I’m a mineral owner. Concerning a lease, can anyone explain what a “Static” Pugh Clause is and how that is different from other types of Pugh Clauses? Also, what wording is included (or excluded?) to make a Pugh Clause “Static”?
Pugh clause definitions vary from state to state. Which state are your minerals in?
Of course … I should have mentioned that my minerals are in Texas.
That is not a commonly used term. Are you discussing lease terms? Ask the landman what exactly he means by that term. There is a difference between vertical and horizontal parts in a Pugh clause.
Is it possible you overheard or misunderstood the phrase statutory Pugh clause? Which is in Oklahoma, not Texas.
Thanks for the responses received so far.
This is what prompted my question about the meaning of a “static Pugh clause”.
I received a lease offer from a company who, after I received their offer in the mail, now tells me that they decided to send lease offers without first reviewing previous leases to determine what was Held by Production, with the plan to review that status after a mineral owner responded to their lease offer. They now say that my minerals are being Held by Production so they choose not to move forward with a new lease offer to me.
They believe a few wells are still producing within the area of an earlier lease and that the previous lease has “insufficient lease language to expire acreage outside of what is still producing”. They acknowledge that the previous lease has a Pugh clause but say that the Pugh clause is a “static Pugh clause meaning that it only applies at one point in time: either 1) the end of the primary term, or 2) the end of continuous drilling, whichever is later.” They believe that most (perhaps all) of the wells in the area they wish to acquire were producing at either of those times. They also say that while most of those wells are no longer producing there is no language to expire that non-producing acreage after the point in time the Pugh clause applied so they believe the entire area is still Held by Production and don’t feel they can move forward with a new lease.
They say that they will be leasing as much as they are able to in this area with the intention of taking over operatorship of long-term shut-in wells and restoring them to production. Am I correct to interpreted this to mean that, in addition to acquiring new leases, they’re hoping to buy existing leases that they say are still in effect because they say those leases are Held by Production?
My thought at this time is to start with trying to understand what is meant by a “static Pugh clause”. To not overwhelm readers with an overly long posting at this time, I’m not including a copy of the Pugh Clause from the earlier lease right now, but can provide it later if requested.
Ultimately, I’m trying to determine if my minerals are being Held by Production or if I’m entitled to a new lease. Any thoughts/comments/insights would be much appreciated.
With only a few responses to my post should I take that to mean that no one is familiar with the term “Static Pugh Clause” or with the definition as given to me by the company that initially extended a lease offer to me, as shown in my last post?
A thank you to those who responded and to all who took the time to read my posting.
This is the danger of multiple tracts on a single lease in Texas. Even with a Pugh clause, there has to be certain “ magic” language as our o&g attorney referred to it, when multiple are involved. I think it’s because they are considered pooled at that point? If I can find a lease with that language I’ll post it, with the disclaimer that you should only rely on the opinion of your O& G attorney as to how the lease reads.
As this is an existing lease, any answer depends on a review of all the language in your lease. You cannot simply look at one paragraph (Pugh clause), as it may be affected or limited by other clauses in the lease. Then the question about what wells were drilled during the primary term or continuous drilling period and the acreage or depths held by those wells and also whether there was any period when there was no production from any well. This is why you can only get general responses and not a specific answer. You should have the lease and wells reviewed by an oil and gas attorney or by your own landman.
Here it is: The magic language that “each retained acreage/ well tract/ pooled unit shall be treated as if covered by a separate lease and separately maintained” was not in a particular lease, which also had a continuous drilling clause, where there were multiple tracts, and therefore, as long as one well was still producing, HBP. I do not know if the continuous drilling clause made the difference, some other, or a combination of conditions, which is why you would need an O&G atty review the entire lease and history of the wells. I’m just passing along a particular experience which seems to align in some ways with yours.
J_Walker and TennisDaze, thanks for your helpful comments. Much appreciate you taking the time to respond.
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