A Pugh clause prevents the entirety of the lease from being held by production, after the primary term, when only a portion of the leased premises lies within a producing unit. A Pugh clause can be based on surface area, depth, or both. A surface area Pugh clause operates to release the acreage outside of the drilling unit. For example, if the mineral owner owned 50 acres, but only 20 of it was included in a unit, then the other 30 would be released at the end of the primary term. A depth Pugh clause operates to release certain depths of acreage outside of those included in the unit (for example all depths 100 feet below the drilled well).
When running title, if you come across an unreleased lease, and there is a well drilled on some of the acreage, you should look to the Pugh clause language (or lack thereof) to see whether the entire leased premises are HBP or if only certain portions are held. This could make a big difference in your reporting of the lease(s) of record and of the leasehold status of your parcel.
When leasing, a savvy landowner (or his/her attorney) may request a Pugh clause as part of the negotiation process, so it is important to be familiar with what it is and what your company/client is willing to accept.