It shall be unlawful for any person to drill or to commence to drill a well for oil or gas within the limits of the city, or to work upon or assist in any way in the prosecution of the drilling of any such well, without a permit for the drilling, completion and operation of such well having been first issued by authority of the city council in accordance with the provisions of this division. It is hereby stated to be the expressed intention of the city council to permit additional wells in each drilling block, where the production appears to warrant such additional wells; that no permit shall be issued for more than one (1) well to each drilling block, and it shall be unlawful to drill more than one (1) well for oil and gas to each drilling block without a permit.
(1991 Code, sec. 22-31)
(a) 
Every application for a permit to drill, complete and operate a well for oil or gas shall be in writing, signed by the applicant or by some person duly authorized to sign the same on his behalf. The application shall state the drilling block and the proposed depth and the particular lot and location in the block where the proposed well is to be located and shall have attached to it certified or photostatic copies of the deed, oil and gas lease or drilling contract with the owners of land covering the lots, blocks or tracts in such drilling block over which the applicant has control for oil and gas purposes, together with abstracts of title, or certificates of title, satisfactory to the city council to the end that the application will show what proportion and what part of the drilling block the applicant owns in fee or holds under lease or drilling contract from the owners; or satisfactory information may be provided on the plat by showing lessors, lessees and volume and page where the lease or contract is recorded in the deed records. The applicant may withdraw the abstracts or certificate of title after they have been examined and released by the city council. The application shall also be accompanied by a map or maps of the drilling block showing the designation of the lots, blocks, or tracts owned or controlled by the applicant, as well as the ownership of all tracts and interests within the drilling block, and showing the exact location of the proposed well, which location shall be as nearly as is practicable in the center of the drilling block. No permit shall be issued for any well to be drilled at any location within an oil well drilling block or a gas well drilling unit, which location is nearer than two hundred fifty (250) feet to any residence, building or structure, unless the applicant for the permit for such well first secures the written permission of the owner of such residence, building or structure.
(b) 
The application shall be filed in duplicate, with duplicate plats, with the city clerk. The duplicate application and plat accompanying the same shall be delivered to the oil well inspector.
(1991 Code, sec. 22-32)
(a) 
Notice of the filing of an application for a permit under this division shall be given by the applicant at least ten (10) days prior to the date of hearing on the application, a copy of the notice in the form herein prescribed shall be sent by registered mail to each owner and lessee of lots, blocks and tracts in the drilling block owned by or under lease to the applicant, addressed to the last known address of such land and lease owners, if known to the applicant. A copy of such notice shall likewise be published, at the cost of the applicant, in three (3) issues of the official newspaper of the city, the first of such notices to be published not less than ten (10) days prior to the date of such hearing. Such notice shall state the lot and block number on which the applicant is asking for a permit to drill, and the date and place of hearing, and shall be in words and figures as follows:
“Notice is hereby given that _____, acting under and pursuant to the terms and provisions of Article 4.10 of the Sherman City Code did on the _____ day of _____, ______, file with the city clerk of the City of Sherman, an application for a permit to drill a well for oil and gas upon Lot No. _____, Block No. _____, _____ Addition to the City of Sherman, in Drilling Block No._____ . A hearing upon such application will be held in the Council Room of the City of Sherman at 220 W. Mulberry at _____o'clock on the ______ day of_____, 20_____.”
(b) 
Proof of notice shall be made by the applicant by filing with the city clerk an affidavit of the printer or publisher of the newspaper in which notice is published, containing a copy of the notice and stating the issues in which, and the period of time during which, notice was published, and an affidavit of the applicant showing the date and names of the persons to whom and the addresses to which notice was mailed by the applicant and proof that such addresses are the last known addresses of the persons involved.
(c) 
The time for hearing on each application shall be fixed by the city clerk at the time such application is filed; and at the time so fixed and published in such notices, a hearing on such application shall be held in the council room of the city by the city council.
