Power Energy Corporation et al v. Hess Bakken II, L.L.C.

Filing 70

ORDER by Magistrate Judge Charles S. Miller, Jr. granting 56 Motion for Summary Judgment. (BG)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Power Energy Corporation, a North
Dakota Corporation; Altschuld Oil,
L.L.C., a Colorado Limited Liability
Company; Copperhead Corporation, a
North Dakota Corporation; Strata
Resources, Inc., a Colorado Corporation;
Michael S. Johnson, a Colorado Resident;
Michael T. Fitzmaurice, a North Dakota
Resident; Patrick L. Butz, a North Dakota
Resident; and Jacques F. Butz, a North
Dakota Resident,
Plaintiffs,
vs.
Hess Bakken Investment II, L.L.C.,
a Delaware Limited Liability Company,
Defendant.

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ORDER GRANTING
SUMMARY JUDGMENT OF
DISMISSAL WITH PREJUDICE
Case No.: 1:17-cv-093

Before the court is the motion by defendant Hess Bakken Investment II, L.L.C. (“Hess
Bakken”) for summary judgment. For the reasons set forth below, the motion is granted.
I.

BACKGROUND
A.

Introduction

This case is about whether one or more of plaintiffs possess (or are otherwise entitled to) an
overriding royalty interest (“ORRI”) in the production of oil and gas from certain lands under a lease
granted in 2005 by the Department of the Interior acting through the Bureau of Land Management
(“Federal Lease”). Defendant Hess Bakken is the current holder of the Federal Lease. The parties
agree that Hess Bakken acquired the Federal Lease from the Hess Corporation. The two Hess
entities may sometimes be referred to herein as “Hess” since the corporate distinctions are not
1

relevant to what follows.
Central to the claim of the plaintiffs that they possess or are entitled to an ORRI in the
production from the lease lands in question are two agreements for the purchase of oil and gas leases
that preceded the grant of the Federal Lease. The court will pick up the thread there.
B.

The Prima Group’s purchase of oil and gas leases from the Altschuld Group
under the Altschuld PSA and from Strata under the Strata PSA
1.
The Altschuld and Strata PSAs

On July 8, 2004, Prima Exploration, Inc. (“Prima Exploration”), Gunlickson Petroleum, Inc.,
Niwot Resources, LLC, Cordillera Energy Partners II, LLC, Berry Ventures, Inc., and Strata
Resources, Inc. (“Strata”) (collectively the “Prima Group”) entered into two separate purchase and
sale agreements (“PSAs”) to acquire a number of oil and gas leases in Mountrail County, North
Dakota.
The sellers under the two PSAs owned oil and gas leases in areas that in part overlapped with
each other. The two PSAs were similarly structured. Both included an Area of Mutual Interest
Clause (“AMI Clause”) that was coordinated with and referenced the other PSA’s AMI Clause.
Plaintiffs Altschuld Oil, L.L.C. (“Altschuld Oil”), Powers Energy Corporation (“Powers
Energy”),1 and Copperhead Corporation (“Copperhead”) were the sellers under one of the PSAs
(the “Altschuld PSA”) and will be collectively referred to as the “Altschuld Group.” (Doc. No. 301). The AMI delineated in the Altschuld PSA will be referred to as the “Altschuld AMI.”
Plaintiff Strata Resources, Inc. (“Strata”) was the sole seller under the other PSA (the “Strata
PSA”). (Doc. No. 30-2). It also was a buyer under the Strata PSA of 2% of the interest acquired by

1

The caption refers to Power Energy Corporation based on how this entity was referred to the complaint when
the case was filed. However, it appears the correct name is Powers Energy Corporation.

2

the Prima Group. The AMI delineated in the Strata PSA will be referred as to the “Strata AMI.”
2.

The Altschuld and Strata AMIs

The Altschuld AMI encompassed the following lands in Mountrail County, North Dakota:
Township 157 North, Range 91 West – All
Township 157 North, Range 90 West – S½
Township 156 North, Range 92 West – All
Township 156 North, Range 91 West – All
Township 156 North, Range 90 West – All
(Doc. No. 30-1).
The Strata AMI was broader in reach. It encompassed the same lands as the Altschuld PSA
as well as the following additional land in Mountrail County:
Township 155 North, Range 92 West – All
Township 155 North, Range 91 West – All
Township 155 North, Range 90 West – All
(Doc. No. 30-2).
Under the AMI Clauses in both the Altschuld and Strata PSAs, the Prima Group had the right
to purchase any new leases acquired by the sellers within one year following execution of the PSA
within the AMI of the respective PSA. For any leases acquired by the Prima Group during the same
one-year period within the AMI, the Prima Group agreed to assign to the sellers under the respective
PSA an ORRI in percentages that varied depending upon where the newly-acquired leases were
located and other criteria. (Doc. Nos. 30-1; 30-2).
More particularly, under the Altschuld PSA, an ORRI was due the Altschuld Group on
newly-acquired leases that varied depending upon the distance from an existing Altschuld lease as
follows:
•

3% on newly-acquired leases located within one mile of an existing Altschuld lease.
3

•

1% on newly-acquired leases within the Altschuld AMI but greater than one mile
from an existing Altschuld lease.

These percentages were subject to adjustment based upon the percentage of the total royalty burden
imposed upon the Prima Group under a schedule set forth in the Altschuld PSA. Further, these
percentages were subject to a further exception, which was that the ORRI would be only 0.5% for
any lease acquired within the Altschuld AMI but within a mile of an existing Strata Lease and
outside of a defined “Overlapping Area.” The apparent reason for the reduction to 0.5% was due to
the Strata AMI also encompassing the lands covered by the Altschuld AMI and Strata being entitled
to an ORRI on the same newly-acquired lease acreage under the Strata PSA as discussed next. (Doc.
No. 30-1).
The Strata PSA’s AMI provisions were largely similar but different in at least one respect.
The Strata PSA provided that Strata (as the seller) was entitled to a 3% ORRI for newly-acquired
leases within the Strata AMI and located within a mile of an existing Strata Lease. Like the
Altschuld PSA, this percentage was subject to adjustment depending upon the total royalty burden
suffered by the Prima Group. Unlike the Altschuld PSA, however, no ORRI was due under the
Strata PSA for newly-acquired leases within the Strata AMI but more than a mile from an existing
Strata Lease. (Doc. No. 30-2).
Finally, the Altschuld and Strata PSAs both included an “Overlapping Area of Interest”
provision. Under this provision, the “Overlapping Area” was defined to be an area where “both
parties’s [i.e., the Altschuld Group’s and Strata’s] leasehold interests . . . are located within a mile
of the other.” (Doc. Nos. 30-1; 30-2). Undoubtedly, the purpose for this provision was to deal with
a 3% ORRI otherwise being due to both the Altschuld Group and Strata under their respective PSAs
for newly-acquired leases within a mile of an existing lease. The solution to otherwise having to pay
a double ORRI was to provide that, for newly-acquired leases in the Overlapping Area, the ORRI
was to be shared equally by the Altschuld Group and Strata.

