Does anyone have any insight into what rights royalty owners in well have if the well has become uneconomic? Can they force the operator to plug? What would the process be, and how would you determine uneconomic status for a well?
Thank you.
Your minerals are likely in Texas, but in California “paying quantities” is typically the standard used to determine if a well or wells are uneconomic. Paying quantities is that amount of production that, after deducting all costs of production, marketing, and royalty, has some profit. It is typically a determination of the lessee. If there is only one well and you’re trying to terminate the lease, that’s one thing. If, however, it’s simply one well of many, then the lease as a whole would typically have to fail the paying quantities test.
Hope this helps.
Read your lease. They may pay you a shut in royalty, which usually isn’t much. They have a lot of money invested in wells, and they may just wait until the market for the product improves. Time is on their side. Things will improve. Good luck!