(a) (1) Any ownership (intending that the term shall include ownership of any mineral, royalty, leasehold, or other estate in or to the oil, gas, and minerals in and under any part of any drilling block upon which a permit has been issued) shall participate in the proceeds of production under such permit according to one or the other of the following alternatives, as such owner may elect:
(i) He shall receive royalties and other benefits on the production attributable to his ownership interest, whether whole or fractional, under the provisions of § 170.35 hereof, or on the same basis as the most favorable terms granted by the permittee to any other owner within the drilling block if the latter provides a greater royalty or benefit than set forth in § 170.35. If he elects this alternative such owner shall be deemed to have adopted the status of "lessor", and the permittee as to him that of "lessee", as those terms are known to the law of Texas relating to oil, gas and mineral leases, with the terms of the lease to be those stated in this drilling chapter as amended, in the application for a drilling permit, and in the drilling permit.
(ii) He shall receive the full 8/8 share of production attributable to his ownership, after deduction of his proportionate part of all expenses of drilling, acquiring, producing, maintaining, and operating the lease and well and marketing the product thereof. If he elects this alternative he shall be deemed to have adopted the legal status of a co-owner of the leasehold estate or working interest, as that term is known to the law, and shall bear all of the obligations and liabilities thereto appertaining, except that this shall not diminish the obligations of the permittee or "operator", as that term is herein defined, to the city, nor shall the city ever have to look to any person other than such permittee for fulfillment of all conditions of the permit. Under this alternative the permittee shall be entitled to make reasonable requirements for the proper securing by such owner of the payments and obligations assumed by owner hereunder; and if the owner shall fail to advance such sums of cash, bonds, and other such security, the permittee shall be entitled to receive the owner's share or part of production until he has recovered all of the owner's share of drilling costs and costs of equipping and completing the well, together with interest thereon at the rate of 6% per annum, and shall then be entitled to receive a further sum equal to the first (before calculation of interest) to be held as security for the performance by the owner of his further obligations and liabilities hereunder; and shall thereafter pay to owner his 8/8 share of production attributable to the owner's interest after deducting current operating and marketing costs. Provided, if any person owns less than the full 8/8 interest in the minerals under any such tract, his rights and obligations hereunder shall be proportionately diminished.
(2) Provided further, the owner of any mineral interest of any character may, if he deems the inclusion of his interest in such drilling block under any such permit to be unjust for any reason, make application to the City Council to exclude the same, which application shall be acted on under such regulations as the City Council may adopt.
(b) Records of the adoption by owners of the alternative as provided in division (a)(1)(i) above shall be kept and maintained in the city hall by the City Secretary, whether such adoption be express or deemed and implied hereunder. No form of such adoption or record thereof is herein specified, nor shall the same be defeated by any informality therein, so long as it appears affirmatively that the owner acquiesces in the issuance of such drilling permit and the distribution of royalties and proceeds of production by the permittee in accordance with this chapter, the application, and the drilling permit.
(c) In further clarification of the alternative provided in division (a)(1)(ii), an owner so electing the same shall so far as necessary to any determination of disputes as between the owner and the permittee be deemed to have entered into a mining partnership with the permittee, as that term is known to the law of the state.
(Ord. 39817, passed 10-2-79)