landowner

Re-leasing after shut-in

We leased our land over 3 years ago they did drill and well was productive for a few months and now it is shut-in, my question is since it is shut in can I lease my land to someone new now?

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Permalink Reply by JMan on October 24, 2011 at 3:01
if it is a gas well, then absolutely.  A lot of companies have shut in their gas production because the price is down.  when it rises, they will open the gas wells back up.

Oil & Gas ProPermalink Reply by The_Baron on October 24, 2011 at 4:26
sometimes its more of a problem finding a market for your gas, than just waiting for prices to rise.

Oil & Gas ProPermalink Reply by Geologist on October 24, 2011 at 4:52
I think you are right short term but in the case of multi-year shut-ins it is a matter of gas prices vs. operating expenses.
Charles L. EvansPermalink Reply by Charles L. Evans on October 23, 2011 at 8:00
Does that apply to oil or gas wells?  If the shut-in or plug happened in 2006 would the delay rental money be owed me?  I saw nothing in the lease that forbid me from getting a new lessor but ExxonMobil is silent about my shut-in royalties.
Permalink Reply by JMan on October 24, 2011 at 2:11
Yes it applies to gas and oil wells.  The company doesn't want to lose the lease so they hold it by production.

Oil & Gas ProPermalink Reply by Geologist on October 24, 2011 at 3:01
It applies to any lease that speaks to shut-in royalties which I am willing to bet is your lease.  Unless you have a continuous operations clause in your lease it can be held indefinitely if shut-in royalties are paid as stipulated by the lease.  If the well has been plugged and the lease isn't held by production elsewhere then ExxonMobil has lost the lease.

Oil & Gas ProPermalink Reply by Eric Camp on October 20, 2011 at 9:17
Agreed. When you get a copy of the original lease, the shut-in provision is almost always in the royalty paragraph - so look there first. Next time make sure you get a copy of the full lease at signing.

Oil & Gas ProPermalink Reply by John Brewster on October 20, 2011 at 10:40

As Skip has said, the answer depends on the lease language.  The Baron suggested you ask the operator for a copy.  Presumably you know who you leased to.  Most likely it was a broker, but since the well produced and you were paid for a time, the party who sent you a check is who you need to request a copy of the lease from.  There will be a shut-in clause.  If you are lucky there may also be language that the lessee cannot maintain a lease by paying shut-in royalties for more than maybe two years.  That is in some lease forms but a majority of the forms do not include that limitation.  Don't do anything until you have a copy of your lease.

Permalink Reply by Raymond J. Forbish on October 20, 2011 at 11:01
The quick answer is No.  The well may be shut-in for lack of a gathering pipe line connection.  You need to read your lease.  Now, if the well is uneconomic, the leaser can not hold your lease indefinitely. 
Charles L. EvansPermalink Reply by Charles L. Evans on October 23, 2011 at 8:02
If the lease is producing after thirty years and there is oil reclassification in one of two wells why does ExxonMobil refuse to pay me shut-in royalties?  How can I break that lease?

Oil & Gas ProPermalink Reply by Geologist on October 24, 2011 at 4:56
You aren't due shut-in royalties if there is a producing well that is holding your lease unless there is a well specific clause.  If you are receiving any money on any wells that are within the lease boundary and there is no pugh clause then you don't get shut-in royalties.

landownerPermalink Reply by Bill R on October 20, 2011 at 14:02
My family has six wells that are shut-in with one of them locked out of production for just over five years now.  Each family member gets their $1 per year from it and the O&G attorney says we are locked in until it either produces or is capped. They send them to use certified/registered mail which acts as a 'acceptance signature' for the check.

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