(1991 Code, sec. 22-33)
(a) 
Each application for a permit under this division shall be accompanied by a duly executed bond, given by the applicant as principal and a surety company authorized to do business in the state, as surety, such bond to be approved by the city attorney and the city council. The bond shall run to the city for the benefit of the city and all persons concerned, conditioned that if the permit is granted, and if drilling operations are commenced thereunder, the applicant and his assigns will comply with the terms and conditions of this article, and all future amendments and regulations hereunder in the drilling and operation of a well; that the applicant will restore the streets and sidewalks and other public places of the city which may be disturbed in the operations to their former condition, will clear the blocks and lots of all litter, machinery, derricks, and buildings erected or used in the drilling or operation of such well whenever the well shall be completed, abandoned or the operation thereof discontinued; and that the applicant or his assigns will pay such sums as may be due by them by reason of production of oil, gas or other minerals to all persons owning lots, blocks or tracts of land in the drilling block, who have not executed, at the time of filing of the bond or who shall not execute during the term of the bond and prior to the accrual of liabilities thereunder, leases, drilling contracts, waivers or other form of contract under which the applicant or his assigns is or are authorized to operate the premises of the owner for the development and production of oil and gas in accordance with the provisions of this article.
(b) 
The bond required by this section shall be in the principal sum of twenty-five thousand dollars ($25,000.00) for a one-block drilling unit and one hundred thousand dollars ($100,000.00) for a drilling unit of twelve (12) plus acres. One (1) year after the completion of the well, the city council may, on application, reduce the principal amount of such bond to one thousand dollars ($1,000.00) on a one-block drilling unit and seven thousand five hundred dollars ($7,500.00) on a dwelling unit of twelve (12) plus acres. The reduction shall in no way affect any accrued liabilities, whether known or unknown, at the time the reduction is made.
(c) 
In lieu of the surety bond required by this section, the applicant may file with the city clerk his personal undertaking or undertakings, which shall be in the same amount and shall contain the same conditions as provided with respect to surety bonds and which undertaking or undertakings shall be secured by negotiable United States government securities or negotiable securities of the state, or of counties or municipalities in the state, such securities to be approved by the city council, and having a par value or market value, whichever is lesser, equal to the amount of the surety bond in lieu of which such undertaking is given, which securities shall be deposited in escrow with an official depository of the city, jointly selected by the city manager and the applicant or his assigns, along with and attached to a copy of the written undertaking for which same are to be held as security.
(d) 
Each applicant may provide the bond or security as provided for in this section or, in lieu thereof, an insurance policy or policies to cover the same requirements, liabilities and conditions as required in the bond. Such insurance given in lieu of the bond shall provide that the city or any aggrieved party shall have a right to proceed directly against the insurance company.
(e) 
A bond, undertaking or insurance policy filed pursuant to this section shall be released by the city council when production ceases and the permittee has in all things complied with the provisions of this article. When a permit terminates and becomes inoperative under the terms of section 4.10.043, or when the permittee or his assigns shall file with the city council written notice of his election to surrender his permit and abandon the premises covered thereby, provided that notice of such intent to abandon has been given in the manner provided in section 4.10.033 with reference to application for permits, then if no claims under the bond or undertaking in lieu of the bond have been filed with the city clerk within ninety (90) days, the city clerk on authorization by resolution adopted by the city council shall return the bond or undertaking and security or securities theretofore furnished by the permittee in connection with such permit, and if claims are filed within such time, upon the final satisfaction or defeat of such claims, such bond or undertaking, or security or securities shall thereupon be returned to the permittee or his assigns.
(1991 Code, sec. 22-34)
(a) 
In the event an applicant for a permit under this division does not own the leasehold estate or has not made satisfactory contracts with the owners of all of the leasehold estates in the drilling block on which the application is made, the following rules shall govern such situation:
(1) 
The city shall have the right to defer action upon an application for the drilling of a well if the applicant does not have leases or drilling contracts on all of the land within the drilling block if the evidence introduced at such hearing is such as to indicate that the prospects for completing a profitable producing well on such drilling block are so speculative in the opinion of the city as to justify the protesting lease owner in requesting that the application be deferred.
