A dry hole clause is a lease provision that keeps the lease in effect after a non-productive ("dry") well is drilled, provided the operator resumes drilling or rental payments within a set time.
Drilling is risky, and not every well produces. Without a saving provision, a dry hole during the primary term could put the lease in jeopardy. The dry hole clause gives the operator a defined grace period to either start a new well or resume delay rental payments, keeping the lease alive.
It works hand in hand with the habendum clause and other "saving" clauses (continuous-operations and dry-hole clauses) that prevent automatic termination after setbacks.
Educational information only — not legal, tax, or investment advice. Consult a qualified attorney, CPA, or landman about your specific situation.
Not automatically. A dry hole clause typically gives the operator a window to resume operations or rental payments, keeping the lease in force. Whether the lease ultimately holds depends on the clause language and whether the operator acts in time.
Generally a well that fails to find oil or gas in paying quantities. The lease language and state law determine the precise definition and the operator's options afterward.
If the operator neither resumes operations nor makes required payments within the clause's time limit, the lease can terminate — returning your minerals to an unleased status.
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