Common use of OFFSET XXXXX Clause in Contracts

OFFSET XXXXX. The lessee shall drill such xxxxx as a reasonable and prudent operator would drill to protect the lessors from loss by reason of drainage resulting from production on other land. Without limiting the generality of the foregoing sentence, if oil or gas is produced in a well on other land in which the State or ASRC owns a lesser percentage share of the oil, gas and associated substances, or on which the State or ASRC receives a lower royalty than that covered by this lease, and that well is within 500 feet in the case of an oil well or 1,500 feet in the case of a gas well of lands then subject to this lease, and that well produces oil or gas for a period of 30 consecutive days in quantities that would appear to a reasonable and prudent operator to be sufficient to recover ordinary costs of drilling, completing, and producing an additional well in the same geological structure at an offset location with a reasonable profit to the operator, and if, after notice to the lessee and an opportunity to be heard, either the State or ASRC finds that production from that well is draining lands then subject to this lease, the lessee shall within 30 days after written demand by either the State or ASRC begin in good faith and diligently prosecute drilling operations for an offset well on the leased area. In lieu of drilling any well required by this paragraph, the lessee may, with the consent of both the State and ASRC, or, if only one of lessors is suffering loss of royalty through drainage, with the consent of that one lessor, compensate each of lessors, or if only one of the lessors is suffering loss of royalty through drainage that one of the lessors, in full each month for the estimated loss of royalty through drainage in the amount determined by each of the lessors, or, if applicable, by the one lessor who is suffering loss of royalty through drainage.