North Dakota Administrative Code › Title 85 - University and School Lands, Board of › Article 85-06 - Minerals Management › Chapter 85-06-01 - Oil and Gas › Section 85-06-01-08 - Royalties

Current through Supplement No. 393, July, 2024
If a sale of gas, carbon black, sulfur, or any other products
				  produced or manufactured from gas produced and marketed from the oil and gas
				  leased premises, including liquid hydrocarbons recovered from such gas
				  processed in a plant, does not constitute an arm's length transaction, the
				  royalties due the lessor are as follows:
1. On any gas produced and marketed, except
				as provided herein with respect to gas processed in a plant for the extraction
				of gasoline, liquid hydrocarbons, or other products; the royalty, as determined
				by the board, is based on the gross production or the market value thereof, at
				the option of the lessor, such value to be based on the highest market price
				paid for gas of comparable quality and quantity under comparable conditions of
				sale for the area where produced and when run, or the gross proceeds of sale,
				whichever is greater; provided the maximum pressure base in measuring the gas
				under an oil and gas lease at any time may not exceed fourteen and
				seventy-three hundredths (14.73) pounds per square inch absolute, and the
				standard base temperature shall be sixty degrees Fahrenheit, correction to be
				made for pressure according to Boyle's Law, and for specific gravity according
				to a test made by the balance method or by the most approved method of testing
				being used by the industry at the time of testing.
2. On any gas processed in a gasoline plant
				or other plant for the recovery of gasoline or other liquid hydrocarbons, the
				royalty, as determined by the board, is based on the residue gas and the liquid
				hydrocarbons extracted or the market value thereof, at the option of the
				lessor. All royalties due herein is based on eighty percent or that percent
				accruing to the lessee, whichever is greater, of the total plant production of
				residue gas attributable to gas produced from the oil and gas leased premises,
				and on forty percent or that percent accruing to the lessee, whichever is
				greater, of the total plant production of liquid hydrocarbons attributable to
				the gas produced from the oil and gas leased premises; provided that if a third
				party or parties are processing gas through the same plant pursuant to arm's
				length transaction and one such transaction accounts for an annual average of
				ten percent or more, or all such transactions collectively account for an
				annual average of thirty percent or more of the gas being processed in such
				plant, the royalty is based on the gross proceeds of sale that would accrue to
				the lessee if the gas were processed under the terms of the most remunerative
				third-party transaction for processing gas in such plant. Respective royalties
				on residue gas and on liquid hydrocarbons for which the requirements for using
				third-party transactions cannot be met must be determined by the greater of:
a. The highest market price paid for any gas
				or liquid hydrocarbons of comparable quality and quantity under comparable
				conditions of sale in the general area F.O.B. at the plant after
				processing;
b. The gross proceeds
				of sale for such residue gas or the weighted average gross proceeds of sale for
				the respective grades of liquid hydrocarbons, F.O.B. at the plant after
				processing; or
c. The gross
				proceeds of sale paid to a third party processing gas through the plant. The
				lessee shall furnish copies of any and all third-party gas processing
				agreements pertaining to the plant upon lessor's request.