The Lease Clause Library

Every clause. Plain English. Fairly rated.
Read it before you sign.

Mineral leases are written in language designed to be unreadable. We translate them. Every clause that appears in a typical mineral lease — what it does, when it helps you, when it screws you, how to negotiate it. The Wikipedia of mineral lease language, built for owners and rated for fairness.

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Royalty Percentage

Also: "royalty interest", "royalty fraction", "RI"
The percentage of every barrel of oil or thousand cubic feet of gas the operator extracts that belongs to you. The single most consequential number in your lease — over 30 years it dwarfs the bonus check.
"Lessor reserves a royalty equal to twenty-five percent (25%) of all oil, gas, and other hydrocarbons produced and saved..."
TL;DR: Higher = better. Permian range today: 18.75% (worst) to 25% (best). 25% is achievable in active areas.
Negotiation tip: Always start at 25%. If they say "the most we offer is X%," demand comp data. Landlock provides it free.
+10 FDS at 25%-3 FDS at <22%-8 FDS at <18.75%
Frequency
100%
FDS Weight★★★★★ (15%)
$

Bonus Payment

Also: "lease bonus", "signing bonus", "consideration"
One-time payment per net mineral acre at signing. Compensates you for tying up your minerals during the primary term, regardless of whether the operator drills.
"As consideration for this lease, Lessee shall pay Lessor a bonus of $2,400.00 per net mineral acre, payable upon execution and delivery of this lease..."
TL;DR: Cash up front. Permian core is currently $1,500–$3,000+/ac. Hot zones see $5K+/ac during land rushes.
Negotiation tip: If multiple operators are interested, surface that. Bonus is the most elastic term — competitive pressure moves it fast.
Frequency
100%
FDS Weight★★★★ (12%)
!

Post-Production Deductions

Also: "PPD", "marketing costs", "transportation deductions", "gathering & treating"
The single most expensive clause owners ignore. If silent, the operator can deduct gathering, dehydration, treating, processing, and transportation costs from your royalty share — quietly, every month, for 30 years. Total cost to a typical Permian owner: $40K–$120K over the life of a well.
"...royalty shall be paid on the proceeds received by Lessee, after deducting from such proceeds the costs of gathering, compression, dehydration, treating, processing, and transportation..."
TL;DR: If silent, the operator wins by default in Texas (post-Heritage Resources). You MUST add a "no deductions" or "gross proceeds" clause.
Negotiation tip: Demand: "Lessee shall bear all post-production costs and shall pay royalties on gross proceeds received at the wellhead, with no deduction of any kind." Non-negotiable.
-12 FDS if present+8 FDS if explicitly excluded
Frequency
68%
FDS Weight★★★★★ (12%)
⏱

Primary Term

Also: "term", "habendum clause"
The fixed time period during which the operator can hold your lease without producing — typically 3 or 5 years. The longer the term, the longer your minerals are locked up if the operator doesn't drill.
"This lease shall be for a primary term of three (3) years from the effective date hereof, and so long thereafter as oil, gas, or other hydrocarbons are produced..."
TL;DR: Shorter = better. 3 years is standard in the Permian. 2 years is possible in hot areas. 5 years is too long given today's drilling cycle times.
Negotiation tip: If active drilling within 5 mi, push for 2 years. If they refuse, get a bigger bonus.
Frequency
100%
FDS Weight★★★★ (10%)
✓

Pugh Clause

Also: "horizontal Pugh", "vertical Pugh", "depth severance"
One of the most important owner protections. Forces the operator to release acreage and depths they're not actively developing. Without it, one well in a corner can hold ALL your acreage and ALL formations forever.
"At the end of the primary term, this lease shall terminate as to all lands not included within a producing unit and as to all formations more than 100 feet below the deepest producing formation."
TL;DR: Vertical Pugh = depths released. Horizontal Pugh = acreage released. Demand both. Worth tens of thousands per tract.
Negotiation tip: Push for "100 feet below shallowest" rather than "deepest" to free up deeper formations sooner.
Frequency
52%
FDS Weight★★★★ (8%)
⏳

Continuous Drilling Clause

Also: "operations clause", "continuous development"
Limits how long the operator can wait between wells before the lease starts releasing acreage. Without it, the operator could drill one well and sit on the rest of your acreage forever.
"Lessee shall commence operations for the drilling of a new well within one hundred eighty (180) days of completion of the previous well..."
TL;DR: 180 days standard. 120 days top quartile. 365+ days = essentially no clause.
Negotiation tip: Push for 120 days. Demand actual rig activity, not paperwork.
Frequency
38%
FDS Weight★★★★ (8%)
!

Force Majeure

Also: "FM", "act of God", "operational suspension"
Suspends the operator's lease obligations during specific events. The trick: operators love a broad definition that includes "market conditions" — meaning they can pause production indefinitely if oil prices drop. Then your lease is held forever without you getting paid.
"...obligations shall be suspended during periods of force majeure, including but not limited to acts of God, governmental action, labor disputes, equipment failure, lack of market, low pricing..."
TL;DR: Broad force majeure = trap. Narrow force majeure = fair.
Negotiation tip: Demand: "Force majeure is limited to weather, governmental action, regulatory orders, and mechanical failure. Market conditions, low pricing, and lack of market shall NOT constitute force majeure."
Frequency
100%
FDS Weight★★★★ (7%)
~

