If All Acerage Not Used, Is The Rest Held By Lease
In 2003 I leased 52 acres and the production company drilled a well. The company only included 40 acres of the 52 in the unit. So when I contacted the company last week I was informed that not only was the 12 acres held by the original lease but that a new well was going to be drilled that would now include the total 52 acres. Does anyone know if a company can lease 52 acres and only include 40 in the well? And, would the remaining 12 acres have come back to me after the inital 3 year lease was up, because it was not used
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Replies to This Discussion
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Permalink Reply by J Harris on
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So all can be held if only a portion is used? And if all was not used the first time how can it now be included in the new well that is being talk about? The unit boundaries can change?
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Thanks for the information KB. Would the oil company have to inform me if they had obtained an "application and order"? Any ideas as to what the terms in the lease would be that would alow the use of only a portion of the leased land?
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Permalink Reply by Charmine on
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To the best of my understanding,(which isn't much yet)...this sounds like a simple good definetion of a Pugh clause. Is this correct?
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Thanks for the reply PBOL. I have only seen a Pugh clause in the past define depth limitations with in it. I am unsure as if it can be used in other ways in a lease.
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Permalink Reply by Dion Warr, CPL on -
J Harris:
The original use of a Pugh Clause was a "lease termination" provision to cleave non-unitized and/or non-productive acreage out of the lease. The amount of acreage was inconsequential, ie., you could hold a 500 acre lease with 5 acres being in a producing unit, or a well drilled in the southeast corner. It was first used (anecdotally) in the late 40s. Pugh generally gets the credit, but a similarly worded provision from Texas was also known as a "Freestone Rider" (named for the county in Texas).
The stratigraphic Pugh came later. Jim, when would you think it came into vogue? Early 1970's?
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Thank you for the information Dion Warr. So what I gather for you is that with out a Pugh clause, the oil company can hold all of my 52 acres and use whatever portion of it in which ever well they would like? For future use, what would the Pugh clause need to say to have prevented this type of usage of our property by the oil company?
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Permalink Reply by Dion Warr, CPL on
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This is a good one.
Probably a little ticky-tack on this, but I would prefer to say "except as to the portion or portions of the leased premises" instead of "part or parts". But it gets the job done.
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Permalink Reply by Duncan McGehee on
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J,
There are two types of pugh clause. Vertical and Horizontal. I have both on my clause page http://www.landmen.net/ClausesForms/ClausesForms.htm
Someone has a dispute about the wording of the vertical pugh clause on my site. I put the clauses up as examples for landmen to go by when they do not have one.
As someone brings up an issue with the wording I try to adjust the clauses, so be aware the clauses are just go bys and the wording can change due to specific instances or issues.
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Permalink Reply by insomniacnla on -
J. Harris,
Leases like yours is the main reason that the Pugh Clause came into use. Previously, if a landowner owed 2,000 acres in separate tracts and then leased all 2,000 acres in one lease, the o/g company could drill one well in any of the tracts and hold all the acreage by production.
It would not hurt (nor probably cost very much) to have an attorney review your existing lease.
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Permalink Reply by Dion Warr, CPL on
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I dunno, Insomniac:
Based upon what another friend on this forum just told me, some attorneys are trying to make a pretty good living on advice on and negotiation of leases in the HS...
No wonder so many folks want to do it themselves.
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