Texas Pugh Clause: Protecting Your Property Rights
A landman shows up with a lease offer for your 500-acre ranch. The terms look reasonable on the surface. Six years later, a single producing well covers 40 acres on the southwest corner of your property. The operator has not drilled anywhere else, has no plans to drill anywhere else, and yet your entire 500 acres are still under that lease. Your right to lease the remaining 460 acres to a different operator, or to do anything else with those mineral rights, is gone for as long as that one well keeps producing. The provision that would have prevented this is called a Pugh clause. The operator’s standard lease form does not include it, and the absence is not an oversight. In This Article: Understanding the Basic Function of Pugh Clauses Vertical vs. Horizontal Pugh Clauses Common Variations in Texas Pugh Clause Language Unit Designation and Pooling Considerations Economic Impact
