San Juan Basin royalty Trust
annual report & form 10-k
(two thousand eight)




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SUNSET STORM
New Mexico




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the TRUST THE PRINCIPAL ASSET of the San Juan Basin Royalty Trust (the Trust) consists of
a 75% net overriding royalty interest (the Royalty) carved out of certain oil and gas leasehold and royalty interests (the Underlying Properties) in properties
located in the San Juan Basin of northwestern New Mexico. UnitsofBeneficial Interest The units of beneficial interest of the Trust (the Units) are traded on the New York Stock
Exchange under the symbol SJT. At February 25, 2009 the closing price of a Unit was $15.51. From
January 1, 2007, to December 31, 2008, the quarterly high and low sales prices and the aggregate
amount of monthly distributions per Unit paid each quarter were as follows: 2008 HIGH            LOW            DISTRIBUTIONS Paid
    -   First Quarter $39.9900 $31.9500 $ .539184 Second Quarter 47.2500 36.4400 .751770 Third Quarter 46.7100 35.1100 1.120455 Fourth Quarter 38.8500 21.9900 .658424 
TOTALfor2008$3.069833  2007
 First Quarter $33.5400 $29.3900 $ .515094 Second Quarter 33.6500 30.6000 .553449 Third Quarter 34.8900 31.0300 .802107 Fourth Quarter 38.0500 33.0000 .558534 
TOTALfor2007$2.429184  At February 18, 2009, there were 46,608,796 Units outstanding held by 1,540 Unit holders of record.
The following table presents information relating to the distribution of record ownership of Units: NUMBER ofUNITS
TYPE ofUNIT HOLDER            UNIT Holders            Held
     Individuals, Joint Holders and Minors 1,361 1,771,104 Fiduciaries 142 477,396 Clubs, Associations or Societies 6 13,117 Depositary (for all beneficial holders) 1 44,036,416 Corporations 30 310,763 
TOTAL 1,540 46,608,796    ( one )




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To UNIT HOLDERS WE are pleased topresent the2008 Annual report of the San Juan Basin Royalty Trust. The report includes a copy of the Trusts Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the Commission) for the year ended
December 31, 2008, without exhibits. The Form 10-K contains important information concerning the
Underlying Properties, as defined below, including the oil and gas reserves attributable to the
75% net overriding royalty interest owned by the Trust. Production figures provided in this letter
and in the Trustees Discussion and Analysis are based on information provided by Burlington
Resources Oil & Gas Company LP (BROG), the current owner of the Underlying Properties and the
successor, through a series of assignments and mergers, to Southland Royalty Company
(Southland). The Trust was established in November 1980 by Southland. Pursuant to the Indenture
that governs the operations of the Trust, Southland conveyed to the Trust a 75% net overriding
royalty interest (equivalent to a net profits interest) (the Royalty), carved out of Southland
Royaltys oil and gas leasehold and royalty interests (the Underlying Properties) in properties
in the San Juan Basin of northwestern New Mexico. The Royalty constitutes the principal asset of the Trust. Under the Indenture governing the Trust,
the function of Compass Bank, as Trustee, is to collect the net proceeds attributable to the
Royalty (Royalty Income), to pay all expenses and charges of the Trust, and then distribute the
remaining available income to the Unit holders. Income distributed to Unit holders in 2008 was
$143,081,245 or $3.069833 per Unit. Distributable income for 2008 consisted of Royalty Income of
$144,588,156 plus interest income of $388,454, less administrative expenses of $1,895,365.
Information about the Trusts estimated proved reserves of gas, including coal seam gas, and of oil
as well as the present value of net revenues discounted at 10% can be found in Item 2of the
accompanying Form 10-K. Certain Royalty Income is generally considered portfolio income under the passive loss rules of the
Internal Revenue Code of 1986, as amended. Therefore, Unit holders should generally not consider
the taxable income from the Trust to be passive income in determining net passive income or loss.
Unit holders should consult their tax advisors for further information. Unit holders of record will
continue to receive an individualized tax information letter for each of the quarters ending March
31, June 30 and September 30, 2009, and for the year ending December 31, 2009. Unit holders owning
Units in nominee name may obtain monthly tax information from the Trusts Web site or from the
Trustee upon request. For the readers convenience, a glossary of definitions used in this report
can be found on the inside back cover. Please visit our Web site at www.sjbrt.com to access news
releases, reports, Commission filings and tax information. Compass Bank, Trustee
By: Lee Ann Anderson Lee Ann Anderson Vice
President and Senior Trust
Officer




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Sentinelsof NEW MEXICO




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DESCRIPTION of thePROPERTIES THE principal asset of the Trust is a 75% net overriding royalty interest (the Royalty)
carved out of certain working, royalty and other leasehold interests (the Underlying Properties)
owned by BROG in oil and gas properties located in the San Juan Basin, and more particularly in San
Juan, Rio Arriba and Sandoval Counties of northwestern New Mexico. The Underlying Properties
consist of working interests, royalty interests, overriding royalty interests and other contractual
rights in 151,900 gross (119,000 net) acres and 3,903 gross (1,137 net) wells calculated on a well
bore basis and not including multiple completions as separate wells. The Underlying Properties have historically produced gas primarily from conventional wells drilled
to three major formations: the Pictured Cliffs, the Mesaverde and the Dakota, ranging in depth from
1,500 to 8,000 feet. The characteristics of these reservoirs result in the wells having very long
productive lives. A production index for oil and gas properties is derived by dividing remaining
reserves by current production. Based upon the reserve report prepared by the Trusts independent
petroleum engineers as of December 31, 2008, the production index for the Underlying Properties is
estimated to be approximately eight years. The production index is subject to change from
year-to-year based on reserve revisions and production levels and is not presented as an estimate
of the life expectancy of the Trust. Among the factors considered by engineers in estimating
remaining reserves of natural gas is the applicable sales price for gas. As the sales price
increases, the producer can justify expending higher lifting costs and therefore reasonably expect
to recover more of the known reserves. Accordingly, as gas prices rise, the production index
increases and vice versa. In addition to gas from conventional wells, the Underlying Properties also produce gas from coal
seam wells completed to the Fruitland Coal formation. The process of removing coal seam gas is
often referred to as degasification or desorption. Millions of years ago, natural gas was generated
in the process of coal formation and absorbed into the coal. Water later filled the natural
fracture system. When the water is removed from the natural fracture system, reservoir pressure is
lowered and the gas desorbs from the coal. The desorbed gas then flows through the fracture system
and is produced at the well bore. The volume of formation water production typically declines with
time and the gas production may increase for a period of time before starting to decline. In order
to dispose of the formation water, surface facilities including pumping units are required. The
price of coal seam gas is typically lower than the price of conventional gas. This is because the
heating value of coal seam gas is much lower than that of conventional gas due to (a) ever increasing percentages of carbon dioxide in coal seam gas (carbon dioxide has no heating value),
and (b) the absence of heavier hydrocarbons such as ethanes, propanes, and butanes which are
present in conventional gas. Furthermore, the processing fees for coal seam gas are typically
higher than the processing fees for conventional gas due to the cost of extracting the carbon
dioxide. In February 2002, BROG informed the Trust that the New Mexico Oil Conservation Division (the OCD)
had approved plans for 80-acre infill drilling of the Dakota formation in the San Juan Basin. In
July 2003, the OCD approved 160-acre spacing in the Fruitland Coal formation. Eighty-acre spacing
has been permitted in the Mesaverde formation since 1997. In 2008, BROG participated in a study
involving a total of 15 test wells completed to the Mesaverde and/or Dakota formations, with some
of the test wells drilled on a 40-acre spacing basis. In addition, BROG participated in a pilot
project for the drilling of two horizontal wells to the Dakota formation. Although neither of the
horizontal wells were drilled on acreage burdened by the Royalty, the pilot project could have
implications for the San Juan Basin generally. The Federal Energy Regulatory Commission is primarily responsible for federal regulation of natural
gas. For a further discussion of gas pricing, gas purchasers, gas production and regulatory matters
affecting gas production see Item 2, Properties, in the accompanying Form 10-K. (four)




