Fixed-Fraction NPRIs Are Calculated on the Entire Described Tract—Even Where Part Lies Below the Missouri River’s OHWM: Commentary on Garaas v. Continental Resources, 2025 ND 146

Introduction

In Garaas v. Continental Resources, Inc., the North Dakota Supreme Court reversed and remanded a district court judgment that had excluded State-owned riverbed acreage from the calculation of a fixed nonparticipating royalty interest (NPRI). The Court held that where a royalty deed unambiguously grants a fixed percentage “of all the oil and gas produced and saved from the [described] lands,” the NPRI must be calculated on the entire described tract—not merely on the subset of acres privately owned above the ordinary high-water mark (OHWM) of the Missouri River. The decision also vacates a legally unsupported “equitable upward adjustment” to tract acres, clarifies that courts are not bound by parties’ stipulations on questions of law, and resets the framework for addressing the statutory “safe harbor” for suspended royalty payments under N.D.C.C. § 47-16-39.1. The Court further holds the Trusts—not Continental—are the prevailing party for purposes of costs and disbursements.

Case Overview

The plaintiffs—three Garaas family trusts—each own a one-third share of a 2% NPRI carved out by a 1951 royalty deed covering the NW¼NE¼ of Section 31-154-97 in McKenzie County. The tract abuts the Missouri River, and pursuant to North Dakota Industrial Commission (NDIC) determinations under chapter 61-33.1, 39.01 mineral acres lie above the OHWM (privately owned) and 0.93 mineral acres lie below the OHWM (owned by the State). Continental Resources operates the Dallas 4-30H well on a two-section spacing unit comprising Sections 30 and 31 (final unit acres: 1261.29, per NDIC/Wenck).

The dispute centered on how to calculate the Trusts’ fixed 2% NPRI:

Do “acres burdened” include the State-owned 0.93 acres below the OHWM, or only the 39.01 acres above the OHWM?
Which unit acreage is correct for the denominator—the final NDIC 1261.29 acres or a preliminary survey total of 1267.01 acres?
Was Continental’s “equitable upward adjustment” to tract acres lawful?
Did Continental’s suspension of payments qualify for the statutory “safe harbor” under N.D.C.C. § 47-16-39.1?
Were the Trusts entitled to an accounting and to be deemed the “prevailing party” for costs?

Summary of the Judgment

The Supreme Court:

Held the 1951 deed unambiguously grants a fixed 2% royalty “of all” production “from the [described] lands,” requiring calculation over the entire quarter-quarter (approximately 39.94 acres) rather than excluding the 0.93 State-owned acres below the OHWM.
Rejected the district court’s acceptance of Continental’s “equitable upward adjustment” of acres and the use of preliminary unit acreage without sufficient legal or factual basis.
Reversed and remanded with instructions to recalculate the NPRI consistently with the deed’s plain language and to explain the calculation used.
Reversed the district court’s ruling that Continental’s suspension of payments fell within N.D.C.C. § 47-16-39.1’s “safe harbor,” instructing the court to reconsider and explain whether a “dispute of title” existed.
Directed the district court to address the Trusts’ requests for an accounting and a monetary judgment for any unpaid royalties.
Held the Trusts are the prevailing party and reversed the award of costs to Continental; on remand, the district court must determine the Trusts’ allowable costs and disbursements.

