New Eclipse Lease

I was offered an Eclipse lease the other day.

They have changed their offering to an 8 year lease with a bonus of 1k per acre per year.

18 percent royalty with about a 60 percent pugh clause.

I am not interested in a lease with those terms but I thought someone might be interested to hear the offer dejour.

This was for unleased acreage in Monroe county Ohio

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Permalink Reply by Jon on July 18, 2016 at 6:33am
18% Gross or Net?
Permalink Reply by matthew rouse on July 19, 2016 at 5:07am

gross-but from my experience they all want the market enhancement clause in the lease so gross or net is meaningless to me.

True gross would be nice but I am not sure I would ever get it unless I had hundreds of acres in a hot area.

Permalink Reply by David Allen Lilly on November 21, 2017 at 12:49am

Again, the market enhancement clause is not what it is so many times described as. My lease states that in no circumstance am I to be paid less after market enhancement than I would have been paid without it.

Permalink Reply by searcherone on July 18, 2016 at 3:04pm

Can you explain a 60 % pugh clause.

Permalink Reply by Kyle Nuttall on August 3, 2016 at 8:53am

It's probably that if less than 60% of the tract is produced then the rest will be released from the lease at the end of the primary term.  So if only 59% is producing at the end of eight years, the other 41% will be released.  However, if 61% is producing, the entire tract is kept under lease.  That's what the typical language will do.  His particular clause could be different, of course.

Permalink Reply by Paul Butler on August 3, 2016 at 9:15am

That's not typical language. 

What form book can you quote?

That's the worst Pugh Clause/Freestone Rider I've ever seen.

If you tried to put that in a lease in Texas, you would get punched in the mouth.

Permalink Reply by Kyle Nuttall on August 3, 2016 at 9:32am

I don't let them into my clients' leases, either.  That's what that kind of clause looks like around here, though.  I haven't seen Eclipse's language, but Northeast Natural Energy had language that did that.  It's terribly unfair to royalty/mineral owners.

Permalink Reply by Paul Butler on August 3, 2016 at 9:33am

10-4.

I was shocked to see that language.

A new low.

Permalink Reply by G.H. on August 3, 2016 at 9:37am

Forgive my ignorance, but what language is typically used/preferable?  Release all non-producing acreage regardless of % under production?

Permalink Reply by Paul Butler on August 3, 2016 at 9:48am

If it is not in a unit, it's released--period.

Google "Pugh Clause"

A Pugh clause with percentage language as described in this discussion is a vivid illustration of the desperation and over reaching the sociopaths styling themselves "landmen" in Appalachia will stoop to.

Permalink Reply by G.H. on August 3, 2016 at 9:51am

Thanks for your response.  That makes sense.

Also, I don't think most landmen write the leases themselves, rather, they present what their company is offering.  Just saying.  I would be very surprised if some of the ones I've seen were intelligent enough to write 1/4 of the lease they present.

Permalink Reply by Paul Butler on August 3, 2016 at 9:56am

10-4.

You're very perceptive regarding the Appalachian landmen.  Many of them come out of Michigan (can you believe that?), not being remotely qualified, and are paid very little.  They will do anything the head stooge requests.

For most, it's the unemployment line or cheating mineral owners.

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