Anyone have success wording a Lease Agreement so that the Lessee MUST include a pre-set percentage of your acreage in any royalty producing drilling unit? In other words - they lease your 100 acres then only claim they are incorporating 20 acres into a drilling unit, and your reduced royalties are based on the 20 acres not 100...so what if they later have to release the other non-used 80 acres - IF they control the ingress/egress/ best access points AND who the hell knows what they're are doing under there ESPECIALLY with all the changing technologies! - what legal assurance can be lease protected to make certain they have to use a higher percentage of the 100 acres, or at least pay royalties on it - and/or that ANYTHING they do won't adversely affect the re-leasing value of the remaining lease-freed (due to non-production) 80 acres???
Anybody have a great PUGH CLAUSE you care to share?
All I can tell you is that a landman representing Eclipse told me they don't usually do Pugh Clauses and I was lucky to get the 60 percent pugh clause they offered.
I did not sign by the way.
I have the same concern about making a big chunk of my land useless .even 40 percent of what I have is too much for me to let go unused unless I have no choice
So it's better to have 100% go unused out of principal than to have 40% left unused because of geography? That's...interesting?
Time is on the Land's side, not always the Land OWNER's side. Protecting your land from a less than optimal lease now likely sets it up for a better deal in the future - but how far into the future? - as the technology will continue to advance - as a landowner, you may have to stay alive longer than your genetic predisposition may support to benefit from it! I would use money a lot differently now (including investing for the future) than I'd be willing/able to use it a decade or more from now. But I also don't want to "waste" a large percentage of our land by tying it up in an overly greedy Lessee's snares.
No easy answers...but I'd like to hear opinions and experiences....Thanks.
By the way, The White Law Office in Millersburg, OH has one of the better Pugh Clauses in their LandOwner focused Lease Agreements, and Lessees DO sign it! But you're still potentially "stuck" with only a small portion of the acreage being included in a producing unit. Not good enough. Not if their activities adversely impact leasing the released acreage to another developer! But HOW do we know the full impact???
From what I've heard, not even that large Batesville area group that came together was able to negotiate the 60% Pugh. So from the sounds of it, if you were offered the 60% Pugh Clause, you did a good job of negotiating. Are you tied to an old Oxford lease like that group was?
Good luck to you, by the way!
No I am tied to any lease group.
I guess I feel a little better after what Yall say concerning percentage.
And for the record it is not principal that keeps me from signing the 60 percent it is knowing that I can change my mind if I cant find a better deal.
Would one of you explain how a 60% pugh clause works? My brain just doesn't get it.
Utica watcher.... Can you tell us a little more about the Batesville Group ?
Did they settle ? Do you know the terms ?
Do you know who put the group together ?
This is what I have been told by counsel:
By definition, unless otherwise specified in the Agreement, 60% Pugh Clause is not a pure Pugh clause.
Understood - but what keeps them from ruining the so-called unused subterranean assets - especially in light of the experimental technologies they are bound to be using over the next say 100+ years????
Well, that's the $64,000.00 question isn't it? I'm not a geologist nor do I pretend to be, even though I stayed at a Holiday Inn Express last night (Inject laugh track here).
Seriously, I couldn't even begin to answer that for you. Except to say that the oil and gas companies make money be extracting minerals from your property. I would think that sheer greed would prevent them from ruining the other strata and making it non productive. I think that if they had even the slightest hint they were doing something like that they would pause to think about loss of future revenues from those potentially ruined layers.
(Laugh track appreciated)
I am not confident they even know they are ruining anything until after the fact. And few people in the field, or in the boardroom for that matter, look beyond their own generation's greed.
Sigh...it's hard to trust a corporation and all its representatives for beyond one's own lifetime.....
Thanks Tom,. hope you got a complimentary breakfast.