**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

----

**FORM 10-Q**

**(Mark One)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Forthe Quarterly Period Ended September 30, 2006**

**or**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

**Commissionfile number 1-11450**

----

**Santa Fe Energy Trust**

(Exact name of registrantas specified in its charter)

| **Texas**                                                       | **76-6081498**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) | (I.R.S. Employer  Identification No.) |
|                                                            |                                  |
| **The Bank of New York Trust Company, N.A., Trustee**           |                                  |
| **Global Corporate Trust**                                      |                                  |
| **221 West Sixth Street**                                       |                                  |
| **Austin, Texas**                                               | **78701**                             |
| (Address of Principal Executive Offices)                        | (Zip Code)                            |

 

Registrant’s telephonenumber, including area code: **(800) 852-1422**

Former name, former address and former fiscal year, ifchanged from last report.

**JPMorganChase Bank, N.A., TrusteeInstitutional Trust Services221 West Sixth StreetAustin, Texas 78701**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes x   Noo

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Acceleratedfiler x   Non-accelerated filer o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yes o   Nox

On November 3, 2006, 6,300,000 Depositary Unitswere outstanding.

 

----

**PART I—FINANCIALINFORMATION**

**Item 1.**                        *Financial Statements.*

**SANTA FE ENERGY TRUSTSTATEMENTS OF CASH PROCEEDS AND DISTRIBUTABLE CASH (Unaudited)(In thousands, except per unit data)**
|                                                 | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                      | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Royalty income:                                 |       |                                                 |       |                                                |       |   |   |   |   |
| ODC royalty                                     |       | $                                                    | 3,713      |                                                | $          | 2,958 |   | $ | 10,342 |   | $ | 8,753 |   |
| Net profits royalty                             |       | 2,444                                                |       | 5,786                                               |       | 9,752 |   | 11,830 |   |
| Total royalties                                 |       | 6,157                                                |       | 8,744                                               |       | 20,094 |   | 20,583 |   |
| Administrative  fee to Devon Energy Corporation |       | (79                                                  | )          | (76                                                 | )          | (235 | ) | (227 | ) |
| Cash withheld for  trust expenses               |       | (425                                                 | )          | (350                                                | )          | (625 | ) | (500 | ) |
| Distributable  cash                             |       | $                                                    | 5,653      |                                                | $          | 8,318 |   | $ | 19,234 |   | $ | 19,856 |   |
| Distributable  cash per trust unit              |       | $                                                    | 0.89734    |                                                | $          | 1.32023 |   | $ | 3.05301 |   | $ | 3.15167 |   |
| Trust units outstanding                         |       | 6,300                                                |       | 6,300                                               |       | 6,300 |   | 6,300 |   |

 

**STATEMENTS OF ASSETS AND TRUST CORPUS(In thousands, except unit data)**
|                                                             | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| ** **                                                  | ** ** | **(Unaudited)**              | ** ** | ** **                  | ** ** |
| ASSETS                                                      |       |                         |       |                        |       |   |   |   |   |
| Current  assets—cash                                   |       |                         | $          | 169                         |       |   |   | $ | 93 |   |   |
| Investment in  royalty interests, at cost                   |       |                         | 87,276     |                        |       |   | 87,276 |   |   |
| Less: accumulated  amortization                             |       |                         | (83,423    | )                           |       |   | (82,429 | ) |   |
|                                                        |       |                         | 3,853      |                        |       |   | 4,847 |   |   |
| Total assets                                                |       |                         | $          | 4,022                       |       |   |   | $ | 4,940 |   |   |
| TRUST CORPUS                                                |       |                         |       |                        |       |   |   |   |   |
| Trust corpus, 6,300,000  trust units issued and outstanding |       |                         | $          | 4,022                       |       |   |   | $ | 4,940 |   |   |

 

The accompanying notes are an integral part of the financial statements.

2

----

**SANTA FE ENERGYTRUSTSTATEMENTS OF CHANGES IN TRUST CORPUS (Unaudited)Nine Months Ended September 30, 2006 and 2005(In thousands)**

| Balance at  December 31, 2004  |   | $       | 7,296  |   |
|-------------------------------------|--------|---------|--------|--------|
| Cash proceeds                       |   | 20,356  |   |
| Cash distributions                  |   | (19,856 | )      |
| Trust expenses                      |   | (550    | )      |
| Amortization of royalty interests   |   | (1,561  | )      |
| Balance at  September 30, 2005 |   | $       | 5,685  |   |
| Balance at December 31, 2005   |   | $       | 4,940  |   |
| Cash proceeds                       |   | 19,859  |   |
| Cash distributions                  |   | (19,234 | )      |
| Trust expenses                      |   | (549    | )      |
| Amortization of royalty interests   |   | (994    | )      |
| Balance at  September 30, 2006 |   | $       | 4,022  |   |

 

The accompanying notes are an integral part of the financial statements.

