## Facts

- Lessors executed oil and gas leases that were later assigned so that one set of lessees owned the leasehold estate above sea level, while Westhoma Oil Co. owned all horizons below sea level.
- The parties did not dispute the validity of the depth-severing assignments allocating rights above versus below sea level.
- The leases contained a Pugh-type clause providing that, if a portion of the leased premises was pooled, the lease would terminate at the end of the primary term as to any “tract or tracts” not included in the pooled unit unless drilling or production occurred on the excluded tract(s).
- Production occurred on pooled acreage and at horizons above sea level, but there was no drilling, operations, or production from below-sea-level horizons during the primary term.
- After the primary term ended, lessors asserted the leases terminated as to below-sea-level horizons due to the absence of deep production or operations.
- Lessees filed suits to quiet title to the below-sea-level leasehold interests; the matters were submitted on an agreed statement of facts.
- The trial court quieted title in the lessees, holding the leases did not terminate as to horizons below sea level; lessors appealed.

## Issues

1. Whether the leases’ Pugh-type pooling clause caused the lease to terminate at the end of the primary term as to below-sea-level horizons for lack of drilling or production at those depths.
2. Whether the clause’s reference to excluded “tract or tracts” effected a depth-based severance (separate expiration by horizon) rather than an acreage-based severance tied to pooling.

## Decision

- The Oklahoma Supreme Court affirmed the judgments quieting title in the lessees.
- The court held the leases did not terminate as to horizons below sea level at the end of the primary term.
- The court construed the Pugh-type clause as addressing surface-tract acreage excluded from a pooled unit, not as creating a depth-based severance requiring production from below-sea-level horizons to maintain those rights.
- Because the case was submitted on agreed facts, the court applied the law to those facts as a court of first instance and directed judgment accordingly.

## Legal Principles

- Contracts are interpreted to give effect to the parties’ mutual intent at the time of contracting, so far as lawful and ascertainable.
- Clear and explicit contractual language governs interpretation when it does not produce an absurd result.
- Courts do not rewrite contracts; they enforce the agreement actually made.
- A Pugh-type clause framed in terms of excluded “tract or tracts” in the pooling context is construed as an acreage-based limitation unless the contract clearly provides for termination by depth.

## Conclusion

The court held that the pooling-related Pugh-type clause did not divide the lease into separately expiring estates by depth; therefore, despite no drilling or production from below-sea-level horizons during the primary term, the leases remained in force as to those horizons, and title was properly quieted in the lessees.


Rist v. Westhoma Oil Co., 385 P.2d 791 (Okla. 1963)