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 New Mexico Pugh Clause is a legal provision that is commonly included in oil and gas leasing agreements in the state of New Mexico. It plays a pivotal role in determining the rights and responsibilities of parties involved in the extraction and production of oil and gas resources. The primary purpose of the New Mexico Pugh Clause is to prevent leasehold acreage from being perpetually tied up by lessees who are not actively exploring or producing hydrocarbons from the entire leased area. It essentially targets the release of acreage that is not currently being utilized effectively. Under this clause, if a lessee fails to produce oil or gas on a specific portion or formation of the leased land that is subject to a production unit, that portion of the lease will expire, while the lessee retains rights to the productive portion of the lease. This enables other oil and gas operators to have the opportunity to lease the expired acreage and explore or develop it further. The New Mexico Pugh Clause can vary in its specific language and requirements, resulting in different types or variations. Some commonly encountered types of New Mexico Pugh Clauses include: 1. Vertical Pugh Clause: This clause focuses on the vertical depth of the land. If a lessee fails to produce oil or gas from a certain depth or formation, that particular portion of the lease ceases to be valid. 2. Horizontal Pugh Clause: As the name suggests, this clause pertains to horizontal drilling scenarios. It enables the release of acreage that lies outside the zone of a horizontal well bore, thereby preventing the tying up of excessive land. 3. Depth Pugh Clause: This clause specifically addresses the depth of production. If a lessee fails to produce oil or gas below a specified depth, only the deeper portion of the lease remains active, while the shallower part expires. It is important for both lessors and lessees to thoroughly understand the implications of the New Mexico Pugh Clause before entering into any oil and gas lease agreements. This clause ensures efficient exploration and development of New Mexico's oil and gas resources while promoting competitiveness and facilitating fair market opportunities for all interested parties.
