I recently received a small check via certified mail with a “Shut In Receipt” for me to fill out and return via prepaid envelope. What is a “shut in” payment?
I read an old post on shut-in payments (Aug 2013) and now I am even more confused. I am new to this and do not have a copy of the lease, but this shut-in payment is for the “Overton GU 18 Well, located in Smith County, TX.” Any advice is welcomed. Thank you.
A shut-in payment is provided for in most leases. It occurs when a well has been “shut-in” which means that is capable of producing, but the operator has chosen not to produce the well for any number of reasons. It is typically called “shut-in royalty” because it is a payment made in lieu of royalty that would be paid if the well was producing, and it is paid to “maintain” the lease (to keep the lease in effect).
Standard lease forms provide for shut-in royalty to be $1.00 per acre, but that can be negotiated to a higher valule at the time the lease is executed.
Thank you! That explains the certified mail and return receipt. The company wants evidence that they are maintaining the terms of the lease.