Through the generosity of the forum members, I am aware of the mandatory Pugh clause in Oklahoma, but am struggling to determine the application. I understand this to be mandatory for 160 acre leases. So, is the 160 acres determined lease-by-lease? For example, I own 10 acres and ABC Oil and Gas is leasing 320 acres total, of which I am a holder of 10. Is the depth clause mandatory, since they are leasing 320 (which is greater than 160) or not mandatory, since the lease between them and me is only 10 acres (less than 160)?
Barbara, I have waited to respond, hoping to learn more. I have never heard of a mandatory Pugh clause. I have always asked at each leasing opportunity with varying degrees of success. Maybe someone will tell us what we need to know.
What you are talking about is a statutory pugh clause. It is found in 52 O.S. Section 87.1, which reads:
"(b) In case of a spacing unit of one hundred sixty (160) acres or more, no oil and/or gas leasehold interest outside the spacing unit involved may be held by production from the spacing unit more than ninety (90) days beyond expiration of the primary term of the lease."
This is generally thought to be a geographical limitation and not a depth limitation. For instance, if you signed a lease that covered the entire W/2 of a Section, and then the Corporation Commission spaced the SW/4 as a 160 acre drilling and spacing unit, and then the only well drilled on your lease was in the SW/4 to the formation spaced 160, your lease would expire 90 days after the primary term as to the NW/4 as to all depths.
Thank you! That is very clear.