## Facts

- Predecessors to the lessee acquired 30 oil-and-gas leases in Beckham County, Oklahoma, each with a habendum clause extending into a secondary term “so long as” oil or gas was produced.
- During primary terms, seven wells were drilled on lands covered by fourteen leases; some leased acreage was included in Corporation Commission spacing units and pooling arrangements, while other acreage had no wells.
- In the secondary term, several wells ceased actual pumping in 2011–2012, though the trial court found the wells remained physically able to produce in paying quantities if properly operated.
- During the cessation period, Hall obtained “top leases” intended to take effect if the existing leases terminated.
- Hall claimed the existing leases terminated because the wells were not capable of production in paying quantities and, separately, that 52 O.S. § 87.1(b) prevented production within spacing units from holding acreage outside those units beyond the statutory grace period.
- The trial court, after a bench trial, found the wells capable of production in paying quantities, quieted title in favor of the lessee as to all disputed leasehold interests (including acreage outside spacing units), and denied slander-of-title relief.

## Issues

1. What standard governs whether a well is “capable of production in paying quantities” for maintaining a lease in the secondary term, and did the evidence support capability despite a shut-in period?
2. Under 52 O.S. § 87.1(b), may production from a well-spacing unit maintain leasehold interests in lands outside that spacing unit after the statutory period?
3. Does the enactment of § 87.1(b) violate the Oklahoma Constitution’s bill-title/single-subject requirement (Okla. Const. art. V, § 57)?
4. Does applying § 87.1(b) to limit leasehold acreage constitute an unconstitutional taking for private use (Okla. Const. art. II, § 23)?
5. Were leases on which no well was ever drilled properly quieted in favor of the lessee?

## Decision

- Affirmed the trial court’s finding that the wells were capable of production in paying quantities; the leases were maintained in the secondary term as to interests within the relevant spacing units.
- Reversed the quiet-title judgment as to leasehold interests in lands outside the producing wells’ spacing units; § 87.1(b) prevented those “outside” lands from being held by unit production beyond the statutory period.
- Rejected constitutional challenges, holding the bill title satisfied Okla. Const. art. V, § 57 and application of § 87.1(b) did not amount to a taking under Okla. Const. art. II, § 23.
- Reversed the quiet-title judgment as to leases on which no well had ever been drilled.
- Remanded with directions consistent with these rulings.

## Legal Principles

- A temporary cessation of actual production does not terminate a lease in the secondary term if competent evidence shows the well remains physically and economically capable of producing in paying quantities with ordinary operations.
- Whether a well is “capable of production in paying quantities” is a fact-driven inquiry; appellate review defers to supported trial-court findings.
- Under 52 O.S. § 87.1(b), production from a well-spacing unit may maintain the lease only as to acreage within that spacing unit after the statutory grace period; acreage outside the unit is not held by that production absent timely drilling or saving operations affecting the outside lands.
- The statutory limitation in § 87.1(b) is a general regulation of lease maintenance; its operation does not constitute an unconstitutional taking merely because it causes leasehold interests to expire by law.
- A bill enacting § 87.1(b) satisfies Okla. Const. art. V, § 57 when the title provides adequate notice of the general subject and the statutory provision is germane to that subject.

## Conclusion

The court upheld continuation of the leases within spacing units because the wells remained capable of paying production, but enforced 52 O.S. § 87.1(b) to release acreage outside those units and declined to uphold leasehold rights on wholly undrilled leases, while rejecting state-constitutional title and takings challenges to the statute.


Hall v. Galmor, 427 P.3d 1052 (Okla. 2018)