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 Virginia Pugh Clause, also known as the Pugh Clause in Virginia, is a legal provision typically included in oil and gas leases in the state of Virginia. It serves to address the issue of lease termination and the release of land parcels from the lease agreement. In essence, the Virginia Pugh Clause ensures that only specific portions of the leased land that have been actively explored, developed, or producing hydrocarbons are held under the lease agreement. This clause prevents the continuation of the lease on the non-producing or undeveloped portions while allowing the lessee to retain rights on the productive areas. By incorporating the Virginia Pugh Clause, both the lessor (landowner) and the lessee (oil and gas company) can protect their interests effectively. This provision is advantageous to the lessor as they can reclaim and lease the non-performing areas to other parties who may have a higher development potential. On the other hand, the lessee can focus their efforts and resources on the areas holding significant hydrocarbon reserves. There are three primary types of Virginia Pugh Clauses commonly used in the state: 1. Horizontal Pugh Clause: This type of Pugh Clause applies to horizontally drilled wells. It establishes that if a horizontal well is drilled on the leased property, and it encompasses multiple adjacent land parcels, only those parcels that are part of the well bore's path will remain under the lease. Non-participating parcels will be released from the lease, enabling the lessor to explore different leasing options. 2. Vertical Pugh Clause: Unlike the Horizontal Pugh Clause, the Vertical Pugh Clause applies to vertically drilled wells. It states that if a vertical well is drilled on the leased property, the lease will be retained on the specifically producing acreage identified by the well bore, while non-producing acreage will be relinquished. This provision promotes a fair distribution of drilling rights and encourages optimal utilization of the leased property. 3. Depth Pugh Clause: The Depth Pugh Clause focuses on the vertical depth of a well. It stipulates that if the lessee fails to drill a well to a particular depth specified in the lease, only the depth or strata that has been successfully produced will remain under the lease. The remaining non-producing depths or strata will be released, allowing the landowner to seek alternative leasing opportunities for untapped resources. In summary, the Virginia Pugh Clause safeguards the interests of both lessors and lessees by releasing non-producing or undeveloped areas of the leased land from oil and gas lease agreements. The different types of Pugh Clauses include the Horizontal Pugh Clause, Vertical Pugh Clause, and Depth Pugh Clause, each tailored for varying drilling scenarios in Virginia.
