The Granting Clause in the Modern Oil and Gas Lease

Of all the contracts used in the oil and gas industry, none is as important as the oil and gas lease. It is the foundational instrument in oil and gas and a required prerequisite to development for those who do not own the mineral estate. Its uniqueness arises in that unlike most other oil and gas contracts, it is both a contract and a conveyance of property. Part I of this article begins with an overview of the mineral estate, the predecessor to an oil and gas lease. Part II examines theories of oil and gas rights ownership and oil and gas lease ownership. Part III provides a general overview of the oil and gas lease. Part IV reviews the granting clause, examining its rights of use and the accommodation doctrine; substances granted by the lease; lands and interests granted by the lease, which includes in gross provisions, Mother Hubbard and coverall clauses, after acquired title language, proportionate reduction clauses, subrogation clauses, and warranty clauses. Part V reviews the habendum clause, focusing on the terms of the lease; payment of delay rentals; maintenance by operations; extension of the lease; and the production in paying quantities. Savings clauses, which affect the duration of the lease, are discussed in The Oil and Gas Lease, Part IV: Other Clauses. Following the conclusion, an Appendix provides useful granting clause drafting examples