Mineral Lease
A contract by which the owner of minerals grants another the right to explore for and produce them for a stated term, in exchange for payments such as bonus, rental, and royalty.
Detailed Definition
A mineral lease is a contract by which the owner of minerals grants another party the right to explore for and produce them for a period of time, in return for payment. The U.S. Bureau of Mines Dictionary of Mining, Mineral, and Related Terms (1968) defines a lease as a "Contract between landowner and another granting the latter right to search for and produce oil or mineral substances upon payment of an agreed rental, bonus, and/or royalty," and as "The instrument by which such grant is made." It defines an oil and gas lease as a "Contract conveying mineral interest for drilling purposes."
Federal mineral leases
On federal land, only some minerals are leased. The BLM Glossary of Surveying and Mapping Terms (1980) defines a mineral lease as "A lease under the Act of Feb. 25, 1920 (The Mineral leasing Act), as amended and supplemented. It authorizes the development and production of certain leasable minerals from public lands." It lists the leasable minerals as "Oil and gas; oil shale; coal; potash; phosphate; sodium; sulphur in Louisiana and New Mexico; gold, silver, and quicksilver in certain private land claims; and silica deposits in certain parts of Nevada." A mining claim is a different kind of interest (see Mining Claim).
The parties
- The Office of Natural Resources Revenue (ONRR) glossary defines the lessee as "The entity (company or individual) entitled under oil, gas, geothermal, or solid minerals lease to explore for and produce minerals from a lease."
- On a federal oil and gas lease, 43 CFR 3100.5 defines the lessee as "a person holding record title in a lease issued by the United States," and record title as the interest "which includes the obligation to pay rent and the ability to assign and relinquish the lease."
What a lease sets out
The main financial and time terms each have their own entries: the lease bonus paid to obtain the lease, the primary term, the royalty, and the provisions that keep a lease alive after the primary term (see Lease Bonus, Primary Term, Royalty Interest, and Held by Production). On federal leases many of these terms are fixed by statute and regulation. On state and private land they come from state law and the lease form. The Utah SITLA lease form, for example, grants "the exclusive right and privilege to explore for, drill for, produce, and sell Leased Substances," and defines those substances to exclude coal, tar sands, oil shale, and gilsonite, "all of which must be separately leased from Lessor."
Why it matters in mineral title research
- The first question for any tract is who can grant a lease: the mineral owner of record, which may be the United States, a state, or private parties holding fractions.
- The granting clause and the definition of leased substances decide which minerals and depths the lessee holds.
Related Terms
Mineral Estate
The ownership of the minerals beneath a tract of land, which can be held separately from the surface and, on federal land, is obtained by claim, lease, or sale depending on the mineral.
Royalty Interest
A share of production, or of its value, paid to a lessor or other royalty owner without bearing the costs of drilling and producing.
Working Interest
The interest in an oil and gas lease that carries the right to explore, drill, and produce, together with the obligation to pay the costs of those operations.
Primary Term
The fixed initial period of an oil and gas lease, during which the lease stays in force without production if its other terms are met.