Oklahoma Legislature Enacts Major Amendments to Production Revenue Standards Act

In April 2026, the Oklahoma Legislature passed House Bill (HB) 1371, which contains significant amendments to Oklahoma’s Production Revenue Standards Act, 52 Okla. Stat. Sections 570.1–570.15 (“PRSA” or “Act”). The bill was signed into law by Governor J. Kevin Stitt on 6 May 2026 and becomes effective on 1 November 2026.

Over the almost fifty years since its enactment, the PRSA has undergone several rounds of major legislative revisions. The Act has also given rise to a number of highly contested, and costly, lawsuits in which both state and federal courts have weighed in on the proper interpretation of its key provisions, particularly with respect to unpaid interest accruing on untimely payments under the Act.

Perhaps the most well-known of these lawsuits was Cline v Sunoco, Inc. (R&M) (479 F. Supp. 3d 1148 (E.D. Okla. 2020), where a district court awarded just under USD75 million in actual damages for unpaid interest accrued under the PRSA, as well as punitive damages in the same amount (Id. at 1181-82). In November 2025, the United States Court of Appeals for the Tenth Circuit affirmed the judgment awarding over USD103 million in actual damages (increased from the original award due to prejudgment interest) but vacating the punitive damages award (Cline v Sunoco, Inc. (R&M), 159 F.4th 1171 (10th Cir. 2025)). 

Cline is but one example of a recent wave of similar class action lawsuits that have been filed by interest owners seeking tens of millions of dollars indamages under the PRSA. These lawsuits often resulted in significant monetary consequences for producers who failed to strictly comply with the Act’s terms, causing widespread concern for producers across the industry, and even resulting in the cessation of operations by some producers in Oklahoma.

In response, the new changes to the PRSA reflected in HB 1371 (i) include significant modification to the statutory interest rates by eliminating compound interest; (ii) contain new exceptions where interest does not accrue on suspended proceeds; and (iii) establish a new Mineral Owner’s Fund to be administered by the State Treasurer. These changes are welcome news to both mineral owners and producers, and reflect growing concerns within the industry regarding the potential fallout from the Tenth Circuit’s recent decision in Cline.

History and legislative purpose of Oklahoma’s PRSA

The original legislative purpose behind the PRSA was to codify “the public policy in Oklahoma for royalty owners to receive prompt payment from the sale ofoil”(Hull v Sun Refining and Marketing Co., 789 P.2d 1272, 1279 (1989)).Pursuant to the Act, “[a]ll proceeds from the sale of production shall be regarded as separate and distinct from all other funds of any person receiving or holding the same until such time as such proceeds are paid to the owners legally entitled thereto” (52 Okla. Stat. Section 570.10(A)). The Act requires that such proceeds be distributed to the owners legally entitled thereto “commencing not later than six (6) months after the date of first sale” and “thereafter not later than the last day of the second succeeding month after the end of the month within which such production is sold” (Id., Section 570.10(B)(1)).

To ensure compliance with these time constraints, the Act entitles any owner to whom proceeds are not timely paid to receive statutory interest on the untimely paid proceeds (Id., Section 570.10(D)). The Act’s statutory interest provisions were specifically enacted “to strengthen mineral owners’ rights” and “ensure that those entitled to royalty payments would receive proceeds in a timely fashion”. (See Cline v Sunoco, Inc. (R&M), 6:17-CV-313-JAG, 2019 WL 6720206, at *6 (E.D. Okla. 10 Dec. 2019) (internal quotations omitted); see, also, Krug v Helmerich & Payne, Inc., 362 P.3d 205, 214 (Okla. 2015) (“The obvious overriding purpose of the Act is to ensure that royalty owners are timely paid their share of the proceeds. The Legislature has followed a path of strengthening mineral owners[’] rights since the Act’s inception”)).

Prior to the 2026 amendment, proceeds not paid on a timely basis to persons with marketable title earned interest “at the rate of twelve percent (12%) per annum to be compounded annually, calculated from the end of the month in which such production is sold until the day paid” (52 Okla. Stat. Section 570.10(D)(1)). Any proceeds not paid due to unmarketable title earned interest at the rate of “six percent (6%) interest compounded annually for any period prior to November 1, 2018 and the Wall Street Journal’s reported prime interest rate for any period after November 1, 2018” (Id., Section 570.10(D)(2)(a)).

The Act authorises interest owners to file an action in the district court to recover untimely paid proceeds and accrued interest due under the Act and also entitles the prevailing party in any court proceeding brought under the Act to recover “the costs of the suit, including but not limited to reasonable attorney and expert witness fees” (Id.; see also Id., Section 570.14; Krug, 362 P.3d at 212.). Generally, the remedies set forth under the PRSA are “the exclusive remedy to a person entitled to proceeds from production for failure of a holder to pay the proceeds within the time periods required for payment” (52 Okla. Stat. Section 903).