4

C.

Acquisition of the Federal Lease by Prima Exploration

In 2005, Prima Exploration acquired the previously referenced Federal Lease from the
DOI/BLM of 50% of the mineral interest in the following described property:
Township 155 North, Range 90 West
Section 6:
Lots 4, 5, 6,
SWNE1/4, NESW1/4, ,N1/2NE1/4
Section 27: S1/2
Section 28: NW1/4
Section 33: NE1/4
(Doc. No. 30-3). Prima Exploration’s acquisition of the Federal Lease was within the one-year
period set forth in the Altschuld and Strata PSAs to which it was one of the purchasers along with
the other members of the Prima Group.
Relevant to what follows:
•

None of the Federal Lease acreage was within the Altschuld AMI. However, the
“Section 6 acreage” of the Federal Lease was within one mile of an existing
Altschuld Lease.

•

All of the Federal Lease acreage was located within the Strata AMI. But, while the
Section 6 acreage was within a mile of an existing Strata Lease, the Sections 27, 28,
and 33 acreage may not have been.

The parties to this case agree that the Section 6 acreage has been treated as falling within an
Overlapping Area even though it was outside of the Altschuld AMI. Undoubtedly, this is because
Prima Exploration later conveyed a 3% ORRI in the production from the Section 6 acreage to the
Altschuld Group and Strata as discussed in a moment. This may have been a generous reading of
the Altschuld PSA.
As discussed later, one of the primary questions in this case is whether the Altschuld Group
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was entitled to a share of an ORRI in the production from the Sections 27, 28, and 33 Federal Lease
acreage because the Section 6 acreage was located within the Overlapping Area. There is also a
similar, but somewhat different, question with respect to whether Strata was entitled to an ORRI
with respect to the lease acreage outside of Section 6. That is, whether Strata was entitled to an
ORRI on all of the lease acreage because the Section 6 acreage was within a mile of an existing
Strata Lease or only an ORRI on the Section 6 acreage if the Sections 27, 28, and 33 acreage was
not within a mile of an existing Strata Lease.2
D.

Conveyance by Prima Exploration of an ORRI to Strata and the Altschuld
Group for the Section 6 acreage and the lack of a contemporaneous conveyance
of an ORRI for the remaining lands under the Federal Lease.

On March 13, 2006, Prima Exploration conveyed a 3% ORRI for the Section 6 acreage under
the Federal Lease as follows: 50% to Strata and the other 50% to the respective members of the
Altschuld Group (i.e., 16.6666% to each member). (Doc. No. 30-4). Plaintiffs have not presented
any evidence of a contemporaneous conveyance of an ORRI for the remaining acreage under the
Federal Lease. Prima Exploration did make such a conveyance years later, but this was well after
intervening conveyances impacting the interests under the Federal Lease, including a sale of the
Federal Lease and assignment of the Altschuld and Strata PSAs to Hess.
E.

Prima Exploration’s assignment of a 69.424% working interest in the Federal
Lease to members of the Prima Group, including Strata

On April 13, 2006, Prima Exploration assigned a share of the working interest in the Federal
Lease to the other members of the Prima Group and Marshall Resources, LLC (“Marshall
2

The “part-in, part-out” and “contiguous acreage” issues that may arise from AMI Clauses lacking the
necessary specificity has been discussed in a number of journal articles. See, e.g., Mark T. Nesbitt, Area of Interest
Provisions—Two Edged Swords, 35 Rocky Mountain Law Institute 21 (1989); Dante L. Zarlengo, Area of Mutual
Interest Clauses Regarding Oil and Gas Properties: Analysis, Drafting, and Procedure, 28 Rocky Mountain Law Institute
14 (1982).

6

Resources”) using a DOI/BLM-prescribed assignment form. Pursuant to that assignment, Prima
Exploration retained 30.576% of the working interest and conveyed the remaining 69.424% to the
other members of the Prima Group (including Strata, which received its 2% share) and Marshall
Resources. The assignment document states under a column of “Percent of Overriding Royalty or
Similar Interests” that “None” were reserved and that there was previously reserved or conveyed a
3% interest but without further explanation as to whether that was for all or part of the lease acreage.
(Doc. No. 35-4).
F.

Prima Group’s sale of oil and gas leases, including the Federal Lease, to Hess
Corporation pursuant to the Red Sky PSA along with an assignment of the
Altschuld and Strata PSAs.

On May 16, 2007, the Prima Group, Marshall Resources, and Hess Corporation
consummated the Red Sky Purchase and Sale Agreement (“Red Sky PSA”). (Doc. No. 61). Under
the Red Sky PSA, the Prima Group (which included Strata) and Marshall Resources sold all of their
right, title, and interest in a package of oil and gas leases to the Hess Corporation. Listed first in an
Exhibit A-2 schedule of conveyed leases was the Federal Lease. (Id. at p. 43). In addition to
describing the lands covered by the Federal Lease, the schedule stated that the Lease “acreage” for
the Federal Lease was 895.98 “Gross” and 447.99 “Net.” Most likely, this was because the Federal
Lease was only for 50% of the mineral interest. The schedule goes on to describe the “Royalty” as
0.1250%, the “ORRI” as 0.0300, and the “NRI” [net revenue interest] as 0.8450%.
The Red Sky Agreement also included an assignment to Hess Corporation of certain
agreements, including the Altschuld and Strata PSAs. (Doc. No. 61). Notably, the schedule of
assigned contracts in the “Remarks” section stated that both the Altschuld and Strata PSAs had
expired but that the “ORR[I] survives as to Extensions/Renewals.” (Id. at p. 105).
7

Pursuant to the Red Sky PSA, the Prima Group (including Strata) and Marshall Resources
executed two assignments of the interests being sold to Hess. One assignment document entitled
“Assignment and Bill of Sale” dated May 1, 2007, was recorded with the county register of deeds.
(Doc. No. 35-7). The form of this assignment was an exhibit to the Red Sky PSA. (Doc. No. 61).
That is, its language was negotiated at the time of the consummation of the Red Sky PSA and was
part of the agreement. This assignment covered all of the interests being acquired by Hess, both
leases and contracts.
The other assignment document was a prescribed DOI/BLM form entitled “Assignment of
Record Title Interest in a Lease for Oil and Gas or Geothermal Resources” effective August 1, 2007
that was executed to meet government requirements for assignment of the Federal Lease specifically.
(Doc. No. 35-8). The court will return to the particular language of these assignment documents
later.
G.

