Shut-in Royalty
A payment that keeps a lease alive when a capable well is shut in — not selling production — usually due to no market or pipeline.
A shut-in royalty is a payment that keeps a lease in force when a well is capable of producing but is temporarily shut in — most often because there is no pipeline connection or no buyer for the gas. The shut-in royalty clause lets the operator treat the shut-in well as if it were producing, holding the lease the way real production would.
The amounts are usually small and set by the lease, sometimes a fixed dollar figure per well per year. For the mineral owner, the risk is a lease staying held by production for years on shut-in payments while no real income flows.
Good leases limit how long shut-in status can hold the lease. Watch this clause closely; review it with an oil and gas attorney before signing.