North Dakota Mineral Leases Assignment Clause

North Dakota Mineral Leases
Assignment Clause

One mineral lease provision that is particularly important to mineral rights lessees is the North Dakota Mineral Leases Assignment Clause, which typically grants both:

• the lessor,
  and
• the lessee,

the right to assign their lease interests to a third party, but generally is written in favor of mineral rights lessees.

It is a customary oil and gas industry practice for independent “landmen” to:

• lease mineral rights from owners,
  and then
• sell such rights to an exploration oil company pursuant to an “assignment“.

As a result, the ultimate mineral developer-producer is not usually the original entity leasing the mineral rights.

North Dakota Mineral Leases Assignment Clause

A North Dakota Mineral Leases Assignment Clause facilitates common industry custom and practice, and any given lease may be assigned several times by the lessees.

While such assignments are not per se objectionable:

• in order to become aware of any such assignments,
  and
• in order to assure that assignors and assignees are both held accountable to the terms of the lease,

the mineral owner should attempt to obtain lease provisions similar to the following:

• Provide that the assignor is not released from liability for any default or harm caused by the assignee.
• In case of a partial assignment, provide that any default on the assigned lease will be a default that applies to the entire lease.

While not usually available from prospective mineral rights lessees, the following type of lease provision could be beneficial to the lessor:

The rights of Lessee hereunder may not be assigned or subleased in whole or in part without Lessor’s prior written consent.

North Dakota Mineral Leases Assignment Clause – Modern Lease

An oil and gas lease proposed to be used in North Dakota in the last few years by one oil company contained the following “Assignment Clause” – the purpose of which was to keep the lessee informed of any assignments by the lessor:

The rights of Lessor and Lessee hereunder may be assigned in whole or part.

No change in ownership of Lessor’s interest (by assignment or otherwise) shall be binding on Lessee until Lessee has been furnished with notice, consisting of

• certified copies of all recorded instruments or documents
  and
• other information necessary to establish a complete chain of record title from Lessor, and
• then only with respect to payments thereafter made.

No other kind of notice, whether actual or constructive, shall be binding on Lessee.

No present or future division of Lessor’s ownership as to different portions or parcels of said land shall operate to enlarge the obligations or diminish the rights of Lessee, and all Lessee’s operations may be conducted without regard to any such division.

If all or any part of this lease is assigned, no leasehold owner shall be liable for any act or omission of any other leasehold owner.

North Dakota Mineral Leases Assignment Clause – 1981 Lease

For comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1981 by an oil company in the business of oil exploration contained the following “Assignment Clause” – which was also written for the primary benefit of the lessee:

If the estate of either party hereto is assigned, and the privilege of assigning in whole or in part is expressly allowed, the covenants hereof shall extend to their heirs, executors, administrators, successors or assigns, but no

• change in the ownership of the land
• or
• assignment of rentals or royalties

shall be binding on the lessee until after the lessee has been furnished with a written transfer or assignment or a certified copy thereof;
and it is hereby agreed in the event this lease shall be assigned as to a part or parts of the above described lands and the assignee or assignees of such part or parts shall fail or make default in the payment of the proportionate part of the rents due from him or them, such default shall not operate to defeat or affect this lease in so far as it covers a part or parts of said lands which the said lessee or any assignee thereof shall make due payment of said rentals.

An assignment of this lease, in whole or in part, shall as to the extent of such assignment relieve and discharge the lessee of all obligations hereunder.

North Dakota Mineral Leases Assignment Clause – 1977 Lease

For further comparison purposes, an oil and gas lease actually used in Ward County, North Dakota in 1977 by an oil company in the business of oil exploration contained the following “Assignment Clause“:

The rights or either party hereunder may be assigned in whole or in part and the provisions hereof shall extend to the heirs, executors, administrators, successors, and assigns, but no change or division in ownership of the land, rentals or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of lessee.

No such change or division in the ownership of the land, rentals, or royalties shall be binding upon lessee for any purpose until such person acquiring any interest has furnished lessee with the instrument or instruments, or certified copies thereof, constituting his chain of title from the original lessor.

In the event of an assignment of this lease as to a segregated portion of said land, the rentals payable hereunder shall be apportioned as between the several leasehold owners ratably according to the surface area of each, and default in rental payment by one shall not affect the rights of other leasehold owners hereunder.

An assignment of this lease, in whole or in part, shall, to the extent of such assignment, relieve and discharge lessee of any obligations hereunder,
and, if lessee or assignee of part or parts hereof shall fail or make default in the payment of the proportionate part of the rentals due from such lessee or assigns or fail to comply with any other provision of the lease, such default shall not affect this lease in so far as it covers a part of said lands upon which lessee or any assignee thereof shall sake payment of said rentals.

North Dakota Mineral Leases Assignment Clause – Comparison of Lease Terms

There are no significant differences between the terms of the three Assignment Clauses identified above.

North Dakota Mineral Leases Assignment Clause

Topics of Interest – North Dakota Ancillary Probate

Topics of Interest – North Dakota Mineral Rights.

Topics of Interest – North Dakota Transfer on Death Deeds

Topics of Interest – North Dakota Affidavits of Heirship

Topics of Interest – North Dakota Intestate Succession.

Topics of Interest – North Dakota Informal Probate

Topics of Interest – North Dakota Intestate Succession.