Extent of lien -- dispute resolution -- notice -- buyer in ordinary course of business

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71-3-1603. Extent of lien -- dispute resolution -- notice -- buyer in ordinary course of business. (1) To secure payment from the sale of oil or gas, an interest owner, subject to 71-3-1606(2) and subsection (4) of this section, has a continuing security interest in and the right to a lien upon the severed oil or gas or the proceeds from the sale of severed oil or gas to the extent of the interest owner's interest until the purchase price has been paid to the interest owner.

(2) If there is a bona fide dispute about the amount due to the interest owner, the security interest and lien do not accrue if the person holding the proceeds upon which the interest owner's security interest and lien are based makes a good faith determination of the amount of payment due to the interest owner and pays the interest owner that amount.

(3) (a) To have effect, a security interest or lien claimed under this part must be perfected as provided in 71-3-1605, and a copy of the notice of the lien, as provided in 71-3-1605, must be provided by an interest owner claiming the security interest or lien to other interest owners, if any, and to the operator, first purchaser, or purchaser by registered or certified mail.

(b) A security interest or lien is not valid under this part unless the provisions in subsection (3)(a) have been met.

(4) (a) A buyer in the ordinary course of business, as described in Title 30, chapter 9A, and subsection (4)(b), is entitled to the severed oil or gas free of the security interest and a lien filed by the interest owner under this part.

(b) A buyer in the ordinary course of business is:

(i) a first purchaser or purchaser who has paid the purchase price for severed oil or gas to the interest owner; or

(ii) a person who pays the purchase price for severed oil or gas to a person authorized to receive payment on behalf of an interest owner.

(c) The property of the first purchaser or purchaser described under subsection (4)(b)(ii) also is free from and not subject to a security interest or lien granted to an interest owner under this part.

History: En. Sec. 3, Ch. 367, L. 2009.


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