Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on January 19, 2012 at 7:50

Depends on the wording in the lease as to when shut-in payments are due and in what amount.

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Permalink Reply by RONNY on January 20, 2012 at 2:35

I was told failure to pay shut-in payments per the lease language could be reason to terminate or void a lease.  How does that work?  Thanks. 

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Permalink Reply by Skip Peel - Mineral Consultant on January 20, 2012 at 3:04

If you are "told" that by an experienced oil & gas attorney who has read the language in the lease then you can ask how much they estimate it will take to litigate as you will surely end up in court in an effort to terminate the lease.

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Permalink Reply by RONNY on January 20, 2012 at 3:49

Would they litigate over small acreage if they were "clearly" in violation of the lease terms?

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Permalink Reply by Skip Peel - Mineral Consultant on January 20, 2012 at 4:07

You are the lessor, the O&G company is the lessee. And "they" would not litigate, you would have to. To a point it depends on what company you are dealing with.  If it's a small local company with an old lease and marginal production, a termination letter from an O&G attorney might be sufficient.  Small, locals don't have corporate legal departments.  If it is a larger company and they wish to maintain the lease you will have to file suit.  If you have an attorney they know and respect and you have the law squarely in your favor with no extenuating circumstances, they might terminate your lease when it comes time to go to court.  Of course that can take years and cost you quite a bit in legal fees.  There is a reason that energy companies have legal departments, it's part of their business model.  They will challenge everything from venue (in what jurisdiction the suit will be heard) to what the court will accept as evidence.  They will delay, delay knowing that most lessors can't hold up to that scenario.  I have provided testimony as an expert witness in a court case seeking to terminate a lease.  And I am familiar with a number of others.  There is nothing cut and dried about attempting to terminate a lease.  However an experienced O&G attorney can estimate the time it would take and your chances of prevailing in a court of law by reviewing the specifics of the lease language, the production history and what company or companies would be affected by the lose of the lease rights.

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Permalink Reply by RONNY on January 20, 2012 at 4:14

Thanks Skip. 

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Permalink Reply by The_Baron on January 20, 2012 at 4:23

Most of the time (and it is entirely dependent on the lease) a well must be shut in for 90 consecutive days to trigger a shut in royalty.

 

If you feel you are not being paid your shut in as dictated by Your lease, you must make a demand for such payment. If they did not pay a shut after the demand letter, and you felt you were owed one, you would then file suit.

 

The odds of having your lease voided are next to zero. Most likely, if the court felt you were owed shut in royalties (once again read your lease) they would most likely order those royalties paid in accordance with the lease and maybe a small penalty or interest payment. Only then if they failed to pay, would you be able to return to court to contest the validity of your lease.

 

Most standard leases have a small shut in royalty, so unless its huge I wouldn't even worry about it unless you start getting  into many more months of no royalties. Remeber that many companies also have a minimum amount to be paid before they will cut a check, so its possible with our crappy gas prices that you do not meet the minimum, or there could be a title problem, Its hard to say more without knowing the specifics of your situation.

 

In any case, Fisrt step is to call your lessee. They may be able to help before we go running off to the lawyers and waste a bunch of everybodies money.

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Permalink Reply by Krkyoldhag on January 20, 2012 at 8:23

My mailbox is full of offers to buy my royalties..the offers have dropped over last few weeks.  They are wasting their postage on me but there are some gullibles out there who will bail and sign off on their mineral rights..
Too bad..but there is no cure for ignorance. 

I used to hear stories about how HL Hunt would come into a farmer's house and show them a suitcase full of money..and would get the lease.  Sometimes for less then other operators had offered.  But the vision of cash money...that's a vision.

But the biggest crooks my daddy told me about were the bankers.  What they did was legal but it wasn't "right".  They would foreclose on loans, sell the property off to a brother in law or some such and then resell it retaining the mineral rights.  One woman I know who's uncle was the banker has interest in 18 wells and her cousins (the bankers kids) have same interests.  That might be where the term "brother in law deal" originated.

Its hard looking out on that empty pad and those pits here on my place, but I am not selling out..  That oil and gas will still be there 100 years from now before I would sign the minerals away.

Price today?  $2.31.  Gasoline? $3.47.  Go figure.

I dont' understand a word about shut in and all that  but I do understand that things don't drop like the price of NG unless there are some shenanigans going on out there somewhere.

I am afraid Asia will end up owning the leases here bought at fire sale prices.

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Permalink Reply by The_Baron on January 20, 2012 at 10:45

what are you talking about?

 

Lets try to stay on topic here.

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