Detailed Analysis

1) Precedents Cited and Their Influence

THR Minerals, LLC v. Robinson, 2017 ND 78, 892 N.W.2d 193. The Court’s lynchpin precedent. It interpreted language granting a stated percentage “of all the oil and gas produced and saved from the … described lands” as fixing the calculation base on the entire described tract—even when the grantors owned only a fraction of that tract. Here, the 1951 deed’s language mirrors THR Minerals, and the Court applies it to conclude the Trusts’ 2% must be calculated on production from the entire NW¼NE¼, not just the portion above the OHWM.
Hild v. Johnson, 2006 ND 217, 723 N.W.2d 389. Reinforces deed-construction principles: a specific legal description controls over general statements of quantity (e.g., “forty acres, more or less”), and a quantity statement is only considered if other description elements are ambiguous. This supports using the full described tract acreage as determined by authoritative surveys (here, NDIC/Wenck’s 39.94 acres).
Sargent County Water Resource District v. Mathews, 2015 ND 277, 871 N.W.2d 608. Restates deed interpretation standards: ascertain intent from the instrument; unambiguous deeds are construed from the writing alone. Applied here to find the 1951 deed unambiguous.
Whitetail Wave LLC v. XTO Energy, Inc., 2024 ND 52, 5 N.W.3d 526; Vic Christensen Mineral Trust v. Enerplus Resources (USA) Corp., 2022 ND 8, 969 N.W.2d 175. These cases interpret the “safe harbor” in N.D.C.C. § 47-16-39.1 for suspending royalties due to a “dispute of title.” The Court cites them but declines to define “dispute of title” in this case because the parties did not brief it adequately; nevertheless, it insists the district court make a proper finding of a title dispute, not merely “competing claims.”
Golden v. SM Energy Co., 2013 ND 17, 826 N.W.2d 610; Nodak Mutual Ins. Co. v. Bahr-Renner, 2014 ND 39, 842 N.W.2d 912; Higgins v. Lund, 2025 ND 47, 17 N.W.3d 828. These decisions establish the procedural posture: when cases proceed on stipulated facts, findings are reviewed for clear error, but stipulations of law are invalid and not binding. That principle undercuts any attempt to resolve deed-construction or statutory issues by stipulation.
Dorchester Minerals, L.P. v. Hess Bakken Investments II, LLC, 2024 ND 137, 9 N.W.3d 657; Van Sickle v. Hallmark & Associates, Inc., 2013 ND 218, 840 N.W.2d 92. Guide the “prevailing party” analysis: success on the merits controls, not the dollar amount recovered; there can be none or multiple prevailing parties. Here, the Trusts prevailed on key merits issues.
Petro-Hunt, L.L.C. v. Tank, 2024 ND 46, 4 N.W.3d 526; Ritter, Laber & Associates, Inc. v. Koch Oil, Inc., 2004 ND 117, 680 N.W.2d 634. Outline when an equitable accounting is appropriate—useful on remand as the Court directs the district court to address the Trusts’ accounting request.
101 Ranch v. United States, 905 F.2d 180 (8th Cir. 1990); State ex rel. Sprynczynatyk v. Mills, 523 N.W.2d 537 (N.D. 1994). Acknowledge the equal footing doctrine and State ownership of the beds of navigable waters up to the OHWM. The Supreme Court did not dispute State ownership but held that ownership realities do not trump clear deed language fixing the calculation base on the entire described tract.

2) The Court’s Legal Reasoning

Deed Controls the Calculation Base. The 1951 royalty deed grants a “royalty of two per cent (2%) of all the oil [and gas] produced and saved from the [described] lands.” Under THR Minerals and standard deed-construction rules, this language unambiguously establishes a fixed fraction of total production attributable to the entire described tract (NW¼NE¼ of Section 31), not a fraction limited to what the grantors privately owned or to acreage above the OHWM. The parties also stipulated the grantors owned sufficient minerals to “fully honor” the grant—further undercutting Continental’s position.
State Ownership Below the OHWM Does Not Change the NPRI’s Calculation Base. While the State owns the riverbed minerals below the OHWM by virtue of the equal footing doctrine, that fact does not alter what the deed says about how the conveyed royalty is measured. The key is not who owns every atom of the minerals, but how the instrument defines the royalty: here, a fixed 2% of all production from the whole described tract.
No Legal Basis for “Equitable Upward Adjustment.” The district court adopted Continental’s calculation using (i) a preliminary, larger unit-acre total (1267.01) and (ii) an “upward adjustment” of the tract’s “burdened acres” (from 39.01 to 39.447588), purportedly for equitable distribution among riparian owners. The Supreme Court found no adequate factual or legal basis for that adjustment and directed the district court to recalculate and explain any figures used, consistent with the final NDIC/Wenck determinations and the deed.
Safe Harbor Requires a “Dispute of Title,” Not Merely a Dispute Affecting Distribution. The statute’s text exempts operators from the 18% interest penalty “in the event of a dispute of title existing that would affect distribution of royalty payments” (N.D.C.C. § 47-16-39.1(1)). The district court found only “competing claims to the same royalty,” not a title dispute. Because the parties did not brief “dispute of title,” the Supreme Court declined to define it here, but reversed and required a proper analysis on remand.
Prevailing Party. The Trusts prevailed on central merits issues: the fixed nature of their 2% NPRI and the scope of the calculation base. The district court’s prevailing-party finding in Continental’s favor was error; costs and disbursements must be addressed for the Trusts on remand.

