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Lease of Oil Rights


1. Introduction. This Lease, made [date], conveys oil and gas mining rights from [name] of [address] (Lessor) to [name] of [address] (Lessee).
2. Rights Granted.
a. Lease and Description of Land. Lessor leases to Lessee, for ---------- dollars ($----------) received by Lessor, all that tract of land located in [town, county, state], described as follows: [description, including acreage] (Land).
b. Limitation of Use. The purposes of the Lease and for which Lessee may use the Land are drilling and producing oil and gas, laying pipelines, and building tanks, power stations, and structures on the Land to produce oil and gas.
3. Duration. The term of this Lease will be [number] years, beginning on the date of this Lease and ending on [date]. The term will be automatically extended as long as oil or gas is produced from the Land by Lessee.
4. Delivery and Payments to Lessor.
a. Oil. Lessee will deliver to Lessor, free of cost ---------- percent (----------%) of all oil produced from the Land either at the well or, to Lessor's credit, into the pipeline to which Lessee may connect the well.
b. Gas Wells. Lessee will pay to Lessor, from each well where gas is found, ---------- percent (----------%) of the market price of the gas (including condensate, distillate, casinghead, and other gases) at the wells.
c. Gas from Oil Wells. Lessee will pay Lessor ---------- percent (----------%) of the market value of any gas produced from any oil well used by Lessee to manufacture gasoline. If Lessee sells this gas, Lessee will pay Lessor ---------- percent (----------%) of the market price at the wells of the amount sold.
5. Termination of Lease.
a. Commencement of Drilling. If drilling operations for a well do not begin by [date], this Lease will terminate, unless Lessee pays, or tenders on or before to Lessor, or to Lessor's credit at [bank] ---------- dollars ($----------.) This sum shall be deemed a rental payment and allow Lessee to defer the beginning of drilling operations for a well for [number] months from [date specified above]. These deferments may continue for [number] successive, equal periods on the same terms.
b. Failure to Produce Oil and Gas. If the first well drilled on the land is dry, and drilling for a second well does not begin within [number] months from the end of the last deferment period for which payment was made, under Paragraph 5(a) above, this Lease will terminate. This Lease will not terminate, however, if Lessee, on or before the expiration of that period, makes deferment payments in the sum and manner provided in Paragraph 5(a) above.
c. Outside Date and Continuous Drilling. In addition to the provisions of Paragraphs 5(a) and 5(b), if oil or gas is not being produced on the Land [number] years from the date of this Lease, but Lessee is, at the time, engaged in drilling, this Lease will remain in force as long as drilling operations on the Land are continuous. Drilling will be considered continuous if not more than [number] days pass between the completion or abandonment of one well and the drilling of another.
If oil or gas is produced in paying quantities from any well drilled [number] years after the date of this Lease, this Lease will remain in effect as long as oil or gas is produced.
d. Suspension of Production. If Lessee produces oil or gas, but then suspends production for any reason, Lessee has the right, within [number] days, to resume drilling, and this Lease will remain in effect if these drilling operations are continuous in nature (as defined in Paragraph 5(c) above) and they result in production of paying quantities of oil and gas within [period].
6. Miscellaneous Rights-Lessee and Lessor.
a. Lessor's Estate. If Lessor owns less than a fee simple absolute in the Land, royalties and rentals will be paid only to the extent of Lessor's interest in the Land.
b. Lessee's Use of Resources. Lessee may use, without cost, any gas, oil, or water, except from Lessor's water wells, produced on the Land for operations on the Land.
c. Pipelines. If Lessor requests, Lessee will bury pipeline below plow depth.
d. Drilling Distance. Lessee may not drill a well closer than [number] feet from Lessor's house or barn now located on the Land, without written permission.
e. Damages. Lessee will pay for any damage to growing crops on the Land caused by drilling.
f. Removal of Machinery. Lessee has the right to remove all machinery and fixtures placed on the Land. This includes the right to drain and remove casing.
7. Assignment.
a. Rights of Assignment. Either party has the express right to assign or otherwise transfer all or part of the party's estate in the Land. The covenants in this Lease will extend to the heirs, executors, administrators, successors, or assigns of the parties.
b. Notice to Lessee Required. Lessee will not be bound by any change in ownership of the Land or any assignment of rent or royalties under this Lease until Lessee had been given a written copy of the transfer of assignment.
c. Default After Partial Assignment by Lessee. If only a part of Lessee's interest in the Land and this Lease is assigned and Lessee's assignees fail to pay their portion of any rent or royalty under this Lease, that failure will not affect the interest and rights that Lessee still holds as long as Lessee makes all timely payments.
8. Exclusive Right to Waste Oil. Lessee has the exclusive right to build, operate, and maintain pits, reservoirs, pickup stations, and plants to pick up and conserve waste oil flowing on the Land. Lessee has this right regardless of whether this flowing oil was produced on the Land or on other land. Lessor is entitled to the same royalties provided in this Lease for this flowing oil as for other oil produced by Lessee.
9. Cancellation. If this Lease is canceled or terminated for any reason, Lessee has the right to [number] acres of land around each oil or gas well, that is producing oil or gas or that Lessee was drilling, under the terms of this Lease, as long as such operations are continued in good faith. Lessee will designate this acreage to the closest square footage as is possible.
10. Breach, Remedies, Right to Cure.
a. Notice to Lessee. If Lessor believes that Lessee has failed to comply with either the express or implied terms of this Lease, before production has begun, Lessor must notify Lessee in writing of the breach, describing it in detail.
b. Period to Cure and Action on Default. Lessee will have [number] days after notice of any breach to cure it. Lessor cannot bring an action against Lessee until [number] days after service of notice on Lessee.
c. No Admission or Presumption. Any act done by Lessee to cure the alleged breach, as well as the service of notice on Lessee, will not be considered an admission or presumption that Lessee has failed to perform Lessee's obligations under this Lease.
11. Title to Minerals. Lessee will hold title to the minerals described in this Lease until Lessee completely, absolutely, and intentionally abandons every part and parcel of the Land for all of the express or implied purposes noted in this Lease, at which time, title to the minerals shall revert to Lessor.
12. Lessor's Warranty of Title. Lessor warrants that Lessor has good title to the Land, and will defend that title against claims by third parties.
13. Lessee's Rights to Redeem. Lessor agrees that Lessee may pay any mortgages, taxes, or other liens on the Land, if Lessor is in default in Lessor's payments. If Lessee pays a lien for Lessor, Lessee will be subrogated to the rights of the mortgagor or lienholder. Any payment made in this manner by Lessee for Lessor will be deducted from any sums owed by Lessee to Lessor under this Lease.
[dated]
[signature]
Lessor
[signature]
Lessee
In the presence of: [signature]
[Acknowledgments]

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