How long can a Shut-in Well (API 41931244) hold without payments? When can our holding be leased again?

Akota Operating leased and Swanson Drilled our property (B.F. Adams A-18) in Rusk County back in 2007, completed on 1/28/2008, was tested on 06/01 -06/06/08 to 384 MCF per day on a 20/64 choke and Shut-in by the Operator while they explored a Gas Sales outlet... to date it sets idle, Records state, "Unsuccessful - Well Dead" and the RTTC list is as, "Temporarily Abandoned". For awhile we received $1 per year and now that has stopped.

When I was checking on possibility of Leasing to another Operator, I was told B.F. Adams A-18 and J. Snider A-990 cannot be leased as they are held by 'Production'... is this true and where do I go to contest it? Anyone have any input or thoughts on this?

Thanks

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What does the RRC database show for reported monthly production for the well?  Is there a drilling and production unit that covers all or portions of both surveys? If so, might there be another unit well(s) that could holding the lease by production?  To be HBP there must be reported production.  If there is no reported production for a number of consecutive months, you may need to send a demand to release the lease.  I'm not up on the TX mineral code to speculate beyond that.  However, it is my experience that unless lessors bring attention to the situation, the state is unlikely to take any actions.

Skip - 

Yeah... no reported production ever, just test and cap on A-18, A-990 was merely included on the original Lease Agreement. Never have received a Division Order, merely the obligatory $1.00 per year for about 10 years. 

Information states: 

Atoka Operating, Inc.

Shelby Dist: 06

Wildcat Field

PERMIT: NO. 651821

API : NO. 419-31244

RRCID: NO. 244897

FORMATIONS: Travis Peak - Pettet

When I pull the Well Logs, I download a Graphic File that appears have several lines representing a Depth Graph???

Sent two letters to Atoka, returned as 'undeliverable to addresse'

Contacted RRTC and they stated to contact Atoka

Would contacting Shelby Courthouse be appropriate? 

The interested party in leasing the property said the same as you, I need them to release the lease. 

So confused on this one. 

Thanks!

Atoka needs to file a release of your lease in the public records of Shelby Cty.  Since you can't seem to reach Atoka, I think it is time to get the advice of an experienced O&G attorney.  Most will provide you with a no cost first contact and should be able to spell out your options.  Taking action on an option is when the cost part kicks in.  Before I would spend any money, I'd ask the RRC for contact information for Atoka and if the mailing address is different from your previous letters, send another certified.  You will want proof that you made a good faith attempt to notice the company.  If the RRC address is the same as the address you have been writing to, an attorney will want to know that.  I don't think the county clerk can help you with getting a release from Atoka.

Skip -

In case we don't say it enough, we really appreciate the help and input. I always thought it was a pain selling Timber off of our property here in Oregon, but Texas adds a whole new level to it.

And we really appreciate your help.

Thanks again! 

You're welcome, Bill.  As most of my work involves LA minerals, I'm always a little hesitant to get too specific or sure of myself when addressing Texas codes and regs.  The two states are quite different in both regards as they are in case law.  When the Haynesville Shale land rush started, there was an influx of landmen from all over.  Many were experienced landmen however those that had never worked in Louisiana soon found that their other state experience was of less use and in some cases a hindrance.  When they ran into lands organized as arpents or in some cases as Spanish land grants, they were lost.  Some of us LA landmen familiar with the lands in the Haynesville Fairway used to laugh at the frequent frustrated question, "who in the hell is Francois Grappe.  Monsieur Grappe was an early settler of the Red River Valley and a friend and interpreter for the Caddo Indians. When the Caddo Tribe sold their lands in 1835 to the US government, paving the way for the establishment of Shreveport and settlement of NW LA, he was given a grant of land.  I find that most landmen are history geeks to some extent.

After waiting for some of our industry members to weigh in, I need to add one additional reply to this thread.  A Shut In clause is common in standard form leases utilized by the industry.  I always suggest striking it for any minerals that are part of the established Haynesville/Bossier Fairway where a pipeline connection should not be a significant problem.  If a lessee insists upon the clause, it should provide for more than a dollar an acre per year and the term of the shut in clause should be three years or less.  This is a case by case determination.  If there is pipeline take away capacity in the proximity, I suggest ten dollars an acre and an effective term of eighteen months.  The bottom line is that most companies would not drill a gas well in a location where there was no way to transport the gas to market.  Exploration wells can be an exception but the longer the Shut In term, the more per acre the payment should be.

Well, ask for help from the experts and sometimes it arrives.  In this case data from Enverus/Drilling Info with the statement that the Atoka Operating/Solomon Lease/B F Adams, A-18 has no reported production.  Click the link below.

Atoka%20Op%20-%20Solomon%20Lease%20-%20B%20F%20Adams%20A-18.pdf

Skip - 

I knew there was no production from the Well.... I was looking back through my records yesterday and noted the last 'Shut-in' Check was for $102.00 dtd 7/2018. So, is it safe to assume that once the Well is plugged, that we will be able to again negotiate a lease on B.F. Adams A-18 and that they have no holds on the J. Snider A-990?

Thank you for your help on this.

Bill

Bill, have you checked the lease for a Shut In clause?  Since you have received no payment for 2019 and 2020, Do Not Wait for a plug and abandonment which may never come.  Make demand for a release of the lease now!  It's always a good idea to get some assistance from an experienced O&G attorney so that you get the demand language and process correct the first time.  I'm unsure what your follow up step would be if you do not receive a response from Atoka.  Be proactive.  The following is from the Texas Comptroller of Public Records website.

ATOKA OPERATING, INC.
Texas Taxpayer Number 11616935943
Mailing Address 16200 ADDISON RD STE 155 ADDISON, TX 75001-5333
Right to Transact Business in Texas ACTIVE
State of Formation TX
Effective SOS Registration Date 02/18/2004
Texas SOS File Number 0800305814
Registered Agent Name SCOTT G. HEAPE
Registered Office Street Address 16200 ADDISON ROAD, SUITE 155 DALLAS, TX 75001

Skip -

Thank you, I will go after Atoka again and contact a O&G Attorney

Atoka contact information on RRC is the same as at SOS except that they include a phone number: 972-407-0058. The registered agent address should be Addison not Dallas. On google maps... it's just another generic office building. The last PIR (public information report) filed with the SOS, per corporation wiki, was Dec. 31, 2019.

That well has been shut in since June 2008. The state will keep it in that status as long as Atoka keeps current with their RRC registration and pays whatever fees are required for a 14B extension on it. Cost to close the well and clean up the site are calculated so it is on borrowed time. It might help to rattle cages at RRC. Toll free:

Skip & Julie

I have contacted the RRC and a O&G Attorney, so now commence the 'wait and see' stage I guess. The Attorney sounds very interested about the issue, especially the fact that they have a hold on both Adams and Snider. 

I will let you know the outcome someday once I find out myself.  

I thank you for all input and help on this!

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