The complaints by Powers Energy beginning in 2011 over the lack of payment
of an ORRI on the Sections 27, 28 and 33 Federal Lease acreage and the email
communications about that subject with Hess over the next several years

Beginning in 2011, the principals of Powers Energy (Powers Energy having been part of the
Altschuld Group) began questioning the lack of payment of an ORRI on production from wells
under the Federal Lease on acreage outside of the Section 6 acreage, i.e., the Sections 27, 28, and
33 acreage. (Doc. Nos. 35, pp. 5–8). Over the next several years, Powers Energy communicated
with representatives of Hess about the lack of payment through a number of email exchanges. (Id.;
Doc. Nos. 35-9; 35-10; 35-11).
At one point, a draft of an assignment of a 3% ORRI from Hess to plaintiffs for the Sections
27, 28, and 33 acreage lying outside of the Overlapping Area was prepared. (Doc. No. 35-13).
8

Further, there is some evidence that the principals of Powers Energy were led to believe for a period
of time by some at Hess that an assignment would be forthcoming. (Doc. Nos. 35, pp. 5–8; 35-9,
pp. 7–15; 35–10).
In making its case for entitlement to an ORRI with respect to the Sections 27, 28, and 33
Federal Lease acreage, Powers Energy pointed to: (1) the assignment to the Altschuld Group and
Strata of an ORRI on the Section 6 acreage pursuant to which Powers Energy was being paid a share
of the ORRI; and (2) the reference to a 3% ORRI in the schedule of leases in the Red Sky PSA
whereby Hess acquired the Federal Lease. (Doc. Nos. 35-9, pp. 15–16; 35-11, p. 3). At no point
in the emails from the Powers Energy principals do they reference the 2004 Altschuld and Strata
PSAs, much less explain why under those agreements an ORRI was due on lease acreage outside
of the Overlapping Area. In fact, there is no mention of an AMI or Overlapping Area.
In 2014, Hess advised Powers Energy it was not persuaded an ORRI was due, stating it had
commissioned a records search when it acquired the Federal Lease that had not revealed a
conveyance of an ORRI on the Federal Lease acreage other than Section 6 acreage. (Doc. No. 3511, pp. 3, 6). Hess advised Powers Energy it would need to see the actual document that purportedly
created the ORRI, stating at one point in September 2014 that its legal department wanted to see a
“copy of the Letter Agreement dated July 8, 2004." Hess asked Powers Energy to provide a copy.
(Doc. No. 35-11, pp. 1–2).
It appears from the email exchanges between Powers Energy and Hess in October 2014 that
Powers Energy did not then have a copy of the 2004 letter agreement (i.e., the Altschuld PSA) that
Hess was requesting and that it reached out to Prima Exploration (a part of the Prima Group under
the 2004 Altschuld and Strata PSAs and the initial purchaser of the Federal Lease) for a copy.
9

However, it appears that Prima Exploration also did not then have a copy. This is because Powers
Energy responded to Hess’s request for the 2004 letter agreement by stating that the President of
Prima Exploration could tell Hess what was contemplated but that Prima Exploration had not
retained a copy of the agreement when it transferred all of its files to Hess when it sold the Federal
Lease to Hess as part of the Red Sky PSA. Powers Energy asked Hess whether it had the files that
Prima Exploration transferred to Hess. Hess responded that it did have the files but stated it had
reviewed them and could not find the document. (Doc. No. 35-11, pp. 7–10).3
At that point, the President of Prima Exploration communicated directly by email with Hess
on October 17, 2014, stating the following:
It was the agreement with Jim Powers and Prima Exploration’s intention to assign the ORRI
on all of the leasehold. We have searched our files for the agreement, but it appears all of
our files were sent to Hess when we sold the leasehold to Hess, per our agreement with Hess.

(Doc. No. 35-11, p. 7). This is the last email exchange in the record addressing the subject of an
ORRI on the Sections 27, 28, and 33 lease acreage. Apparently, Prima Exploration’s expression of
its purported intent was not enough for Hess because no conveyance of an ORRI with respect to
Sections 27, 28, and 33 was forthcoming.
As discussed next, this is when Powers Energy in November 2014 obtained an assignment
of an ORRI with respect to the Sections 27, 28, and 33 acreage lying outside of the Overlapping
Area. However, before leaving the emails, what is notable about them is that throughout the
exchanges there is no reliance upon the actual language of the 2004 Altschuld and Strata PSAs by
either Powers Energy in claiming an ORRI was due or by Hess in stating it was not persuaded.

3

Why Hess had trouble locating the relevant the 2004 Altschuld PSA was never explained. One would think
that it had a copy since the Altschuld PSA was one of the agreements specifically listed in the schedule of agreements
being assigned to Hess under the Red Sky PSA.

10

Further, the same is true with respect to the statement by the President of Prima Exploration in his
October 17, 2014 email as set forth above. That is, his statement of what was Prima Exploration’s
intent some ten years earlier in 2004 was made without the benefit of having the 2004 Altschuld and
Strata PSAs in front of him.
H.

Prima Exploration’s November 2014 assignment of an ORRI on the Sections 27,
28, and 33 Federal Lease acreage and the commencement of this action

After it became apparent that Hess Corporation would not pay an ORRI on the Sections 27,
28, and 33 acreage, plaintiffs (including Strata) on November 14, 2014, obtained an assignment from
Prima Exploration of a 3% ORRI on the production from the Sections 27, 28, and 33 lease acreage.
(Doc. No. 35-12). On May 8, 2017, plaintiffs commenced this action, claiming they are owed a 3%
ORRI on that lease acreage and seeking payment on the ORRI dating back to the date of first
production.
II.

DISCUSSION
A.

