KRUG v. HELMERICH & PAYNE, INC.
2015 OK 74
| Okla. | 2015Background
- Class of royalty owners (Krug and Eubanks) sued Helmerich & Payne (H&P) for uncompensated natural gas drainage from wells operated 1978–1998 in Beckham County, Oklahoma.
- Jury originally awarded multiple damages (including $3,650,000 for breach of implied covenant and larger awards later reversed), and the trial court entered a large judgment with interest, fees, and costs.
- On appeal in Krug v. Helmerich & Payne (2013), the Oklahoma Supreme Court affirmed the $3,650,000 breach-of-lease verdict, reversed other awards (constructive fraud/unjust enrichment), and remanded for reconsideration of costs, fees, and prejudgment interest.
- On remand, the trial court held the Production Revenue Standards Act (PRSA) inapplicable and denied prejudgment interest under 23 O.S. §6 because damages were unliquidated.
- Plaintiffs appealed the denial of prejudgment interest; the Court considered law‑of‑the‑case, PRSA applicability, and whether §6 permits interest on the drainage damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether settled‑law‑of‑the‑case bars review of prejudgment interest | Krug: Court remanded and directed reconsideration; issue may be revisited | H&P: Trial court previously denied interest in 2008; law‑of‑the‑case precludes relitigation | Not barred — doctrine is flexible; remand directed reconsideration so review permitted |
| Whether PRSA (52 O.S. §570 et seq.) requires interest on ANR settlement proceeds | Krug: H&P’s settlement proceeds from ANR are "royalty proceeds" and trigger PRSA interest/penalties | H&P: PRSA applies to proceeds from actual production/sale; drainage settlement is not production proceeds | PRSA inapplicable — royalties under PRSA require proceeds from production/sale; H&P never produced/sold the gas |
| Whether prejudgment interest is recoverable under 23 O.S. §6 for drainage damages | Krug: alternatively entitled to interest under §6 if PRSA does not apply | H&P: Damages were unliquidated and required jury factfinding, so §6 does not permit interest | Denied — §6 applies only to damages certain or capable of mathematical determination; drainage damages were unliquidated |
| Accrual date / calculation of interest on any recoverable amounts | Krug: implied that interest should run from accrual per prior direction | H&P: contest based on statutory inapplicability and unliquidated nature | Not reached for §6 (no interest); PRSA not available, so statutory interest provisions do not apply |
Key Cases Cited
- Seal v. Corporation Com'n, 725 P.2d 278 (Okla. 1986) (explaining PRSA purpose to protect rights and correlative rights of gas interest owners)
- Hull v. Sun Refining & Marketing Co., 789 P.2d 1272 (Okla. 1989) (PRSA aims to avoid needless litigation; prejudgment interest under Act integral to contractual claim)
- Goodall v. Trigg Drilling Co., Inc., 944 P.2d 292 (Okla. 1997) (operator duty to hold revenue/proceeds for benefit of legal owners)
- Roye Realty & Dev., Inc. v. Watson, 2 P.3d 320 (Okla. 1996) (discussion of "produced," "sold," and royalty entitlement under lease)
- Withrow v. Red Eagle Oil Co., 755 P.2d 622 (Okla. 1988) (prejudgment interest compensates for loss of use; statutory predicate required)
- Fleet v. Sanguine, Ltd., 854 P.2d 892 (Okla. 1993) (describing PRSA interest as enforcement mechanism/penalty before legislative clarification)
- Purcell v. Sante Fe Minerals, Inc., 961 P.2d 188 (Okla. 1998) (addressing PRSA prejudgment interest for underpaid royalties)
- Krug v. Helmerich & Payne, Inc., 320 P.3d 1012 (Okla. 2013) (prior appeal affirming lease‑based drainage damages and remanding for reconsideration of interest/costs)