3) What the Decision Means in Practice (Impact)

For fixed-fraction royalty deeds, the whole described tract matters. Operators and title analysts must calculate the fixed fraction on the entire tract described in the granting instrument when the deed uses “of all oil and gas produced and saved from the described lands” language. Ownership complexities within that tract (e.g., State-owned riverbed acreage) do not shrink the calculation base.
Expect recalculations for riparian tracts along the Missouri River. Many North Dakota tracts intersect the Missouri River. Where historical deeds convey fixed fraction-of-production royalties, this decision may require inclusion of OHWM-below acreage in the tract factor, potentially increasing NPRI owners’ payments and generating back royalty exposure.
“Equitable adjustments” are not a substitute for legal authority. Distribution factors must be anchored in controlling instruments and authoritative acreage determinations (e.g., NDIC/Wenck), not equitable improvisation.
Safe harbor suspensions must be tied to bona fide title disputes. The 18% interest penalty may be avoided only if there is a “dispute of title.” Disagreements over calculation methodologies or distribution factors, without a true title conflict, may not suffice. Operators should reevaluate blanket suspensions and consider narrowly tailoring suspensions or using interpleader for disputed portions.
Prevailing party analysis is merits-driven. Even without a damages award, a party that secures key legal rulings on the main issues may be the prevailing party for costs and fees.

Complex Concepts Simplified

NPRI (Nonparticipating Royalty Interest): A cost-free share of production carved out of the mineral estate. NPRI owners typically have no right to lease (no executive rights) and do not pay development costs. Their interest is defined by the granting instrument.
Fixed vs. Floating Royalty: A fixed royalty entitles the owner to a set fraction of production (e.g., “2% of all oil produced from the described lands”). A floating royalty is tied to another fraction that can vary (e.g., “½ of the landowner’s royalty”); as lease royalties change, so does the floating share. The Trusts’ royalty was adjudicated as fixed.
OHWM and State Ownership: North Dakota owns minerals under the beds of navigable waters up to the OHWM (equal footing doctrine). NDIC administers determinations of the historical OHWM along the Missouri under N.D.C.C. ch. 61-33.1 (with expert support like the Wenck report).
Spacing Unit Arithmetic (Distribution Factor): Commonly, a fixed NPRI factor for a unit is computed as: “Royalty fraction in the deed” × (“acres in the described tract” ÷ “total unit acres”). The Court holds the numerator here is the entire NW¼NE¼ acreage (≈39.94), not the above-OHWM subset (39.01).
Safe Harbor for Late Royalties (N.D.C.C. § 47-16-39.1): Operators must pay royalties within 150 days of market; if not, 18% interest accrues, unless a “dispute of title” exists that affects distribution. The Court requires precise findings on whether such a title dispute exists before safe harbor applies.
Stipulations of Fact vs. Law: Parties can stipulate to facts, but not to legal conclusions. Courts will disregard stipulations that purport to decide questions of law (e.g., correct legal calculation methods).