Shut-In Royalty

Also: "SIR", "in lieu royalty"
Allows the operator to keep your lease alive when there's a well capable of production but isn't actually producing (low gas prices, pipeline issues). They pay a token amount instead of regular royalty.
"During any period in which a well is capable of producing in paying quantities but is shut-in, Lessee shall pay Lessor a shut-in royalty of $1.00 per acre per year..."
TL;DR: If silent or set too low, operator can shut in indefinitely. Push for time limits.
Negotiation tip: Cap at 24 consecutive months and require "good faith effort to restore." Set rate at $50–$100/ac/yr.
Frequency
88%
FDS Weight★★★ (5%)
⭐

Most-Favored-Nation Clause

Also: "MFN", "favored nations", "matched terms"
If the operator signs another owner in your same section/unit at better terms within a defined window (usually 6–12 months), you automatically get the upgraded terms. Rare but extremely valuable in active leasing zones.
"If, within twelve (12) months of the effective date hereof, Lessee enters into a lease for any tract within the same Section as the leased premises on terms more favorable than herein contained, Lessor shall receive the benefit of such terms..."
TL;DR: Pure upside protection. Costs the operator nothing if they're paying market.
Negotiation tip: Operators rarely offer this. Always ask. If they refuse, that's a signal they expect to pay more for adjacent tracts.
Frequency
12%
FDS Weight★★★ (4%)
§

Warranty Clause

Also: "warranty of title", "general warranty", "special warranty"
Determines whether you personally guarantee that your title is good. A general warranty makes you liable for centuries-old title problems you may never have heard of.
"Lessor warrants and forever defends the title to the leased premises against the lawful claims of all persons whomsoever..."
TL;DR: Always insist on "without warranty of title" or at most "special warranty." Title is the operator's risk to verify.
Negotiation tip: On Landlock, operators rely on AOR-signed title opinions. The general warranty is unnecessary.
Frequency
94%
FDS Weight★★★ (5%)
⚙️

Pooling & Unitization

Also: "voluntary pooling", "unit declaration"
Allows the operator to combine your tract with neighboring tracts into a drilling unit. Watch the unit size cap. Without one, your 80 NMA might end up in a 1,280-acre unit getting 80/1,280 of one well's production.
"Lessee may pool the leased premises with adjacent lands into units not exceeding 640 acres for an oil well and 640 acres for a gas well..."
TL;DR: Cap unit size at 640 acres for oil, 640 for horizontal/gas wells (Permian standard). No cap = bad.
Negotiation tip: Add: "Each pooled unit shall include a horizontal completion in or under the Lessor's tract, otherwise the Lessor's tract shall not be included."
Frequency
98%
FDS Weight★★★ (5%)
▼

Depth Limitation Clause

Also: "depth severance", "formation limit"
Restricts the lease to specific depths or formations. Prevents the operator from holding deeper rights forever based on a shallow well.
"This lease covers only those formations from the surface to one hundred (100) feet below the base of the Wolfcamp Shale..."
TL;DR: Pairs with vertical Pugh. Frees up unexplored formations after primary term.
Negotiation tip: If your tract has stacked plays (Wolfcamp A, B, C, Spraberry), depth severance can essentially double your minerals' value.
Frequency
31%
FDS Weight★★★ (4%)
⛺

Surface Use / SUA

Also: "surface damage clause", "surface use agreement"
Only applies if you also own the surface. Restricts where the operator can build pads, roads, pipelines, tank batteries; sets damage payments.
"Lessee shall pay surface damages of $25,000 per pad site plus $5,000 per acre of disturbance and shall set back any pad at least 500 feet from any residence..."
TL;DR: If silent, operator can put a 5-acre pad next to your house with limited recourse.
Negotiation tip: Always insist on a separate Surface Use Agreement.
Frequency
42%
FDS Weight★★★ (5%)
🔍

Audit Rights

Also: "books and records", "royalty audit clause"
Gives you the right to inspect the operator's books to verify your royalty calculations. Without it, you're trusting the check stub blindly.
"Lessor or its representatives may, upon reasonable notice, inspect Lessee's books, records, and documents pertaining to the calculation of royalties..."
TL;DR: Royalty miscalculations are common and almost always favor the operator.
Negotiation tip: Add fee-shifting: if audit finds >5% underpayment, operator pays your audit costs.
Frequency
29%
FDS Weight★★ (3%)
↔

Assignment / Change of Operator

Also: "transfer clause", "successor and assigns"
Determines whether the operator can sell or transfer your lease without your consent. Most leases let them transfer freely. Risk: original operator was reputable; the assignee might not be.
"This lease and the rights hereunder may be assigned in whole or in part by Lessee without consent of Lessor..."
TL;DR: If you're betting on operator quality, demand consent rights.
Negotiation tip: Add: "Assignment to non-investment-grade operators requires Lessor's written consent, not unreasonably withheld."
Frequency
98%
FDS Weight★★ (3%)
⚖

Arbitration / Dispute Resolution

Also: "ADR clause", "venue selection"
Determines how disputes get resolved (arbitration vs. court) and where (your county vs. operator's HQ). Operator-friendly clauses force you to arbitrate in Houston when you live in Midland.
"Any dispute arising hereunder shall be resolved by binding arbitration administered by AAA in Harris County, Texas, with the prevailing party's reasonable costs paid by the losing party..."
TL;DR: Demand venue in your home county or via Landlock arbitration.
Negotiation tip: Push for: "Disputes resolved via Landlock-administered arbitration with neutral panel and fee-shifting to prevailing party."
Frequency
79%
FDS Weight★★ (3%)

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