Hi, Folks, I posted this question in Mar 2022 but received no replies and the issue has come up again.
Are operators required to pay compound or only simple interest on late royalty payments? An operator is several years late on some royalty payments and it has calculated the interest based on simple interest. If they are required to pay compound interest (i.e., “interest on interest”), is there a court case or state regulation you could refer me to that makes that clear? It makes a worthwhile difference in my case. Thanks.
Here is the North Dakota Statute:
Section 47-16-39.1 of the North Dakota Century Code states in part:
If the operator under an oil and gas lease fails to pay oil or gas royalties to the mineral owner or the mineral owner’s assignee within one hundred fifty days after oil or gas produced under the lease is marketed and cancellation of the lease is not sought, the operator shall pay interest on the unpaid royalties at the rate of eighteen percent per annum until paid, except that the commissioner of university and school lands may negotiate a rate to be no less than the prime rate as established by the Bank of North Dakota plus four percent per annum with a maximum of eighteen percent per annum, for unpaid royalties on minerals owned or managed by the board of university and school lands. Provided, that the operator may remit semiannually to a person entitled to royalties the aggregate of six months’ monthly royalties where the aggregate amount is less than fifty dollars. The district court for the county in which the oil or gas well is located has jurisdiction over all proceedings brought pursuant to this section. The prevailing party in any proceeding brought pursuant to this section is entitled to recover any court costs and reasonable attorney’s fees. This section does not apply when mineral owners or their assignees elect to take their proportionate share of production in kind or in the event of a dispute of title existing that would affect distribution of royalty payments; however, the operator shall make royalty payments to those mineral owners whose title and ownership interest is not in dispute.