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.
The Tennessee Pugh Clause is a crucial component within oil and gas lease agreements, particularly in the state of Tennessee. This contractual provision clarifies the rights and obligations of both the lessor (landowner) and lessee (oil and gas exploration company) regarding the termination and release of certain leased areas. In simple terms, the Tennessee Pugh Clause highlights how the remaining undeveloped or unproductive portions of the leased land can be released from the lease agreement, while keeping the productive areas intact. This clause grants the lessor the ability to terminate the lease on non-producing areas, providing them with potential opportunities to lease or explore other parts of their land. The purpose of the Pugh Clause is to prevent lessees from indefinitely tying up large areas of land through holding non-producing portions, thus giving the lessor more flexibility and control over their valuable property. It ensures that the landowner's rights are protected and that they have the opportunity to negotiate new lease terms or engage with other exploration companies. Different variations of the Tennessee Pugh Clause include: 1. Continuous Operations Pugh Clause: This type of clause requires the lessee to continually conduct exploration, drilling, or other operations on the leased land. If no such activities occur within a specific timeframe or in certain designated areas, the lessor has the right to terminate the lease on those unproductive parts while maintaining the lease on the productive areas. 2. Vertical Pugh Clause: This clause focuses on the vertical aspects of the leased land. It states that if the lessee ceases operations or production within specific zones or formations (i.e., specific depths), the lessor has the right to release those unproductive portions but retain the lease on other formations that remain productive. 3. Horizontal Pugh Clause: Unlike the vertical Pugh Clause, this provision concentrates on the horizontal aspects of the lease. It allows the lessor to release the non-producing sections of the lease while keeping the productive portions within a particular horizontal drilling unit or unit boundaries intact. 4. Production Pugh Clause: This type of clause emphasizes the actual production of oil or gas. It enables the lessor to release the lease on non-producing areas while holding onto productive parts, based on specific production levels or a lack thereof. Employing a Tennessee Pugh Clause within oil and gas lease agreements is crucial for landowners, as it grants them more control and allows them to utilize their properties more effectively. Understanding the different types of Pugh Clauses, such as the continuous operations, vertical, horizontal, and production clauses, empowers landowners and lessees to negotiate mutually beneficial terms while striking a balance between exploration and land use.
