(1) The governing body of each municipality has the power: (a) To lease any real estate or any interest therein owned by the municipality for oil and gas exploration, development, and production purposes, upon such terms and conditions as may be prescribed and contracted by the governing body in the exercise of its best judgment and as such governing body deems to be in the best interests of the municipality. Any such lease of oil and gas rights shall be for a term not to exceed ten years and as long thereafter as oil or gas is produced and shall provide for a royalty of not less than twelve and one-half percent of all oil or gas produced, saved, and marketed or the equivalent market value thereof, which royalty may be reduced proportionately under appropriate provision in such lease if the interest of the municipality is less than a full interest in the land or oil and gas rights in the land described in such lease. When, in the opinion of the governing body and because of the size, shape, or current use of any tract of real estate owned by said municipality, the best interest of the municipality so requires, any such lease of such tract may provide that no drilling shall be conducted on the land covered thereby, in which case such lease shall be for a term not to exceed ten years and so long thereafter as the municipality may share in royalties payable on account of production of oil or gas from lands adjacent to such tract so leased. (b) To enter into, on behalf of the municipality, when deemed by the governing body to be in the best interest of the municipality, any agreement providing for the pooling, unitization, or consolidation of acreage covered by any oil and gas lease executed by such municipality with other acreage for oil and gas exploration, development, and production purposes and providing for the apportionment or allocation of royalties among the separate tracts of land included in such unit or pooling agreement on an acreage or other equitable basis and, by such agreement, with the consent of the lessee under such lease, to change any of the provisions of any such lease issued by such municipality, including the term of years for which such lease was originally granted and any drilling requirements contained therein, in order to conform such lease to the terms and provisions of such unit or pooling agreement and to facilitate the efficient and economic production of oil and gas from the unit lands. (2) All leases of oil and gas or rights therein and all unit agreements relating to or dealing with oil and gas and containing provisions similar to those set forth in this section affecting municipal lands made or entered into by any municipality prior to April 16, 1953, acting by its governing body, are hereby confirmed, validated, and declared to be legal and valid in all respects.
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