Anyone having a problem getting a pugh clause from Range or Chesapeake??

Have been negotiating with Range (we are in Beaver/Independence area of PA). We are being told directly by Range that they are no longer allowing Pugh's clause in the lease and we are also hearing through many attorneys that both Chesapeake and Range are saying the same things. We know that a large group in the area have just signed on with Range...have not figured out what terms they received. We were attempting to get $2700/ 16% with Pughs clause but at this point don't know if it is realistic. We have 100+ acres. We are being told by people at Pennstate extension webinars to accept what you can get but then we hear about Utica...anyone, anyone??

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Permalink Reply by brian kulp on May 27, 2011 at 2:13am

i have seen alot of pugh clause that say if they have 50% of your leased lands in a unit the leese is still inforce. so dont do that either. or go for a higher percent or say all most be included. just my 2 cents.

 

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 27, 2011 at 3:55am

Hi everyone...

J.M., I surely would like to see what your clause regarding 'units' says...you say if your property is placed in a unit then your entire acreage is in the unit and you say that is good.   But what defines the royalty payment to you the landowner?  Are you sure you get paid on ALL of your acreage for the royalty gross or net??  In fact, have you received royalties yet as you say the lease has been three years...do you know for sure that they pay royalties on ALL your land that is either in the unit or not?   I hope so but if not then what we are saying here is very important to you also.

 

What you are saying is similar  to what we are saying but if there are royalties paid it is only on the part that is defined of the unit acreage written in the permit in the public records of your county under the drilling site permit.   Pls call your local county courthouse or go to Landex.com and make sure that your entire acreage has been included in the description as you will most likely only get paid on the acres listed in the legal record.

What we are saying is that the entire acreage becomes a hold under the lease for the lessee which could possibly result in a longer term than the primary term of what ever years the lease is for and that most likely the Oil company (or whomever holds the lease) would not have to renew the lease and thereby not pay another cent to extend the lease.   If that Oil company only places a well and does not drill then they are saying that they could hold your entire acreage so you could not renegotiate or negotiate with a new lease after the primary term thereby they made sure that they can make money (for they have an assignment clause most likely) but not you.   Now if they put some of your acreage in a unit (ex. you have 20 acres and they only use 2 for the drill horizontal or vertical...) give some time before your hair stands up...cause the forming of having wells, feeder lines, and transport lines still is underway (not established yet) cause they may form another unit within your acreage or include more of the acres in the same unit and apply for that addition on the permit or they may drill another wellsite and include your remaining acres or same acres there.

 

What we landowners that already have a lease are saying is that we wish we would have been wiser when establishing our primary existing contract as now we don't really know what to expect of the Oil Company's faithfulness to us in helping us make profit also.  Now I have land that is in two units and it is the same acreage...a good thing cause it now can be accessed by two drill sites increasing the chance to add to the royalties of what NG they may derive.   The feeder lines and transport lines are not all in...and they may add more well sites....so I now am expressing that I wish I knew these things before cause now I am depending on the Oil company caring about us making profit (yet I was the one to have to call them to see just what was happening and didn't know that almost 8 months have passed since they had included some of our acreage in a unit!..so they evidentally didn't care to contact us the owners which tells me we owners need to be alert and watchful.

 

fyi....just because you see a well down the street from your front porch doesn't mean that they use the visual for deriving the plan for horizontal drilling...they use what geological plan is most viable to obtain the natural gas...Some of our land is right next door to a well site but the well site used for the horiz. plan is two or three wells over.   Of course that doesn't make much sense since we are not privy to their geological findings.

For those of you that are now either renewing or doing a new lease....another suggestion regarding the unit clause especially if the oil company is resisting the Pugh clause (which one would have to wonder just how much the Oil company that resists such really cares about what you make)...then see about adding the stipulation that at the end of the primary lease any acreage or part acreage that you own that is not defined in the public records of your county as being in a unit for drilling is released from the contract back entirely so that a new contract can be renegotiated with whomever at the end of the primary term.   Similar to a Pugh clause but giving more fairness to both parties (lessor and lessee) for the lease would still carry forth for those acres in the unit but you the landowner will be given back the Lessor right to decide what to do with your remaining acres that are not in a unit rather than the oil company claiming that right.

