North Dakota Mineral Leases Habendum Clauses

North Dakota Mineral Leases
Habendum Clauses

Most mineral leases will have a habendum clause, otherwise known as a to have and to hold clause.

Habendum is a Latin term which means to have.

Tenendum is a Latin term which means to hold.

The complete Latin phrase is habendum et tenendum – which means to have and to hold.

When used with respect to an oil and gas lease, the habendum clause identifies the term of the lease – the duration during which the lessee / oil company will have and hold the property for exploration and/or production purposes.

Oil and gas leases generally make reference to two distinct periods of time:

• a primary term,
  and
• a secondary term:

However, in order for a lease to be extended beyond the primary term into the secondary term, the lessee must be:

• actually producing oil or gas,
  or,
• engaged in production operations related to drilling, either:
  • on the leased property,
    or
  • on an identified production unit that includes at least a portion of the leased property.

North Dakota Mineral Leases Habendum Clauses – Primary Term

The primary term is the maximum number of years that the lessee will have in order to decide whether it will explore and drill for oil or gas on the leased property.

The lessor would like the primary term to be short – one to three years.

However,  the lessee would like the primary term to be longer – five to ten years.

North Dakota Mineral Leases Habendum Clauses – Secondary Term

If production of oil and gas in commercial quantities is established, the lease will continue into its secondary term.

North Dakota Mineral Leases Habendum Clauses – Modern Lease

An oil and gas lease proposed to be used in North Dakota in the last few years by one oil company contained the following “Habendum Clause“:

It is agreed that this lease shall remain in force:

• for a term of Five (5) years from this date
  and
• as long thereafter as oil or gas of whatsoever nature or kind is produced from said leased premises or on acreage pooled therewith, or drilling operations are continued as hereinafter provided.

If, at the expiration of the primary term of this lease, oil or gas is not being produced on the leased premises or on acreage pooled therewith but Lessee is then engaged in drilling or re-working operations thereon, then this lease shall continue in force so long as operations are being continuously prosecuted on the leased premises or on acreage pooled therewith; and operations shall be considered to be continuously prosecuted if not more than one hundred eighty (180) days shall elapse between the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well.

North Dakota Mineral Leases Habendum Clauses – 1981 Lease

For comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1981 by an oil company in the business of oil exploration contained the following “Habendum Clause“:

It is agreed that this lease shall remain in force:

• for a term of Five (5) years
  and
• as long thereafter as oil or gas or either of them, is produced from said land by the lessee, its successors and assigns.

North Dakota Mineral Leases Habendum Clauses – 1977 Lease

For further comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1977 by an oil company in the business of oil exploration contained the following “Habendum Clause“:

Subject to the other provisions herein contained, this lease shall remain in force

• for a term of Five (5) years from this date (called “primary term”)
  and
• as long thereafter as oil, liquid hydrocarbons, gas or their respective constituent products, or any of them, is produced from said land or land with which said land is pooled.

Comparison of Lease Terms

With the exception of references to pooling acreage in two of the lease, there are no significant differences between the terms of the three Habendum Clauses identified above.

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