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TRUSTEES DISCUSSION and ANALYSIS Gas andOil Production Total gas and oil production from the Underlying Properties for the five years ended December 31,
2008 were as follows: 2008 2007 2006 2005 2004
         Gas  Mcf Mcf per 34,527,043 94,336 36,961,349 101,264 40,900,570 112,056 42,867,162 117,444 44,015,816 120,262
Day Oil- Bbls Bbls 50,323 137 65,755 180 74,438 204 69,558 191 77,341 211
per Day Royalty Income for a calendar year is based on the actual gas and oil production during the period
beginning with November of the preceding calendar year through October of the current calendar
year. Gas and oil sales attributable to the Royalty for the past five years are summarized in the
following table: 2008 2007 2006 2005 2004
         Gas  Mcf Average 19,529,046 $8.28 20,116,806 $6.11 22,475,405 $6.55 26,600,644 $6.27 25,324,435 $4.68
Price (Per Mcf) 28,221 $99.32 35,129 $63.14 40,702 $61.30 43,142 $49.62 44,832 $34.81
Oil- Bbls Average
Price (Per Bbl) Sales volumes attributable to the Royalty are determined by dividing the net profits
received by the Trust and attributable to oil and gas, respectively, by the prices received for
sales volumes from the Underlying Properties, taking into consideration production taxes
attributable to the Underlying Properties. Since the oil and gas sales attributable to the Royalty
are based on an allocation formula dependent on such factors as price and cost, including capital
expenditures, the aggregate sales amounts from the Underlying Properties may not provide a
meaningful comparison to sales attributable to the Royalty. The fluctuations in annual gas production that have occurred during these five years generally
resulted from changes in the demand for gas during that time, marketing conditions, and increased
capital spending to generate production from new and existing wells, as offset by the natural
production decline curve. Production from the Underlying Properties is influenced by the line
pressure of the gas gathering systems in the San Juan Basin. As noted above, oil and gas sales
attributable to the Royalty are based on an allocation formula dependent on many factors, including
oil and gas prices and capital expenditures. BROG previously entered into three contracts for the sale of all volumes of gas produced from the
Underlying Properties to ChevronTexaco Natural Gas, a division of Chevron U.S.A. Inc. (ChevronTexaco), Coral Energy Resources, L.P. (Coral), and PNM Gas Services (PNM),
respectively. All three contracts provide for (i) the delivery of such gas at various delivery
points through March 31, 2007 and from year-to-year thereafter, until terminated by either party
on 12 months notice; and (ii) the sale of such gas at prices which fluctuate in accordance with
the published indices for gas sold in the San Juan Basin of northwestern New Mexico. In March
2008, both ChevronTexaco and Coral notified BROG of their election to terminate their respective
contracts effective March 31, 2009. Requests for proposal have been circulated to potential
purchasers of the packages of gas covered by the expiring contracts, and the responses to those
requests are currently being evaluated by BROG and the Trusts independent gas marketing
consultants. Neither BROG nor PNM gave notice of termination with respect to the PNM contract and,
accordingly, the term of that contract has been extended at least through March 31, 2010. Confidentiality agreements with purchasers of gas produced from the Underlying Properties prohibit
public disclosure of certain terms and conditions of gas sales contracts with those entities,
including specific pricing terms and gas receipt points. Such disclosure could compromise the
ability to compete effectively in the marketplace for the sale of gas produced from the Underlying
Properties. (five)




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TRUSTEES DISCUSSION and ANALYSIS Royalty income Royalty Income consists of monthly Net Proceeds attributable to the Royalty. Royalty Income
for the five years ended December 31, 2008 was determined as shown in the following table: Gross Proceeds from the2008 2007 2006 2005 2004 Underlying Properties
           Gas $274,759,523 $225,276,909 $264,428,021 $267,895,460 $204,682,365 Oil 4,944,422 4,114,534 4,561,342 3,451,115 2,670,763 Other -0- 279,1011 1,384,8482 2,405,486 3 3,314,808 4
        
TOTAL$279,703,945$229,670,544$270,374,211$273,752,061$210,667,936          Less Production Costs 2008 2007 2006 2005 2004            Capital Expenditures $ 26,992,650 $ 27,354,003 $ 39,195,168 $ 19,127,698 $ 22,338,684 Severance Tax  Gas 25,500,279 21,213,310 25,652,907 26,717,315 19,766,231 Severance Tax  Oil 483,725 406,776 460,702 362,023 253,022 Other -0- -0- 42,968 273,766 42,763 Lease Operating Expenses and 33,943,082 28,958,669 23,273,276 22,126,907 20,210,213 Property Taxes
        
