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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0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 25, 2011 at 8:46am

then don't call it a 'Pugh clause'....make a clause in the addendum that will protect your rights to lease what land they don't utilize for drilling or use in a unit.   When a company pulls a permit for drilling they must tell at that time what land acres they expect to use for horizontal drilling and that is where the units are formed (so I was told).

Remember they are not working in your best interests financially, and they WILL MAKE MONEY with having your lease...it is your play at the time of the lease to establish what you can to negotiate your best interest.

The fact that they are wanting to pull out the Pugh clauses...tells me that I am right about they are not interested in making the landowner any money....in fact us landowners are only in their way of making more profit.

 

Pls whether you use an attorney or not...if your neighbors will listen and you all see the need to do your best negotiating NOW...cause you won't have that opportunity later and they will assign your lease asap to gain profit off what they negotiated with you.  Many of us here at gomarcellusshale signed contracts cause the promises looked good, we didn't understand many of the clauses (and the landman certainly knew that) and we were focused on only three things...the upfront money, the royalty at gross, and the fact we could renew the lease in five years with a new contract and new negotiations (SO  WE THOUGHT).

Now we find not only did they have the CYA clauses to negotiate and perhaps extend the lease whether we wanted to or not....but in some places the area (that wonderful PA mountain land) is soooo at risk for pollution now.

So take your time to do you lease please and hear the wisdom....The oil companies are not having any problem at assigning and selling leases and shares of their leases...so why would you if they don't want your land at this time if you don't meet their conditions?   It's only going up in price (take a look at some of these discussions..)   If you can tell I am not that happy about what they did in our lease is that they lied about the interpretation of some of these clauses to my elderly dad (who didn't want to use an atty and if he did he wouldn't have known which atty would have really helped)...I was present at all the discussions and my dad asked clearly several times about renewing the lease in five years (which we were told that it will be renewed but didn't mention what could keep us from being paid in the clauses)...we were told things that are contrary to what is in writing and urged to just sign and renew in five years....now he has passed and I am finding that this Pugh clause or some form of it surely should have been in the addendum.

http://gomarcellusshale.com/forum/topics/look-at-the-clauses-not-just

 

 http://gomarcellusshale.com/forum/topics/getting-ready-to-sign-a-new

 

http://gomarcellusshale.com/forum/topics/assigns-clause-and-a-globa...

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on May 25, 2011 at 9:09am

You could also put the wording that the contract regarding every clause (every clause) ends at the end of five years (if you are using five year) and that the lessee must renegotiate the contract at the end of five years.   You must be willing to stand at contract time...I negotiated for my dad for the money part...but I did not understand the clauses at that time and had to depend on the landman and other property owners (out of state also) who also did not understand the unit clauses and assigns , etc.   ...and of course the final decision was my dad's and he was very weary...we negotiated with Chesap. Chief, and Range over 4 months....and I must say the figures grew each month and now leasing is several more thousand per acre and we have been to the fourth year yet. 

So do what you can to have more of the profit than the the skim of the skim.    Cause you see unless there is sooo much upfront money to cover if they don't drill ....cause they may find ways to reduce that 15% you are talking about with using 'units' and you should surely make sure that if any surface drilling is done that you have a good payment at that time also. 

