production, as long as the lessee keeps drilling or reworking with no gap longer than the clause allows.
- What to check
- The days allowed between wells, what counts as operations, and whether it holds the whole lease or only acreage around each well.
“if production results from the continuous prosecution of the very operations being engaged in by the lessees upon the expiration of the primary term, the lease is good”
Rogers v. Osborn, 261 S.W.2d 311 (Tex. 1953)
Read on October 5, 2026 in full text: static.case.law
8. Pooling clause
Lets the lessee combine the tract with neighbors into one unit, so production anywhere in the unit counts for every tract and royalty is shared by acreage.
- What to check
- The maximum unit size, whether your consent is needed, whether part of the tract can be pooled alone, and a Pugh clause to pair with it.
“A lessee has no power to pool without the lessor’s express authorization, which is usually contained in the lease’s pooling clause.”
Southeastern Pipe Line Co. v. Tichacek, 997 S.W.2d 166 (Tex. 1999)
Read on October 5, 2026 in full text: static.case.law
9. Delay rental clause
In an “unless” lease, ends the lease automatically during the primary term if the lessee neither drills nor pays the yearly rental on time.
- What to check
- Whether rentals are due yearly or were paid up front in a paid up lease, and the due date and payee.
“if delay rental payments required by the lease are deficient in either time or the amount of payment, the lease terminates automatically”
Serhienko v. Kiker, 392 N.W.2d 808 (N.D. 1986)
Read on October 5, 2026 in full text: static.case.law
10. Dry hole and cessation of production clause
Keeps the lease alive for a stated number of days after a dry hole or after production stops, if new drilling or reworking starts within that window.
- What to check
- The number of days, and whether the limit applies in the secondary term too; a 73 day gap ended the Samano lease under a 60 day limit.
“there was neither production nor any drilling or reworking operations for a continuous period of seventy-three days”
Samano v. Sun Oil Co., 621 S.W.2d 580 (Tex. 1981)
Read on October 5, 2026 in full text: static.case.law
11. Entireties clause
If the leased land is later split among owners, royalty from any well on it is shared by all of them by acreage, not only by the owner of the well tract.
- What to check
- Whether it is there if the land may be divided later; without it, Texas does not apportion royalty and the well tract takes it all.
“The petitioner is entitled to share the royalty in proportion that the interest owned by it bears to the entire leased premises”
Thomas Gilcrease Foundation v. Stanolind Oil & Gas Co., 266 S.W.2d 850 (Tex. 1954)
Read on October 5, 2026 in full text: static.case.law
12. Mother Hubbard clause
Extends the lease to small strips or gaps of the lessor’s adjoining land that the legal description missed.
- What to check
- That it is limited to small adjoining strips, so it cannot sweep in a separate tract you meant to lease to someone else.
“Its apparent reasonable purpose is to prevent the leaving of small unleased pieces or strips of land”
Sun Oil Co. v. Bennett, 84 S.W.2d 447 (Tex. Comm’n App. 1935)
Read on October 5, 2026 in full text: static.case.law
13. Assignment clause
Lets either side transfer its interest and sets who stays liable after the transfer; for federal leases, the statute sets it.
- What to check
- On a private lease, whether an assignment frees the original lessee from unpaid royalty and plugging duties, and what notice makes your own sale binding on the lessee.
“the assignor or sublessor and his surety shall continue to be responsible for the performance of any and all obligations as if no assignment or sublease had been executed”
30 U.S.C. 187a (Mineral Leasing Act, federal leases)
Read on October 5, 2026 in full text: law.cornell.edu
14. Warranty clause
The lessor promises it owns the title it leases and will defend it, and usually lets the lessee pay off taxes or liens and recover the cost.
- What to check
- Whether you can give a special warranty or none, and the proportionate reduction clause, because a general warranty can make you repay the lessee if title proves short.
