Royalty check deductions in North Dakota: how to read your stub

What the stub has to show

North Dakota requires an information statement with every royalty payment. NDCC 38-08-06.3 says it must let you clearly identify the amount of oil or gas sold and the amount and purpose of each deduction from the gross amount due, and a person who fails to comply is guilty of a class B misdemeanor.^[1] The Industrial Commission's rule, NDAC 43-02-06-01, lists the contents. They have to be on the check stub or an attachment, unless the information is otherwise provided on a regular monthly basis.^[2] In the rule's order, the items are:

1. The lease, property or well name, or its identification number. If a number is used, you must first be given the name it stands for.
2. The month and year the sales occurred.
3. One hundred percent of the corrected volume sold, regardless of ownership: oil in barrels, gas in thousand cubic feet.
4. The price, as a weighted average per barrel of oil, per thousand cubic feet of gas and per gallon of natural gas liquids. The rule says the price must be the net price the producer received after all deductions.
5. The total state severance and other production taxes.
6. The producer's net value of total sales after taxes and deductions.
7. The amount and purpose of each owner deduction, identified as transportation, processing, compression or administrative costs.
8. The amount and purpose of each owner adjustment or correction.
9. Your interest in sales as a decimal.
10. Your share of the total value of sales before taxes are removed. It can be figured before or after your deductions if the statement clearly says which.
11. Your share of sales value less taxes and deductions.
12. An address where you can get more information. If you ask by certified mail, the answer must come by certified mail within 30 days.

Taxes and deductions are separate lines

The rule lists taxes (item 5) apart from deductions (item 7), and the producer's net value (item 6) comes after both. When a check is smaller than you expected, find which line took the money. How a given tax applies to your royalty is a question for a tax adviser, and we don't give tax advice. If the stub is missing items from the list above, that's a fair question for the payor, and item 12 is where to send it.

Whether a deduction is allowed depends on your lease

The Legislative Council's 2021 memo on postproduction deductions says royalties on oil and gas production in North Dakota are governed by contract law, meaning the oil and gas lease the owner signed, and that how royalties are calculated depends on the royalty clause. A royalty clause typically sets the point where value is determined and what deductions may apply.^[3]

The memo says most royalty clauses set value “at the mouth of the well” or at the “market value at the well.”^[3] In Bice v. Petro-Hunt, the North Dakota Supreme Court adopted the “at the well” rule when it read “market value at the well.”^[4] As the court described it later in Kittleson v. Grynberg, a lessee under that rule can use the “work-back” method. It starts with the price received at a downstream point of sale and subtracts the reasonable post-production costs, including transportation, gathering, compression, processing, treating and marketing.^[5]

Different words lead to different results. The Kittleson lease also said there “shall be no deductions from the value of Lessor's royalty of any required processing, cost of dehydration, compression, transportation, or other matter to market such gas.” The court held that this specific language prevailed over “market value at the well,” so the post-production deductions had to be added back.^[5]

We can't tell you whether a deduction on your stub is allowed. That turns on your lease and the facts of your well. Look in the royalty clause for phrases like “at the well,” “market value,” “proceeds,” “free of cost” or “no deductions,” then take the clause to a North Dakota attorney.

Two other points from the memo. Under the gas royalty clauses it describes, post-production costs are shared proportionately by the working interest and royalty owners, and both also share proportionately in the added value from downstream sales. And when the Tax Department studied private royalty contracts, it recommended no statutory changes, noting that the courts are there to decide which deductions a contract allows.^[3]

How far back a claim can reach

In Kittleson, the court held that the ten-year limit in NDCC 28-01-15(2) applied to an action for underpaid royalties under the lease. The trial court found about $17,240 underpaid between 1997 and 2009, and the judgment, with interest and attorney's fees, was about $111,300.^[5] Time limits depend on the facts, so if you think you've been underpaid, don't wait to ask an attorney.

Late royalties: the 150-day and 18 percent rule

NDCC 47-16-39.1 covers late payment. If the operator doesn't pay royalties within 150 days after oil or gas produced under the lease is marketed, and cancellation of the lease isn't being sought, the operator has to pay interest on the unpaid royalties at 18 percent per year until they're paid. The owner doesn't have to ask for it. Unleased mineral owners get the same 150 days from the time production from their minerals is marketed. If the amount is under $50, the operator may pay semiannually, in a lump sum covering six months.^[6]

The statute lists exceptions. It doesn't apply if owners elect to take their share of production in kind, if a title dispute that would affect distribution exists, or if an owner can't be found after reasonable inquiry by the operator. Even then, the operator has to pay owners whose title isn't in dispute. The section also doesn't apply to minerals owned or managed by the Board of University and School Lands.^[6]

For enforcement, the district court in the county where the well sits has jurisdiction, and the winning party recovers court costs and reasonable attorney's fees. The statute also calls the royalty obligation “of the essence” of the lease and says a breach may be grounds for cancelling it where a court finds the equities require.^[6] To check timing, compare the sales month on your stub (item 2) with the date you were paid.

Asking for an explanation and your records

Start in writing, to the address on the statement. A certified-mail request has to be answered by certified mail within 30 days.^[2] Ask the payor which lease provision it relies on for each deduction. If you want the underlying records, NDCC 47-16-39.2 lets a royalty owner, an assignee or a designated representative inspect and copy the production and royalty payment records on written notice. The notice has to name the lease, the period and the records, and go to the address on the information statement. If the payor refuses or doesn't respond within 30 days, the owner can go to district court, and a successful owner recovers costs, copying expenses and reasonable attorney's fees.^[6] Operators have to keep the books and records behind their reports for at least six years.^[2]

Related guides

The division order guide covers the decimal that drives your check. The royalty estimator lets you test numbers from your stub. County pages: Williams, McKenzie, Dunn, Mountrail and Divide County. The FAQ has short answers to common questions.

A note on our interest

Fort Union buys minerals and royalty interests, so we have a commercial interest in this subject. Nothing in this guide depends on selling to us, and each statement comes from a public source listed below. Our editorial standards explain how we source and review our pages. If you ever want to know what we'd pay for your interest, the offer page is the way to reach us.

Sources

These are the sources behind this guide, in the order we first cite them. We read each one in full on October 25, 2026.

1. N.D.C.C. section 38-08-06.3, information statement to accompany payment to royalty owner — North Dakota Legislative Branch, Century Code chapter 38-08, read October 25, 2026.
2. N.D.A.C. chapter 43-02-06, Royalty Statements — North Dakota Legislative Branch (Administrative Code), read October 25, 2026.
3. Oil and gas lease postproduction deductions, memorandum 23.9039.01000 — North Dakota Legislative Council, August 2021.
4. Bice v. Petro-Hunt, L.L.C., 2009 ND 124, 768 N.W.2d 496 — North Dakota Supreme Court, opinion text as published by Justia, 2009.
5. Kittleson v. Grynberg Petroleum Co., 2016 ND 44, 876 N.W.2d 443 — North Dakota Supreme Court, opinion text as published by Justia, 2016.
6. N.D.C.C. chapter 47-16, Leases (sections 47-16-36 to 47-16-40) — North Dakota Legislative Branch, Century Code, read October 25, 2026.