In case a permit for the drilling of a well is is-isued to a person, firm or corporation not holding oil and gas leases or drilling contracts with the owners of all lots within a one-half block or area of land equal thereto, as defined in the section setting forth regulations covering the granting of permits in this chapter, then it shall be a condition of the permit that the permittee, his or its assigns and successors shall deliver to the credit of each of such owners whose land shall not be under lease to such permittee, free of cost in the pipeline to which the well may be connected, a pro-rata share in the royalty of all oil produced and saved from such well, equal to no less than one-eighth royalty, in the proportion that the area of land so owned bears to the entire area of such one-half block or area of land, exclusive of the streets and alleys and a like proportion of the proceeds of gas and casing head gas produced from the well and used off the premises if such owner or owners desire to have and take the same. (Prior code § 28-1-4)