California Shut-In Oil Royalty

State:
Multi-State
Control #:
US-OG-825
Format:
Word; 
Rich Text
Instant download

Description

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.

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FAQ

The royalty percentage is usually 12.5% to 15% but can change based on regional regulations or negotiations. Types of Leases: There are different types of oil and gas leases, and they affect royalty calculations differently.

A clause in an oil & gas lease that allows a lessee to keep the lease in effect past the primary term by substituting payment of shut-in royalty for actual production.

Royalty interest in the oil and gas industry refers to ownership of a portion of a resource or the revenue it produces. A company or person that owns a royalty interest does not bear any operational costs needed to produce the resource, yet they still own a portion of the resource or revenue it produces.

California also passed a law last year banning oil and gas drilling within 3,200 feet of structures including homes, schools and hospitals. But CIPA has blocked implementation of that law by qualifying a referendum to overturn it for the November 2024 ballot.

A clause in an oil & gas lease that allows a lessee to keep the lease in effect past the primary term by substituting payment of shut-in royalty for actual production.

The analysis finds that 5,540 wells in California may already have no viable operator, and that the potential net liability for the State appears to be about $500 million, after subtracting available bonds. An additional 69,425 economically marginal and idle wells could become orphaned in the future.

In the last four years, California's local oil and gas production has declined by 29%, primarily due to state and local energy policies shutting down production. But, decreasing California's local production does not decrease our consumption, just where our oil comes from.

Royalty Payment Clauses A royalty is agreed upon as a percentage of the lease, minus what was reasonably used in the lessee's production costs. This is stipulated in a Royalty Clause. The royalty is paid by the lessee to the owner of the mineral rights, the lessor in the lease.

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California Shut-In Oil Royalty