TOTAL$ 86,919,736$ 77,932,758$ 88,625,021$ 68,607,709$ 62,610,913          Net Profits $192,784,209 $151,737,786 $181,749,190 $205,144,352 $148,057,023 Net Overriding Royalty Interest 75% 75% 75% 75% 75%
Royalty Income $144,588,156 $113,803,339 $136,311,892 $153,858,264 $111,042,767          1 Represents funds allocated to the Trust as part of the ongoing negotiation of joint interest audit exceptions.
2 Represents funds allocated to the Trust as part of the ongoing negotiation of joint interest audit exceptions, and a portion of the arbitration award issued November 11, 2005 in favor of the Trust, and interest thereon.
3 Represents funds allocated to the Trust as part of the ongoing negotiation of joint interest audit exceptions, interest received for resolved audit exceptions, and insurance proceeds for a business interruption claim.
4 Represents a settlement between BROG and the Mineral Management Service of the United States Department of the Interior. Distributable income Distributable Income (as that term is used herein) consists of Royalty Income plus interest,
less the general and administrative expenses of the Trust and any changes in cash reserves
established by the Trustee. For the year ended December 31, 2008, Distributable Income was $143,081,245, representing a 26%
increase from 2007. For the year ended December 31, 2007, Distributable Income was $113,221,235,
representing a 16% decrease from 2006. Distributable Income in 2006 was $135,867,325. The Trust received Royalty Income of $144,588,156 and interest income of $388,454 in 2008. After
deducting administrative expenses of $1,895,365, Distributable Income for 2008 was $143,081,245
($3.069833 per Unit). In 2007, Royalty Income was $113,803,339, interest income was $1,401,849, and
administrative expenses were $1,983,953, resulting in Distributable Income of $113,221,235
($2.429184 per Unit). The increase in Distributable Income from 2007 to 2008 was primarily attributable to higher natural gas pricing. BROG has
informed the Trust that the decrease in reported volumes was due primarily to the natural
production decline curve. Interest earnings in 2008 were lower as compared to 2007, primarily due
to additional interest paid to the Trust in 2007 as a result of the granting of certain audit
exceptions. Administrative expenses were lower in 2008, as compared to 2007 due primarily to
differences in timing in the receipt and payment of these expenses, but also in part to costs
incurred in December 2007 in connection with the special meeting of Unit holders. In 2006, the Trust received Royalty Income of $136,311,892 and interest income of $1,207,360.
After deducting administrative expenses of $1,651,927, Distributable Income for 2006 was
$135,867,325. ($2.915055 per Unit). The decrease in Distributable Income from 2006 to 2007 was
primarily attributable to lower natural gas pricing, higher lease operating expenses and reduced
gas volumes. BROG informed the Trust that the decrease in reported volumes was due in part to the
natural production ( six )




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T R U S T E E  S D I S C U S S I O N andA N A LY S I S decline curve and in part to the adjustments in the first two
quarters of 2007 for over accruals of gas production allocated to
the Trust in 2006. In addition, interest earnings in 2007 were
higher, as compared to 2006. Administrative expenses were
higher in 2007 as compared to 2006, primarily due to costs
incurred in connection with the special meeting of Unit holders
on December 12, 2007, but also as a result of differences in
timing in the receipt and payment of these expenses. BROG has informed the Trustee that the New Mexico Oil and
Gas Proceeds Withholding Tax Act (the Withholding Tax Act)
requires remitters who pay certain oil and gas proceeds from
production on New Mexico properties on or after October 1,
2003, to withhold income taxes from such proceeds in the case
of certain nonresident recipients. The Trustee, on advice of New
Mexico counsel, has observed that net profits interests, such
as the Royalty, and other types of interests, the extent of which
cannot be determined with respect to a specific share of the oil
and gas production, are excluded from the withholding
requirements of the Withholding Tax Act. Unit holders are
reminded to consult with their tax advisors regarding the
applicability of New Mexico income tax to distributions received
from the Trust by a Unit holder. O P E R A T I N G            E X P E N S E S Monthly operating expenses of the Underlying Properties,
exclusive of property taxes, in 2008 averaged approximately
$2,738,966, which is higher than the $2,328,983 average in
2007 and higher than the $1,871,974 average in 2006. BROG
has observed that the increase in operating expenses has
generally followed increases in gas prices. S E T T L E M E N T S As part of the September 4, 1996, settlement of the litigation
filed by the Trustee on June 4, 1992 against BROG and Southland,
the Trustee and BROG established a formal protocol pursuant to
which joint interest auditors retained by the Trustee gained
improved access to BROGs books and records as applicable to
the Underlying Properties. The audit process was initiated in
1996 and, since inception, has resulted in audit exceptions
being granted by and payments or credits received from BROG
totaling approximately $26.2 million. C A P I T A L            E X P E N D I T U R E S Capital expenditures of $27 million were included in calculating
Royalty Income paid to the Trust in calendar year 2008, and included
expenditures for the drilling and completion of 118 gross (14.37 net)
conventional wells and 40 gross (16.16 net) coal seam wells. There
were 18 gross (5.51 net) conventional wells and four gross (1.48 net)
coal seam wells in progress as of December 31, 2008. All of the wells
were development wells. Approximately $12.5 million of capital
expenditures covered 162 projects budgeted for 2008. Approximately $6.4 million of those costs were incurred in new
drilling activity, which included 38 new wells operated by BROG
and three new wells operated by third parties. The balance of
the expenditures allocable to current projects was attributable
to the workover of existing wells and the maintenance and
improvement of production facilities. The $27 million of capital expenses reported by BROG 2008 also
included approximately $14.5 million attributable to capital
budgets for prior years. This occurs because capital expenditures
are deducted in calculating royalty income in the month they
are accrued, and projects within a given years budget often
extend into subsequent years. Further, BROGs accounting
period for capital expenditures runs through November 30 of
each calendar year, such that capital expenditures incurred in
December of each year are actually accounted for as part of the
following years capital expenditures. In addition, with respect
to wells not operated by BROG, BROGs share of capital
expenditures may not actually be paid by it until the year or
years after those expenses were incurred by the operator. During 2007, in calculating Royalty Income, BROG deducted
approximately $27.4 million of capital expenditures for projects,
including drilling and completion of 45 gross (21.47 net)
conventional wells and 21 gross (15.31 net) coal seam wells.
There were 10 gross (0.35 net) conventional wells and nine gross
(4.52 net) coal seam wells in progress as of December 31, 2007.
All of the wells were development wells. During 2006, in calculating Royalty Income, BROG deducted
approximately $39.2 million of capital expenditures for
projects, including drilling and completion of 115 gross (24.14
net) conventional wells, two gross (0.003 net) payadds, two
gross (1.74 net) recompletions, three gross (2.50 net)
restimulations, 44 gross (14.63 net) coal seam wells, seven
gross (0.28 net) coal seam payadds, two gross (0.48 net) coal
seam recompletions, and two gross (0.08 net) coal seam
miscellaneous capital projects. There were 100 gross (26.27 net)
conventional wells, 14 gross (0.39 net) payadds, seven gross
(3.49 net) recompletions, six gross (4.02 net) restimulations,
four gross (0.02 net) miscellaneous capital projects, 28 gross
(11.79 net) coal seam wells, one gross (0.04 net) coal seam
payadd, five gross (3.57 net) coal seam recompletions, and two
gross (0.004 net) coal seam restimulations in progress as of
December 31, 2006. All of the wells were development wells. BROG has informed the Trust that its budget for capital
expenditures for the Underlying Properties in 2009 is estimated
at $25.2 million. Approximately 12% of the planned expenditures
attributable to the 2009 budget will be on Fruitland Coal formation
projects with the remainder to be spent on conventional projects.
In addition, BROG estimates that during 2009 it will incur
capital expenses in the amount of approximately $12.1 million




