timely manner. However, the question of whether operators owe statutory interest on suspended override (and working interest) payments remains open under the North Dakota Suspense Statute. 26
V. A Brief Note on the Legislative History of Section 47-16-39.1
N .D. C ent . C ode § 47-16-39.1 was first proposed in 1961 as S.B. 44, ch. 295. The bill was proposed because a number of landowners had reported an “unreasonable lag in royalty payments,” and that their “only recourse was to sue in court.” The comments to S.B. 44 indicated that the bill should also apply to overriding royalties. Although overrides were not expressly included in the final language of this early version of Section 47-16-39.1, they were seemingly contemplated as within the original definition of “royalties.” In 2023, an attempt was made to amend Section 47-16-39.1 and several other code sections under HB 1520. 24 The proposed change expressly added overriding royalty interests to the Suspense Statute. This was in direct response to the SunBehm Gas decision and relied in part on written testimony from Dorchester Minerals, L.P. In arguing that overriding royalty interest owners should have the right to receive interest on wrongfully withheld payments, Dorchester argued that: (i) an override, like a royalty, is paid to the owner directly by the operator/payor and in the same manner; (ii) an operator can thus hold an override interest free for “years upon years”; and (iii) there is no logical reason a royalty and override should be treated differently. Ultimately HB 1520 failed to pass by a large margin (yeas 10, nays 80) and died in chamber. However, based on its legislative history it seems that HB 1520’s failure may have been due more to the amendments to numerous other portions of the Century Code, and less to the proposed inclusion of overriding royalties in Section 47-16-39.1. The door may thus still be open to a future proposal to amend the Suspense Statute. 25
interest owner. It was further argued that the statute is at best ambiguous, and reasonable doubt exists as to how it should be interpreted. The federal district court rejected both views.). Sunbehm Gas was also cited by the Eighth Circuit Court of Appeals in Slawson Expl. Co. v. Nine Point Energy, LLC for the proposition that, although overriding royalty interests and working interests are interests in real property, overriding royalties are carved out of the working interest created by an oil and gas lease and thus the ownership interest arises from the lease, not from ownership of the subsurface minerals. 966 F.3d 775 , 780 (8th Cir. 2020). [24] HB 1520 can be summarized as a Bill for an Act to create and enact a new subsection to section 38-08-04 and new sections 38-08-06.5 and 38-08-06.6 of the North Dakota Century Code, relating to jurisdiction of the industrial commission and payment for production from wells; to amend and reenact sections 38-08-02, 38-08-06.3, 47-16-39.1, 47- 16-39.2, and 47-16-39.4 of the North Dakota Century Code, relating to royalties; and to provide a penalty. [25] None of the legislative history or proposed amendments to the Suspense Statute attempt to expand its reach to working or net revenue interests. Perhaps the rationale is that there is less ambiguity between operators who are actively developing the well, or that the operator and non-operators will negotiate an operating or co-development agreement (though this may seldom happen in practice). [26] Note that because overriding royalty interests may not fall within the protections of the Suspense Statute, overriding royalty owners would most likely need to sue under a breach of contract in a conveyance theory. Claims would thus potentially fall within the ten-year statute of limitations set forth in N.D. Cent. Code § 28-01-15. See, e.g., Powell v. Statoil Oil & Gas LP , 999 N.W.2d 203, 209 (N.D. 2023) (“Thus, we conclude as a matter of law that the ten-year statute of limitations, [N.D. Cent. Code] § 28-01-15(2), which in [ Kittleson v. Grynberg Petro. Co. , 876 N.W.2d 443 (N.D. 2016)] applied to a claim for underpayment of royalties under an oil and gas lease, applies here to the claim for untimely payment of royalties under the oil and gas lease. Because Plaintiffs claims accrued within ten years of commencing this action, their action is timely under [N.D. Cent. Code] § 28-01-15(2).”) Certain provisions of the Judicial Remedies code sections, relating to damages and interest on damages generally, might also be implicated. See , N.D. Cent. Code §§ 32-03-01, 04.
VI. So . . . Do I Have to Pay Interest on Wrongfully Suspended Overrides or Not?
The obligation to pay royalties on leased or unleased mineral interests in North Dakota is of the essence in the lease contract, and great care should be taken to make these payments in a
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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