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Simple English definitions for legal terms
cessation-of-production clause
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A quick definition of cessation-of-production clause:
A cessation-of-production clause is a rule in a lease agreement for oil and gas that explains what the renter must do to keep the lease if production stops. The purpose of this clause is to avoid the uncertainties of the temporary cessation of production doctrine. This clause usually states that the lease will be maintained as long as production does not stop for more than an agreed period of time, usually sixty to ninety days. As long as sixty days does not pass without operations on the property, the lease will not end even if there is no production.
A more thorough explanation:
A cessation-of-production clause is a provision in an oil and gas lease that outlines what the lessee must do to maintain the lease if production stops. The purpose of this clause is to avoid the uncertainties of the temporary cessation of production doctrine.
For example, if an oil company leases land for drilling and production, the lease may include a cessation-of-production clause that states the lease will be maintained as long as production does not cease for more than an agreed-upon period of time, usually 60 to 90 days. If the lessee continues operations on the property within this timeframe, the lease will not terminate even if there is no production.
The cessation-of-production clause provides more certainty for both the lessor and lessee, as it outlines specific actions that must be taken to maintain the lease and avoid any confusion or disputes that may arise from temporary cessation of production.