Supreme Court of Oklahoma
385 P.2d 791 (Okla. 1963)
Westhoma Oil Company (Westhoma) (plaintiff) leased oil and gas rights at all horizons below sea level in a tract of land. Other lessees owned the lease rights for all horizons above sea level in the tract. The lease contained a Pugh clause, which stated that if a portion of the leasehold was pooled, the lease, “insofar as it cover[ed] any tract or tracts not included” in the pooled unit, would terminate as to the excluded tract unless there was production on that tract specifically. There was mineral production on the tract on the horizons above sea level, but no production or drilling operations on the horizons below sea level. After the primary term of the lease expired, Westhoma brought suit against B.C. Rist and Gladys Rist (defendants), the lessors, to quiet title to the land in the District Court of Texas County. Westhoma claimed that the production at the higher depth operated to extend the primary term of the lease for the lower, below-sea-level depths as well. The Rists argued that the Pugh clause severed the leasehold horizontally, meaning that the lack of production at the depths below sea level cancelled the lease as to those depths at the expiration of the primary term. The trial court ruled in favor of Westhoma. The Rists appealed.
Rule of Law
Holding and Reasoning (Berry, J.)
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