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 Texas Pugh Clause is a critical provision in oil and gas leases that determines how land or mineral rights are retained or released after the expiration of a primary lease term. This clause is particularly relevant in Texas, where oil and gas activities are prominent. It is essential for both landowners and oil companies to understand the implications and various types of the Texas Pugh Clause to ensure fair and efficient lease agreements. In its simplest form, the Texas Pugh Clause acts as a means to separate leased land into two categories: the "Pugh Tract" and the "Retained Tract." The Pugh Tract refers to the portion of the leased land that is currently productive and includes all oil and gas wells actively producing hydrocarbons at the end of the primary lease term. On the other hand, the Retained Tract consists of the remaining land that is not part of the Pugh Tract and thus, is no longer subject to the terms of the original lease. The Texas Pugh Clause aims to protect landowners' interests by ensuring that leased land is not indefinitely tied up if only a fraction of it is producing oil or gas. By separating the Pugh Tract from the Retained Tract, landowners have the opportunity to negotiate new lease terms or enter into agreements with other oil and gas companies for untapped areas. This provision serves as a safeguard against operators' tendencies to prolong lease agreements on non-producing portions of land, preventing landowners from exploring alternative opportunities. Different variations of the Texas Pugh Clause include the "Whole Lease Pugh," the "Vertical Pugh," and the "Horizontal Pugh." Each variation introduces nuanced criteria for determining the Pugh Tract and Retained Tract: 1. Whole Lease Pugh: The Whole Lease Pugh approach releases all the leased land except for the specific area actively producing hydrocarbons. It focuses on the entire lease rather than individual wells or formations. If any part of the leased land ceases production, all other areas not actively producing are freed, allowing landowners to engage in new lease negotiations or explore other options. 2. Vertical Pugh: The Vertical Pugh approach takes into consideration the production of specific strata or formations. In this case, the clause releases the portions of the lease that are not producing oil or gas from the targeted stratum. This variation provides opportunities for landowners to negotiate separate lease agreements for untapped formations while retaining the revenue from those actively producing. 3. Horizontal Pugh: The Horizontal Pugh approach focuses on section lines and allows landowners to retain ownership of the entire leased acreage while releasing land not currently subject to the extraction efforts of horizontal wells. It enables landowners to negotiate new lease terms for untapped sections while still benefiting from the productive areas. Understanding these different types of the Texas Pugh Clause is crucial for both landowners and oil companies when negotiating lease agreements. By being well-informed, parties can secure fair terms that ensure efficient exploration and production while protecting the landowners' rights to maximize the potential of their assets.
