Posted Without Comment -- A Bakken Story -- Mineral Owners Might Be Interested -- February 14, 2019

From The Bismarck Tribune:

A judge has ruled against the state of North Dakota in a lawsuit brought by an oil company over a gas royalty dispute.

In a case being closely watched by the industry, Northwest Judicial District Judge Robin Schmidt ruled in favor of Newfield Exploration, which sued the state and the Board of University and School Lands last year.

Newfield and the North Dakota Department of Trust Lands have been in a dispute over the interpretation of the state’s oil and gas leases. The department has alleged that Newfield and other companies have been underpaying the state for royalties on natural gas.

In response to a "concerns notice" from the department, Newfield filed a lawsuit in McKenzie County seeking a judge to declare the company has properly paid gas royalties and does not owe the state additional payments. The case focused on how the royalty is calculated when gas is sold to an unaffiliated third party, such as a gas processing plant.

In an order dated Thursday, Schmidt ruled in favor of Newfield, saying the lease requires Newfield to pay the state based on the gross proceeds it receives from the sale of gas. Schmidt wrote that the state’s argument that Newfield is required to pay based on what a third party receives for the processed gas “strains the language beyond reason and this court is not persuaded.”