CHAPTER 35-37 OIL AND GAS OWNER'S SALES LIENS 2

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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

"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

"Operator" means a person engaged in the severance of oil or gas

"Purchaser" means a person who purchases oil or gas from a first purchaser

"Severed" means the taking, extraction, or production from the land of oil or gas in any manner

of business

35-37-02. Extent of lien - Dispute as to amount due - Notice - Buyer in ordinary course 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

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

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 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 Page No. 1 lien

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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

3. 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

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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

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

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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