Royalty Interests Partnership secures a court victory in the oil and gas lease disagreement.
In a significant ruling, Royalty Interests Partnership, LP (Royalty) has secured a complete victory in an oil and gas lease termination dispute with MBI Oil and Gas, LLC (MBI). The dispute, which began in 2022, centred around minerals owned by Royalty in the Bakken Formation in McKenzie County, North Dakota.
The crux of the dispute was MBI's 2013 oil and gas lease with Royalty, which Royalty argued terminated at the end of its three-year primary term in 2016 due to the lack of production in paying quantities on the leased premises. MBI, however, contended that its lease remained in effect due to ongoing production from the "Calhoun Well".
Under North Dakota law, oil and gas leases automatically expire at the end of their primary term unless production in paying quantities occurs, or unless the lease otherwise expressly authorizes extension or reservation of rights. The district court agreed with Royalty, granting summary judgment in the company's favour, dismissing MBI's claims, terminating its lease, and awarding Royalty statutory damages and attorneys' fees.
The district court's ruling was affirmed by the Eighth Circuit Court of Appeals on July 25, 2025. The Eighth Circuit Court's decision upheld the validity of the property's current lease, held by co-defendant Grayson Mill Bakken, LLC.
The ruling emphasises the importance of the lease contract’s explicit language and the physical location of production to determine lease termination or extension in North Dakota. Production must occur on the leased premises to perpetuate the lease; production from other wells typically will not preserve the lease. Rights reserved to existing wells must be clearly stated in the lease language.
Pearce Durick PLLC and Hogan Thompson Schuelke LLP served as local and co-counsel, respectively, representing Grayson Mill Bakken, LLC. Will Moss, senior counsel at our website, represented Royalty in the dispute. Our website has one of the largest oil and gas practices in the world with offices in every major market, including Houston.
[1] Source: North Dakota Century Code § 35-13-01 et seq., North Dakota Oil and Gas Division, and case law cited in the district court's and Eighth Circuit Court of Appeals' rulings.
The ruling in the oil and gas lease termination dispute between Royalty and MBI underscores the crucial role of the lease contract's language and the location of production in determining lease termination or extension in North Dakota. Specifically, production must occur on the leased premises, and rights reserved to existing wells must be clearly stated in the lease language. Moreover, finance and energy industries, including those in the oil-and-gas sector, should be attentive to the implications of this decision for lease termination and extension practices in North Dakota.