Plaintiff members of the Altschuld Group are not entitled to an ORRI on the
Federal Lease lands outside of the Overlapping Area

Plaintiffs contend that the “Overlapping Area of Interest” provision in the Altschuld PSA,
together with the remainder of the Altschuld AMI, is at least ambiguous with respect to whether the
Altschuld Group was entitled to a share of an ORRI on the Sections 27, 28, and 33 Federal Lease
acreage that lies outside of the Overlapping Area due to the fact that part of the Section 6 acreage
was within the Overlapping Area. According to plaintiffs, since the language is ambiguous, there
needs to be a trial.
In Pamida, Inc. v. Meide, 526 N.W.2d 487 (N.D. 1995), the North Dakota Supreme Court
summarized the primary rules governing interpretation of contracts as well as dealing with
11

ambiguity as follows:
The construction of a written contract to determine its legal effect is a question of
law. Red River Human Services Found. v. Department of Human Services, 477 N.W.2d 225
(N.D.1991); Production Credit Ass'n v. Foss, 391 N.W.2d 622 (N.D.1986); Sorlie v. Ness,
323 N.W.2d 841 (N.D.1982). A contract is to be interpreted to give effect to the mutual
intention of the parties at the time of contracting. Section 9–07–03, N.D.C.C. Under §
9–07–04, N.D.C.C., the intention of the parties to a written contract is to be ascertained from
the writing alone, if possible. If executed documents are unambiguous, parol evidence is not
admissible to contradict the terms of the written agreement. Production Credit Ass'n v. Foss,
supra. If a written contract is ambiguous, extrinsic evidence can be considered to clarify the
parties' intent. First Nat'l Bank & Trust Co. v. Scherr, 435 N.W.2d 704 (N.D.1989).
“[W]here the contract is clear and unambiguous there is no reason to go further.” Hoge v.
Burleigh County Water Management Dist., 311 N.W.2d 23, 27 (N.D.1981). Whether or not
a contract is ambiguous is a question of law. Vanderhoof v. Gravel Products, Inc., 404
N.W.2d 485 (N.D.1987); First Nat'l Bank & Trust Co. v. Scherr, supra. “ An ambiguity
exists when rational arguments can be made in support of contrary positions as to the
meaning of the term, phrase, or clause in question.” Vanderhoof v. Gravel Products, Inc.,
supra, 404 N.W.2d at 491 If the parties' intentions can be ascertained from the writing alone,
then the interpretation of the contract is entirely a question of law, and we will independently
examine and construe the contract to determine if the district court erred in its interpretation
of it. Sorlie v. Ness, supra. “A contract may be explained by reference to the circumstances
under which it was made and the matter to which it relates.” Section 9–07–12, N.D.C.C.
“However broad may be the terms of a contract, it extends only to those things concerning
which it appears that the parties intended to contract.” Section 9–07–13, N.D.C.C.

Id. at 490. This remains the governing law in North Dakota today. See, e.g., Hess Bakken
Investments II, LLC v. AgriBank, FCB, 2020 ND 172, ¶ 7, 946 N.W.2d 746; Flaten v. Couture,
2018 ND 136, ¶ 14, 912 N.W.2d 330 (quoting Pamida).
The relevant portions of the Altschuld PSA are the following:
AREA OF MUTUAL INTEREST
An Area of Mutual Interest ("AMI") is hereby established by this Agreement. The AMI shall
consist of the following described lands:
Township 157 North, Range 91 West - All
Township 157 North, Range 90 West- South One-Half
Township 156 North, Range 92 West- All
Township 156 North, Range 91 West - All
Township 156 North, Range 90 West-All
The AMI shall expire one year from the date of this Agreement.

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Any additional oil and gas leases acquired in the AMI ("AMI Leases") during the effective
date of the AMI by either Seller or Buyer shall be subject to the terms and . conditions
described below. Seller agrees to offer any AMI Leases it acquires to Buyer during the
effective date of the AMI.
OUTSTANDING OFFERS OF THE SELLER
In addition to the Subject Leases, Buyer acknowledges that Seller has tendered offers to
lease to various mineral owners of lands within the AMI. Seller agrees to provide Buyer a
schedule of said offers concurrent with the date of this Agreement. Said schedule shall
hereby be incorporated into this Agreement as Exhibit "B" after being reviewed and
acknowledged by the Buyer. Buyer agrees to include in this Agreement any outstanding
offers represented by Seller on said schedule that have been made and accepted by said
mineral owners for a period of 30 days from the date of this Agreement. Any oil and gas
leases that are accepted by said mineral owners after 30 days of this agreement shall be
considered as "Post Closing Leases" and are discussed below.
****
ADDITIONAL ACREAGE ACQUIRED IN AMI
Seller agrees to consult with Buyer prior to making any offers to purchase any AMI Lease.
Seller agrees that Buyer has the right, but not the obligation, to purchase any AMI Lease
acquired by Seller. Such AMI Lease shall be offered to Buyer at the same price Seller has
acquired such AMI Lease. Buyer agrees to assign to Seller an overriding royalty interest in
such AMI Lease as described below.
Buyer agrees to assign an overriding royalty interest to Seller in and to any AMI Leases
acquired for a period of one year from the date of this Agreement and as further defined
below.
Buyer shall assign an overriding royalty interest to the Seller in and to any AMI Leases,
renewals or extensions acquired by the Buyer that is located within one mile of any Subject
Lease in the following proportions:
Total Royalty Burden to Buyer
12.5%
Greater than 12.5% up to 15%
Greater than 15% but not more than 17%
Greater than 17% but less than 18%

Overriding Royalty to Seller (*)
3.00% of 8/8ths
2.00% of 8/8ths
1.00% of 8/8ths
82% NRI less the royalty burden

In any area within the AMI, where the additional leasehold acquired by Buyer is located
greater than one mile from the Subject Leases, the Buyer shall assign an overriding royalty
interest to Seller of 1.00% with the exception that additional leasehold acquired by Buyer
located within one mile of any existing Strata Resources, Inc: lease as shown on Exhibit "A"
and not located within the area defined herein below as the Overlapping Area of Interest,
Seller shall receive an assignment from Buyer of an overriding royalty interest equal to
0.5%. All assignments of overriding royalty shall be proportionately reduced to the interest
owned.

13

In no event shall Seller be entitled to an assignment of overriding royalty on any AMI Leases
that would result in a burden to the Buyer in excess of an 82% net revenue interest. In no
event shall Seller be entitled to an assignment of overriding royalty interest from the Buyer
on leasehold fr acquires or earns through a farmout, support agreement, or operations
conducted by it, including seismic or drilling.
STRATA RESOURCES INC. - OVERLAPPING AREA OF INTEREST
Seller acknowledges that Buyer is also acquiring interests in various oil and gas leases
owned by Strata Resources Inc. ("Strata"). Some of the oil and gas leases owned by Strata,
are located within and around the boundaries of the AMI of this Agreement. Buyer shall
provide to Seller and to Strata a map of both parties' leasehold interests identifying where
such interests are located within one mile of the other. This area shall be defined as the
"Overlapping Area." Where any oil and gas lease is acquired in the Overlapping Area, during
the effective date of the AMI herein, the overriding royalty assigned by the Buyer, as
described in the "Additional Acreage Acquired in the AMI'' paragraphs hereinabove, shall
be assignable to the Seller and to Strata in equal proportions to the Seller and Strata.