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TRUSTEES DISCUSSION and ANALYSIS attributable to the capital budgets for 2008 and prior years. BROG reports that based on
its actual capital requirements, the pace of regulatory approvals, the mix of projects and swings
in the price of natural gas, the actual capital expenditures for 2009 could range from $10 million
to $45 million. BROG anticipates 431 projects in 2009 at an estimated cost of $25.2 million. Approximately $6
million of that budget is allocable to 49 new wells, including 39 wells scheduled to be dually
completed in the Mesaverde and Dakota formations and four wells projected to be drilled to
formations producing coal seam gas. Approximately $7.1 million will be spent on workovers and
facilities projects. Of the $12.1 million attributable to the budgets for prior years,
approximately $6.9 million is allocable to new wells, and the $5.2 million balance will be applied
to miscellaneous capital projects such as workovers and operated facility projects. BROG also
anticipates that the possible implementation of new rules minimizing surface disturbances,
requiring the implementation of closed-loop systems for the disposal of drilling fluids and
cuttings, and restricting the use of open reserve pits could reduce the number of projects due to
increased compliance costs. Contractual Obligations Under the Indenture governing the Trust, the Trustee is entitled to an administrative fee for its
administrative services and the preparation of quarterly and annual statements of: (i) 1/20 of 1%
of the first $100 million of the annual gross revenue of the Trust, and 1/30 of 1% of the annual
gross revenue of the Trust in excess of $100 million and (ii) the Trustees standard hourly rates
(currently ranging from $75.00 to $250.00 per hour) for time in excess of 300 hours annually. As
of January 1, 2003, the administrative fee due under items (i) and (ii) above will not be less
than $36,000 per year (as adjusted annually to reflect the increase (if any) in the Producers
Price Index as published by the U.S. Department of Labor, Bureau of Labor Statistics). Effects of Securities Regulation As a publicly-traded trust listed on the New York Stock Exchange (the NYSE), the Trust is and
will continue to be subject to extensive regulation under, among others, the Securities Act of
1933, the Securities Exchange Act of 1934 (which contains many of the provisions of the
Sarbanes-Oxley Act of 2002) and the rules and regulations of the NYSE. Issuers failing to comply
with such authorities risk serious consequences, including criminal as well as civil and
administrative penalties. In most instances, these laws, rules and regulations do not specifically
address their applicability to publicly-traded trusts, such as the Trust. In particular, the
Sarbanes-Oxley Act of 2002 provides for the adoption by the Securities and Exchange Commission (the
Commission) and NYSE of certain rules and regulations that may be impossible for the Trust to literally satisfy because of its nature as a
pass-through trust. It is the Trustees intention to follow the Commissions and NYSEs rulemaking
closely, attempt to comply with such rules and regulations and, where appropriate, request relief
from these rules and regulations. However, if the Trust is unable to comply with such rules and
regulations or to obtain appropriate relief, the Trust may be required to expend as yet unknown
but potentially material costs to amend the Indenture that governs the Trust to allow for
compliance with such rules and regulations. To date, the rules implementing the Sarbanes-Oxley Act
of 2002 have generally made appropriate accommodation for passive entities such as the Trust. Critical Accounting Policies In accordance with the Commissions staff accounting bulletins and consistent with other royalty
trusts, the financial statements of the Trust are prepared on the following basis:  Royalty Income recorded fora month is the amount computed
and paid by BROG to the Trustee for the Trust. Royalty Income
consists of the proceeds received by BROG from the sale of
production from the Underlying Properties less accrued
production costs, development and drilling costs, applicable
taxes, operating charges, and other costs and deductions,
multiplied by 75%. The calculation of net proceeds by BROG
for any month includes adjustments to proceeds and costs for
prior months and impacts the Royalty Income paid to the
Trust and the distribution to Unit holders for that month.  Trust expenses recorded are based on liabilities paid and
cash reserves established from Royalty Income for liabilities
and contingencies.  Distributions to Unit holders are recorded when declared by the Trustee.  The conveyance which transferred the Royalty to the Trust
provides that any excess of production costs applicable to
the Underlying Properties over gross proceeds from such
properties must be recovered from future net profits before
Royalty Income is again paid to the Trust. The financial statements of the Trust differ from financial statements prepared in accordance with
U.S. generally accepted accounting principles (GAAP) because revenues are not accrued in the
month of production; certain cash reserves may be established for contingencies which would not be
accrued in financial statements prepared in accordance with GAAP; expenses are recorded when paid
instead of when incurred; and amortization of the Royalty calculated on a unit-of-production basis
is charged directly to trust corpus instead of an expense. ( eight )




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APPROACHING Storm
New Mexico