(2) 
In the event the permit is granted, the owner of the nonagreeing leasehold estate or working interest is hereby given the right and privilege of selecting one (1) of the following alternatives:
(A) 
Transfer his working interest or leasehold estate to the permittee and his associates upon receipt of the reasonable market value of his leasehold estate or working interest within five (5) days after the reasonable value of the same is determined by the city council, and fixed by order at the time the permit is issued; or
(B) 
Keep his working interest in the block by executing and delivering a bond in an amount to be fixed by the city council at the time the permit is issued to guarantee to the permittee that the principal will pay to the permittee his pro rata cost of drilling and equipping the well, such payment to be made upon receipt of a bill for same, and executed by the nonagreeing owner of the working interest as principal, and a corporate surety authorized to do business in the state. Such bond shall be made and filed with the city clerk within five (5) days after the issuance of the permit, and shall be for the benefit of the permittee; or
(C) 
Retain his working interest without personal liability for his pro rata share of the cost of drilling, equipping and operating the well, but with no right to share in the production from the well, until such time as the value of his working interest share of the production shall equal four times the amount of his pro rata share of the cost of drilling, equipping and operating the well, and thereafter he shall be entitled to his working interest share of current production less his pro rata share of current operating expenses.
(b) 
In the event of failure on the part of the nonagreeing owner of the working interest to elect either (a)(2)(A) or (a)(2)(B) above, it shall be considered, and it is ordained that (a)(2)(C) above shall automatically be effective.
(c) 
The permittee shall, as to each well and drilling block, keep complete and accurate logs of drilling operations and detailed accounts showing all costs and expenses of drilling and operations, the amount of oil and gas runs, to whom sold and the price received therefor, together with such other records as may be reasonable and necessary to carry out the provisions of this article, which records shall be accessible and open to inspection by the owner and holder of any working interest in the block or blocks.
(1991 Code, sec. 22-36)
The fee for a permit under this division shall be as established by ordinance. Such fee shall be paid, in cash, to the city clerk at the time the permit application is filed.
(1991 Code, sec. 22-37)
Except as otherwise provided in this division, if an application for a permit under this division is found by the city council to comply in all respects with the terms of this article, the city council shall, by resolution adopted either at a regular or special meeting, authorize the city clerk to issue a permit for the drilling, completion and operation of the well applied for. Such permit shall be issued in the form prescribed by the city council and shall be approved by the city attorney. The granting and issuance of a permit for a well on a drilling block as provided in this article shall automatically operate as a rejection and denial of all other pending applications for a well or wells upon the drilling block involved or any portion or portions thereof.
(1991 Code, sec. 22-38)
In case there is filed with the city clerk, and pending at the same time, applications for permits to drill on any single drilling block within the city limits made by more than one (1) applicant, that application shall be granted, if otherwise sufficient, which is made by the person holding the greater area of ground within the drilling block by ownership in fee or by lease or other contract authorizing the drilling and operation on land within such block for oil or gas.
(1991 Code, sec. 22-39)
(a) 
The city council shall have the power and reserves the authority to refuse any application for a permit under this division, or to require a definite location within the drilling block to be specified for drilling such well, when by reason of the location of the proposed well and the character and value of the permanent improvements already erected on the drilling block in question or adjacent thereto, and the use to which the land and surroundings are adapted for civic purposes, or for sanitary reasons, the drilling of an oil or gas well is determined by the city council to be a serious disadvantage to either the health, safety, morals or welfare of the city and its inhabitants. When a permit is refused for any of these reasons, but not otherwise, the deposit in cash as a fee, made with the application, shall be returned to the applicant.
(b) 
As an alternative to the refusal of a permit upon the conditions set forth in subsection (a) above, the city council may, in its sole discretion, require as a condition for the granting of such permit such additional requirements as may be deemed necessary under the circumstances. Subsequent breach of any part of such conditions shall authorize forfeiture of such permit by resolution of the city council duly adopted after five (5) days’ notice to the holder thereof and hearing thereon. For the guidance and convenience of the city council, but without restricting it to the conditions so set forth or excluding the imposition of other conditions, the following conditions most likely to be required are enumerated, any one (1) or more of which may be required:
(1) 
That an internal combustion engine may be used in the drilling operations of the well and, if an internal combustion engine is used, that mufflers shall be installed on the mud pumps and engine so as to reduce noise to a minimum, all of such installations to be done in a manner satisfactory to the fire marshal for fire prevention purposes only. For production purposes, only electric power may be used, except that whenever electric power is unavailable, impractical, or it becomes economically more feasible for an internal combustion engine to be used, then such an engine may be used for production purposes upon the issuance of a permit therefor by the city manager or his authorized representative.