(Doc. No 30-1, pp. 3, 5–6).
The court disagrees with plaintiffs that the Altschuld PSA is ambiguous with respect to
whether the Altschuld Group’s entitlement to a share in an ORRI for leases with some acreage
within the Overlapping Area extends just to the lease acreage within the Overlapping Area or to all
of the lease acreage. True, there is nothing in the language of the Altschuld PSA that explicitly
states that lease acreage outside of the Overlapping Area is not subject to an Altschuld Group’s
share. Further, the references to “lease” in the foregoing provisions standing alone could refer to
all acreage covered by the lease. However, the fact that a term might be susceptible to different
meanings does not render an agreement ambiguous if the intent of the parties can be determined
from the remainder of the agreement. Under North Dakota law that is the starting point for the
court’s inquiry. It is also the ending point under the authority previously cited if the court concludes
the intent of the parties can reasonably be determined from the agreement itself.
Here, the court believes the mutual intent of the parties can be determined when the entirety
of the relevant language of the Altschuld PSA is considered. That being: the Altschuld Group was

14

entitled to share in the ORRI only on lease acreage within the specifically delineated areas in the
Altschuld AMI and not lease acreage outside of the designated areas. The following supports this
conclusion even if no single point is dispositive:
•

The Altschuld PSA stating that the entitlement to an ORRI applies to leases and
leasehold interests acquired “in” the AMI or Overlapping Area..

•

The interests in the acquired leases being divisible. That is, it is possible to convey
an ORRI on the production from some of the leasehold lands and not others.
Restricting the ORRI to the lease acreage within the AMI and/or the Overlapping
Area is consistent with the parties having designated a specific AMI as well as to any
Overlapping Areas.

•

The title to one of the AMI paragraphs in the Altschuld PSA being “Additional
Acreage Acquired In AMI.” That is, the use of the words “Additional Acreage”
suggesting the entitlement to an ORRI applies only to the lease acreage within the
AMI.

•

The very detailed and specific provision of the coordinated AMI provisions of the
Altschuld and Strata PSAs with respect to when the Altschuld Group and Strata are
entitled to an ORRI. Within the Altschuld AMI, the Altschuld Group’s entitlement
to an ORRI on a newly-acquired leasehold interest varies depending upon whether
it is within in a mile of an existing Altschuld lease or is in an Overlapping Area.
Likewise, under the Strata PSA, Strata is entitled to an ORRI within the Strata AMI
only if the newly-acquired lease interest is within a mile of an existing Strata Lease
but not otherwise. Here, the Sections 27, 28, and 33 lease acreage is both outside of
15

the Altschuld AMI and several miles from what the parties have apparently treated
as being a qualifying Overlapping Area. Reading the relevant language as entitling
the Altschuld Group to an ORRI outside of the Altschuld AMI and not within an
Overlapping Area is incongruous with the detailed AMI provisions of the Altschuld
and Strata PSAs. Or, to put it another way, the court is convinced the relevant
language would have been written differently if there was an intent that the Altschuld
Group would be entitled to an ORRI on newly-acquired lease acreage outside of its
AMI or even the Overlapping Area but within the Strata AMI for which it had no
mutual interest.
In short, while the proffered interpretation by the Altschuld Group is a possible reading of the
relevant language, it not a reasonably plausible one given the foregoing.4

4

But, even if the court is wrong in concluding there is no ambiguity, the court in this case is also the
factfinder given that a jury trial has not been demanded. And here, plaintiffs have not come forward with extrinsic
evidence that would be sufficient to result in the court potentially reaching a different conclusion if the court was to
consider the extrinsic evidence that is in the record. Further, even if plaintiffs had no obligation to come forward with
all relevant extrinsic evidence now in response to the motion for summary judgment, the court is skeptical that any more
relevant evidence exists that would broker a different construction.
The extrinsic evidence of record that plaintiffs would point to in support of their interpretation and the problems
with it are the following:
•
The expression by the principals of Powers Energy beginning in 2011that they believed Powers
Energy and the other members of the Altschuld Group are entitled to an ORRI on the Federal Lease
acreage lying outside of the Overlapping Area. This expression of belief comes long after the
execution of the execution of the Altschuld PSA, is from only one of the members of the Altschuld
Group, and is not tethered to the contract language that purportedly created the entitlement to the
ORRI. Further, as a general matter, after-the-fact unilateral expressions of intent are of minimal, if
any, relevance of the mutual intent of the parties at the time a contact is entered into under North
Dakota law—at least in the undersigned’s view. See Sickler v. Lone Tree Energy & Associates, No.
4:12-cv-077, 2014 WL 1334185, at *8 (D.N.D. Apr. 2, 2014).
•
The October 17, 2014 email from the President of Prima Exploration that it was Prima Exploration’s
“intention to assign the ORRI on all lands.” However, as noted earlier, this appears to have been based
upon a recollection of what had transpired some ten years earlier and without the benefit of first
reviewing the actual language of the 2004 Altschuld and Strata PSAs. Further, it suffers from the
same problem of being an after-the-fact unilateral expression of intent. Finally, in terms of the intent
of the parties to the Altschuld and Strata PSAs, Prima Exploration was only one of the purchasers.
Included in the Prima Group as purchasers, as noted earlier, were Gunlickson Petroleum, Inc., Niwot
Resources, LLC, Cordillera Energy Partners II, LLC, Berry Ventures, Inc., and Strata.

16

The court’s conclusion that the Altschuld Group’s contractual right to share in an ORRI in
any newly-acquired lease acreage in an Overlapping Area did not extend to acreage under the
Federal Lease lying outside of the Overlapping Area disposes of the claims of the plaintiff Altschuld
Group members given as discussed later that they did not obtain an interest by the 2014 assignment
from Prima Exploration. Strata, however, is also a plaintiff and the foregoing does not necessarily
dispose of Strata’s possible entitlement to an ORRI, which is addressed next. The same applies to
plaintiff Johnson. While the pleadings are not clear, it appears he acquired the interest upon which
he bases his claim to an ORRI from Strata.
B.