3

----

**SANTA FE ENERGY TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited)**

**Note 1.Summary of Significant Accounting Policies**

The financial statements of the Trust are prepared onthe cash basis of accounting for revenues and expenses. Royalty income isrecorded when received (generally during the quarter following the end of thequarter in which the income from the Royalty Properties is received by Devon)and is net of any cash basis exploration and development expenditures andamounts reserved for any future exploration and development costs. Expenses ofthe Trust, which include accounting, engineering, legal and other professionalfees, Trustee fees, an administrative fee paid to Devon and out-of-pocketexpenses, are recognized when paid. Under accounting principles generallyaccepted in the United States of America, revenues and expenses would berecognized on an accrual basis. Amortization of the Trust’s investment inRoyalty Interests is recorded using the unit-of-production method in the periodin which the cash is received with respect to such production; therefore, astatement of cash flows is not presented.

The Trust is a grantor trust and as such is notsubject to income taxes and accordingly no recognition has been given to incometaxes in the Trust’s financial statements. The tax consequences of owning TrustUnits are included in the income tax returns of the individual Trust Unitholders.

The preparation of the Trust’s financial statementsrequires the use of certain estimates. Actual results may differ from suchestimates.

In the opinion of the Trustee and Devon Energy Corporation(“Devon”), all adjustments (all of which are normal and recurring) have beenmade which are necessary to fairly state the financial position, cash proceedsand distributable cash of the Trust.

The accompanying financialstatements and notes thereto should be read in conjunction with the financialstatements and notes thereto included in the Trust’s 2005 Annual Report on Form 10-K.

4

----

**SANTA FE ENERGY TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)**

**Note 2.Distribution to Trust Unit Holders**

TheTrust has received royalty payments net of administrative fees paid to Devonand made distributions as follows:

| ** **     | ** ** | **Royalty  Payment**                                              | ** ** | **Distributions** | ** ** |
|----------------|------------|-------------------------------------------------------------------|------------|-------------------|------------|
| ** **     | ** ** | **Received**                                                      | ** ** | **Amount**        | ** ** | **Per Trust Unit** | ** ** |
| ** **     | ** ** | **(in thousands, except per unit data)** | ** ** |
| 2005           |       |                                                              |       |              |       |   |   |   |   |
| First quarter  |       | $                                                                 | 5,944      |              | $          | 5,844 |   |   | $ | 0.92772 |   |   |
| Second quarter |       | 5,744                                                             |       | 5,694             |       |   | 0.90372 |   |   |
| Third quarter  |       | 8,668                                                             | (a)        | 8,318             |       |   | 1.32023 |   |   |
| Fourth quarter |       | 5,449                                                             |       | 5,349             |       |   | 0.84909 |   |   |
|           |       | $                                                                 | 25,805     |              | $          | 25,205 |   |   | $ | 4.00076 |   |   |
| 2006           |       |                                                              |       |              |       |   |   |   |   |
| First quarter  |       | $                                                                 | 6,294      |              | $          | 6,194 |   |   | $ | 0.98324 |   |   |
| Second quarter |       | $                                                                 | 7,487      | (b)               | $          | 7,387 |   |   | $ | 1.17243 |   |   |
| Third quarter  |       | $                                                                 | 6,078      | (c)               | $          | 5,653 |   |   | $ | 0.89734 |   |   |

----

        (a) Includes proceeds from the sale of Net Profits properties of $2.4million or $0.37372 per Trust Unit.

       (b) Includes proceeds from the sale of Net Profits properties of $0.4million or $0.05643 per Trust Unit.

        (c) Includes proceeds from the sale of Net Profitsproperties of $0.1 million or $0.02000 per Trust Unit.

**Note 3. Commitmentsand Contingencies**

The Royalty Propertiesrelated to the Trust are the subject of lawsuits and governmental proceedingsfrom time to time arising in the ordinary course of business. While the outcomeof lawsuits or other proceedings involving the Royalty Properties cannot bepredicted with certainty, these matters are not expected to have a materialadverse effect on the financial position or cash proceeds and distributablecash of the Trust.

**Note 4. PropertyDivestitures**

Reported in the thirdquarter of 2006 are sales by the Trust of interests in wells in Love County,Oklahoma for proceeds of $0.1 million, or $0.02000 per Trust Unit. Reported inthe second quarter of 2006 are sales by the Trust of interests in wells in WardCounty, Texas for proceeds of $0.4 million, or $0.05643 per Trust Unit. Reportedin the third quarter of 2005 are sales by the Trust of interests in certain NetProfits properties for proceeds of $2.4 million, or $0.37372 per Trust Unit.