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TRUSTEES DISCUSSION and ANALYSIS Results of the 4thQUARTERS of 2008 and2007 For the three months ended December 31, 2008, Distributable Income was $30,688,371 ($0.658424 per
Unit), which was more than the $26,032,582 ($0.558534 per Unit) of income distributed during the
same period in 2007. The increase in Distributable Income resulted primarily from higher natural
gas prices. Royalty Income of the Trust for the fourth quarter is based on actual gas and oil production
during August through October of each year. Gas and oil sales for the quarters ended December 31,
2008 and 2007 were as follows: Underlying Properties 2008 2007
     Gas   Mcf 9,393,367 9,427,385 Mcf per Day 102,102 102,472 Average Price (per Mcf) $ 6.62 $ 5.41 Oil- Bbls 14,155 14,583 Bbls per Day 154 159 Average Price (per Bbl) $ 88.98 $ 75.79      Attributable            to the            Royalty 2008 2007      Gas   Mcf 4,949,220 5,229,676 Oil- Bbls 7,434 8,055 The average price of gas and oil increased in the fourth quarter of 2008 compared to the same
period of 2007. The price per barrel of oil during the fourth quarter of 2008 was $13.19 per Bbl
higher than that received in the fourth quarter of 2007 due to increases in oil prices in world
markets generally, including the posted price applicable to the Royalty. Gas production decreased
in the fourth quarter of 2008 because new production brought on line in 2008 failed to completely
offset the natural decline in production from existing wells. Capital costs for the fourth quarter of 2008 totaled $7,133,274 compared to $5,005,517 during the
same period of 2007. Lease operating expenses and property taxes for the fourth quarter of 2008
averaged $3,125,598 per month compared to $2,452,069 per month in the fourth quarter of 2007.
Operating expenses were higher in the fourth quarter of 2008 than for the fourth quarter of 2007
primarily due to increased compression costs, salt water disposal costs, and artificial lift
costs. Based on 46,608,796 Units outstanding, the per-Unit distributions during the fourth
quarters of 2008 and 2007 were as follows: 2008 2007
   October $.291008 $.193305 November .210922 .173684 December .156494 .191545   
QUARTER TOTAL$.658424$.558534    ( ten)




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Grandeur
New Mexico




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SAN JUAN BASIN ROYALTY TRUST STATEMENTS ofAssets, Liabilities andTrust Corpus December 31, 2008 and 2007

Assets 2008 2007
     Cash and Short-Term Investments $ 7,449,767 $ 9,042,528 Net Overriding Royalty Interests in Producing Oil and Gas Properties  Net 17,927,498 19,880,888   
TOTAL$25,377,265 $28,923,416    Liabilities andTrust Corpus 2008 2007      Distribution Payable to Unit holders $ 7,293,978 $ 8,927,670 Cash Reserves 155,789 114,858 Trust Corpus  46,608,796 Units of Beneficial Interest Authorized and Outstanding 17,927,498 19,880,888   
TOTAL$25,377,265 $28,923,416    StatementsofDistributable Income For each of the three years ended December 31

2008 2007 2006
     Royalty Income $144,588,156 $113,803,339 $136,311,892 Interest Income 388,454 1,401,849 1,207,360     
Expenditures  General and Administrative 144,976,6101,895,365 115,205,1881,983,953 137,519,2521,651,927     
Distributable Income $143,081,245 $113,221,235 $135,867,325     
Distributable Income per Unit (46,608,796 Units) $ 3.069833 $ 2.429184 $ 2.915055      Statements ofChanges inTrust Corpus For each of the three years ended December 31

2008 2007 2006
     Trust Corpus, Beginning of Period $ 19,880,888 $ 21,823,390 $ 23,881,494 Amortization of Net Overriding Royalty Interest (1,953,390) (1,942,502) (2,058,104) Distributable Income 143,081,245 113,221,235 135,867,325 Distributions Declared (143,081,245) (113,221,235) (135,867,325)     
Trust Corpus, End of Period $ 17,927,498 $ 19,880,888 $ 21,823,390      These financial statements should be read in conjunction with the accompanying Notes to Financial
Statements included herein. ( twelve )




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NOTES toFINANCIAL STATEMENTS 1. Trust Organization andProvisions The San Juan Basin Royalty Trust (Trust) was established as of November 1, 1980. Southland
Royalty Company (Southland) conveyed to the Trust a 75% net overriding royalty interest
(Royalty) carved out of Southlands working interests and royalty interests (the Underlying
Properties) in the properties located in the San Juan Basin in northwestern New Mexico. Through an
acquisition completed March 24, 2006, Compass Bank succeeded TexasBank as Trustee (herein so
called) of the Trust. On September 7, 2007, Compass Bancshares, Inc. was acquired by Banco Bilbao
Vizcaya Argentaria, S.A. (BBVA) and is now a wholly-owned subsidiary of BBVA. On November 3,1980, units of beneficial interest (Units) in the Trust were distributed to the
Trustee for the benefit of Southland shareholders of record as of November 3, 1980, who received
one Unit in the Trust for each share of Southland common stock held. The Units are traded on the
New York Stock Exchange. The terms of the Trust Indenture provide, among other things, that: · The Trust shall not engage in any business or commercial
activity of any kind or acquire any assets other than those initially conveyed to the Trust; · The Trustee may sell up to one percent (1%) of the value
(based on prior year engineering reports) of the Royalty in
any 12- month period, but otherwise may not sell all or any
part of the Royalty unless approved by holders of 75% of all
Units outstanding. In either case, the sale must be for cash
and the proceeds promptly distributed; · The Trustee may establish a cash reserve for the payment of any liability which is contingent or uncertain in amount; · The Trustee is authorized to borrow funds to pay liabilities of the Trust; and · The Trustee will make monthly cash distributions to Unit holders (see Note 2). 2.Net Overriding Royalty interest andDistribution tounit holders The amounts to be distributed to Unit holders (Monthly Distribution Amounts) are determined on a
monthly basis by the Trustee. The Monthly Distribution Amount is an amount equal to the sum of cash
received by the Trustee during a calendar month attributable to the Royalty, any reduction in cash
reserves and any other cash receipts of the Trust, including interest, reduced by the sum of
liabilities paid and any increase in cash reserves. If the Monthly Distribution Amount for any
monthly period is a negative number, then the distribution will be zero for such month and such
negative amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation becomes a positive number, at
which time a distribution will be made. Unitholders of record will be entitled to receive the
calculated Monthly Distribution Amount for each month on or before 10 business days after the
monthly record date, which is generally the last business day of each calendar month. The cash received by the Trustee consists of the proceeds received by the owner of the Underlying
Properties from the sale of production less the sum of applicable taxes, accrued production costs,
development and drilling costs, operating charges and other costs and deductions, multiplied by
75%. The initial carrying value of the Royalty ($133,275,528) represented Southlands historical net
book value at the date of the transfer of the Trust. Accumulated amortization as of December 31,
2008 and 2007 aggregated $115,348,030 and $113,394,640, respectively. 3. basis            of            Accounting The financial statements of the Trust are prepared on the following basis: · Royalty Income (as defined in the Glossary of Terms)
recorded for a month is the amount computed and paid by the
owner of the Underlying Properties, Burlington Resources
Oil & Gas Company LP (BROG), the present owner of the
Underlying Properties, to the Trustee for the Trust. Royalty
Income consists of the proceeds received by BROG from the
sale of production less accrued production costs, development
and drilling costs, applicable taxes, operating charges, and
other costs and deductions, multiplied by 75%. The calculation
of net proceeds by BROG for any month includes adjustments
to proceeds and costs for prior months and impacts the
Royalty Income paid to the Trust and the distribution to Unit
holders for that month. · Trust expenses recorded are based on liabilities paid and
cash reserves established from Royalty Income for liabilities
and contingencies. · Distributions to Unit holders are recorded when declared by
the Trustee. · The conveyance which transferred the Royalty to the Trust
provides that any excess of production costs applicable to the
Underlying Properties over gross proceeds from such
properties must be recovered from future net proceeds
before Royalty Income is again paid to the Trust. The financial statements of the Trust differ from financial statements prepared in accordance with
United States generally accepted accounting principles (GAAP) because revenues are not accrued
in the month of production; certain cash reserves may be established for contingencies which would ( thirteen )




