ELR Citation: 49 ELR 20120
No(s). 20190088 (N.D. Jul 11, 2019)

A state high court reversed a summary judgment for a natural gas producer in a challenge to the interpretation of leases it entered into with North Dakota. Before the lower court, the producer challenged the North Dakota Department of Trust Lands' conclusion that the producer had improperly calculated royalties paid to the state. The lower court agreed with the producer's interpretation of the leases and held that they required the payments to be based upon the gross amount the producer received from a company that processed the fuel for market. On appeal, the state argued the lower court's interpretation required the state to share in post-production costs incurred to make the gas marketable and thus was contrary to the leases. The appellate court agreed, finding that gross proceeds from which the royalty payments under the leases were calculated could not be reduced by an amount that directly or indirectly accounted for post-production costs incurred to make the gas marketable. It therefore reversed the summary judgment.