(A) In the event an application for a permit for the drilling, completion, and operation of a well for oil or gas shall be made by any person not owning or not holding oil and gas leases or drilling contracts from the owners of all lots, blocks, or parcels of land including in or embraced within a drilling unit as shown upon the map attached to the ordinance codified herein, a permit shall be issued to the applicant, and his or her heirs, successors, and assigns, only upon the following conditions in addition to any other conditions as may be provided in other sections of this chapter. The applicant shall be free to enter into any contracts and agreements with the owners of the other lots, blocks, or tracts as he or she may be able to make. If agreements are not reached with all owners of lots, tracts, and blocks within the drilling unit, then the owner or owners of any given lot or lots, block or blocks, or tract or tracts shall have the right or option, by notice to the permittee given in writing within 30 days after the issuance of a permit for a well on the drilling unit involved, either:
(1) To treat his or her interest as a working interest and contribute toward the actual cost and expense of drilling, completing, and operating the well with all necessary appurtenances currently each month in the proportion that the number of square feet in area owned by him or her in the drilling unit bears to the number of square feet embraced in the unit, and thereupon receive the same proportion of the oil produced and saved from the well or its value at the well at the option of the permittee and a like proportion of natural as produced, saved, and utilized or sold or the value of same at the well at the option of the permittee; or
(2) To treat his or her interest as a royalty interest and receive, delivered free of cost in the pipeline to which the well may be connected, a share of all oil produced and saved from the well equal to one-eighth of the proportion of the whole quantity of oil so produced and saved from the number of square feet in the area owned by him or her bears to the number of square feet in the drilling unit, or at the election of the permittee to receive the proportion of the value at the well of the oil so produced, and to receive a like proportion of the gas and casinghead gas produced, saved, and utilized or sold, or at the election of the permittee the value at the well of the proportion of gas or casinghead gas produced, saved, and utilized or sold.
(B) If any owner does not exercise the right and adoption above provided, the obligation shall then be upon the permittee, his or her heirs, successors, and assigns, to make settlement with the owner on the terms provided in division (A)(2) above, providing for the payment of a one-eighth royalty. If the owner of a lot or lots, block or blocks, or tract or tracts shall exercise division (A)(1) above and treat his or her interest as a working interest, as therein provided, the permittee shall be entitled to reimburse himself or herself for the owner's proportionate part of the costs out of the owner's proportionate part of the oil, gas, and casinghead gas or the value thereof before making deliveries of products or settlement for the value thereof. If division (A)(1) above is exercised by the owner of any lot or lots, block or blocks, or tract or tracts, the owner shall, within the time provided for notice of his or her election above set forth, file with the City Secretary a bond or other obligation executed by the owner as principal and by an authorized surety company as surety, in which the principal and surety agree, bind, and obligate themselves to pay to the permittee, his or her heirs, successors, and assigns, currently each month that proportion of the actual and necessary costs and expenses involved in the drilling, completion and operation of the well that the number of square feet embraced within the lot or lots, block or blocks, or tract or tracts of the owner bears to the total of square feet in the drilling unit, the bond to be approved by the Mayor and held by the City Secretary for the benefit of the beneficiaries therein. Permits shall be issued in all the cases upon the condition that the permittee, his or her heirs, successors, and assigns, shall make settlement in accordance with the provisions hereof.
(Ord. 59-311, passed 3-11-1959)