The Pugh clause: letting go of land that is not producing
A Pugh clause releases the parts of your lease that are not producing or not inside a pooled unit, usually at the end of the primary term. Without one, production from a unit that takes in a small piece of your land can keep the whole lease alive.
What it does
Most lease forms let the company pool your land with neighbors' land, and under a standard form, production from that unit counts as production on your whole lease. If 40 of your 640 acres are in the unit, the other 600 acres can stay leased with no well on them.
A vertical Pugh clause releases the acres outside producing units. A horizontal, or depth, Pugh clause releases depths below the deepest producing formation, often measured as a set distance below it. Many owners ask for both.
What we mark on a review sheet
Normal
- A release, at the end of the primary term or after continuous drilling stops, of land not in a producing or pooled unit.
- A recorded release, so the county records show what is released.
Missing
- Any Pugh clause at all. Many printed forms leave it out.
- The depth kind, so every depth stays held.
Ask about
- A Pugh clause that applies only to pooled land.
- A release that waits on a long drilling program first.
Questions to ask the company
- Will you add a Pugh clause releasing land outside producing units at the end of the primary term?
- Will you add a release of depths below the deepest producing formation?
- Will you record each release and send me a copy?
Common questions
What is a Pugh clause?
A lease clause that releases land not included in a producing or pooled unit, usually at the end of the primary term. Without it, a unit that covers part of your land can hold all of it.
What is a horizontal Pugh clause?
A depth release. It frees the depths below the deepest producing formation, so deeper rock can be leased again later.
Send it before you sign
Tell us what you got and what you want to know. We reply by email and tell you how to send the pages. A landman reads them and sends back a one-page review sheet.
Email hello@landman.review with what you got and your question, or call (307) 263-8515.