The oil and gas lease has served as the basic contract for the petroleum industry since 1853. Throughout the decades, the “typical” oil and gas lease clauses have been developed and revised in response to judicial decisions. To provide an update on the evolution of today’s oil and gas lease, it is necessary to review selected court decisions construing lease clauses.
Theoretically, the rules of document interpretation should provide a reliable guide when courts are asked to determine the legal ramifications of express lease provisions. However, review of relevant cases, including recent decisions and older cases providing unique lessons about particular lease clauses, reveals that several problems with that theory. In particular, it shows that pervasive disagreement exists about the substance of the interpretive process, and that even when judges and parties agree about how the language of a lease should be applied, they often disagree about the meaning of that language.
For the practitioner, these problems lead to unpredictability. On the other hand, they also expand the list of arguments an advocate can assert when faced with litigation over the meaning of express lease provisions. In order to avoid such litigation, drafters should carefully scrutinize past court decisions and anticipate changes in circumstances and differing interpretations. These measures can at least provide a safeguard against the nebulous nature of the interpretive process.
Laura H. Burney, Determining the Legal Ramifications of Express Oil and Gas Lease Provisions: Do the Rules of Document Interpretation Provide Predictability?, 19 E. Min. L. Inst., ch. 3 (1999).