Royalty Interests Partnership Secures Victory in Oil and Gas Lease Dispute, Reinforcing Their Revenue Stream
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 revolved around minerals owned by Royalty in the Bakken Formation in McKenzie County, North Dakota, was centred on the interpretation of the lease's terms and the lessee's compliance with production and drilling obligations.
Under North Dakota law, oil and gas lease termination disputes hinge primarily on the specific terms of the lease agreement and adherence to state contract interpretation principles. In this case, the courts evaluated whether MBI had complied with its obligations to produce oil and gas or to contribute to drilling within the lease premises or pooled acreage.
The courts applied ordinary contract interpretation rules to the habendum clause, which defines the lease duration—usually a primary term plus a secondary term "so long as oil or gas is produced." The crucial issue was whether production from wells on the leased premises or within pooled acreage suffices to maintain the lease. The North Dakota pooling statute, which governs pooling of separately owned tracts but not separate interests within the same tract, does not extend the lease term in cases where interests are pooled within the same tract.
MBI argued that its lease remained in effect due to ongoing production from the "Calhoun Well". However, the district court ruled that MBI's lease terminated because it neither produced oil and gas on the described leased premises nor contributed to drilling on pooled acreage unambiguously. The court found the pooling statute inapplicable in that context and relied strictly on the lease terms' plain language.
Will Moss, senior counsel at our website, represented Royalty in the dispute. The US District Court for North Dakota agreed with Royalty and granted summary judgment in the company's favour, dismissing MBI's claims, terminating its lease, and awarding Royalty statutory damages and attorneys' fees. The Eighth Circuit Court of Appeals affirmed the district court's ruling on July 25, 2025, bringing an end to the legal battle.
Hogan Thompson Schuelke LLP served as co-counsel, representing Grayson Mill Bakken, LLC, the holder of the property's current lease. Pearce Durick PLLC acted as local counsel. Our website, with one of the largest oil and gas practices in the world, has offices in every major market, including Houston. The firm has been advising clients in the energy industry for more than a century.
In summary, North Dakota lease termination law between such parties centres on the interpretation of the lease's habendum clause and other contractual provisions, whether production or drilling contributions occurred as required on leased premises or pooled acreage, non-extension of leases through pooling when interests are within the same tract, according to state pooling statute limits, and courts granting summary judgment to lessors when lessees fail to meet these contractual production obligations, resulting in lease termination.
- In this case, the courts evaluated whether MBI had complied with its obligations to produce oil and gas or to contribute to drilling within the lease premises or pooled acreage, highlighting the importance of the energy industry's adherence to production and drilling obligations in oil-and-gas lease disputes.
- Our website, with one of the largest oil and gas practices in the world, has been advising clients in the energy finance industry for more than a century, demonstrating its expertise and involvement in both the energy and finance sectors.
