Legal Definitions - proportionate-reduction clause

A proportionate-reduction clause, also known as a lesser-interest clause, is a provision in an oil-and-gas lease that allows the lessee to reduce payments proportionately if the lessor owns less than 100% of the mineral interest.

For example, if a lessor owns only 50% of the mineral interest, the lessee would only be required to pay 50% of the agreed-upon payments. This clause protects the lessee from overpaying for a lease when the lessor does not own the full mineral interest.

Another example would be if a lessor owns 75% of the mineral interest, the lessee would only be required to pay 75% of the agreed-upon payments.

The proportionate-reduction clause is important in ensuring fair and equitable payments between the lessee and lessor in oil-and-gas leases.