 

Permalink Reply by J.M. on May 30, 2011 at 5:34am

VG,

 

OK...lets call it a "reverse Pugh"....if you have 100 acres and are part of a 640 acre "unit"...all of your 100 acres must be put it the unit.  I can see how a company could put you in a "unit" and then say" the horizontal is only under 10 acres of your property so we can only pay royalties for 10% of your property"

I have an addendum my contract stating this...not unitized or under production yet...roughly 2000 acres (around me) in Fayette county are leased together in one area (block)...all leased to Marathon!

Permalink Reply by J.M. on May 30, 2011 at 5:39am

Brian K.

 

An additional 2 cents.....I agree with your comment "all must be included"!!

By the way...I sold the Sunbeam Tiger a few months ago!

 

Permalink Reply by Finnbear on May 30, 2011 at 8:33am
A recurring theme on this website seems to be people who don't know what part of their land is included in a particular drilling unit or if it is included at all. When a permit is issued for a well, there is a plat filed with the state that defines exactly what land is included in the drilling unit. This is public information and accessible by anyone willing to go look for it. In Ohio, you can go here for the information. On this page, you want to look at the "Oil & Gas Well Database" and search for the well permit number in the county where it is located. There is a file included for each well that includes the whole permit application package. If you don't know the permit#, go to this page and click on "Find a well" under the EMERGENCY OIL AND GAS WELL LOCATOR heading. This will bring up a map that shows the location of every existing and permitted well location in the state. If a person has a question about whether part or all of their land is included in a drilling unit, they probably have not bothered to do their homework.
0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 30, 2011 at 8:55am

thanks finnbear and J.M....for your input here.   Yes, you can go and spend the time to seek if any or all of your acreage is in a unit thru the public records if you know that well permits for drilling are being pulled in your area.

But wouldn't it make better relations between the lessee and lessor if the lessee would notify the landowner (lessor) when they are doing such.   I really hate having to do follow up when I am the one paying...such as when you pay a plumber but have to chase him down to do warranty work or even come back to give an estimate....so why does this burden of having to figure out what is happening on our land when the lessee should have to inform us.  

 

So any of you that have yet to negotiate a new lease or renew keep in mind to put something in the contract regarding notifying you the lessor of events happening regarding your land and put a penalty in it if they don't to pay for your time in having to do the follow up.

Permalink Reply by Finnbear on May 30, 2011 at 3:14pm
An O&G company is only going to do the bare minimum that is required by the lease (contract) they have with the mineral holder/landowner. Most leases do not require them to notify the lessor about much of anything and the lessor agreed that this was OK when they signed the lease. You have to put everything you want or think you want in the lease or the addendum and then if you can get the O&G to agree to your terms it will still be up to you to hold them to it. Most O&G's wash their hands of the lessor (except for royalties) after the lease is signed. They do not consider lessors as partners in the venture, only as a necessary hurdle to get over so they can get on with the race to extract O&G and make more $$$.
0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 30, 2011 at 6:50pm

thanks finnbear...I know that we cannot change their behaviour towards landowners..just hope that we can get something on the lease paper that works for our benefit as well as theirs since they have been doing so well.  

Any hope that God can change their behaviour towards us landowners for the better?  I know I hope he sees me typing this...cause I read when you have done it to the least of these you have done it to GODs' son.....Somehow I think that God could deal with them at any time even beyond this time.

Permalink Reply by Guy Smith on May 31, 2011 at 8:33am

At this time I have a lease that is being looked over by my attrny from Chesapeake (DPS) with a Pugh clause.

EQT Also wanted to  lease my land but was not willing to add a Pugh clause. 

60 acres in Greene County, PA

Permalink Reply by Marc on May 31, 2011 at 9:16am
Can you give us an idea how the Pugh clause is worded? Congrats, btw.
Permalink Reply by A. Betz on May 31, 2011 at 3:38pm
Hi Guy-- was it difficult to get Chesapeake to agree and what were the terms/addendums if you feel comfortable saying...we would really appreciate it. Also, were you part of a larger landowner group or did you contact Chesapeake directly? Thanks!
Permalink Reply by Henry on June 2, 2011 at 2:08am
One way around not having a horizontal Pugh Clause in your lease is to lease your individual tracts on multiple separate, but identical leases.  For example, if you have two tracts of land in two different areas that might end up in different drilling units, then create a separate lease for each tract of land.  It achieves the same purpose as having the horizontal Pugh Clause.

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