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NOTES toFINANCIAL STATEMENTS not be accrued in financial statements prepared in accordance with GAAP; expenses are
recorded when paid instead of when incurred; and amortization of the Royalty calculated on a
unit-of-production basis is charged directly to trust corpus instead of an expense. The basis of
accounting used by the Trust is widely used by royalty trusts for financial reporting purposes. 4. Federal Income Taxes For Federal income tax purposes, the Trust constitutes a fixed investment trust which is taxed as
a grantor trust. A grantor trust is not subject to tax at the trust level. The Unit holders are
considered to own the Trusts income and principal as though no trust were in existence. The
income of the Trust is deemed to have been received or accrued by each Unit holder at the time
such income is received or accrued by the Trust rather than when distributed by the Trust. The Trust is a widely held fixed investment trust (WHFIT) classified as a non-mortgage widely
held fixed investment trust (NMWHFIT) for federal income tax purposes. The Trustee is the
representative of the Trust that will provide tax information in accordance with the applicable
U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT
and a NMWHFIT. The Royalty constitutes an economic interest in oil and gas properties for federal income tax
purposes. Unit holders must report their share of the production revenues of the Trust as ordinary
income from oil and gas royalties and are entitled to claim depletion with respect to such in
come. The Royalty is treated as a single property for depletion purposes. The Trust has on file
technical advice memoranda confirming such tax treatment. Sales of gas production from certain coal seam wells drilled prior to January 1, 1993, qualified
for federal income tax credits under Section 29 (now Section 45K) of the Internal Revenue Code of
1986, as amended (the Code), through 2002 but not thereafter. Accordingly, under present law, the
Trusts production and sale of gas from coal seam wells does not qualify for tax credit under
Section 45K of the Code (the Section 45 Tax Credit). Congress has at various times since 2002
considered energy legislation, including provisions to reinstate the Section 45 Tax Credit in
various ways and to various extents, but no legislation that would qualify the Trusts current
production for such credit has been enacted. For example, in February 2009, new energy tax
legislation was enacted which, among other things, modified the Section 45 Tax Credit in several
respects, but did not extend the credit for production from coal seam wells. No prediction can be
made as to what future tax legislation affecting Section 45K of the Code may be proposed or enacted
or, if enacted, its impact, if any, on the Trust and the Unit holders. The classification of the Trusts income for purposes of the passive loss rules maybe important to
a Unit holder. As a result of the Tax Reform Act of 1986, royalty income such as that derived
through the Trust will generally be treated as portfolio income that may not be offset or reduced
by passive losses. In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting
for Uncertainty in Income Taxes  an interpretation of SFAS 109 (FIN 48). This interpretation
clarifies the application of SFAS 109 by defining the criterion that an individual tax position
must meet for any part of the benefit of that position to be recognized in an entitys financial
statements and also provides guidance on measurement, derecognition, classification, interest and
penalties, accounting in interim periods, and disclosure. The provisions of FIN 48 are effective
for fiscal years beginning after December 15, 2006. The Trust adopted the provisions of FIN 48 on
January 1, 2007. The adoption of this standard has not had a material impact on the Trusts
consolidated financial statements for 2007 or 2008. No liabilities or assets have been recognized
as a result of the implementation of FIN 48. 5. Certain Contracts BROG previously entered into three contracts for the sale of all volumes of gas produced from the
Underlying Properties to ChevronTexaco Natural Gas, a division of Chevron U.S.A. Inc.
(ChevronTexaco), Coral Energy Resources, L.P. (Coral), and PNM Gas Services (PNM),
respectively. All three contracts provide for (i) the delivery of such gas at various delivery
points through March 31, 2007 and from year-to-year thereafter, until terminated by either party
on 12 months notice; and (ii) the sale of such gas at prices which fluctuate in accordance with
the published indices for gas sold in the San Juan Basin of northwestern New Mexico. In March
2008, both ChevronTexaco and Coral notified BROG of their election to terminate their respective
contracts effective March 31, 2009. Requests for proposal have been circulated to potential
purchasers of the packages of gas covered by the expiring contracts, and the responses to those
requests are currently being evaluated by BROG and the Trusts independent gas marketing
consultants. Neither BROG nor PNM gave notice of termination with respect to the PNM contract and,
accordingly, the term of that contract has been extended at least through March 31, 2010. Confidentiality agreements with purchasers of gas produced from the Underlying Properties prohibit
public disclosure of certain terms and conditions of gas sales contracts with those entities,
including specific pricing terms and gas receipt points. Such disclosure could compromise the
ability to compete effectively in the marketplace for the sale of gas produced from the Underlying
Properties. ( fourteen )




