47-331. OBLIGATION TO PAY ROYALTIES AS ESSENCE OF CONTRACT — INTEREST. (1) The obligation arising under an oil and gas lease to pay oil and gas royalties to the royalty owner or the owner’s assignee, to deliver oil and gas to a purchaser to the credit of the royalty owner or the owner’s assignee, or to pay a portion of the proceeds of the sale of the oil and gas to the royalty owner or the owner’s assignee is of the essence in the lease contract.
(2) Unless otherwise agreed by the parties:
(a) A royalty of no less than twelve and one-half percent (12.5%) of the oil and gas or natural gas plant liquids produced and saved shall be paid. The lessee shall make payments in legal tender unless written instructions for payment in kind have been provided.
(b) Royalty shall be due on all production sold from the leased premises except on that consumed for the direct operation of the producing wells and that lost through no fault of the lessee.
(3) If the operator under an oil and gas lease fails to pay oil and gas royalties to the royalty owner or the owner’s assignee within one hundred twenty (120) days after the first production of oil and gas under the lease is marketed, or within sixty (60) days for all oil and ninety (90) days for all gas produced and marketed thereafter, the unpaid royalties shall bear interest at the maximum rate of interest authorized under section 28-22-104(1), Idaho Code, from the date due until paid. Provided, however, that whenever the aggregate amount of royalties due to a royalty owner for a twelve (12) month period is less than one hundred dollars ($100), the operator may remit the royalties on an annual basis without any interest due.
(4) A royalty owner seeking a remedy for failure to make payments under the lease or seeking payments under this section may file a complaint with the commission or may bring an action in the district court pursuant to section 47-333, Idaho Code. The prevailing party in any proceeding brought under this section is entitled to recover court costs and reasonable attorney’s fees.
(5) This section does not apply if a royalty owner or the owner’s assignee has elected to take the owner’s or assignee’s proportionate share of production in kind or if there is a dispute as to the title of the minerals or entitlement to royalties, the outcome of which would affect distribution of royalty payments.
History:
[47-331, added 2017, ch. 271, sec. 24, p. 704.]
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