Leases are divided into two separate time periods. The first period, or primary term, is a set number of years negotiated by the parties during which the lessee must commence drilling operations or pay an annual fee to the lessor. The lease will generally state that if drilling operations are not commenced within one year after the lease is entered, the lease will terminate unless an agreed sum is paid the lessor. This sum is called a delay rental. Delay rentals must be paid on each subsequent anniversary date of the lease's primary term if drilling operations have not yet begun by that date.
Failure to receive the delay rental payment by the stipulated time automatically terminates the lease whenever the word "unless" is used in the lease to indicate the necessity of tendering the payment. Some leases contain the word "or" rather than "unless." In the latter case the lease will not terminate.
If production is not established by the end of the primary term, the lease will end. If production has been established, the lease will continue into its secondary term and last so long as substances covered by the lease continue to be produced. Generally the full clause will read, "This lease shall remain in force and effect for a term of ____ years (or months) and as long thereafter as substances covered by the lease are produced."
For the best protection, the lessor should consider one or more of the following recommendations: