I receive questions from clients on a weekly basis about division orders. Division orders are a document common to the oil and gas industry in North Dakota and it is defined by the North Dakota Century Code.
A division order is an instrument executed by the operator, the royalty owners, and any other person having an interest in the production directing the purchaser of oil or gas to pay for the products taken in the proportions set out in the instrument. Royalty payments may not be withheld because an interest owner has not executed a division order. A division order may not alter or amend the terms of the oil and gas lease. A division order that varies the terms of the oil and gas lease is invalid to the extent of the variance and the terms of the oil and gas lease take precedence.
Most clients are surprised by to hear that North Dakota law does not require execution of the division order to receive payments of royalties. A number of industry professionals and operators will try and make you think otherwise but you do not need to execute a division order to receive your royalties. In fact there are only potential pitfalls involved with executing division orders.
If you wish to hear more on this and other oil and gas related matters please call our office and set up a consultation today.