I inherited a several small working interests in old gas wells. I recently received one bill of over $400 for accrued JIB charges on a well, mainly composed of a fixed monthly “overhead”, monitoring fees, and marketing. This was for a period of about 18 months. Applied against the charges was a credit for production over this time period of about $10. Seems to me like this well doesnt produce in paying quantites. Any suggestions on a course of action? Complain to Corp. Commissioner? This problem on these wells has been going on for many years. Thanks
That is the problem with working interest charges. They go on for the life of the well and you will also be charged your percentage for plugging when the well is finished. The Commission does not get involved with this sort of thing. “Paying” quantities is supposed to be profit > expenses. You may have to contact an attorney.
Thanks, M Barnes! Appreciate your comments on this.
It’s also possible the operator is able to operate the well for significantly less than the fixed COPAS charges, depending on the wells and the operator, which makes it economic for them but not you.
Here’s an article that explains it a little better. My Operator is Making Money on the Well and I’m Not. What Can I Do? Part 1. | Gray Reed - JDSupra
I’m not sure the legality of it all and where the line is between economic and non-economic, but I know the same language in leases is hard to nail down (how much profit, what is included and what isn’t included in the calculation, over what time period, etc).
When I was the person on the operator’s side determining which wells to abandon and which wells to keep producing, we did not include COPAS/G&A/Overhead in the equation (again, not sure if that was by the letter of the law…) because shutting in that well wouldn’t actually reduce those costs. Those tend to be flat costs, like software, buildings, and people, that don’t go away for the operator by ending production on just one well. Those were the large, sweeping decisions that needed 30-40 wells to be shut in before costs were really affected any. How much of that G&A we were able to assign to a well was based on the JOA and COPAS rules (and that’s about my extent of knowledge about that…accounting did all the calcs).
Even still, a well could be negative for several months before we’d notice just because getting the data from accounting took a while and we were usually overloaded. It ended up being a once or twice a year exercise that we’d line up with the RRC’s required action on inactive wells (group all the inactive and marginal wells together and decide what to do with them based on economics and future potential)…