§ 38-10-03 — Term of lease for production - Conditions and limitations in lease

A lease for production made by a personal representative may be made subject to the
confirmation of the district court, for a period of not more than ten years, and it may be extended
thereafter as long as oil or gas is produced from such land by the lessee or the lessee's assigns
or the lessee or the lessee's assigns are engaged in continuous drilling or reworking operations.
Such a lease must be made upon such terms and in consideration of such bonuses, royalties,
rentals, and payments as may be agreed upon except that in no case may the royalty be:
1. Less than equal to a one-eighth part of all oil produced and saved from the leased
premises;
2. Less than equal to a one-eighth part of the gross proceeds at the prevailing market
rate at the well for all gas used off the premises, when gas only is found on the leased
premises; nor
3. Less than one-eighth of the gross proceeds at the prevailing market rate at the well for
gas, during all times that such gas is used, when gas is produced from any oil well and
used off the premises or for the manufacture of casinghead gasoline or dry commercial
gas.
No lease for production is effective for a period of more than two years from its date unless
mining or a well is commenced on such land within such time, except that the lease may provide
that the lessee may pay a delay rental in an amount that may be specified in the lease. Such
payment operates as a rental and covers the privilege of deferring the commencement of mining
or of a well for one year. A lease may provide for the payment of successive delay rentals which
defers the commencement of mining or of a well for like successive periods. Any lease made by
a personal representative under the authority of this section may provide for the pooling or
unitization of the lease land, or any part or parts thereof, and of any mineral or royalty interest
therein, with land adjoining or in the vicinity of the leased land, or any mineral or royalty interest
therein, so as to form a unit for development and purpose of operation. Operations or production
on any such unitized area shall have the same effect as operations or production on the leased
land. The lease may provide for payment of a proportionate part of the royalties on production
from any such unitized area to the personal representative in lieu of the royalties provided in the
lease as to the area so unitized. A personal representative, upon compliance with the provisions

of this chapter, may also enter into agreements pooling or unitizing existing leases. Upon the
execution, approval, and delivery of a production lease, all persons interested in the estate are
bound thereby during the entire period thereof.