23.1101.01000
Sixty-eighth
Legislative Assembly SENATE BILL NO. 2374
of North Dakota
Introduced by
Senators Piepkorn, Bekkedahl, Rust
Representatives Hatlestad, Longmuir, J. Olson
1 A BILL for an Act to create and enact a new subsection to section 38-08-04 and section
2 38-08-06.6 of the North Dakota Century Code, relating to jurisdiction of the industrial
3 commission and payment for production from wells; to amend and reenact sections 38-08-06.3,
4 47-16-39.1, 47-16-39.2, and 47-16-39.4 of the North Dakota Century Code, relating to royalties;
5 and to provide a penalty.
6 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
7 SECTION 1. A new subsection to section 38-08-04 of the North Dakota Century Code is
8 created and enacted as follows:
9 The commission may not determine the legal relationship between a lessor and a
10 lessee or enforce lease terms or division orders.
11 SECTION 2. AMENDMENT. Section 38-08-06.3 of the North Dakota Century Code is
12 amended and reenacted as follows:
13 38-08-06.3. Information statement to accompany payment to royalty owner - Penalty.
14 1. Any person whothat makes a payment to an owner of a royaltyan interest in land in
15 this state for the purchase of oil or gas produced from that royalty interest shall provide
16 with the payment to the royalty owner an information statement that, including a
17 portable document format and comma-separated values file which are unlocked and
18 editable by the recipient free of charge, which will allow the royalty owner to clearly
19 identify clearly the amount of oil or gas sold and the amount and purpose of each
20 deduction made from the gross amount due.
21 2. The statement must be on forms approved by the industrial commission and contain
22 the information that the commission prescribes by rule.
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1 3. The name, address, telephone number, electronic mail address, and, if available,
2 facsimile number of the oil and gas operator and its designee must be made available
3 by the operator or designee to the industrial commission.
4 4. A person whothat fails to comply with the requirements of this section is guilty of a
5 class B misdemeanor.
6 5. If the mineral owner, mineral owner's assignee, or the owner of an overriding royalty
7 interest prevails in a proceeding under this section, the mineral owner, mineral owner's
8 assignee, or the owner of an overriding royalty interest is entitled to recover court
9 costs and reasonable attorney's fees.
10 SECTION 3. Section 38-08-06.6 of the North Dakota Century Code is created and enacted
11 as follows:
12 38-08-06.6. Ownership interest information statement - Penalty.
13 1. Within one hundred twenty days after the end of the month of the first sale of
14 production from a well or change in the spacing unit of a well or a decimal interest in a
15 mineral owner, the operator or payor shall provide the mineral owner with a statement
16 identifying the spacing unit for the well, and the effective date of the spacing unit
17 change or decimal interest change if applicable, the net mineral acres owned by the
18 mineral owner, the gross mineral acres in the spacing unit, and the mineral owner's
19 decimal interest that will be applied to the well.
20 2. An address provided under section 38-08-06.3 also must provide where additional
21 information may be obtained regarding how the operator or payor has calculated the
22 mineral owner's decimal interest and for any questions pertaining to the information
23 provided on the statement. Upon request of the mineral owner, the operator, payor, or
24 the operator's or payor's agent must provide the relevant document number or book
25 and page number of any recorded document and the county in which it was recorded
26 which relates to the owner's decimal interest. If information is requested by certified
27 mail, the answer must be mailed by certified mail within thirty days of receipt of the
28 request.
29 3. A person who fails to comply with the requirements of this section is liable to the
30 affected owner of an interest, except for the working interest, in the amount of five
31 hundred dollars for each violation and an additional five hundred dollars for each
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1 month the court determines the person was not in compliance with this section or
2 wrongfully withheld information under this section. If a mineral owner brings an action
3 to enforce this section and prevails, the court shall award reasonable attorney's fees
4 and court costs.
5 4. The department of mineral resources shall make spacing information available,
6 including any orders or cases pertaining to the spacing unit, free of charge on its
7 website, to allow any individual mineral owner to verify the information provided on the
8 statement. The department shall make orders and cases searchable by well name and
9 legal description.
10 SECTION 4. AMENDMENT. Section 47-16-39.1 of the North Dakota Century Code is
11 amended and reenacted as follows:
12 47-16-39.1. Obligation to pay royalties - Breach.
13 1. The obligation arising under an oil and gas lease to pay oil or gas royalties to the
14 mineral owner or, the mineral owner's assignee, or the owner of an overriding royalty
15 interest, to deliver oil or gas to a purchaser to the credit of the mineral owner or the
16 mineral owner's assignee, or to pay the market value thereofof the oil or gas is of the
17 essence in the lease contract, and breach of the obligation may constitute grounds for
18 the cancellation of the lease in cases in which it is determined by the court that the
19 equities of the case require cancellation.
20 2. If the operator under an oil and gas lease fails to pay oil or gas royalties to the mineral
21 owner or, the mineral owner's assignee, or the owner of an overriding royalty interest
22 within one hundred fifty days after oil or gas produced under the lease is marketed and
23 cancellation of the lease is not sought or if the operator fails to pay oil or gas royalties
24 to an unleased mineral interest owner within one hundred fifty days after oil or gas
25 production is marketed from the unleased mineral interest owner's mineral interest, the
26 operator thereafter shall pay interest on the unpaid royalties, without the requirement
27 that the mineral owner or, the mineral owner's assignee, or the owner of an overriding
28 royalty interest request the payment of interest, at the rate of eighteen percent per
29 annum until paid. If the aggregate amount is less than fifty dollars, the operator may
30 remit semiannually to a person entitled to royalties the aggregate of six months'
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1 monthly royalties. Payment of a claim for unpaid royalties does not relieve liability for
2 unpaid interest and a separate action may be maintained for the interest.
