2016 North Dakota Century Code Title 35 Liens Chapter 35-37 Oil and Gas Owner's Sales Liens
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CHAPTER 35-37
OIL AND GAS OWNER'S SALES LIENS
35-37-01. Definitions.
As used in this chapter:
1. "First purchaser" means the first person who purchases oil or gas from an interest
owner at or after the time the oil or gas is severed.
2. "Interest owner" means a person owning an entire or fractional interest of any kind or
nature in the oil or gas at the time it is severed, or a person who has a right, either
express or implied, to receive a monetary payment determined by the value of the oil
or gas severed.
3. "Operator" means a person engaged in the severance of oil or gas.
4. "Purchaser" means a person who purchases oil or gas from a first purchaser.
5. "Severed" means the taking, extraction, or production from the land of oil or gas in any
manner.
35-37-02. Extent of lien - Dispute as to amount due - Notice - Buyer in ordinary course
of business.
1. To secure payment from the sale of oil or gas, an interest owner, subject to section
35-37-04, has a continuing security interest in and a lien on the oil or gas severed, or
the proceeds of sale if the oil or gas has been sold, to the extent of the interest owner's
interest until the purchase price has been paid to the interest owner.
2. In the event of a bona fide dispute as to the amount due the interest owner, the
security interest and the lien do not accrue if the person holding the proceeds upon
which a lien is claimed tenders to the interest owner the amount which that person in
good faith believes to be due and payable.
3. A security interest or lien claimed pursuant to this chapter is not effective against an
interest owner, operator, first purchaser, or purchaser until a copy of the notice of lien
required to be filed under section 35-37-04 has been delivered to the interest owner,
operator, first purchaser, or purchaser by registered mail.
4. Notwithstanding any other provision in this chapter to the contrary, a person who pays
the purchase price for oil or gas severed from a well to the interest owner with whom
that person has a contract regarding purchases from the well or to one who is
authorized to receive payment on behalf of or for the interest owner is deemed a buyer
in the ordinary course of business and takes the oil or gas free of the security interest
and lien granted to the interest owner by this chapter, and the first purchaser or
purchaser who makes the payment and all its property is free from and not subject to
the security interest or lien granted to the interest owner by this chapter.
35-37-03. Validity of lien.
The validity of the security interest and lien granted to an interest owner under this chapter
is not dependent upon possession of the oil or gas by an interest owner or operator and a
security interest or lien does not become or may not be deemed to be void or expired by reason
of a change or transfer of the actual or constructive possession or title of the oil or gas from the
interest owner or an operator to a first purchaser or purchaser.
35-37-04. Perfection of lien - Verified notice - Effect of instruments - Effective date of
lien.
1. If the proceeds for oil or gas which are required to be paid are not paid to the interest
owner when due, the interest owner may perfect the security interest and lien by filing
electronically a UCC-1A in the central indexing system and recording the lien in the
real estate records in the office of the county recorder of the county in which the well is
located. If the oil and gas owner's lien is not filed within ninety days from the date of
production, the security interest is not perfected and does not give the interest owner
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priority over a perfected security interest in the same oil, gas, or proceeds of the oil or
gas.
Liens must be filed electronically in the central indexing system and recorded in the
real estate records of the county according to sections 11-18-01 and 11-18-05. Liens
may be terminated in the same manner as financing statements.
Upon perfection by filing, the security interest and lien of the interest owner takes
priority over the rights of all persons whose rights or claims arise or attach thereafter to
the oil or gas unpaid for, or the proceeds of oil or gas if the oil or gas has been sold,
including those that arise or attach between the time the security interest and lien
attaches and the time of filing. The security interest and lien created pursuant to this
chapter do not have priority over the security interest and lien rights previously created
and perfected or an operating agreement or other voluntary agreement for the
development and operation of the property.
35-37-05. Rights of first purchasers.
Neither this chapter nor the filing of a lien permitted under this chapter affects the time at
which legal title to the oil and gas may pass from an interest owner or operator to a first
purchaser or the ownership of the oil and gas before severed as reflected by the records
affecting real property or the right of a first purchaser to take or receive oil and gas under the
terms of a division order or similar agreement for the sale and purchase of oil or gas.
Notwithstanding this chapter, a first purchaser or purchaser is free to transport products out of
the state and to sell the products without permission or release of lien.
35-37-06. Expiration of lien - Enforcement - Joinder and consolidation - Costs Personal actions - Other rights and remedies.
1. The security interest and lien granted to an interest owner follow the oil and gas
unpaid for or the proceeds of the oil or gas if the oil or gas has been sold. The security
interest and lien expire one year after the date of the filing of the notice of lien unless
proper action to enforce the lien is commenced within such time in the district court of
the county in which the well is located, or wherever the oil or gas unpaid for or the
proceeds of oil or gas sold may be found. Persons claiming security interests and liens
with respect to the oil or gas from the same well may join in the same action, and
where separate actions are commenced the court may consolidate them. The court
may allow as part of the costs of the action moneys paid for filing and recording
instruments and reasonable attorney's fees for the prevailing party. If an action is
commenced after the filing of a lien, the lien is considered a lien upon the oil or gas
severed, or the proceeds of sale if the oil or gas has been sold, to the extent of the
interest of the claimant, for payment of the amount due the claimant and the security
interest and lien of the claimant may be enforced in the manner provided by law.
2. This chapter does not impair or affect the right of a person to whom a debt may be due
to maintain a personal action to recover the debt against the person liable for payment
of the debt.
3. This chapter does not impair or affect the rights, priorities, or remedies of a person
under the Uniform Commercial Code and this chapter is cumulative to and not a
limitation on or a substitution for any rights or remedies otherwise provided by law to a
creditor against the creditor's debtor.
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