Applying the Court’s Direction: A Calculation Illustration

The Supreme Court instructed the district court to recalculate using the deed’s command—2% “of all” production from the entire NW¼NE¼—and to explain the arithmetic. Although the Court did not itself compute the number, the record provides the following authoritative figures:

Acres in described tract (per NDIC/Wenck Final): 39.94 mineral acres (39.01 above OHWM + 0.93 below OHWM)
Total unit acres (Dallas 4-30H two-section unit per NDIC/Wenck Final): 1261.29 mineral acres

Illustrative factor (subject to the district court’s final computation on remand):

NPRI factor ≈ 0.02 × (39.94 ÷ 1261.29) ≈ 0.0006333

For comparison, the district court had adopted an adjusted value of 0.000622688 (relying on a preliminary 1267.01-acre denominator and an “equitable” upward adjustment of tract acres to 39.447588). The Supreme Court rejected that approach and required a recalculation grounded in the deed and supported by the record.

Safe Harbor, Accounting, and Prevailing Party

Safe Harbor: The district court’s safe harbor ruling failed because it found only “competing claims to the same royalty,” not a “dispute of title.” On remand, the court must determine whether a true title dispute existed and explain its reasoning. Depending on that finding, the Trusts may be entitled to 18% interest on unpaid amounts and, if applicable, attorney’s fees under § 47-16-39.1.
Accounting: Given the undisputed obligation to pay the Trusts royalties and the complexity of royalty distributions over time, the Supreme Court directed the district court to address the Trusts’ request for an accounting and to enter monetary judgment for any unpaid royalties.
Prevailing Party: The Trusts are the prevailing party as a matter of law. They secured key legal rulings, including a reversal on the central calculation issue. Costs and disbursements awarded to Continental were reversed; the district court must award appropriate costs to the Trusts on remand.

Practical Takeaways for Industry and Practitioners

Drafting and Title Review: Deeds that grant a fixed percentage “of all oil and gas produced and saved from the described lands” will be construed to fix the calculation base on the whole described tract. If parties intend to limit the royalty to the grantor’s then-owned interest or to a specific subset of acres, they must say so expressly.
Riparian Tracts and OHWM: When a tract straddles the Missouri River, include below-OHWM acreage in the numerator for fixed-fraction NPRIs unless the deed language dictates otherwise. Use final NDIC/Wenck determinations for acreage; avoid reliance on preliminary surveys or “equitable” adjustments.
Suspensions and the 18% Interest Risk: Before suspending royalties wholesale, confirm whether a bona fide “dispute of title” exists. Consider suspending only the disputed portion or using interpleader. A mere disagreement over arithmetic or interpretation may not shield an operator from statutory interest.
Litigation Strategy: Do not rely on stipulations to resolve legal questions. Build a record that supports all calculation inputs—tract acres, unit acres, and any adjustments—with authoritative sources and legal theory.
Accounting Relief: Courts may order an accounting when relationships and ledgers are complex, or discovery is needed, particularly in multi-year, multi-well royalty disputes.

What Remains for the District Court on Remand

Recalculate the Trusts’ NPRI in conformity with the deed’s “of all production from the [described] lands” language, and explain each element of the formula used (royalty fraction, tract acres, unit acres).
Determine whether Continental’s payment suspension fits § 47-16-39.1’s “dispute of title” safe harbor and, accordingly, whether 18% interest and fee-shifting apply.
Address the Trusts’ requests for an accounting and a money judgment for any unpaid royalties.
Tax costs and disbursements in favor of the Trusts as the prevailing party and set the amount.

Conclusion

Garaas v. Continental Resources cements a key royalty-calculation principle in North Dakota: when a royalty deed unambiguously grants a fixed share “of all” production from the “described lands,” the calculation base is the entire described tract, even where part of that tract lies beneath navigable waters owned by the State. The decision rejects ad hoc, equitable adjustments and underscores that deed language—not shifting ownership mosaics within the tract—controls the numerator in unit calculations. It also insists on precision in invoking the statutory safe harbor for suspended royalties and clarifies that “prevailing party” status turns on merits success. For operators, owners, and practitioners, the case is a strong reminder that careful drafting, disciplined reliance on authoritative acreage determinations, and rigorous statutory analysis are indispensable in North Dakota royalty practice.