(2) 
That all oil drilling and production operations shall be conducted in such a manner as to eliminate, so far as practicable, dust, noise, vibration or noxious odors, and shall be in accordance with the best accepted practices incident to drilling for the production of oil, gas and other hydrocarbon substances. Proven technological improvements in drilling and production methods may be adopted as they may become, from time to time, available, if capable of reducing factors of nuisance and annoyance.
(3) 
That firefighting equipment as required and approved by the fire marshal shall be maintained on the premises at all times during the drilling and production operations.
(4) 
That no more than two (2) production tanks shall be installed on the drilling site, neither one (1) of which shall have a rated capacity of more than five hundred (500) barrels; that the plans for such tank or tanks, including the plot plan showing the location thereof on the property, shall be submitted to and approved in writing by the city manager or his authorized representative before such tank or tanks and appurtenances are located on the premises, and that such tank or tanks shall be kept in good condition at all times.
(5) 
That no refinery, dehydration or absorption plant of any kind shall be constructed, established or maintained on the premises at any time. This shall not be deemed to exclude a simple gas separation process.
(6) 
That suitable and adequate sanitary toilet and washing facilities shall be installed and maintained on the premises in a clean condition at all times during drilling.
(7) 
That within sixty (60) days after the drilling of such well has been completed and the well placed on production or abandoned, the derrick, all boilers and all other drilling equipment shall be entirely removed from the premises unless such derrick and appurtenant equipment is to be used within a reasonable time limit determined by the city manager or his authorized representatives for the drilling of another well on the same drilling site.
(8) 
That no oil, gas or other hydrocarbon substances may be produced from any well hereby permitted unless all equipment necessarily incident to such production is completely enclosed within a building, the plans for such building to be approved by the building inspector and the fire marshal. This building shall be of a permanent type, of attractive design and constructed in a manner that will eliminate, as far as practicable, dust, noise, noxious odors and vibrations or other conditions which are offensive to the senses, and shall be equipped with such devices as are necessary to eliminate the objectionable features mentioned above. The architectural treatment of the exterior of such building shall also be subject to the approval of the city manager or his authorized representative.
(9) 
That no sign shall be constructed, erected, maintained or placed on the premises or any part thereof, except those required by law or ordinance to be displayed in connection with the drilling or maintenance of the well.
(1991 Code, sec. 22-40)
In the event a well is lost or abandoned as a dry hole, the permittee may relocate the well on the drilling block involved and drill and complete such relocated well under the permit for the first well by filing a plat and certificate showing the abandonment of the first well and the location of the second, such location to be approved by the city council in the manner set forth for the approval of the location of the original well.
(1991 Code, sec. 22-41)
No permit for the drilling, completion or operation of a well issued under this division shall be deemed to grant a vested right, but each such permit shall specifically provide that it is issued subject to all future amendments of this article and all other ordinances or regulations that may be adopted hereafter by the city and all future laws adopted by the state legislature and regulations adopted by the state railroad commission, and that violation of any such future ordinance, law or regulation shall, when determined, after five (5) days’ notice and hearing by the city council, be grounds for the cancellation of such permit and operations thereunder shall cease immediately as of the time of such cancellation.
(1991 Code, sec. 22-42)
A permit issued under this division shall terminate and become inoperative without any action on the part of the city council, unless within ninety (90) days from the date of issuance actual drilling of the well is commenced, or additional periods of ninety (90) days each for the commencement of such drilling are authorized by resolution of the city council. After the drilling of the well has commenced, the cessation of drilling operations prior to the completion of the well for a period of six (6) months shall operate to terminate and cancel the permit, and the well shall be considered as abandoned for all purposes of this article, and it shall be unlawful thereafter to continue the operation or drilling of such well without the issuance of another permit. If a well is completed as a producer and thereafter ceases to produce, the permittee shall have the right to conduct deepening or reworking operations on the well within six (6) months after cessation of production without having to procure a new permit.
(1991 Code, sec. 22-43)