NATURE, EXTENT AND DURATION OF OIL AND GAS LIEN

A. To secure the obligations of a first purchaser to pay the sales price, each interest owner is hereby granted an oil and gas lien to the extent of the interest owner’s interest in oil and gas rights. The oil and gas lien granted by this act is granted and shall exist as part of and incident to the ownership of oil and gas rights.

B. An oil and gas lien:

1. Exists in and attaches immediately to all oil and gas on the effective date of this act;

2. Continues uninterrupted and without lapse in all oil and gas upon and after severance; and

3. Continues uninterrupted and without lapse in and to all proceeds.

C. An oil and gas lien exists until the interest owner or representative first entitled to receive the sales price has received the sales price. Notwithstanding the immediately preceding sentence, as between an interest owner and a representative of an interest owner or any person claiming adversely to such interest owner or representative, such interest owner’s oil and gas lien continues uninterrupted and without lapse in proceeds in the possession or control of a representative until the interest owner on whose behalf such representative acts receives such proceeds in full. When a first purchaser, in good faith, pays the sales price to an interest owner or a representative otherwise apparently entitled to receive the sales price and the first purchaser is without actual knowledge that such interest owner or representative is not entitled to receive the sales price so paid, then such first purchaser takes free of the oil and gas lien otherwise applicable to the oil or gas for which such payment was made. Notwithstanding the immediately preceding sentence, the oil and gas lien will continue uninterrupted in the proceeds paid to or otherwise due the interest owner or representative.

D. The validity of an oil and gas lien shall not be dependent on possession of the oil or gas by an interest owner or representative. No oil and gas lien shall become or be deemed to be void or expired by reason of a change or transfer of the actual or constructive possession of or title to the oil or gas from the interest owner or representative to a first purchaser or purchaser.

E. On the conveyance or transfer of any oil and gas rights by a transferor interest owner, the oil and gas lien vested in the transferor interest owner immediately before the conveyance or transfer shall remain with the transferor interest owner to the extent of any oil and gas rights retained by the transferor interest owner.

F. On the conveyance or transfer of any oil and gas rights by a transferor interest owner, the oil and gas lien vested in the transferor interest owner immediately before the conveyance or transfer shall be transferred to and attach automatically to the oil and gas rights acquired by the transferee interest owner uninterrupted and without lapse and as part of and incident to the oil and gas rights so transferred or conveyed.

Added by Laws 2010, c. 142, § 3, emerg. eff. April 19, 2010.