N.D. Supreme Court hears dispute over how to calculate 2% nonparticipating royalty interest and whether operator could suspend payments

FARGO attorney Jonathan Garris told the North Dakota Supreme Court on Monday that his clients, the Garris Family Trust, are entitled to a full 2% nonparticipating royalty interest on production from a roughly 39.94-acre tract and accused Continental Resources of paying as little as 15% of what they are owed.

At the same argument, attorney James Dallner, representing Continental Resources Inc., urged the court to affirm the district court’s determination that state-owned acreage beneath the ordinary high-water mark of the Missouri River should not be included in the royalty calculation and defended the company’s suspension of royalty payments while the ownership and payment-factor dispute is litigated.

Why it matters: The justices’ decision will determine how to calculate a nonparticipating royalty interest (NPRI) when a legal description overlaps state-owned riverbed and will affect whether and when suspended production funds must be released to competing claimants.

What the dispute is about

The parties agree the grant at issue conveyed a 2% NPRI. The disagreement is how to compute the payment factor the 2% produces. Continental’s position, as presented by James Dallner, is that an NPRI is “carved off” from what the original grantor (the Landers) actually owned, and because the Landers never owned minerals under the ordinary high-water mark, state-owned riverbed acreage should be excluded from the acres used in the formula.

Garris countered that the 1951 royalty deed conveyed 2% of the described tract — about 39.94 acres — without limiting the grant to only the portions the grantor actually owned. "They tried to cheat us by giving us 15% of what we were entitled to," Garris said, describing a period when Continental reduced payments while the parties litigated the calculation.

Legal and statutory issues raised

Counsel debated whether the computation should use the acres the Landers owned or the full acreage described in the deed, and whether the operator properly suspended payments under a statutory safe-harbor for title disputes. Dallner argued the district court correctly excluded state-owned land and properly suspended payments during the dispute; he cited prior North Dakota cases addressing suspension and safe harbors. Garris said there was no title dispute and urged immediate payment plus statutory interest and fees for nonpayment.

The attorneys also discussed other authorities and precedents raised in briefing, including cases the parties labeled as Vic/Christiansen, Powell, THR Minerals and the so-called Duhigg line of authority; counsel debated how and whether those decisions apply to a carved-off NPRI and to suspension of payments.

Facts and procedural posture from argument

- The deed at issue describes approximately 39.94 acres and grants a 2% royalty interest. Counsel disputed whether that percentage is calculated against the acreage that the Landers actually owned or the full described tract.

- The Garris Family Trust began its litigation in January 2022, and Garris told the court that Continental suspended royalty distributions to the trust after the suit was filed and that the trust has not received payments from Continental since the lawsuit began.

- Continental contends the safe-harbor language in the relevant statute permits suspension of payments while a dispute that affects distribution is resolved; counsel noted the statute’s 150-day payment provision and cited cases interpreting the safe harbor.

What the justices asked

Justices on the bench pressed counsel on the provenance of the acreage determinations, whether there were factual findings in the record about which acres the state owned in 1951, and whether the parties’ stipulations in the lower court supplied the needed legal effect. Justice Daniel Crothers, Justice Lisa Fair McEvers, Justice Jared C. Tufte, Justice Douglas Bahr and Justice John Johnson asked questions about the interaction of deed language, riparian ownership and the statutory payment framework.

Outcome at argument and next steps

The justices took the case under advisement at the close of argument; no decision was announced. The court indicated it would issue a written opinion at a later date and the argument record will be used to resolve both the proper calculation method for the 2% NPRI and whether Continental’s suspension of payments was permitted under the statute and controlling case law.

Context and immediate implications

If the Supreme Court affirms the district court’s approach that excludes state-owned riverbed acreage from the calculation, the payment factor for the Garris trust could remain tied to the acreage the Landers actually owned. If the court takes Garris’s view, the calculation would use the described tract acreage in the deed. The ruling also bears on whether suspended funds must be released immediately after a final payment-factor determination and whether statutory interest or attorney fees are due for the period of nonpayment.

The case was argued on the court’s public oral-argument calendar and will be resolved in a written opinion to be posted by the North Dakota Supreme Court.