Strata is not now entitled to an ORRI on the Federal Lease lands located outside
of the Overlapping Area

In its briefing on the motion for summary judgment, Hess assumed that Strata was entitled
to an ORRI on the Sections 27, 28, and 33 acreage and argued that any entitlement that Strata might

•

The references in the Federal Lease and subsequent conveyances of it to a 3% ORRI. These
references are consistent with the 3% ORRI being limited to the Section 6 acreage.
•
The November 2014 conveyance of a 3% ORRI in the Federal Lease acreage outside of the
Overlapping Area by Prima Exploration to plaintiffs. This conveyance appears to have been made by
Prima Exploration shortly after the email by its President discussed above and suffers from the same
problems in terms of being probative evidence of the intent of the parties when the Altschuld and
Strata PSAs were consummated.
If the court was to consider extrinsic evidence, far more persuasive in terms of the mutual intent of the parties
(particularly given that there were nine separate parties to the Altschuld PSA) are : (1) the contemporaneous conveyance
by Prima Exploration to the Altschuld Group and Strata of their respective shares of the ORRI that is limited to the
Section 6 acreage lying within the Overlapping Area; (2) the lack of a contemporaneous conveyance to the Altschuld
Group of a share of the ORRI for the remaining Federal Lease acreage outside of the Overlapping Area; and (3) the lack
of any contemporaneous objection by the several parties making up the Altschuld Group or by Strata that an ORRI in
the Federal Lease acreage lying outside of the Overlapping Area had not been conveyed when the ORRI for the Section
6 acreage was conveyed. All of this evidence supports what is the most straightforward reading of the language in
dispute in this case, which is that the Altschuld Group was not entitled to a share of the ORRI for the Sections 27, 28,
and 33 Federal Lease acreage lying outside of both any Overlapping Area and the Altschuld AMI.
Finally, if plaintiffs possessed more compelling evidence than what they can point to in the record (e.g., a
writing contemporaneous to the execution of the Altschuld PSA that sets forth how the parties contemplated the AMI
provisions would work and supportive of their position), surely plaintiffs after the almost four years this case has been
pending and the opportunity for discovery would have located it and submitted it to the court in response to the motion
for summary judgment.

17

have to an ORRI was extinguished or transferred to Hess as part of the Red Sky lease sale. The
court agrees and will discuss that first. However, it also appears likely that Strata was not entitled
to a 3% ORRI on the Sections 27, 28, and 33 acreage in the first instance. While the court did allude
to that possibility in written questions it posed prior to argument on Hess’s motion for summary
judgment, the court will discuss the issue but not reach a final conclusion given that plaintiffs may
not have had an adequate opportunity to fully weigh in on it.
1.

Whatever ORRI interest in the Sections 27, 28 and 33 acreage Strata
possessed or was entitled to as a matter of contract was assigned to Hess
as part of the Red Sky transaction

In resetting the table, the Strata PSA contemplated that, if any of the Prima Group
purchasers acquired qualifying lease acreage within the Strata AMI within one year, there would be
a subsequent conveyance of an ORRI to Strata. The only conveyance of an ORRI prior to the sale
of the Federal Lease to Hess as part of the Red Sky lease sale that plaintiffs have been able to
produce (either “of record” with the Mountrail County Register of Deeds or DOI/BLM or
unrecorded) is Prima Exploration’s assignment of a 3% ORRI to Strata and the Altschuld Group
with respect to the Section 6 acreage.
Hence, at the time of the sale of leases to Hess by the Prima Group members (including
Strata) pursuant to the Red Sky PSA, what Strata possessed with respect to the Sections 27, 28, and
33 Federal Lease acreage was a share of the working interest it had acquired pursuant to a separate
assignment from Prima Exploration, a share of an ORRI on the Section 6 acreage of the Federal
Lease, and the possibility it had a contractual right to a conveyance of an ORRI on the production
from the Sections 27, 28, and 33 acreage.
Following consummation of the Red Sky PSA and pursuant to it, the Prima Group members
(including Strata) made a specific assignment of the Federal Lease to Hess to satisfy DOI/BLM’s
requirements. This assignment stated the following in bold letters: “IT IS THE INTENT OF
ASSIGNORS TO CONVEY ALL OF THE RIGHT, TITLE, AND INTEREST WHICH THEY
OWN IN THE ABOVE DESCRIBED LAND WITHOUT RESERVATION.” The assignment
18

further stated that the percentage of interest being conveyed was 100%, that no ORRI or similar
interest was reserved, and that previously reserved or conveyed ORRIs or similar interests were
“Those of Record.” (Doc. No. 35-8).
Similarly, the more general assignment of the lease interests pursuant to the Red Sky PSA
that was recorded with the Mountrail County Register of Deeds provided for the assignment of all
of the Prima Group’s (including Strata’s) right, title and interest in the “Lands” that are the subject
of the scheduled leases, including the Federal Lease, together with all “production payments and
interests attributable allocable to the Wells and leasehold estates insofar as they cover the Lands (the
‘Leases) . . . .” Further, the assignment assigned any contractual rights that are “in any way
belonging to, incidental to, or appertaining to the property, interests, and rights” otherwise being
conveyed. (Doc. No. 35-7).
The court concludes that the foregoing assignments of all “right” and “interest” in the
Federal Lease acreage as well as the assignment of contract rights related to the leases extinguished
any contractual claim to an ORRI in the Sections 27, 28 and 33 Federal Lease acreage that Strata
may have possessed or at least transferred it to Hess. Further, even if the Strata PSA could itself be
construed as a conveyance of a future interest, the interest that Strata acquired was assigned to Hess.
Strata contends that the Red Sky PSA provides that, in the event of a conflict between the
assignments and the PSA, the latter controls. Strata argues that the reference to a 3% ORRI and a
0.8450 NRI interest with respect to the Federal Lease in the Red Sky PSA’s Exhibit A-2 listing of
leases being conveyed meant either that Hess was only acquiring the specified NRI or that it was
some sort of exception from the sale or reservation of an ORRI due Strata pursuant to the Strata
PSA. Strata contends these references in the lease schedule of the Red Sky Agreement constitute
19

a conflict and that the Red Sky PSA language controls.
The court disagrees. The reference to the 3% ORRI and 0.8450 NRI in the schedule of leases
attached to the Red Sky PSA is consistent with a 3% ORRI having been conveyed with respect to
the Section 6 lands under the Federal Lease. It is also consistent with the 3% ORRI and specified
NRI being only what the sellers were warranting and not a limitation upon what was agreed to be
sold when one works through the specific language of the Red Sky PSA. More particularly:
•

Section 1 of the Red Sky PSA provides that “Sellers agree to sell and convey and
Buyer agrees to purchase and pay for the Interests (as defined in Section 1.2), subject
to the terms and conditions of this Agreement.” It defines “Interests” in Section 1.2
broadly to include “all of Sellers’ right, title and interest” in “Leases” consisting of
“The mineral and leasehold estates created by the leases, licenses, permits and other
agreements described in Exhibit A-2, INSOFAR BUT ONLY INSOFAR as they
cover and relate to the lands described in Exhibit A-2” with Exhibit A-2 listing the
lands covered by each of the conveyed leases. In addition, the “Interests” conveyed
under Section 1.2 expressly includes the Sellers’ right, title and interest to a set of
“Contracts” “set forth in Exhibit A-3, which includes both the Strata Agreement and
the Altschuld Agreement. Finally, in Section 1.3, the Red Sky PSA lists what
interests are being reserved and excepted from the sale and conveyance of interests
and there is no mention of Sellers (including Strata) retaining, reserving, or excepting
any ORRI.