Cline v Sunoco - Tenth Circuit Court of Appeals addresses disputes over compound interest and “interest-on-interest”

Although the prior version of the PRSA contemplated compounded interest rates, nothing in the prior language of the Act explicitly provided for interest to continue to accrue after the proceeds had been paid. To the contrary, the prior version of the Act could reasonably be interpreted to state that interest  would no longer accrue after late proceeds were paid in full (see 52 Okla. Stat. Section 570.10(D)(1) (“...that portion [of proceeds from the sale of production] not timely paid shall earn interest ...”); Id. at Section 570.10(D)(2) (“... such proceeds shall earn interest...”); see also Cline v Sunoco, Inc. (R&M), 159 F.4th 1171, 1205-07 (10th Cir. 2025) (Moritz, Circuit Judge, concurring in part, dissenting in part.)).

In a number of recent cases, however, interest owners have taken the position that statutory interest under the PRSA continues to accrue even after the payment of all proceeds if the statutory interest itself has not been paid in full.

This question was considered by the United States Court of Appeals for the Tenth Circuit in Cline. The case originated in 2017, when Perry Cline, an Oklahoma farmer and landowner owning royalty interests in three Oklahoma wells, filed a class action lawsuit in the United States District Court for the Eastern District of Oklahoma against Sunoco, Inc. (R&M) and Sunoco Partners Marketing & Terminals, L.P. (collectively, “Sunoco”). Cline sought to represent a class comprised of all Oklahoma interest owners who had received late payments from Sunoco without the PRSA-required interest payments (see Cline, 159 F.4th at 1179.). The district court certified a class of over 53,000 similarly situated interest owners. In 2020, after a four-day bench trial, the plaintiff class was awarded judgment against Sunoco on the PRSA claims that included over USD103 million in actual damages for accrued interest under the PRSA and an additional USD75 million in punitive damages (Id.).

On appeal, Sunoco argued that the judgment was erroneous because it included compound interest that continued to accrue even after the date the underlying proceeds were actually paid. In other words, the district court’s judgment included a substantial amount of interest that had accrued solely on unpaid interest payments, not on untimely paid proceeds. The Class, on the other hand, argued that interest continued to accrue, compounding annually, until the interest had been paid in full.

On 17 November 2025, the Tenth Circuit Court of Appeals issued its opinion affirming the district court’s judgment as to actual damages and vacating the punitive damages award. In its analysis of the parties’ dispute over “interest on interest,” the Tenth Circuit held that the accrual date for interest under the PRSA stops only when the production proceeds and all accrued interest are paid in full (Id. at 1200).The circuit court reasoned that “[a]s unpaid compound interest accrues, it is added to the principal, effectively converting it from unpaid interest to become a portion of the underlying unpaid principal proceeds that are owed to the plaintiff” (Id.).

The Tenth Circuit also vacated the punitive damages award, holding that such punitive damages ran afoul of Oklahoma law “which precludes punitive damages for a breach of contract claim” (Id. at 1202-05). The court noted that punitive damages may be awarded in a PRSA case if the plaintiff alleges and proves an independent, intentional tort, but were not warranted in this particular case in light of the plaintiff’s failure to prevail on its additional claim for fraud (Id.).

Notably, Circuit Judge Moritz issued a separate opinion concurring in part and dissenting in part with the majority’s opinion. Circuit Judge Moritz’s dissent disagreed with the majority’s decision to affirm the district court’s opinion as to actual damages, as well as its decision to vacate the punitive damages award. With respect to actual damages, the dissent would not have upheld the district court’s calculation of “interest on interest,” and, instead, would hold that interest “stops accruing once proceeds are paid, even if some amount of statutory interest remains outstanding” (Id. at 1205-07).

Further, the dissent concluded that, while the majority correctly vacated the award of punitive damages as it currently stood, it would remand to the district court to reconsider punitive damages under the Energy Litigation Reform Act, 52 Okla. Stat. Sections 901–903 (“ELRA”). According to the dissent, the majority erred by deviating from the Oklahoma legislature’s “express directive in the ELRA that the PRSA provides the ’exclusive remedy’ for late payment of oil and gas proceeds”(Id. at 1208). Critically, the ELRA “authorizes punitive damages if the district court finds that the defendant intended to deceive or deprive the well owner of the withheld proceeds” (Id. at 1209). With that said, because the district court focused its punitive damages analysis on interest, not proceeds, the dissent believed it should vacate the award and remand to the district court for appropriate analysis of intent regarding proceeds (Id.).

