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.
Bronx New York Pugh Clause
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State:
Multi-State
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Bronx
Control #:
US-OG-843
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How to fill out Pugh Clause?
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FAQ
The granting clause in an oil and gas lease specifies the rights granted to the lessee, such as the rights to extract oil or gas from the property. This clause articulates the extent of permissions and limitations placed on the lessee. When discussing the Bronx New York Pugh Clause, understanding the granting clause becomes crucial, particularly for those engaged in energy extraction agreements.
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.
LEGALLY a vertical pugh clause is one where all acreage outside of the well/unit boundaries must be released. LEGALLY a horizontal pugh clause is one where you must release acreage below a certain depth. However, these two terms are used interchangeably in the industry.
PUGH CLAUSE (SOMETIMES REFERRED TO AS A~FREESTONE RIDER): "If a part of the leased premises is included in a pooled unit or units, then, at the end of the primary term, only the land that is included in the pooled unit or units shall continue to be held by the lease."
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.
Any provision resulting in acreage being released after production is a Pugh Clause. A Pugh Clause is a type of retained acreage provision that is only applicable with regards to pooled or unitized lands. A Pugh Clause is completely inapplicable when there has been no pooling or unitization.
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.
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.