•

Section 2.1 provides that purchase price is allocated “based on Sellers delivering not
less than 56,196 mineral leasehold acres with Sellers retaining no overriding royalty
20

interest therein.” (emphasis added).
Notably, there is no mention in the foregoing sections to previously reserved or conveyed ORRIs
or that the interest Hess was acquiring was limited to any specified NRI. Where there is a reference
is in Section 5 addressing title matters that allow for permitted encumbrances and also provide a
floor for what is being conveyed and price adjustments to compensate Hess if it received less than
what is guaranteed.
When one considers the totality of the Red Sky PSA, it appears clear that the references in
the Exhibit 2 schedule of leases to previously reserved or conveyed ORRIs and the specified NRIs
was not for the purpose of limiting what was being conveyed. Rather, it was for the purpose of
identifying potential permitted encumbrances and setting a baseline for any adjustments required
to what was being conveyed.5
2.

It appears likely that Strata was not entitled to an ORRI on the
production from the Sections 27, 28, and 33 lease acreage in the first
instance

The AMI Clauses of the Strata PSA are almost identical in form to those of the Altschuld
PSA. Like the portions of the Altschuld PSA as set forth earlier, the Strata AMI provisions refer to
leases acquired “in” the AMI. Further, as with the Altschuld PSA, the title of one of the paragraphs
of the Strata PSA refers to additional “acreage” acquired in the AMI. Finally, the Strata PSA refers

5

The pleadings in this case limit what is in dispute to whether an ORRI interest was created or is contractually
owed on production from Sections 27, 28, and 33. Out of curiosity, the court inquired during oral argument about what
became of Strata’s share of the 3% ORRI in the production from the Section 6 acreage that it acquired from Prima
Exploration in terms of whether Strata and any of its successors were being paid on that interest or whether the parties
had treated that interest as having been conveyed to Hess. Counsel for both plaintiffs and defendant stated they did not
know. Hess’s counsel stated the answer would take some digging in that a third party operator(s) is the one making
payments on the relevant interests and it would take some analysis to determine what the particular payments encompass
given the numerous interests and wells. To be clear, the court is making no ruling with respect to the ORRI that was
created with respect to the Section 6 acreage.

21

to the Altschuld Group PSA and has comparable provisions addressing overlapping areas of interest.
Unlike the Altschuld PSA, however, Strata was not entitled to an ORRI on all newly-acquired lease
acreage within the Strata AMI—not even an ORRI of reduced percentage. Rather, under the Strata
PSA, Strata was only entitled to an ORRI if the newly-acquired lease acreage was within the Strata
AMI and within one mile of an existing Strata Lease.
In this case, while the Section 6 acreage of the Federal Lease was within a mile of an existing
Strata Lease, there does not appear to have been an existing Strata lease that was within a mile of
the Sections 27, 28, and 33 acreage. The map that was part of the Strata PSA that depicts the
existing Strata leases shows the nearest lease acreage to be in the SE/14 of Section 17 in the same
township as the Sections 27, 28, and 33 acreage. This lease acreage, while abutting up to the radius
of a one-mile dividing line, is technically not “within a mile” of the nearest acreage in Section 28.
If the only existing Strata Lease acreage was in the SE1/4 of Section 17 and if this lease acreage is
considered to be not “within” a mile of the Sections 27, 28, and 33 lease acreage, this creates a partin/part-out issue similar to the one dealt with above with respect the Altschuld Group. That is, the
Section 6 Federal Lease acreage was within a mile of an existing Strata Lease but not the Sections
27, 28, and 33 acreage.
However, there is a difference from the Altschuld part-in/part-out issue. With respect to the
Altschuld Group’s claim, the Sections 27, 28, and 33 acreage was not within either the Altschuld
AMI or an Overlapping Area.. With respect to Strata’s claim, the Sections 27, 28, and 33 acreage
is at least within the Strata AMI.
While perhaps a closer question, it does appear the mutual intent of the parties can
reasonably be determined from the language of the Strata PSA alone and that there is no ambiguity.
22

While it is possible to literally read the Strata PSA to provide for an ORRI for the Sections 27, 28
and 33 acreage, this arguably is not a reasonably plausible construction for the same reasons
expressed earlier with respect to the Altschuld Group’s claim when considering the particular
language employed and the structure of the agreement.6
C.

The Altschuld Group and Strata did not obtain an interest by the 2014
conveyance from Prima Exploration because Prima Exploration had nothing
to convey

As discussed earlier, Strata Exploration did attempt to convey a 3% ORRI in the Sections
27, 28, and 33 acreage to the Altschuld Group and Strata in 2014. However, Prima Exploration was
one of the sellers in the Red Sky transaction and had by that date assigned whatever interest it
possessed to Hess. Hence, in 2014, it had nothing to convey.
With respect to the contention that the 2014 assignment was some sort of after-the-fact
“curative assignment,” there was nothing to cure with respect to the Altschuld Group since it was
not entitled to an ORRI on the Sections 27, 28, and 33 lease acreage and the same was likely true
as to Strata. Further, any contractual entitlement to an ORRI or other interests held by Strata had
been assigned to Hess.
D.

Claims of Michael Johnson, Michael T. Fitzmaurice, Patrick Butz, and Jacques
Butz

While the foregoing disposes of any claims of the Altschuld Group and Strata, Michael
Johnson, Michael T. Fitzmaurice, Patrick Butz, and Jacques Butz are also named plaintiffs in this

6

But, even if that is not the case and there is an ambiguity, the extrinsic evidence in the record favors the
construction limiting the right to an ORRI to the lease acreage within one-mile of an existing Strata Lease. Again, most
persuasive is what occurred immediately following Prima Exploration’s acquisition of the Federal Lease. That is, the
assignment by Prima Exploration of the 3% ORRI only with respect to the Section 6 acreage in 2006 and there being
no evidence of any complaint by Strata that it did not get all that it had bargained for in 2004 until the filing of this action
in 2017.