“since Tippett warranted to Shell’s assignor an unincumbered title which was breached by his retention of one half the bonuses and delay rentals”
Navarro Oil Co. v. Cross, 162 S.W.2d 677 (Tex. Comm’n App. 1942)
Read on October 5, 2026 in full text: static.case.law
15. Force majeure clause
Excuses the lessee’s delay and keeps the lease from ending when listed events beyond normal operations prevent performance.
- What to check
- The list of events, whether low prices or permit delays count, the notice deadline, and any cap on how long it can hold the lease.
“Because the clause labelled ‘force majeure’ in the Lease does not mandate that the force majeure event be unforeseeable or beyond the control of Perlman before performance is excused”
Perlman v. Pioneer Ltd. Partnership, 918 F.2d 1244 (5th Cir. 1990), applying Wyoming law
Read on October 5, 2026 in full text: static.case.law
Common questions
What is a Pugh clause?
A lease clause that keeps production from a pooled unit from holding the lessee’s rights in leased land outside the unit after the primary term.
What is the habendum clause in an oil and gas lease?
The clause that sets the lease’s life: a primary term of years, then as long as oil or gas is produced, which Texas reads as production in paying quantities.
What is the difference between a shut-in royalty and a delay rental?
A delay rental keeps an unless lease alive in the primary term without drilling; a shut-in royalty keeps it alive when a well that can produce is not selling.
Which clauses matter most to a mineral owner?
The royalty clause, the habendum clause and the pooling clause, with a Pugh clause to limit pooling; they set what you are paid and how long the lease ties up your land.
Summary
Fifteen clauses do most of a lease’s work, and each has been argued in court. For what your state’s law adds, from royalty deductions to pooling, see AMR’s royalty deductions by state and forced pooling by state.
Sources
Every page below was opened on October 5, 2026.
- T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261 (Pa. 2012)
- Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002)
- Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996)
- Gulf Oil Corp. v. Reid, 337 S.W.2d 267 (Tex. 1960)
- Egeland v. Continental Resources, Inc., 2000 ND 169, 616 N.W.2d 861
- Endeavor Energy Resources, L.P. v. Discovery Operating, Inc., 554 S.W.3d 586 (Tex. 2018)
- Rogers v. Osborn, 261 S.W.2d 311 (Tex. 1953)
- Southeastern Pipe Line Co. v. Tichacek, 997 S.W.2d 166 (Tex. 1999)
- Serhienko v. Kiker, 392 N.W.2d 808 (N.D. 1986)
- Samano v. Sun Oil Co., 621 S.W.2d 580 (Tex. 1981)
- Thomas Gilcrease Foundation v. Stanolind Oil & Gas Co., 266 S.W.2d 850 (Tex. 1954)
- Sun Oil Co. v. Bennett, 84 S.W.2d 447 (Tex. Comm’n App. 1935)
- 30 U.S.C. 187a (Mineral Leasing Act, federal leases)
- Navarro Oil Co. v. Cross, 162 S.W.2d 677 (Tex. Comm’n App. 1942)
- Perlman v. Pioneer Ltd. Partnership, 918 F.2d 1244 (5th Cir. 1990), applying Wyoming law
Cite this list
American Mineral Registry. "Oil and Gas Lease Clauses: 15 Clauses Explained With the Cases Behind Them." Release 2026.10.1, October 5, 2026. https:// americanmineralregistry.com/ research/ oil-and-gas-lease-clauses
[Oil and Gas Lease Clauses: 15 Clauses Explained With the Cases Behind Them](https:// americanmineralregistry.com/ research/ oil-and-gas-lease-clauses), American Mineral Registry, release 2026.10.1 (October 5, 2026).
<a href="https:// americanmineralregistry.com/ research/ oil-and-gas-lease-clauses">Oil and Gas Lease Clauses: 15 Clauses Explained With the Cases Behind Them</ a>, American Mineral Registry, release 2026.10.1 (October 5, 2026).
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title = {Oil and Gas Lease Clauses: 15 Clauses Explained With the Cases Behind Them},
version = {2026.10.1},
date = {2026-10-05},
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