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Permalink Reply by Skip Peel - Mineral Consultant on October 30, 2018 at 14:43

You are referencing a "horizontal Pugh" clause that serves to release any portion of leased lands not included in a producing unit.  Without a horizontal Pugh clause production on any portion of a leased tract will maintain the lease even if a portion of the tract is not in a producing unit and not receiving royalty.  This is the situation of Kassie and the Rambin Farms group.  Their subdivision was created out of a portion of a large farm with an old lease held by production from an old well far from the subdivision.  During title due diligence Chesapeake discovered the old lease that lacked a horizontal Pugh and rescinded their offers to lease the Rambin Farms home owners.

There are extenuating circumstances and a simple answer may not be sufficient without detail.

https://www.courtlistener.com/opinion/3467602/hunter-co-v-shell-oil...

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Permalink Reply by Checkmateking on October 30, 2018 at 14:52

Family had 112 contiguous acres, 57 in section 5 and 55 in section 8. More or less a north south rectangle. We recieved notice the lands in Section 5 have been held by production by a 1982 lease and subsequent Hosston well producing since then. Which is great as the surface rights were sold in the late 80’s. We are going to be part of a new HA RA SU86 in Sections 5 and 6.

Now in section 8 there has been a CV and Haynesville unit formed and drilled post the 1982 lease, wouldnt our HBP land from the producing lease  kept us in the unit in section 8?

keep in mind no one in our family had kept up with this as we were never contacted until a few weeks ago and the small check from the Hosston well in section 5 was given to a family member as it was not enough to really worry about.

ETA all 112 acres was under the one 1982 lease

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Permalink Reply by Skip Peel - Mineral Consultant on October 30, 2018 at 15:03

This is a different situation as what you own is a mineral servitude since the sale of the surface in the 1980's.  Servitudes can be complicated as to the interruption of prescription by a producing well or a good faith attempt to drill a producing well.  In your case, the servitude in Section 8 would have had prescription interrupted if the Section 5 producing unit well location was on the 55 acre tract.  If the producing unit well was not on the 55 acres then the Section 5 unit well would not interrupt prescription for the Section 8 acreage.

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Permalink Reply by Checkmateking on October 30, 2018 at 15:12

So if prescription was not interrupted on the 55 acres in section 8 the leaseholder would retain the lease but the rights would revert to the surface owner under the 1982 lease terms? Now I’m really confused lol

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Permalink Reply by Skip Peel - Mineral Consultant on October 30, 2018 at 15:24

The day the servitude was created, the ten year prescription clock started.  The drilling of a unit well in Section 5, with a surface location within the unit but not on the 55 acres, would not serve to interrupt prescription on the 55 acres in Section 8. 

If you do not know the surface location for the producing Section 5 well, you need to get a well plat from the database.  It's straightforward, if the well is not on your 58 acre portion of the unit, it doesn't interrupt prescription on your 55 acres in Section 8.

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Permalink Reply by Checkmateking on October 30, 2018 at 15:36

It’s not on the 58 acres in 5, answers that question. Happy we still have the 58, nothing wrong with that.

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Permalink Reply by Skip Peel - Mineral Consultant on October 30, 2018 at 15:47

Yes, you are fortunate to have your 58 acres.  Hope you get plenty of good wells. 

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