I am attempting to enforce my rights under the North Dakota Century Code Section 47-16-39.1-which requires the lessor to pay lessee an 18% royalty penalty for failure of the lessor to make payments to lessee within 150 days from initial date of production. My wife entered in to a 3 year lease with an operator. She received no notice of any activity under the lease. Upon expiration of the lease, we attempted to contact the lessor which was acquired by another firm during the lease without notice to us. Finally we made contact and the rep confirmed that production had commenced 18 months earlier and that we would be required to go through probate and resolve any title issues. She stated we would be receiving a Division Order shortly. Eight months expired during which time we completed the Probate but received no notice from the lessor. I notified them we would seek the 18% penalty since they had not given us notice within the 150 days and never identified any title issues which required curing. They have argued that they are not required to "give notice" of production since such information is "public record" . They refused to respond to a demand that they must also "give notice" of any title problem within the 150 days since we cannot cure a problem which has not been identified. They said we will have to sue if we want to seek the penalty.
What advice can you provide? Any dispute under the Code requires the losing party to pay the winners legal fees and court costs. Thank you!
I have in the past told people to ask if there is a title requirement when you first contact the producer because they do not owe interest if they can claim there was a title issue that made your title unmarketable.
When you completed the probate did you inform the operator by sending them a certified copy by certified mail to their title/division order department and legal department? If not I think it would be iffy that you could demand interest and that even if you won, the amount of interest from the moment you had marketable title is far less than people think. 18% per year from the moment you had marketable title means 18% on a month where the operator was 12 months behind, the interest is 1.5% a month so on a month where the operator was only 6 months behind they would only owe 9% for that month. I'll let you do the math. The average of interest on the total of money owed is going to be far less than 18% unless it has been years since you notified the operator that you now have marketable title.
Where did you find the requirement that they inform you that your title was not marketable? There is no requirement that I know of that the operator must inform you of title requirements. Do not assume that the law protects you because it would sound reasonable. The fact is that because you signed a lease you are at a horrible disadvantage. You are only assumed to be entitled to what is in the lease and you may have to file suit to even get that because the law looks at disagreement between you and the lessee as a disagreement between business partners and all you can do is sue them. I would expect that a simple matter like this would only cost you $25,000 to $50,000 out of your pocket before it was resolved and you may not get those attorney fees back even if you collected the interest. Think about it. Calculate interest from the point at which you informed the lessee that you had marketable title. Is it worth it? Ambiguity is your enemy in this case.
I know it galls but I would rather not see you throw good money after bad. I don't think there is enough money in this that even if you prevailed. You will still be leased at the end of the legal battle also. The lessee/operator is still going to make money off of 80% or more of your oil and show a better profit from it even after the legal battle than you will if you have 20% royalty. They can spend you into the ground. I would not consider any lawyer who told you anything different than I have just told you reputable because even if you won, you would lose, time money and aggravation. Do some recalculation and let me know if you think there is more than $100,000 at stake and I may change my mind. I wish you the very best of luck.
Very good advice.