The Force Majeure Clause

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The Force Majeure Clause

The standard industry lease form contains a force majeure  clause similar to that set out below:

If, while this lease is in force, at, or after the expiration of the primary term hereof, it is not being continued in force by reason of the shut-in well provisions of paragraph 3 hereof, and lessee is not conducting operations on said land by reason of (1) any law, order, rule or regulation, (whether or not subsequently determined to be invalid) or (2) any other cause, whether similar or dissimilar, (except financial) beyond the reasonable control of lessee, the primary term hereof shall be extended until the first anniversary date hereof occurring ninety (90) or more days following the removal of such delaying cause, and this lease may be extended thereafter by operations as if such delay had not occurred.

 

Normally, force majeure clauses excuse performance of contractual obligations when acts of God prevent that performance.  The typical force majeure clause that you now see in industry lease forms tend to excuse the oil company’s performance of all its lease obligations.  Oil companies will generally work with you force majeure clause.  An example of a negotiated force majeure clause accepted by many oil companies in Alabama oil and gas leases is set out below:

Should Lessee be prevented from conducting drilling or reworking operations or from producing Minerals from the Leased Premises by operation of force majeure beyond Lessee's ability to cure by reasonable and good faith effort (including inability to obtain equipment or material or authority to use same, failure of carriers to transport or furnish facilities for transportation, labor strikes or other labor trouble, and local, state or federal law, order, rule or regulation), then the term of this Lease shall be extended while, and so long as, Lessee is prevented by such force majeure from conducting Continuous Operations, or from producing Minerals from the Leased Premises, and the time while Lessee is so prevented shall not be counted against Lessee, anything in this Lease to the contrary notwithstanding; subject, however, to the following conditions:

 

(a)        If any such force majeure should occur after the Primary Term of this Lease, Lessee shall immediately give Lessor a written notice setting forth the circumstances of such force majeure, and Lessee shall have the right to maintain this Lease in full force and effect during the existence of such force majeure, without production of Minerals or Continuous Operations, by paying to Lessor monthly (i) for each well on the Leased Premises which is capable of producing one or more Minerals in paying quantities but which is not in production because of such force majeure, an amount equal to the shut-in payments provided for in Section 2.4 and (ii) the sum of ten cents (10) per acre per day for each net mineral acre of the Leased Premises then affected by this Lease which is not included in a Well Tract as defined in Section 1 on which the well is producing one or more Minerals in paying quantities. The first month's payments under (i) and (ii) above shall be made within thirty (30) days following the date on which drilling and/or producing operations are suspended; payments for the second and any subsequent months of suspended operations shall be made in advance, on or before the first day of each such month, and shall continue until Lessee resumes such operations.

 

(b)        The aggregate length of all extensions allowed under this Section 14, including paragraph (a) above, shall be no more than twenty-four (24) months notwithstanding the number and cause of such extensions and whether they occurred during the Primary Term and/or thereafter.

Copyright 2011 by Edward G, Hawkins. All rights reserved.