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New Shut-in Royalty Rule for State Trust Lands

As a sweet Halloween treat for the beleaguered oil and gas industry, the State Land Office recently amended 19.2.100 of the New Mexico Administrative Code, Section 71, effective October 31, 2016, to allow operators to shut-in their oil and gas wells located on State Trust lands instead of continuing operations in this low oil price environment (the “Rule”). The Rule is effective for two years unless extended further by the State Land Commissioner. All leases issued by the Commissioner of Public Lands will not expire provided there is a shut in well capable of production located on the leased premises and such well has ceased operating due to the severe reduction in the price of oil, the lessee timely notifies the Commissioner in writing within thirty days of the date that each well is shut in and timely pays within 90 days of shut in a royalty equal to twice the annual delay rental, but no less than $320, per each well. Payment of such shut in royalty will extend the lease for one year.

The Rule can be found HERE.

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