Ending lease. Next step?

#1

I purchased land with an existing lease. This was a fairly new lease, 2010, and production had just begun. This is in a large oil reserve in which I was told the largest producer in KY is a neighboring farm. Fast-forward to 2015. There was little production, according to KY Geomap, and the lease was sold to someone I know. This person did/does not have the funds to properly run oil/gas wells. I received only 2 royalty payments of under $50 each. The last payment of any kind was in April 2017 of which was not reported to KY oil and gas Division. I have received no royalties or shut-in payments as according to lease. When questioned, I get no response as to production or payments. It’s clear the lease is broke due to non-payment. What is the next step I must take to clear this lease to hopefully re-lease the wells or produce myself? Is this something simple I can handle myself or would it be more prudent to enlist an oil/gas attorney? Any all help is appreciated.

#2

KY may have a “release of lease” form that you can try to get the lease owner to sign and file at the courthouse. Check you lease and see if you have a “holding” clause that references shut in time and make sure that the time frame for that has also passed. Check the oil and gas division for Kentucky. They may have the form or a land man there may have one. If that fails, then you may have to contact an attorney to “nudge” for a release, just to have proof.

#3

I’ve poured over the lease agreement. Production has a 1 year time frame as does the shut in clause. It has been 2 years since I have received any payment of any kind and 1 year since anyone has even looked at the wells. From my understanding, I must have the lease holder sign a release. I know this will be next to impossible since he has been avoiding me for the last 15 months. Looks like I’m stuck taking the attorney route. Thank you for your incite. It is much appreciated.

#4

Debra:

An attorney is not necessary. You can place an Affidavit of Non-Payment of royalties or similar form of record at the County Court House in the county where the minerals are located stating that you have not received royalties in however long a time and the other provisions of the Oil & Gas Lease haven’t been satisfied for the lease to be in good standing. The next landman that does research on that section or tract will then have reason to look further to see if the lease is still in effect or expired under its own terms.

Hope that helps.

Todd M. Baker