Blasi v. Bruin E&P Partners, 959 N.W.2d 872

Plaintiffs (Blasi) sued multiple oil companies in federal court alleging underpayment of royalties under oil leases requiring delivery free of cost in the pipeline to which lessee may connect wells on the land; plaintiffs take royalties in cash.
Defendants moved to dismiss under Rule 12(b)(6), arguing the royalty valuation point is at the well, which permits deduction of post‑production costs before computing royalties.
The federal court certified the question to the North Dakota Supreme Court: whether the royalty is based on the value of oil "at the well," noting no controlling ND precedent and that the answer may be dispositive.
The North Dakota Supreme Court exercised discretion to answer, holding the royalty clause unambiguously sets the valuation point at the well and answered the certified question "yes."
The Court denied plaintiffs’ request to decline answering pending discovery, reasoning the clause is unambiguous and interpretation is a question of law; whether specific costs are deductible follows from establishing the valuation point.
A dissent would have deferred, arguing discovery was needed to resolve potential latent ambiguities about the meaning of "pipeline" and the costs deducted.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the royalty valuation point is at the well or downstream (the pipeline).	Valuation is at the pipeline (downstream), not necessarily at the well.	Valuation is at the well (where lessee may connect pipeline), allowing post‑production deductions.	Court: unambiguous clause establishes valuation point at the well.
Whether post‑production costs may be deducted before computing royalties.	"Free of cost" precludes deduction of post‑production costs.	If valuation is at the well, reasonable post‑production costs can be deducted under work‑back method.	Because valuation point is at the well, deductions of post‑production costs are permissible in principle; specific cost disputes follow from that ruling.
Whether the Court should decline to answer the certified question now and allow discovery.	Decline; discovery needed to define "pipeline" and determine what costs were deducted (latent ambiguity).	Answer now; clause is unambiguous and a question of law, so discovery is unnecessary.	Court denied the motion to decline and answered the question; dissent would have deferred for discovery.

Bice v. Petro‑Hunt, L.L.C., 768 N.W.2d 496 (N.D. 2009) (adopted the work‑back method for royalty valuation)
Kittleson v. Grynberg Petroleum Co., 876 N.W.2d 443 (N.D. 2016) (lease language controls royalty calculation)
MacMaster v. Onstad, 86 N.W.2d 36 (N.D. 1957) (interpreting similar royalty language)
Kretni Dev. Co. v. Consolidated Oil Corp., 74 F.2d 497 (10th Cir. 1934) (delivery "in the pipeline" valued at the field connection)
Molter v. Lewis, 134 P.2d 404 (Kan. 1943) (lessee's duty to market; delivery at the well permits deduction of transportation)
Burlington Res. Oil & Gas Co. v. Texas Crude Energy, LLC, 573 S.W.3d 198 (Tex. 2019) (delivery "into the pipeline" contemplates valuation at the well and allows post‑production cost deductions)