Permalink Reply by J.M. on May 27, 2011 at 12:50am
A Pugh clause may work "out West" where acreage is in the thousands of acres...In Pa a "reverse Pugh clause"...is the best bet!!!!!! In other words if your property is placed in a unit...your entire acreage is part of the unit. I wonder why no-one has ever mentioned this?....we have had this clause in our contract for three years!!!!
Permalink Reply by Mmmarkkk on June 2, 2011 at 2:24am
VG:  I'm kind of confused on your issue with the "renew at 5 years" piece.  All leases say that if a well is drilled and producing, then the lease is in effect until that well stops producing in paying quantities.  So, the 5-year term is invalid if a well is producing.  You won't have the "option" to renegotiate in 5 years in this case.  Now, the use of Pugh clauses may help limit the acreage "held" by the producing well/unit, but it will NOT allow you to renegotiate the entire lease at the end of 5 years.  I'm I mis-reading your issue??
Permalink Reply by Finnbear on May 27, 2011 at 1:58am
It IS called a Pugh clause. The Pugh clause basically says that at the end of the primary term of the lease, (typically 5 years, maybe 10 depending on what you signed) any of your land that has not been unitized (included in an active drilling unit) will not be held by the lease. For example, if you lease 100 acres but only 25 of them have been included in a drilling unit at the end of the lease, the lease holder has to terminate the lease on those 75 acres. Without a Pugh Clause you would be receiving royalties on those 25 acres and they would be HBP until that well is plugged. The other 75 acres would also be HBP (at NO cost to the lessee) until that same well is plugged and you would never receive a dime. Depending on how YOUR Pugh clause is worded, it may force the lessee to unitize ALL your land and pay royalties on all of it if they need any of it to drill a well. 
Permalink Reply by Mmmarkkk on June 2, 2011 at 2:27am
One addition/clarification.  At the end of the end of the primary term, the acres not included in the unit could also be extended, assuming the original lease had clauses allowing for an extension.  And generally, these extensions are for the company's option, not the royalty owner.
Permalink Reply by Michael Mclaughlin on June 15, 2011 at 3:30pm
You might want to consider vertical Pugh Clauses. They would probably be of more benefit to you.
Permalink Reply by Thomas Wentzler on June 2, 2011 at 2:10am
Thank you for your insight.
Permalink Reply by Barbara on June 7, 2011 at 4:28am

AMEN AMEN AMEN

I have just received a check from Chesapeake for the GAS pipeline which will cross my property.  I agreed to this in the first place because I thought I was obligated to it with my gas lease.

This contract was signed two years ago...........at that time I was told pipeline would be done in the next few months..............wasn't, so that is why now I get the payment....

This check was for more than I had remembered calculating two years ago............YEA!!....wait, not when dealing with Chesapeake.  About two or three months ago, another landman came here............he wanted a buried water line to be placed to run parallel to the gas line.  This is when i learned that the 'fresh water' that they say will be in these pipes is actually FRACK water with four chemicals removed at the well site. 

No way did I want to give up yet another twenty-five feet of right-of-way on top of the fifty already taken for the gas pipeline; no way did I want this horrid fluid running through my land forever. Thus I signed NOTHING and was very clear to the landman that I was totally opposed to the whole proposition.

He came again once.............I told him the same thing.  He was offering $5/foot as a one time payment. 

I added what the waterline would have paid to the remembered amount for the gas line....................THESE CRUMBS HAVE ADDED THEM TOGETHER with out me having signed ANYTHINGor APPROVED anything..............they tell me the gasline lease, which I HAD run past a lawyer, gives them permission for MULTIPLE lines at their discretion.  It's in there..............NEVER would I have left it that way when I signed; my lawyer really let me down.  AND the original landman for the gasline had told me just the one gas line and a one-time dig.  People tell me that there is no way it will be a one time dig.

 

BEWARE EVERYWORD THAT IS UTTERED AND WRITTEN.  I am meeting more and more people who are discovering the subterfuge within the 'deals'.

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on June 7, 2011 at 10:31am

Barbara...thanks for sharing...I tell you more here should share what they can so the next person will do much better as a landowner in their signing for ROW's and for natural gas leases.   That is loving thy neighbor as thyself....clearly the gas company that did you wrong wasn't interested in showing you the proper respect as a landowner.

Would you pls consider posting your above post in this thread discussion?  It might help someone.

And in Sullivan County board discussions we have a discussion about Pipeline leases ...your post would also be welcome there.

http://gomarcellusshale.com/forum/topics/getting-ready-to-sign-a-new

 

http://gomarcellusshale.com/group/sullivancountypa/forum/topics/pip...

 

Permalink Reply by Shower Bath on June 15, 2011 at 3:59pm

I saw theseon Marcellus Drilling News web site:

 

http://essentialdissent.blogsp...      3 videos by N.Y. landowners

 

http://fleased.org   N.Y. lease problems web site 

 

http://www.museumoftheearth.org/outreach

 

These are landowners & issues fom Marcellus leasing and drilling in New York state. Note that there are differences in N.Y. and Ohio law, but still things to consider before leasing.

 

 

Permalink Reply by Finnbear on May 27, 2011 at 2:03am

ALOV got a lease with CHK that does include a Pugh clause. See the ALOV Lease for what CHK IS willing to do if you push them. They are most likely not going to do this for an individual but if you bring them a pool of land they will deal with you.

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