You’ve all been very helpful throughout the years and our family truly appreciates it.
On the sites “Mineral Help” under leasing it recommends non-contiguous sections not being on one lease. Does the same apply for contiguous sections, say 23 & 24?
Thanks, Jon
You can lease several properties on the OGL if you carefully craft an addendum to the OGL. At a minimum you need to include a vertical and horizontal “Pugh” clause. I go further with a producing zone limit. If you can get it, attempt to get a wellbore limitation. There are several other issues that should be considered in negotiations such as: “Paying Quantities”, “Shut-In Limitation”, “Cost Free Royalty”, “Affiliates”, and “Information”. Good luck.
If these are both in the same lease, then a well drilled in either section will keep the lease active (held by production) in the undrilled section, whether it is drilled or not. It is best to have these under two leases. That way, production in one of the sections will not keep the lease in the other section from expiring. Pugh clauses, which allow the non-producing lands to expire are another option but can complicate the lease.
Pugh clause is essential part of a lease, at least in Texas. For example, if you own a fractional interest in am]n entire section and only one horizontal well is drilled in north half of the section, then you want the minerals released in south half. Or if a unit is formed containing only part of the acreage, then you want to]he acreage outside of the unit released. Same for release of depths. This is different from pooling orders which encompass an entire section.
When you say “section” do you mean parcel or section of a township?
agree with @jvt and @TennisDaze
This is not a contest. It all depends on the written terms of the lease. If it does not have any clause regarding release of nonproducing depths or acreage, then a single well will hold the entire lease and all depths. It it contains a clause specifying that the lease expires as to acreage not included in a unit or well, then that will expire. Same with release of depths. If you cannot get the lessee to agree to these limitations, then you should have separate leases in the 2 sections and also consider leasing the shallow and deep rights separately.
There is no doubt that the addition of a Pugh clause creates a greater amount of negotiation, your goal should be to attain the best possible OGL terms. Separate OGLs are a valid option, but that does not protect your economic potential from future producing zones development. Many of the additions that I mentioned protect the mineral owner. There is no doubt that this will drive away many Lessees, but you should ask “Why”.
Thank you all for the additional information, they’re valid comments and observation’s on the complexities of an Oil, Gas and Mineral lease and what’s in the best interest for the Lessor.