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Acquisition of Fractional Mineral Interests

John L. Sherman, Mining Agreements II (1981)

The preparation of a lease for the acquisition of fractional solid mineral interests requires consideration of the possibility that the Lessor may not in fact own the interests he represents to own. One of the safeguards utilized to protect the Lessee in these circumstances is the proportionate reduction clause.

The proportionate reduction clause, often referred to as the “lesser interest” clause, is a common sight in virtually all modern oil and gas lease forms. While there are many variants of the clause,1 the clause might contain language as follows:

“If Lessor owns a less interest in the oil or gas in said land than the entire undivided fee simple estate, then the rental and royalties hereunder shall be paid to Lessor only in the proportion which Lessor's interest bears to the whole and undivided fee.”

Proportionate reduction clauses are not quite so common in solid mineral leases and there is a great absence of case law interpreting them.2 Consequently, we must to a large extent look to oil and gas law for possible interpretation of the solid mineral lease proportionate reduction clause.3

It is the purpose of this paper to explore some of the aspects, workings and effects of the proportionate reduction and related clauses in solid mineral leases with a view toward the Lessee obtaining all the Lessor has to lease and at the same time