on April 23, 2016 (the “Slagle Interest”). The remainder was owned by the June Slagle Family Mineral Trust (the “Slagle Trust”). In April 2010, Brigham Oil & Gas L.P., the predecessor in interest to Statoil Oil & Gas LP (n/k/a Equinor Energy LP) (hereinafter “Statoil”), took a lease from “Fonda Powell, power of attorney for June Slagle.” Importantly, a power of attorney naming Fonda Powell (June’s daughter) as attorney-in-fact for June Slagle was provided to Statoil but was never recorded in McKenzie County. 3 Statoil’s Patent Gate 7-6 #1H Well was spud in October 2011 and began producing in April 2012. However, June Slagle was never paid royalties during her lifetime. In April 2017, after June’s death, Statoil paid the Slagle Trust ~$750,000 for the suspended royalties attributable to June’s life estate mineral interest. 4 In May 2019, the Estate of June A. Slagle, Deceased and the June Slagle Family Mineral Trust (the “Plaintiffs”) filed suit, alleging that Statoil breached its obligation to timely pay royalties and seeking statutory interest. 5 Statoil countered that it had legitimately suspended the payments because, although a copy of the power attorney had been provided to Statoil, it had never been recorded in McKenzie County. However, Statoil had never contacted June or Fonda and informed them of this alleged title defect or that June’s life estate interest was being held in suspense. The district court found that the unrecorded power of attorney created a legitimate title dispute under the “Safe Harbor” provision of the Suspense Statute, and that Statoil thus did not owe statutory interest. The Plaintiffs appealed, 6 challenging (i) the applicable statute of limitations, and (ii) whether Statoil rightfully suspended the Slagle Interest due to a dispute of title.
disagreed, noting that the “Legislature is aware of the difference between ‘interest’ and ‘penalty,’ and although there may be an upper limit where interest becomes a penalty, we will not second- guess its use of the word ‘interest’ here.” 7 Section 28-01-15(2) of the Code imposes a ten- year statute of limitations on “a contract contained in any conveyance . . . affecting title to real property.” As previously held in 2016’s Kittleson v. Grynberg Petro. Co. , the ten-year statute of limitations applies to a breach of contract action for the underpayment of royalties 8 . In North Dakota, unlike some other states, the obligation to pay royalties is “of the essence” in an oil and gas lease and breaching the obligation can lead to lease cancellation. The obligation to pay royalties is thus a “contract in a conveyance affecting title to real property” and falls within the scope of Section 28- 01-15(2). 9 Under the Suspense Statute, the 18% interest is part of an unpaid royalty owner’s damages for the nonpayment and an alternative remedy to cancellation of the lease. 10 The basis of the grievance can be nonpayment, underpayment, or (as in Powell ) untimely payment of royalties. The Plaintiffs’ claim for untimely royalties and statutory interest accrued within ten years of bringing suit and was not barred by limitations, including the three-year statute. 11
III. Vic Christensen and the Safe Harbor Provision
As noted above, the Suspense Statute allows a mineral owner to charge 18% interest on untimely
[3] 2023 N.D. LEXIS 233, 2 (¶ 3). [4] Id. at 2-3 (¶ 4). [5] Id. at 3 (¶ 5). [6] Id. at 4 (¶ 6). [7] Id. at 7-9 (¶ 11). [8] 876 N.W.2d 443 (N.D. 2016). [9] Powell (at ¶ 12). [10] Id. at (¶ 13). [11] Id .
II. Kittleson and the Ten-Year Statute of Limitations
Section 28-01-17(2) of the North Dakota Century Code imposes a three-year statute of limitations on actions for a “penalty or forfeiture.” Statoil argued that the interest owed under the Suspense Statute is “not truly interest,” but a penalty and that the three-year statute should apply. The court
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G rowth T hrough E ducat i on - J anuary / F ebruary / M arch 2024
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