For adding a Pugh clause to lease agreement on horizontal well does it need to be worded any differently than on a vertically drilled well? Also does it need to specify release of zones both above and below producing zone? Research has provided me with increased confusion! Any input would be appreciated!
Debbie,
Understanding how oil and gas are formed chemically and how they migrate when under pressure of maturing, will deem Pugh clauses for horizontal drilled developments similar to shooting yourself in the foot or killing the goose that lays the golden eggs.
A better way to encourage development of your minerals as implied in most leases is to set a date certain well beyond the termination date when the lessee is required to return all non-producing geologic formations to the owner or pay an annual fee to hold them.
The time will come when vertical well will not be allowed through developed horizontally drilled fields except from drill pads on the edges for safety purposes. If you are lucky enough to have a horizontal field on your land, don't mess with prosperity.
Gary L Hutchinson
Minerals Managment