Replies to This Discussion

Permalink Reply by Ben Elmore on March 13, 2011 at 14:44

If the leases that these wells are holding are in the secondary term and there is no express shut in time limit, it sounds like your only recourse is to rely on your lessee's implied covenant to market your hydrocarbons. That is a fact specific analysis depending on the availability of a market, the lessee's reasons for keeping the wells shut in for so long, and oil and gas prices, among other things. I suggest you ask your lessee in a letter via certified mail for its reasons and justification for keeping the well shut in for so long. If the reasons are insufficient, you might have a claim for breach of the covenant to market which is governed by a 4 year statute of limitations period. Definitely find out your lessee's justification for the extended shut-in period.

Permalink Reply by Bill R on March 14, 2011 at 15:53

With several, the statement was that they're waiting for improved prices to complete.I understand their reasoning.

However the longer term well with Atoka has never accepted a certified/registered letter, nor replied at all to any correspondence or phone calls. How do you go about starting a claim for breach of covenant?

Permalink Reply by Ben Elmore on March 15, 2011 at 4:01

Friend me and we can talk off line.  But to answer your question, you follow the notice provisions under your lease for asserting a breach.  The lessee then has a certain number of days to cure.  If they fail to do so, you then decide whether to file suit or not.

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