Replies to This Discussion

Permalink Reply by Two Dogs, Pirate on August 7, 2009 at 1:19

I would need more information about the terms of your lease to answer the question. Do you have a Pugh Clause in your OGML? What type of unit has been formed? Some units cross section lines.

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Permalink Reply by Pelican on August 7, 2009 at 1:33

I kinda figured that. I believe there is no Pugh Clause - more than likely. I haven't seen this particular lease in question. This is a question I was asked. . Here is the deal - These are EnCana/Shell leases in Sabine Parish that were signed that I am guessing that no kind of amendments were made to most back then. These are about to expire within the next year and EnCana is making phone calls to land owners offering to extend the current leases for around 1500 bucks on the average. This particular lease is in 9n-12w-sec 14 and 11. EnCana has a permit in 13 and 3 I believe.
Sounds like EnCana is holding the cards!

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Permalink Reply by Catfish on August 7, 2009 at 1:20

Thats a good question. I would think it could only HBP the unit the well is producing in. Les or Skip can give you a fact based answer.

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Permalink Reply by Landowner on August 7, 2009 at 1:34

About 40 years ago, my father had one lease for two properties that were about 3 miles apart. They drilled a well on one and he was told that it binded the other property also. I am not sure this was correct, he probably would have just accepted what they told him at the time.

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Permalink Reply by The_Baron on August 7, 2009 at 7:51

A lease with no horizontal pugh clause can hold land in two sections or even two units with one well. As Two Dogs said, it would depend on the wording of the lease.

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Permalink Reply by Dion Warr, CPL on August 7, 2009 at 11:07

Pelkid:

If there is no Pugh clause, operations (such as well spud or drilling) or production on any portion of the lease, or on lands pooled therewith will serve to HBP the lease as to the entirety of the leased premises.

This is what is holding Kassi's property and her immediate neighbors. Production affecting only a portion of a 1950s-era lease is holding noncontiguous property in several sections, including hers.

If you have no Pugh Clause, and the expiration of the lease is eminent, correct the problem (any other problems that you failed to address previously) by renegotiating the lease; don't just extend a lease with unfavorable terms. If I am reading this properly, the permitted wells are not located in units in which your property is located. Is this correct? (Drilling near your tract but outside the unit will not hold your lease.)

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Permalink Reply by Keith Mauck (Site Publisher) on August 10, 2009 at 4:50

pelkid, have you been able to confirm the presence of a pugh clause?

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Permalink Reply by Pelican on August 10, 2009 at 6:34

There is no pugh clause and as of to date no permits in 9n-12w-sec 14 and 11. Best to hope this lease expires first in order to get better terms.

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Permalink Reply by Ann Whitchurch on August 10, 2009 at 6:27

Unless you have a Pugh Clause, sometimes known as a Freestone Clause. This clause releases any acreage outside the well's spacing (after the end of the primary term of the lease). This clause can also be worded to release non producing zones below the producing zone. Depends on what's in your lease or lease addendum.

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Permalink Reply by The_Baron on August 10, 2009 at 9:04

Good pugh clauses:


HORIZONTAL PUGH: In the event a portion or portions of the land described in this lease are pooled or unitized with other lands, lease or leases so as to form a pooled unit or units, operations on or production from the unitized premises shall maintain this lease only as to that portion of the leased premises within such unit or units, and, as to that portion of the leased premises not included in such unit or units, this lease may be maintained during and after the primary term by production of oil or gas therefrom or in any other manner provided for in this lease.

VERTICAL PUGH: At the end of the primary term or any extension thereof, this lease shall terminate and be of no force and effect as to all depths 100 feet below the stratigraphic equivalent of the base of the deepest formation penetrated in any well drilled on the leased premises or on lands pooled therewith.

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Permalink Reply by KK on August 10, 2009 at 16:00

What is the date of the lease?

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