Replies to This Discussion

Permalink Reply by jett on March 3, 2014 at 11:52am

This is the only time I personally have seen it described this way. Can't speak for others. I've included in my other replies just 2 of the links that describe it the other way.

In the Marcellus/Utica region, the Vertical Pugh clause idea is pretty recent (as in the past couple of years) since the average Joe (myself included) didn't realize at first that there were other layers that also had value. When we began to learn that there was more beneath us than we thought, some were able to include both of these Pugh clauses in their leases in our area.

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Permalink Reply by Utica JOE on March 3, 2014 at 12:04pm

I used to think that as well. But, it is actually the opposite. I learned it the hard way, as I was in a meeting with a client and was corrected by our head O&G attorney on the proper use. Thus, now I use Strategraphic and Geographic in describing the situations .So now there is none of this none-sense.

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Permalink Reply by jett on March 3, 2014 at 2:56pm

I agree about more technical descriptions possibly making the Pugh Clause more clear for lessors but I, myself, need more evidence to be convinced to change my idea of the vertical and horizontal pugh clause meanings.

http://definitions.uslegal.com/p/pugh-clause/

Permalink Reply by Kathleen on March 3, 2014 at 11:24am

Horizontal is sideways, not depth.
I have language, not necessarily a paugh Claus, that states a vertical well can only hold 40 aces. This was put in so they couldn't use a vertical well from holding a bigger unit.
I was always told a paugh Claus is used to stop undeveloped lands/minerals from being included in a unit, forever.
If the minerals/land is not included, its term expires at the end of the lease term.

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Permalink Reply by jett on March 3, 2014 at 11:27am

http://www.mineralweb.com/owners-guide/lease-proposals/pugh-clause/Right, Horizontal is sideways, Vertical is depth (or up and down).

We have both in our lease.

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Permalink Reply by J. Kinney LandRights on March 3, 2014 at 11:36am

Jett, you're right.  Horizontal is for acres not included in the unit to be released from the lease at the expiration of the primary term and vertical is to release all the formations of shale not in production by the expiration of the primary term. 

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Permalink Reply by Hal Whitlatch on March 3, 2014 at 11:44am

Both vertical and horizontal pugh clause is the way to go and a definite advantage to the rights owners.

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Permalink Reply by jett on March 4, 2014 at 6:06am

In researching this, there are many variations of terms used to cover depth and surface.

It seems like some of the confusion has resulted from a court case in Texas in how the term "horizontal" was interpreted in favor of the Lessee as opposed to the losing Lessor. Apparently the Lessors thought their acreage was protected, as was their intent in including a Horizontal Pugh clause in their lease, until it was ruled otherwise.

Using the term "vertical" to describe the release of a horizontal surface seems to fly in the face of common sense so of course there is mass confusion over these terms.

There really should be a standard, unequivocal term for each meaning. It should be clear to the Landowners, the courts and the Gas/Oil cos what is the meaning in the leases. These are vital clauses that seriously affect the landowners' protection of their properties.

Of course, you can just try your best.

http://www.linkedin.com/groups/Let-s-have-fun-lease-4230861.S.89526506

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Permalink Reply by maag man on February 27, 2014 at 6:37am

Sorry. I don't agree if a GOOD drilling company is working with u ....and if there is another level that is producible.. Then why wouldn't they continue to drill more therefore still pay u more in royalty..u think a separate company would take the chance of being in the same block with another major producer?.. Sorry doesn't fit any trailers operational tactics And isn't the royalty money way better than any lease money....give me the royalty screw the lease Bonuses

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