ND Bar Practice Questions - North Dakota Bar Examination Exam

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An oil and gas lease in North Dakota's Bakken formation contains a habendum clause providing the lease lasts for a primary term of five years 'and so long thereafter as oil or gas is produced.' Production ceases entirely after the primary term. The most likely effect is:

The lease continues indefinitely regardless of production The lessee automatically receives a new five-year primary term The lease terminates, because the secondary term depends on continued production, subject to savings clauses (e.g., shut-in or operations clauses) The surface owner forfeits all royalty rights

Correct Answer:

The lease terminates, because the secondary term depends on continued production, subject to savings clauses (e.g., shut-in or operations clauses)

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