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NOTES toFINANCIAL STATEMENTS 6. Significant Customers Information as to significant purchasers of oil and gas production attributable to the Trusts
economic interests is included in Note 5 above and Item 2 of the Trusts Annual Report on Form
10-K, which is included in this report. 7. Settlements andLitigation In 2006, as part of the ongoing negotiations between the Trust and BROG concerning a number of
revenue and expense audit issues, an aggregate of $1,981,933 was included in calculating net
proceeds paid to the Trust, together with interest of $1,124,063 in settlement of certain of those
audit issues. During 2007, as part of the ongoing negotiations between the Trust and BROG concerning a number of
revenue and expense audit issues, an aggregate of $1,489,209 was included in calculating net
proceeds paid to the Trust, together with interest of $1,480,765 in settlement of certain of those
audit issues. In 2008, as part of the ongoing negotiations between the Trust and BROG concerning a number of
revenue and expense audit issues, an aggregate of $2,497,044 was included in calculating net
proceeds paid to the Trust, together with interest of $376,427 in settlement of certain of those
audit issues. In each instance, the settlements described above as having been paid to the Trust in 2006 through
2008 were received in the form of increased revenues, reduced overhead, interest on late payments,
or other payments or allocations, many of which do not appear as separate line items in the tables
included in the Trustees Discussion and Analysis. On April 28, 2008, the Trust filed a suit against BROG relating to the Arbitration Award in its
favor issued in November 2005, in the amount of $7,683,699. The litigation is styled San Juan Basin
Royalty Trust vs. Burlington Resources Oil & Gas Company, LP,No. D1329-CV-08-751, in the District
Court of Sandoval County, New Mexico, 13th Judicial District. The Trust alleges breach of contract
and breach of the covenant of good faith and fair dealing and seeks a judgment for damages in the
amount of $5,025,000, plus interest and punitive damages. The purpose of the arbitration was to
resolve certain joint interest audit issues. The arbitrator ruled in favor of the Trust on all five
of the issues submitted to arbitration. BROG filed suit in Harris County, Texas alleging that the
award should be modified or vacated, and seeking to recover its attorneys fees. The trial court
denied BROGs motion to vacate, granted the Trusts application to confirm and rendered a final
judgment in favor of the Trust. BROG paid the award as it related to four of the five issues and
appealed the award as to the fifth. In August 2007, the appellate court reversed the judgment of the trial court and vacated the award as it related to the
unpaid balance. The appellate court also remanded the case to the District Court, where BROG is
pursuing its claim for attorneys fees and costs in the amount of approximately $200,000. On
September 8, 2008, Burlington filed a motion for summary judgment. The Trust has filed its response
opposing that motion and its own cross-motion for summary judgment. On December 15, 2008, BROGs
motion for summary judgment was denied. The Trusts motion remains pending. With respect to that fifth issue which was the subject of the appeal, the Trust had asked for
damages based on either of two alternative claims. The appellate court ruled that the alternative
claim selected by the arbitrator in awarding the Trust approximately $5,000,000 was not technically
included within the scope of what the parties intended to submit to arbitration. The appellate
court did not rule on whether or not the arbitrator properly decided the fifth issue in favor of
the Trust. The litigation filed in New Mexico seeks recovery on the claim which had been resolved
in favor of the Trust by the arbitrator. In June 2008, BROG removed the Trusts state court suit to the federal court in New Mexico and
filed a motion seeking to have the case transferred to the federal district court in Houston.
BROGs action in the federal court is styled San Juan Basin Royalty Trust vs. Burlington Resources
Oil & Gas Company LP,No. 08cv532WJ/ACT, in the United States District Court for the District of
New Mexico. In July 2008, the Trust filed a motion to remand the case from the federal to the
state court in New Mexico together with a response in opposition to BROGs motion to change the
venue of the case to Houston, Texas. On November 20, 2008, the Trusts motion was granted and the
case was remanded to the state district court. On March 14, 2008, BROG notified the Trust that the distribution for March would be reduced by
$4,921,578. BROG described this amount as the Trusts portion of what BROG had paid to settle
claims for the underpayment of royalties in the case styled United States of America ex rel.
Harrold E. (Gene) Wright vs. AGIP Petroleum Co. et al.,Civil Action No. 5:03CV264 (formerly
9:98-CV-30) (E.D. Tex.). The Trusts consultants continue to analyze this settlement as it may
apply to the Trust. 8. Proved Oil andGas Reserves (unaudited) Proved oil and gas reserve information is included in Item 2 of the Trusts Annual Report on Form
10-K which is included in this report. ( fifteen)




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NOTES toFINANCIAL STATEMENTS 9. Quarterly Schedule ofDistributable income (unaudited) The following is a summary of the unaudited quarterly schedule of distributable income for
the two years ended December 31, 2008 (in thousands, except per unit amounts): DISTRIBUTABLE
2008 ROYALTY            DISTRIBUTABLE            INCOME and
INCOME            INCOME            DISTRIBUTION perUNIT
    
First Quarter $ 25,576 $ 25,131 $ .539184 Second Quarter 35,612 35,039 .751770 Third Quarter 52,542 52,223 1.120455 Fourth Quarter 30,858 30,688 .658424     
TOTAL$144,588$143,081$3.069833      2007
 First Quarter $23,949 $ 24,008 $ .515094 Second Quarter 26,288 25,795 .553449 Third Quarter 37,087 37,385 .802107 Fourth Quarter 26,479 26,033 .558534     
TOTAL$113,803$113,221$2.429184      Report of independent Registered Public Accounting Firm We have audited the accompanying statements of assets, liabilities and trust corpus of the San
Juan Basin Royalty Trust as of December 31, 2008 and 2007 and the related statements of
distributable income and changes in trust corpus for each of the three years in the period ended
December 31, 2008. These financial statements are the responsibility of the Trustee. Our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 3 to the financial statements, these financial statements were prepared on a
modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S.
generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material
respects, the assets, liabilities and trust corpus of the San Juan Basin Royalty Trust as of
December 31, 2008 and 2007 and the distributable income and change sin trust corpus for each of
the three years in the period ended December 31, 2008, on the basis of accounting described in
Note 3 to the financial statements. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Trusts internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2,
2009, expressed an unqualified opinion thereon. Weaver and Tidwell,
L.L.P. Fort Worth, Texas
March 2, 2009 (sixteen)




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GLOSSARY ofTERMS AGGREGATE MONTHLY DISTRIBUTION:An amount paid to Unit holders equal to the Royalty Income
received by the Trustee during a calendar month plus interest, less the general and administrative
expenses of the Trust, adjusted by any changes in cash reserves.

BBL: Barrel, generally 42 U.S. gallons measured at 60°F.
BCF: Billion cubic feet.
BROG: Burlington Resources Oil & Gas Company LP. BTU: British thermal unit; the amount of heat necessary to raise the temperature of one pound of
water one degree Fahrenheit. COAL SEAM WELL:A well
completed to a coal deposit found to contain and emit natural gas. COMMINGLE WELL:A well which produces from two or more formations through a common well casing and
a single tubing string. CONVENTIONAL WELL:A well completed to a formation historically found to contain deposits of oil
or gas (for example, in the San Juan Basin, the Pictured Cliffs, Dakota and Mesaverde formations)
and operated in the conventional manner. DEPLETION: The exhaustion of a petroleum reservoir; the reduction in value of a wasting asset by
removing minerals; for tax purposes, the removal and sale of minerals
from a mineral deposit. DISTRIBUTABLE INCOME: An amount paid to Unit holders equal to the Royalty Income received by the
Trustee during a given period plus interest, less the general and administrative expenses of the
Trust, adjusted by any changes in cash reserves. DUAL COMPLETION:The completion of a well into two separate producing formations at different
depths, generally through one string of pipe producing from one of the formations, inside of which
is a smaller string of pipe producing from the other formation. ESTIMATED FUTURE NETrevenues: An estimate computed by applying current prices of oil and gas
(with consideration of price changes only to the extent provided by contractual arrangements and
allowed by Federal regulation) to estimated future production of proved oil and gas reserves as of
the date of the latest balance sheet presented, less estimated future expenditures (based on
current costs) to be incurred in developing and producing the proved reserves, and assuming
continuation of existing economic conditions; sometimes referred to as estimated future net cash
flows.