Although the Cline case is notable for the size of the total damages awarded, it is just one example of a recent wave of class action lawsuits seeking substantial monetary relief under the PRSA. In many of those other recent cases, operating companies have opted to settle with the class rather than risk larger monetary judgments and the possibility of punitive damages. Notable examples include:

• Reirdon v XTO Energy, Inc., No 16-CN-87-KEW (E.D. Okla.) (USD20 million in cash, USD20 million in future benefits to class);
• Chieftain v Marathon Oil Co., No 17-CV-334-SPS (E.D. Okla.) (USD14.95 million in cash, USD17.1 million in future benefits to class);

• Reirdon v Cimarex Energy Co., No 16-CV-113-KEW (E.D. Okla.) (USD9.5 million in cash, USD11 million in future benefits to class);
• Stamps Brothers Oil & Gas, LLC. v Continental Resources, Inc., No CIV-14-182-HE (W.D. Okla.) (USD5.1 million in cash, additional USD1.55 million in fees and costs to class);
• Chieftain v Newfield Exploration Mid-Continent, Inc., No 17-CV-336-KEW (E.D. Okla.) (USD19.5 million in cash, USD12 million in future benefits to class);
• DASA Investments, Inc. v EnerVest Operating, LLC, et al., No 18-CV-83-SPS (E.D. Okla.) (USD8 million in cash, USD7 million in future benefits to class);
• Kernen v Casillas Operating, LLC, No CIV-18-00107-JD (W.D. Okla.) (USD2.7 million in cash, USD5 million in future benefits to class); and
• Kernen, et al. v Citizen Energy II, LLC, et al., Case No CJ-2018-7, District Court of Garvin County, State of Oklahoma (USD4,668,120.00 in cash).

Legislative reaction and HB 1371

In April 2026, less than six (6) months after the Tenth Circuit’s decision in Cline was released, the Oklahoma Legislature reacted by passing HB 1371, making four significant amendments to the PRSA and the interest provisions that were at issue in Cline, as follows.

• First, HB 1371 replaces the prior twelve percent (12%) compound interest rate under Section 570.10(D)(1) with a fifteen percent (15%) simple interest rate. While the new interest rate under HB 1371 is higher, the elimination of compound interest will significantly reduce disputes over the proper calculation of accrued interest and will also substantially reduce the amount of interest that will accrue after proceeds are paid in full.
• Second, while HB 1371 maintains a lower interest rate tied to the prime interest rate as reported in the Wall Street Journal for proceeds not paid due to title that is not marketable, the amendment also caps this interest rate at a maximum of six percent (6%) per annum.
• Third, HB 1371 creates new exceptions to the interest provisions, and clarifies that interest shall not accrue: (i) “where marketability has remained uncured and a probate is required to cure”; (ii) where “proceeds [are] in suspense due to the filing of statutory liens, or at the written request of the owner”; or (iii) “where such proceeds are not paid because the paymentwas returned to the payor as undeliverable or the payment check is not cashed by the owner”.
• Fourth, HB 1371 creates a new Mineral Owner’s Fund, an escrow account administered by the Office of the State Treasurer and permits payors to remit payment of proceeds and interest attributable to unknown or unlocatable owners to this new Mineral Owner’s Fund. The bill also provides that where proceeds remain unpaid after a period of thirty-six (36) months “the payor may remit such proceeds, together with any accrued statutory interest, to the Mineral Owner’s Fund,” and thereby be relieved of any further obligation for payment of the proceeds or interest accruing thereon. This new mechanism is intended “as an alternative to filing an action in interpleader”.

An April 2026 press release by the Oklahoma Senate describes the bill as “solidifying a historic agreement between mineral owners and the oil and gas industry after decades of political disagreements over the interest accrued on royalty payments” (see Senate Advances Negotiated Agreement Between Mineral Owners, Oil and Gas Producers, 16 April 2026). The amendments to the PRSA reflected in HB 1371 are the result of “a negotiated agreement” between mineral rights owners and producers, and “provide clarity and consistency on the interest penalties owed to mineral owners” and “also provides an alternative to litigation that can drag on in the courts for years, taking a financial toll for all parties involved” (Id.)

As with most statutory amendments, time (and inevitably, litigation) will tell if the amendments included in HB 1371 successfully alleviate the concern regarding the PRSA created by decisions such as Cline. HB 1371 does, however, signal a clear willingness by Oklahoma policymakers, industry leaders, and mineral interest owners to work together to create better predictability within the state’s top economic industry.