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Permalink Reply by Moth on July 31, 2008 at 7:47

You would do well to conduct a legal review of your lease. Not the main language but the attachments, to see if you have a Pugh Clause and/or a Drill Depth Restriction. Also the terms of the lease relative to your primary term seems to play a major role. Keep in mind that a lawyers is am "attorney and counselor at law" so you don't have to hire someone...rather you go in and ask for their hourly rate and offer to pay them for their billing time for the singular purpose of advising you on your deep drill rights. Pick a major firm but ask them to have their junior oil and gas guy do it because he is often available where the Big Dogs are not.


In my case I first knew of the existing limits to drill depth when the company that has owned the lease since 1999 called and wanted to cut a new deal to "extend the depth restriction." Some people have one of these items; many do not. Frankly, it was the keen negotiation efforts of my neighbor 9 years ago or the advise of an attorney we visited in advance of the signing which resulted in the inclusion of this condition in our respective leases.

That call from J-W (Cohort) prompted me to research all this, including asking another local oil and gas attorney to give my lease a quick review to see if I could, in fact, legally lease my deep drill rights to another company while the current lease holder is still extracting gas from above the Haynesville Shale levels. He said I DO have the right to lease deep! I wanted to french kiss him over the internet but thought he'd find that a bit offensive!! ;-0 (yes, that's a joke!)

If you do still have your deep drill rights and can cut another deal, be sure you have another Pugh Clause or depth restriction included so you can repeat the bonus/lease dance as technology permits ever-deeper access. That goes for you natural gas virgins out there, too...just lease as little depth as possible!!!

It is often suggested, and wisely so, that when the contract comes to you, go see a lawyer to have them cut out items which as totally contrary to your best interest and add ones that give you greater protection (such as depth restrictions as one example!). It's not that I am great fan of attorneys, believe me, but at certain times in this process they have their place!!

Hope this helps! Moth

Permalink Reply by Aubrey C. Sanders, Jr. on July 31, 2008 at 12:39

Very, very good advice Moth. You can include Pugh clause to lease only one formation or one depth. I would never lease mine to the center of the earth which is what you do if you do not use proper Pugh clauses.

Permalink Reply by pfood on July 31, 2008 at 8:32

Thanks for the advice. The kissing part may come later.

Permalink Reply by pfood on July 31, 2008 at 8:42

Sense you are so very helpful, maybe you can tell me who or what an overrider is?
It sounds like a landman to me or one in the same. His name is( Crige Lott), I think.

Permalink Reply by Aubrey C. Sanders, Jr. on July 31, 2008 at 12:44

An overrider is a lease man who keeps an over riding royalty interest on leases he buys for, or to sell to a third party. He will keep the difference between what royalty is reserved to landowner and the company is willing to pay. Anyway you cut it this comes out of landowners pocket if landowner is not good negotiator.