Abstract This paper includes an analysis of the offset clause contained in most oiland gas leases, with particular emphasis upon the implications of the newproduction spacing units. The Need for an Offset Clause Petroleum and natural gas are of a fugacious nature, and, being lighter thanthe water that is present in porous strata, migrate up dip and accumulate whenentrapped by a permeability barrier. If there is static pressure in thereservoir, there will be no migration of the hydrocarbons. However, if there isa pressure change, such as a well piercing the reservoir, there will bemigration to an extent which would depend on the porosity and permeability ofthe reservoir rock as well as on the degree of the pressure change. Thehydrocarbons will move toward the point of low pressure. Under thesecircumstances, it is conceivable that if production is taken from a well onland owned by lessor A, hydrocarbons underlying land owned by lessor B couldmove to a position under A's land and be brought into A's possession, there by diminishing the quantity of petroleum and natural gas under B's land. It becomes apparent that the lessor must ensure that the lessee doeverything he can to prevent hydrocarbons from being drained by others fromunder the lessor's land, and the most effective way a lessor can protect hisinterest is to have the lessee drill a well on his own land and produce thehydrocarbons before they have been produced through the well on the adjoiningpremises. This need to protect against drainage has given rise to a drillingcommitment, often incorporated in oil and gas leases, known as the "offsetobligation." This requires the lessee to commence drilling within a specifiedtime from the time that production in commercial quantities is obtained on theadjoining lands.