36.25.409    OVERRIDING ROYALTY INTERESTS

(1) If an overriding royalty interest is created which is not shown in the instrument of assignment or transfer, a statement must be filed with the director describing the interest. Any such assignment will be deemed valid if accompanied by a statement over the assignee's signature that the assignee is a person as defined in the rules. All assignments of overriding royalty interests without a working interest and otherwise not contemplated by ARM 36.25.408, must be filed for record in the office of the department in Helena within 90 days from the date of execution. Such interests will not receive formal approval and will be recognized as a transfer of title only without recognition of the overriding royalty interests.

(2) No overriding royalty on the production of geothermal resources created by an assignment contemplated by ARM 36.25.408 or otherwise shall exceed 5% nor shall an overriding royalty, when added to overriding royalties previously created exceed 5%.

(3) The creation of an overriding royalty interest that does not conform to the requirements of this rule shall be deemed a violation of the lease terms, unless the agreement creating overriding royalties provides for a prorated reduction of all overriding royalties so that the aggregate rate of overriding royalties does not exceed 5%.

(4) In addition to the foregoing limitations, any agreement to create or any assignment creating royalties or payments out of production from the leased lands shall be subject to the authority of the board, after notice and hearing, to require the proper parties thereto to suspend or modify such royalties or payments out of production in such manner as may be reasonable when and during such periods of time as they may constitute an undue economic burden upon the reasonable operations of such lease.

History: 77-4-103, MCA; NEW, Eff. 12/31/72; AMD, Eff. 3/7/75; TRANS, 1996 MAR p. 2384.