Shut In: How long will this last?
I was just wondering if any one knows how long we can be locked in with the shut in royalties, Guess I am asking if they can just give me a small check at the end of every year till prices go up. There is a well ,but they are not producing it and with the lease coming due they have me locked in with shut in royalties.
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Replies to This Discussion
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Permalink Reply by mike lough on
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Just by reading the lease it looks like it could go on forever as long as they pay the shut in royalties , Looks like I may need a good lawyer.
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Permalink Reply by Barry D on -
@mike
The answer to your question is an unequivocal - it depends.
It depends on the language in the lease.
Some lease language set a time limit to shut in periods and
associated payments.
Other leases have no such time limits.
Since I have not seen your lease it's difficult to give a definitive answer.
Is there a time limit in your lease.
As to the second part of your question; shut in payments may extend the Primary Term
and therefore your lease may not be "coming due".
What does the lease language state?
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Barry It says on shut-in-royalty shall have the same force and effect as production obtained from the premises under paragraph 2. Paragraph 2 reads- To have and to hold said premises for the purpose aforesaid during the term of 5 years from the primary term date ,and as long thereafter as drilling or reworking operations for oil and gas are conducted thereon as hereinafter provided, or oil or gas is gas is produced in paying quantities therefrom, or this lease is extended by any subsequent provision hereof.
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Permalink Reply by Barry D on
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@mike
In other words, the lease remains in force.
Also, sometimes in the shut in clause a time limit is stated. If no time limit is stated the company could, theoretically, keep the well shut in indefinitely. Although, I doubt this will be the situation in your case.
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That is the way I understand it also, There is another company wanting to top lease but not sure how that will work out with being shut in, Thanks for the info, it all helps .
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Permalink Reply by Kathi Albertson on
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if you are in Ohio, you might want to look at ORC 1509.062 that refers to idle wells. There are rules re how long a well can remain idle before the Chief requires a plan on putting it back in production or requiring it to be plugged. However, sadly, these rules seem not to be enforced.
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Permalink Reply by Barry D on
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@ Kathi
Yours is a good point.
However, this part of the code may not apply to lease language that contains a shut-in clause.
My understanding.
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Permalink Reply by Kathi Albertson on
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While my shallow well was shut in for the 4th year, several years ago, and I was receiving shut in payments according to the lease, I was told by someone in the industry that it was against the law for the well to be shut in for that length of time. I called the inspector who agreed and he made them put the well back in production. So the question is, does the law trump the lease, although ODNR might say that they don't want to interfere with leases.
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Kathi That is exactly what is going on with mine , a shallow well was drilled and never put in production they are using it to keep me shut in, my property is all in WV
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Permalink Reply by Barry D on
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@mike
Wish you had shared this info earlier.
Drilling a well and not producing the well may not fulfill the terms of the lease.
Has the company said why the well isn't in production?
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Barry The reason they gave me was that prices are to low at this point and it has been this way for 10 months .
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