After winning a lawsuit over royalty payments in North Dakota, Continental Resources ended up before the North Dakota State Supreme Court where the victory was recently reversed.
The ruling stemmed from a “dispute over the calculation of nonparticipating royalty interests (NPRI) in oil and gas produced from a tract of land in McKenzie County, North Dakota.”
North Dakota is home to the Bakken Shale Play which is located mostly in the western part of the state as well into Eastern Montana as well as part of Saskatchewan and Manitoba in the Williston Basin. It is also where Continental Resources became a leading exploration energy company.
The ruling is as follows:
Garaas v. Continental Resources
Court: North Dakota Supreme Court
Citation: 2025 ND 146
Opinion Date: August 28, 2025
Judge: Douglas Bahr
Areas of Law: Energy, Oil & Gas Law, Real Estate & Property Law, Trusts & Estates
This case concerns a dispute over the calculation of nonparticipating royalty interests (NPRI) in oil and gas produced from a tract of land in McKenzie County, North Dakota. The plaintiffs, as trustees of three family trusts, each hold an undivided one-third interest in a 2% royalty on all oil and gas produced from the NW¼NE¼ of Section 31-154-97, based on a 1951 royalty deed. The land in question abuts the Missouri River, and a portion of it lies below the ordinary high-water mark, which is owned by the State of North Dakota. Continental Resources, Inc. operates an oil well on a spacing unit that includes this tract, while third-party defendants own the minerals above the high-water mark, subject to the trusts’ royalty interests.
The District Court of McKenzie County previously found that the trusts’ NPRI did not include State-owned acreage below the high-water mark, and adopted Continental’s calculation of the royalty payment factor, which excluded the State’s acreage and included an upward adjustment for equitable distribution. The court also held that Continental’s suspension of royalty payments was permissible under the “safe harbor” provision of N.D.C.C. § 47-16-39.1, denied the trusts’ request for an accounting, and awarded costs to Continental, concluding the trusts were not the prevailing party. The trusts appealed, arguing errors in the NPRI calculation, the application of the safe harbor provision, and the determination of the prevailing party.
The Supreme Court of North Dakota reversed the district court’s amended judgment. It held that the 1951 royalty deed unambiguously grants the trusts a 2% royalty on all oil and gas produced from the entire described tract, including State-owned acreage. The court remanded for recalculation of the NPRI, reconsideration of the safe harbor provision, determination of outstanding royalties and accounting, and proper allocation of costs and disbursements, finding the trusts to be the prevailing party.
