I own royalty in Oklahoma under a gas lease which is subject to an old standard lease (Form 88 from 1969). In other words, the lessee is allowed to pay $1 per year per net mineral acre shut-in royalty, with no apparent limitations. The royalty is 1/8.
Two years ago, the lease was shut-in with minimal production of about 5MCF per day. It has not produced since.
There is clearly a case to be made that this well is not producing in paying quantities. However, because of the shut-in clause, are they allowed to continue to do this indefinitely?
It has become an issue because this lease overlays a very productive, deeper shale gas zone which has only become apparent in the last 3 years.
Clearly, I would like the re-lease the property on much more favorable terms.
Can someone tell me if there is hope of breaking the lease here, or if the shut-in clause prevents that in this situation?
JW:
Not being able to read the lease, I would be guessing somewhat on the answer to your question. One way to be able to re-lease the minerals to the lower formation would be via a "Pugh Clause". You might want to read the lease carefully to verify if this clause exists in the terms of the lease. If you don't understand the term "Pugh Clause", you can google it and learn exactly what it refers to.
This is a 40-year old standard form lease, written to the distinct advantage of the lessee, and clearly does not have a Pugh Clause. The question really relates to the shut-in royalty for a gas lease if someone has experience with that.
I am just curious, what county are you in?
Ms. Bradley Apodaca ( Carter County )
This is in Blaine County (Woodford Shale).
You may want to check with OCC and see what the latest ruling is on shut in clauses. I believe that Oklahoma Corporation Commision ruling may override the company after the well has been shut in for 2 years.
I think it may be worth going to a lawyer on this. I have a great oil & gas attorney in OK City that was able to get my lease back because the oil company was tryng to hold it on a shut in. Found out later, they were getting ready to water flood the area and they wanted to keep the lease for that reason.
Thanks very much. Would you mind passing on the name of your attorney in OKC?
JWAnerson,
If you will email me, I will be glad to share his name. He is with a large Oil & Gas firm.
I don't know if I'm suppose to give names out on this form.
Virginia
pflum1@sbcglobal.net