3 3. The district court for the county in which the oil or gas well is located has jurisdiction
4 over any proceeding brought under this section. The prevailing party in any
5 proceeding brought under this section is entitled to recover court costs and reasonable
6 attorney's fees. If the mineral owner, mineral owner's assignee, or the owner of an
7 overriding royalty interest prevails in any proceeding brought under this section, the
8 mineral owner, mineral owner's assignee, or the owner of an overriding royalty interest
9 is entitled to recover court costs and reasonable attorney's fees.
10 4. This section does not apply if mineral owners or their assignees elect to take their
11 proportionate share of production in kind, in the event of a dispute of title existing that
12 would affect distribution of royalty payments, or if a mineral owner cannot be located
13 after reasonable inquiry by the operator; however, the operator shall make royalty
14 payments to those mineral owners whose title andfor any ownership interest that is not
15 in dispute.
16 2.5. This section does not apply to obligations to pay oil and gas royalties under an oil and
17 gas lease on minerals owned or managed by the board of university and school lands.
18 6. Payments made under this section must identify interest and royalty amounts
19 separately.
20 7. A claim for relief for compensation brought under this chapter must be commenced
21 within the limitations period provided under section 28-01-15.
22 SECTION 5. AMENDMENT. Section 47-16-39.2 of the North Dakota Century Code is
23 amended and reenacted as follows:
24 47-16-39.2. Inspection of production and royalty payment records - Penalty.
25 1. A royalty owner, a royalty owner's assignee, an unleased mineral interest owner, or a
26 designated representative, upon written notice, is entitled to inspect and copy the oil
27 and gas production and royalty payment records for the lease of the person obligated
28 to pay royalties under the lease or division orderas required by section 47-16-39.1.
29 The person obligated to pay royalties under the lease shall make that person's oil and
30 gas royalty payment and production records available for inspection and copying at
31 that person's usual and customary place of business within the United States. Upon
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1 request of a royalty owner, records available in an electronic format must be
2 electronically transmitted to the royalty owner. A royalty owner may bring an action to
3 compel the person obligated to pay royalties to allow inspection and copying of oil and
4 gas production royalty payment records. In order for the royalty owner to prevail in
5 such an action, the royalty owner must establish that:
6 a. The royalty owner or the royalty owner's assignee complied with the notice
7 requirements of this section;
8 b. The notice specified the leaselands involved, the time period under review and
9 the records requested;
10 c. The royalty owner notified the person obligated to pay royalties at the address
11 printed on the information statement as prescribed by rules adopted by the
12 industrial commission pursuant to section 38-08-06.3; and
13 d. The person obligated to pay royalties denied inspection of the records or failed to
14 respond within thirty days of service of the notice.
15 2. The district court for the county in which the oil or gas well is located has jurisdiction
16 over all proceedings brought pursuant to this section. If the royalty owner or the royalty
17 owner's assignee is successful in any proceeding brought pursuant to this section, the
18 district court shall allow the royalty owner or the royalty owner's assignee to recover
19 court costs; reasonable costs, fees, disbursements, and expenses incurred by the
20 royalty owner or the royalty owner's assignee or a designated representative in
21 inspecting and copying the oil and gas production and royalty payment records of the
22 person obligated to pay royalties under the lease; and reasonable attorney's fees. The
23 district court shall assess a civil penalty of two thousand dollars per day for any period
24 the court determines royalty record payment records requested under this section
25 were wrongfully withheld.
26 3. If a royalty owner, a royalty owner's assignee, or a designated representative is the
27 board of university and school lands:
28 a. The records in subsection 1 must be sent electronically, or in a manner
29 acceptable to the board, to a location designated by the board.
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1 b. Notwithstanding subsection 2, at the discretion of the board, a proceeding
2 brought under this section may be brought in the district court of Burleigh County
3 or in the county in which the oil or gas well is located.
4 4. If the board of university and school lands is successful in any proceeding brought
5 under this section, the district court shall allow the board to recover court costs;
6 reasonable costs, fees, disbursements, and expenses incurred by the board in
7 inspecting theand copying the oil and gas production and royalty payment records of
8 the person obligated to pay royalties under the lease; and reasonable attorney's fees.
9 a. The district court also shall assess a civil penalty of two thousand dollars per day
10 for each day the person obligated to pay royalties under the lease failed to send
11 the oil and gas royalty payment and production records to the board in
12 accordance with subsection 1.
13 b. The civil penalty under subdivision a ceases to accrue on the date the
14 proceedings are initiated under subsection 1.
15 SECTION 6. AMENDMENT. Section 47-16-39.4 of the North Dakota Century Code is
16 amended and reenacted as follows:
17 47-16-39.4. Resolution of spacing unit ownership interest disputes - Penalty.
18 1. If the mineral owner and mineral developer disagree over the mineral owner's
19 ownership interest in a spacing unit, the mineral developer shall furnish the mineral
20 owner with a description of the conflict including the document number or book and
21 page number of any recorded documents relevant to the dispute and the proposed
22 resolution oralong with that portion of the title opinion that concerns the disputed
23 interest, if available to the mineral developer.
24 2. A mineral developer shall pay the mineral owner five hundred dollars per day for each
25 day the court determines the mineral developer was not in compliance with this
26 section or wrongfully withheld information under this section. If a mineral owner brings
27 an action to enforce this section and prevails, the court shall award reasonable
28 attorney's fees and court costs.
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Statutes affected:
INTRODUCED: 38-08-06.3, 47-16-39.1, 47-16-39.2, 47-16-39.4