23

case.
There is nothing in the amended complaint or otherwise in the record that specifically
explains how and when plaintiff Michael Johnson acquired an interest upon which he bases his claim
to an ORRI on the production from the Sections 27, 38, and 33 lease acreage. However, it appears
from the email evidence discussed earlier and the percentage of ORRI that Johnson claims in the
amended complaint relative to Strata’s claim that he acquired his interest from Strata and that this
was well after the sale of the Federal Lease and the assignment of the Strata PSA to Hess. When
the court suggested to plaintiffs’ counsel during the hearing on the motion for summary judgment
that this was what the record indicated, he did not dispute it. That being the case, any claim that
plaintiff Michael Johnson might have fails because Strata had already conveyed whatever interest
it possessed to Hess. It also fails due to the failure in response to the motion for summary judgment
to come forward with evidence demonstrating an entitlement to an ORRI and that there are fact
issues to be tried with respect to his claim.
The complaint and the record are also clearly devoid of any explanation of when or how
plaintiffs Michael T. Fitzmaurice, Patrick Butz, and Jacques Butz acquired an interest that entitled
them to an ORRI. The court suspects that they are the successors-in-interest to Copperhead which
was one of the Altschuld Group sellers under the Altschuld PSA but has not been named as a
plaintiff in this action. If that is correct, then any claim that these plaintiffs might have fails for the
same reasons that the Altschuld Group’s claim fails. Also, their claims fails because of the failure
now to come forward with evidence demonstrating they have a claim and that there are fact issues
to be tried with respect to it.

24

E.

Additional Hess defenses for which the court makes no rulings

Hess makes two arguments for why any outstanding entitlement to an ORRI on the Sections
27, 28 and 33 lease acreage under the Altschuld and Strata PSAs is not enforceable as to it despite
its obvious knowledge of the PSAs given that it obtained an assignment of them. One argument that
Hess makes is that, while it obtained an assignment of rights and interests under the PSAs, it did not
agree to assume any of the obligations. The court does not reach this argument.

Whether Hess

assumed the obligations under the Altschuld and Strata PSAs, or not, arguably does not make a
difference if the entitlement to an ORRI on qualifying acreage created by the PSAs is a covenant that
runs with the land. Hess contends it is not. In support, Hess cites to the North Dakota Supreme
Court’s decision in Golden v. SM Energy Co., 2013 ND 17, 826 N.W.2d 610 (“Golden”). In that
case, the North Dakota Supreme Court considered whether the party taking an assignment of an
agreement containing a similar obligation to convey an ORRI in an AMI Clause had assumed that
obligation because the parties had stipulated that the obligation to convey the ORRI was a personal
one that did not run with the land.7 Hess acknowledges that, while Golden is not dispostive on the
issue of whether AMI covenants run with the land, the North Dakota Supreme Court did not intimate
in Golden that North Dakota law was contrary to what the parties had stipulated. This is a point
made by another case cited by Hess, the Tenth Circuit decision in Spring Creek Exploration &
Production Co. v. Hess Bakken Investment, II, LLC, 887 F.3d 1003 (10th Cir. 2018). In Spring
Creek, the Tenth Circuit agreed with the district court that AMI covenants do not run with the land
under North Dakota law relying in part upon the lack of any suggestion to the contrary by the North

7

The North Dakota Supreme Court concluded that the assignment in that case was ambiguous with respect
to whether there was an assumption of liabilities and remanded that aspect of the case to the district court for further
proceedings.

25

Dakota Supreme Court in Golden. The Tenth Circuit also gave technical reasons for why it is
unlikely that the North Dakota Supreme Court would conclude that AMI covenants do run with the
land. Id. at 1027–29.
The Tenth Circuit’s decision is not binding on this court. And, more recently this court in
Slawson Exploration v. Nine Point Energy, LLC, No. 1:17-cv-106, 2019 WL 1518164 (D.N.D. April
2019) (Hovland, D.J.) expressed some doubt as to whether the Tenth Circuit’s decision accurately
predicts what the North Dakota Supreme Court would decide, including citing to two North Dakota
Law Review articles with opposing views on whether an AMI covenant can in certain instances run
with the land under North Dakota law. Id. at **4–5 & n.3–4. Further, as noted by the Tenth Circuit
in Spring Creek, courts in some states have concluded that AMI covenants do run with the land,
including Texas. Spring Creek at 1027–29. Given this uncertainty and the fact this case can be
resolved on other grounds, the court does not reach this argument.
Finally, Hess initially moved to dismiss this action based on a statute-of-limitations defense.
In an earlier decision, the court expressed concern about resolving the case on that grounds based
solely upon the pleadings and because of the possibility that there might be fact issues that would
need to be resolved. Power Energy Corp. v Hess Bakken Investment II, No. 1:17-cv-093, 2019 WL
2526169 (D.N.D. June 19, 2019). Hess states it has not abandoned this defenses and explains it did
not reassert it in its present motion because of what the court previously stated about the possibility
of fact issues that may need to be resolved.
Hess’s statute of limitations defense is by no means frivolous. Hess contends that the
relevant statute of limitation is either the six-year statute of limitations in N.D.C.C. § 28-01-16(1)
that applies to breaches of contract generally or the ten-year statute of limitations in § 28-01-15(2)
26

that applies to contracts contained in any conveyance, mortgage, or other instrument affecting title
to real property. Hess argues that, even if the relevant statute is the latter, plaintiffs’ time for
bringing this action ran prior to the filing of this action on May 8, 2017.
Notably, there is evidence that supports Hess’s argument that plaintiffs (or their
predecessors-in-interest) likely knew about Prima Exploration’s acquisition of the Federal Lease
(and thereby their purported entitlement to an ORRI with respect to the Sections 27, 28, and 33
acreage) in March of 2006 when Prima Exploration made its assignment of the 3% ORRI in the
Section 6 acreage to the Altschuld Group and Strata. Further, Strata certainly knew at least by April
20, 2006, given this was the date it signed the federal form pursuant to which Prima Exploration
assigned to the other members of the Prima Group their share of the working interest in the Federal
Lease. (Doc. No. 35-4, p. 7). Finally, whatever tolling and estoppel arguments that Powers Energy
might have may be more problematic with respect to Strata.
III.

ORDER
Based on the foregoing, Hess Bakken’s motion summary judgement (Doc. No. 56) is

GRANTED and plaintiffs’ complaint is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
Dated this 3rd day of May, 2021.
/s/ Charles S. Miller, Jr.
Charles S. Miller, Jr.
United States Magistrate Judge

27