The shut-in clause: holding a lease without selling anything
A shut-in clause lets the company keep your lease alive when a well can produce but is shut in, usually for lack of a pipeline or market, by paying you a shut-in royalty instead of production royalty.
What it does
The payment is usually a set amount per acre or per well, paid once a year, and it is often small next to what production would pay. Without a time limit, a shut-in well can hold the lease for years.
Some forms apply shut-in only to gas wells. Some say the payment is due within a set number of days after the well is shut in, and some say what happens if the company pays late or not at all.
What we mark on a review sheet
Normal
- A shut-in payment for a well that can produce in paying quantities and is shut in for lack of a market or pipeline.
- A clear due date for the payment.
Missing
- A limit on how long shut-in payments can keep the lease alive.
- What happens if the payment is late or never made.
Ask about
- A payment that is very small next to what production would pay.
- Shut-in language that also covers wells shut in by the company's own choice.
Questions to ask the company
- Will you limit shut-in to a set number of years in a row, and in total?
- Is the shut-in payment due on a set date, and does the lease end if it is not paid?
- Does shut-in apply only to a well that can actually produce in paying quantities?
Common questions
What is a shut-in royalty?
A payment the company makes to keep a lease alive when a well that can produce is shut in, usually because there is no pipeline or market yet.
How long can a shut-in well hold my lease?
That depends on the lease. Many printed forms set no limit. Owners often ask for a cap on years in a row and on total years.
Send it before you sign
Tell us what you got and what you want to know. We reply by email and tell you how to send the pages. A landman reads them and sends back a one-page review sheet.
Email hello@landman.review with what you got and your question, or call (307) 263-8515.