This lease rider form may be used when you are involved in a lease transaction, and have made the decision to utilize the form of Oil and Gas Lease presented to you by the Lessee, and you want to include additional provisions to that Lease form to address specific concerns you may have, or place limitations on the rights granted the Lessee in the “standard” lease form.
Illinois Pugh Clause
Category:
State:
Multi-State
Control #:
US-OG-843
Format:
Word;
Rich Text
Instant download
Description
How to fill out Pugh Clause?
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FAQ
LEGALLY ? a vertical pugh clause is one where all acreage outside of the well/unit boundaries must be released. LEGALLY ? a horizontal pugh clause is one where you must release acreage below a certain depth. However, these two terms are used interchangeably in the industry.
A Vertical Pugh Clause requires the Operator to release the rights below a defined vertical depth after the primary term of your lease expires. For example, all rights 100 feet below the deepest drilled depth or 100 feet below the deepest formation penetrated.
A Pugh Clause is enforced to ensure that a lessee can be prevented from declaring all lands under an oil and gas lease as being held by production. This remains true even when production only takes place on a fraction of the property.
The Pugh Clause limits the rights of the lessee to hold only particular depths or amounts of leased property in a pooled unit after the expiration of the primary term. In Texas, production from any portion of a leased tract is deemed production from the entire tract.
Example of horizontal Pugh Clause A horizontal could offer a lease that spans certain acreage, including 30 acres across the property. This implies that a lessee would be able to access 30 acres of land across the drilled well, but no further.
The point of a retained-acreage provision is to be able to seek a new opportunity to lease unworked land to a different lessee, one who might do something productive with it. A Pugh clause is a negotiated provision in favor of the lessor. Pugh clauses modify pooling/unitization rights.
A phrase (usually contained in a Pugh clause in an oil & gas lease) that terminates the lease after the primary term as to all formations below a particular depth typically defined as the stratigraphic equivalent of the base of the deepest producing formation in the unit.
