This lease rider form may be used when you are involved in a lease transaction, and have made the decision to utilize the form of Oil and Gas Lease presented to you by the Lessee, and you want to include additional provisions to that Lease form to address specific concerns you may have, or place limitations on the rights granted the Lessee in the standard lease form.
Shut-In Gas Royalty
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Multi-State
Control #:
US-OG-824
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Word;
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FAQ
To shut in a well means to make it not produce, so we'll start with a primer on production. When a well is producing it means the well has been drilled, completed in a reservoir, and oil and/or gas is somehow moving up the wellbore and to the surface facility.
Shut-In Clause: Where a gas well has been completed but no market exists for the gas, the shut-in clause enables a lessee to keep the non-producing lease in force by the payment of the shut-in royalty. Such payment serves as constructive production and avoids application of the automatic termination rule.
In the petroleum industry, shutting-in is the implementation of a production cap set lower than the available output of a specific site. This may be part of an attempt to constrict the oil supply or a necessary precaution when crews are evacuated ahead of a natural disaster.
To restart production, it is necessary to bring a new rig, drill the cement plug, and pump the sludge blocking the well head.At best, resuming production may require months of work, at worst, shutdown can permanently diminish the throughput of the facility. Offshore drilling platforms have their own challenges.
Essentially, the shut-in royalty provision allows a lessee to temporarily cease production (i.e., shut-in a well) and pay a shut-in royalty to the lessor in place of the royalty on production that is not occurring during the shut-in period.
Shut in a well in the Oil and Gas Industry To shut in a well is to close off a well so that it stops producing.The company had to shut in a well that began producing water in order to prevent contamination of the dry oil from other wells when production was commingled.
In the petroleum industry, shutting-in is the implementation of a production cap set lower than the available output of a specific site. This may be part of an attempt to constrict the oil supply or a necessary precaution when crews are evacuated ahead of a natural disaster.
