I received a small check for shut-in royalty payment and the operator wants me to sign a statement that I received and accepted the check as payment for the shut-in on this date. It does not indicate when the well was shut-in . Should I accept the check and sign and return the form? I do not know exactly when this well was shut-in. Sec 27- 5N-7W, Grady.
I would not accept the check or return the form. Doing so would definitely bind your lease. Someone else on the forum should have a better answer.
I agree with Tom. The shut in payment usually has a certain time it has to be tendered and if it is, they need no notice of acceptance from you. If on the other hand they are late, your lease could have terminated. I don't believe they could charge you for the drilling of the well since it was drilled under a lease. I would verify the shut in date, read my lease and consult an attorney if it appears prudent.
For what it is worth, the subject of non-payment of shut-in payments has come up at a number of sessions that I have attended where at least 3 different Oil and Gas attorneys have been speaking.
All of them have said the non-payment of shut-in fees by itself will not terminate a lease in Oklahoma. It basically creates a debt instead of terminating the contract.
In Texas, it terminates the lease and you own the % of the well. (and you may not want that liability)
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Added some more, lol.
r w kennedy said:
I added a bit.
r w kennedy said:
Rick Howell said:For what it is worth, the subject of non-payment of shut-in payments has come up at a number of sessions that I have attended where at least 3 different Oil and Gas attorneys have been speaking.
All of them have said the non-payment of shut-in fees by itself will not terminate a lease in Oklahoma. It basically creates a debt instead of terminating the contract.
In Texas, it terminates the lease and you own the % of the well. (and you may not want that liability)
Sessions of what Rick?
If a well is not shut in (evidently or there would have been shut in royalty) and not producing, not in the primary term anymore. why wouldn't the lease have expired in the absence of shut in royalty? Of course this could change if you had a clause in your lease that said that you must notify the lessee of their breach and give them time to begin to comply, common in many leases today.
If shut in royalty is not paid, the lease should expire by it's own terms like any other non-producing lease. If the operator does not have to pay shut in royalty, why aren't all non producing wells just shut in forever? With the lessee not even having to pay shut in royalty? Think about it.
So now the operators are allowed to secretly shut in a well? Probably so secretly that they don't have to tell the state or pay shut in royalty? You have to watch oil and gas lawyers sometimes, if you are not the one paying them, and sometimes if you are, you can hear some rather strange things come out of their mouths.
I'm not prepared to argue it at all, but I'm confident enough in the attorneys that gave the info to make the statement. Non-payment of shut-in fees by itself will not terminate a lease in Oklahoma.
I'll pm you with some more info.
Thanks everyone. I am going to check the lease and try to find out exactly when it was shut-in.
That's fishy that they would want YOU to sign something to that effect when they could just use a cancelled check or an Affidavit of Payment of Shut-In Royalty filed at the County Clerk's Office as evidence of the payment. I definitely would not sign it without verifying the shut-in date and comparing it to the Lease expiration date and the Lease terms.
I have been reading my lease paper work and I see the term shut-in but I don't understand it, could someone explain this. The well behind my property has been finished for some time now (6 months) and I have not heard from anyone since we signed the lease agreement. My lease is very small but I would like to know what's going on. The well is a short walk from the back of my property. I tried to get the well number so I could find out what it is producing but they won't let me near it. I would appreciate any info if possible. Thanks Leon County Texas.
After a well is drilled, depending upon the wording in the Leases associated with that well, the Operator is required to pay "shut-in royalties" to the mineral owners whenever production ceases for a variety of reasons, such as the necessity to build pipeline to the well in order to send the product to market and also, even when there IS pipeline to the well, when commodity prices are low for the commodity involved (natural gas or crude oil), Operators sometimes temporarily shut off production in order to allow market forces to move the price higher.
Cydne, you need to go to the Web site for the Texas Railroad Commission to look for production levels, although they are almost always behind by a few months. Somewhere on this Web site is a synopsis of how to get there, how to navigate the Web site once you do get there, and other helpful information.