Montana Code 82-10-103. Obligation to pay royalties as essence of contract — interest
82-10-103. Obligation to pay royalties as essence of contract — interest. (1) The obligation arising under an oil and gas lease to pay oil or gas royalties to the royalty owner or the owner’s assignee, to deliver oil or gas to a purchaser to the credit of the royalty owner or the owner’s assignee, or to pay a portion of the proceeds of the sale of the oil or gas to the royalty owner or the owner’s assignee is of the essence in the lease contract.
Terms Used In Montana Code 82-10-103
- Contract: A legal written agreement that becomes binding when signed.
- Entitlement: A Federal program or provision of law that requires payments to any person or unit of government that meets the eligibility criteria established by law. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Social Security and veterans' compensation and pensions are examples of entitlement programs.
- Gas: means all natural gases and all other fluid hydrocarbons, including methane gas or any other natural gas found in any coal formation, as produced at the wellhead and not defined as oil in subsection (3). See Montana Code 82-1-111
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Oil: means crude petroleum oil and other hydrocarbons, regardless of gravity, that are produced at the wellhead in liquid form by ordinary production methods and that are not the result of condensation of gas before or after it leaves the reservoir. See Montana Code 82-1-111
- Person: includes a corporation or other entity as well as a natural person. See Montana Code 1-1-201
(2)If the operator under an oil and gas lease fails to pay oil or gas royalties to the royalty owner or the owner’s assignee within 120 days after the initial oil or gas produced under the lease is marketed and within 60 days for all oil and 90 days for all gas produced and marketed, the unpaid royalties must bear interest at the maximum rate of interest authorized under 31-1-107 from the date due until paid. The operator may remit semiannually to a person entitled to royalties the aggregate of 6 months’ royalties whenever the aggregate amount is less than $50 and annually whenever the aggregate amount is less than $10.
(3)A royalty owner seeking a remedy for failure to make payments under the lease or seeking payments under this section shall bring the action in the district court for the county in which the oil or gas well is located, and that court has jurisdiction over any actions brought under this section. The prevailing party in any proceeding brought under this section is entitled to recover court costs and reasonable attorney fees.
(4)This section does not apply if a royalty owner or the owner’s assignee has elected to take the owner’s or assignee’s proportionate share of production in kind or whenever there is a dispute as to the title of the minerals or entitlement to royalties, the outcome of which would affect distribution of royalty payments.