GRANTOR TRUST: A trust (or portion thereof) with respect to which the grantor or an assignee of
the grantor, rather than the trust, is treated as the owner of the trust properties and is taxed
directly on the trust income for federal income tax purposes under Sections 671 through 679 of the
Internal Revenue Code of 1986, as amended. GROSS ACRES OR WELLS:The interests of all persons owning interests in such acres or wells. GROSS PROCEEDS: The amount received by BROG (or any subsequent owner of the Underlying Properties)
from the sale of the production attributable to such interests. HORIZONTAL WELL:A well that begins as a vertical or inclined linear bore, which extends from the
surface to a subsurface location just above the target oil or gas reservoir, then bears off to
intersect the reservoir and, thereafter, continues at a near-horizontal attitude to substantially
or entirely remain within the reservoir until the desired bottom hole location is reached.

INDENTURE: The Amended and Restated Royalty Trust Indenture, dated December 12, 2007 (the original
Royalty Trust Indenture, dated November 1, 1980 having been entered into between Southland Royalty
Company and The Fort Worth National Bank, as Trustee, which was amended and restated effective
September 30, 2002).


INFILLDRILLING: The drilling of wells intended to be completed to proven reservoirs or
formations, sometimes occurring in conjunction with regulatory approval for increased density in
the spacing of wells.

LEASE OPERATING EXPENSES: Expenses incurred in the operation of a producing property as
apportioned among the several parties in interest.


MCF:1,000 cubic feet; the standard unit for measuring the volume of natural gas. MMBTU: One
million British thermal units.


MULTIPLE COMPLETION WELL:A well which produces simultaneously, with or without separate tubing
strings, from two or more producing horizons or alternatively from each.

NET ACRES OR WELLS:The interests of BROG in such acres or wells.


NET OVERRIDING ROYALTY INTEREST:A share of gross production from a property, measured by net
profits from operation of the property and carved out of the working interest, i.e., a net profits
interest.


NET PROCEEDS: The excess of Gross Proceeds received by BROG during a particular period over
Production Costs for such period.


PAYADD:Completion in an existing well of additional productive zone(s) within a producing
formation.


PRESENT VALUE OF ESTIMATED FUTURE NET revenues: The


present value of the Estimated Future Net Revenues computed using a discount rate of 10%.


PRODUCTION COSTS: Costs incurred on an accrual basis by BROG in operating the Underlying
Properties, including both capital and non-capital costs and including, for example, development
drilling, production and processing costs, applicable taxes and operating charges.

PROVED DEVELOPED reserves: Those Reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. See 17 CFR 210.4-10(a)(3).

PROVED reserves: The estimated quantities of crude oil, natural gas and natural gas liquids which,
geological and engineering data demonstrate with reasonable certainty to be recoverable in future
years from known oil and gas reservoirs under existing economic and operating conditions. See 17
CFR 210.4-10(a)(2)-2(iii).


PROVED UNDEVELOPED reserves: Those Reserves that are expected to be recovered from new wells on
undrilled acreage, or from existing wells where a relatively major expenditure is required for
recompletion. See 17 CFR 210.4-10(a)(4).

RECAVITATED WELL:A coal seam well, the production from which has been enhanced or extended by the
enlargement of the cavity within the coal deposit to which the well has been completed.

RECOMPLETED WELL:A well completed by drilling a separate well bore from an existing casing in
order to reach the same reservoir, or re-drilling the same well bore to reach a new reservoir
after production from the original reservoir has been abandoned.



ROYALTY:The principal asset of the Trust; the 75% net overriding royalty interest conveyed to the
Trust on November 3, 1980, by Southland Royalty Company, the predecessor to BROG, which was carved
out of the Underlying Properties.

ROYALTY INCOME:The monthly Net Proceeds attributable to the Royalty.


SECTION 45K TAXCREDIT: A Federal income tax credit available under Section 45Kof the Internal
Revenue Code of 1986, as amended, for coal seam gas (and certain other nonconventional fuels) that
was (i) sold prior to January 1, 2003 and (ii) produced from wells drilled (or certain later
recompletions treated as wells drilled) after December 31, 1979, but prior to January 1, 1993.


SPOT PRICE: The price paid for gas, oil or oil products sold under contracts for the purchase and
sale of such minerals on a short-term basis.

UNDERLYING PROPERTIES: The working, royalty and other interests owned by Southland Royalty
Company, the predecessor to BROG, in properties located in the San Juan Basin of northwestern New
Mexico, out of which the Royalty was carved.

UNITS OFBENEFICIAL INTEREST: The units of ownership of the Trust, equal to the number of shares of
common stock of Southland Royalty Company outstanding at the close of business on November 3, 1980.

WORKING INTEREST: The operating interest under an oil and gas lease.

(seventeen)




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PHIL BOB BORMAN
The beautiful, yet haunting paintings of acclaimed artist Phil Bob Borman make the perfect
backdrop for our annual report. His interpretation of the New Mexico sky illustrates why this
state is known as the Land of Enchantment. SAN JUAN BASIN ROYALTY TRUST Compass Bank, Trustee 2525 Ridgmar Boulevard, Suite 100 Fort Worth, TX 76116 Toll-free telephone: 866.809.4553 www.sjbrt.com sjt@compassbank.com AUDITORS Weaver and Tidwell, L.L.P. Fort Worth, Texas LEGAL COUNSEL Greenberg Traurig, LLP Dallas, Texas TRANSFER AGENT Computershare Investor Services P.O. Box 43078 Providence, RI 02940-3078 www.computershare.com For questions about distribution checks, address changes, and transfer procedures call 312-360-5154 Containing 10% post-consumer fiber, Cougar is now FSC-certified
and endorsed by the Rainforest Alliance. Also SFI-certified, Cougar is
the premiere member of the Domtar EarthChoice® family of high-quality,
socially and environmentally-responsible papers.