Montgomery Maryland Pugh Clause

State:
Multi-State
County:
Montgomery
Control #:
US-OG-843
Format:
Word; 
Rich Text
Instant download

Description

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 Montgomery Maryland Pugh Clause is a legal provision that pertains to the transfer of oil and gas leases in Montgomery County, Maryland. It plays a crucial role in determining how leasehold interests are severed or retained in case of partial drilling or production within a leasehold. In essence, the Pugh Clause in Montgomery Maryland safeguards landowners' interests by providing a method to release unproductive portions of a leased property while maintaining ownership rights over the productive areas. This clause is particularly relevant in areas where the leased land spans multiple formations or targets. There are primarily two types of Montgomery Maryland Pugh Clauses: Horizontal Pugh Clause and Vertical Pugh Clause. 1. Horizontal Pugh Clause: This type of clause focuses on horizontal drilling activities. It stipulates that if any part of the leased land is subjected to horizontal drilling resulting in productive operations, the non-producing parts shall be released from the original lease. This allows landowners to renegotiate lease provisions, secure better terms, or explore other opportunities for the non-producing sections. 2. Vertical Pugh Clause: Unlike the horizontal clause, the vertical Pugh Clause focuses on vertical drilling operations. It ensures that if any part of the leased land is subjected to vertical drilling resulting in production, only that section of land will remain under the original lease while the remaining land can be released. This allows landowners to benefit from potential royalties and maintain control over the productive section without being restricted by the non-producing parts. Both types of Pugh Clauses provide landowners with the opportunity to maximize the value of their leases, as they prevent situations where an entire leasehold remains tied up despite only a fraction of it being actively producing. By allowing the release of non-productive areas, landowners can potentially negotiate new lease terms, explore fresh opportunities, or even engage in alternative land uses unrelated to oil and gas operations. It provides flexibility while ensuring fair compensation for property owners by preventing unnecessary tie-ups of unproductive portions. The overreaching goal of the Montgomery Maryland Pugh Clause is to protect landowners' rights, encourage responsible resource extraction, and promote equitable participation between leaseholders and landowners. Landowners must carefully evaluate and negotiate the specific language of the Pugh Clause in their lease agreements to ensure they secure the most favorable terms and retain control over their property interests.

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FAQ

Simply stated, a retained acreage clause is a clause in an oil and gas lease that sets out how much acreage a lessee may retain for each well it drills on the leased premises after the balance of the lease automatically terminates.

A vertical Pugh Clause could provide a lease to a particular depth, such as 100 feet below the drilled well. The lessee would be limited to drilling to 100 feet but no further. Conceivably, the lessor could lease property below that range to another entity.

A Pugh Clause is meant to prevent a lessee from declaring all lands under an oil and gas lease as being held by production, even if production only occurs on a fraction of the property.

The horizontal Pugh clause operates to release all lands not included in a pooled unit, typically at the end of the primary term or after cessation of continuous drilling operations, if the lease provides for same. The horizontal Pugh clause releases land at the surface as to all depths.

The Pugh Clause is named for a Louisiana attorney, Lawrence Pugh, who took on Shell Oil in 1947 on behalf of a lessor. The Louisiana Supreme Court sided with Shell Oil, and Pugh determined that the only way to prevent something similar from happening again was with a special clause in the lease contract.

Pugh, who first used such a clause in 1947 to prevent the holding of non-pooled acreage in his client's lease while only certain portions of the lease acreage were being held under pooling agreements.

In general terms, the Pugh Clause provides that production from a unitized or pooled area located on or including a portion of the leased lands will not be sufficient to extend the primary term for the entire leasehold.

In general terms, the Pugh Clause provides that production from a unitized or pooled area located on or including a portion of the leased lands will not be sufficient to extend the primary term for the entire leasehold.

More info

Up for consideration. Pugh Clauses: A Primer.BE IT FURTHER RESOLVED that any such lease shall contain a horizontal Pugh clause to read the same or substantially the same as the following:. The assignment's primary term was 2 years and "as long thereafter as operations"—defined to include "drilling" and "completing"—. Who fills out Ballotpedia's Candidate Connection survey? 694 candidates completed the survey in 2021. On April 19, 1955, Aurelia Browder is arrested for sitting in the white section of a Montgomery city bus. Her arrest and conviction led to Browder v. Hold Harmless Clause. Pugh,.

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Montgomery Maryland Pugh Clause