5

----

**SANTA FE ENERGY TRUST NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)**

**Note 5. Remittanceof Prior Period Operating Expenses**

In the second quarter of2006, Devon determined that in prior periods, it had overstated certain of theTrust’s operating expenses in the calculations of the Net Profits Royalties. Accordingly,in the second quarter of 2006, Devon remitted $1.3 million or $0.20973 perTrust Unit to the Trust to adjust for the prior periods’ overstatement ofexpenses.

**Note 6. OtherMatters**

On October 2, 2006, The Bank of New Yorkcompleted its purchase of substantially all of the corporate trust business ofJPMorgan Chase, an affiliate of which was serving as Trustee of the Trust. As aresult of this transaction, effective October 2, 2006, The Bank of NewYork Trust Company, N.A., a subsidiary of the Bank of New York, became theTrustee of the Trust and Depositary for the Trust’s depositary units. Thetransaction is not expected to have any material effect on the Trust.

6

----

***Item 2.*****                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

The following discussion addresses material changes inresults of operations for the three and nine months ended September 30,2006, compared to the three and nine months ended September 30, 2005 andin financial condition since December 31, 2005. It is presumed thatreaders have read or have access to the Trust’s 2005 Annual Report on Form 10-Kwhich includes disclosures regarding critical accounting policies as part of Management’s Discussion and Analysis ofFinancial Condition and Results of Operations. 

The Trust will terminateand the Net Profits Royalties are to be sold on or before the Liquidation Date,February 15, 2008. Each holder of Depositary Units of record as of the daynext preceding the Liquidation Date will be entitled to receive a liquidatingdistribution equal to (1) $20 per Depositary Unit from the proceeds of thematured Treasury Obligations, plus (2) a pro rata portion of the netproceeds from the sale of Net Profits Royalties, to the extent not previouslydistributed. Following the Liquidation Date, Holders will no longer receivequarterly distributions and the Depositary Units will no longer trade. Underthe Trust Agreement, the Trustee is to use all reasonable efforts to completesales of all Net Profit Royalties on any date after June 30, 2006 and onor before June 30, 2007. The timing of sales of Net Profits Royalties,future oil and gas prices and future production levels are uncertain. These andother factors make uncertain the ultimate liquidation value of the Trust formatters unrelated to the Treasury obligations. Please read “Description of theTrust Units and Depositary Units—Termination and Liquidation of the Trust” inthe Trust’s 2005 Annual Report on Form 10-K. 

**General; Liquidityand Capital Resources**

The Trust’s results of operations are dependent uponthe sales prices and quantities of oil and gas produced from the RoyaltyProperties, the costs of producing such resources and the amount of capitalexpenditures made with respect to such properties. 

Since, on an equivalent basis, the majority of theTrust’s proved reserves are crude oil, even relatively modest changes in crudeoil prices may significantly affect the Trust’s revenues and results ofoperations. Crude oil prices are subject to significant changes in response tofluctuations in the domestic and world supply and demand and other marketconditions as well as the world political situation as it affects OPEC andother oil producing countries. In addition, a substantial portion of the Trust’srevenues come from properties which produce sour (i.e., high sulfur content)crude oil which sells at prices lower than sweeter (i.e., low sulfur content)crude oils. 

Natural gas prices fluctuate due to weatherconditions, the level of natural gas in storage, the relative balance betweensupply and demand and other economic factors. 

Trust expenses includeaccounting, engineering, legal and other professional fees, Trustee fees, anadministrative fee paid to Devon and other out-of-pocket expenses. The Trust’sability to pay expenses primarily depends on receipt of royalty income. Devonmay, at its sole discretion and without obligation to do so, advance funds tothe Trust to enable the Trust to pay expenses. The Trustee is authorized toborrow funds required to pay liabilities of the Trust, provided that any suchborrowings are repaid in full prior to making further distributions to Holders.As of September 30, 2006, there were no outstanding advances to the Trustfrom Devon.

7

----

**Results ofOperations**

Royaltyincome is recorded by the Trust when received, generally during the quarterfollowing the end of the quarter in which revenues are received and costs andexpenses are paid by Devon. Cash proceeds from the Royalty Properties mayfluctuate from quarter to quarter due to the timing of receipts and payment ofrevenues and costs and expenses as well as changes in prices and productionvolumes. The following table reflects pertinent information with respect to thecash proceeds from the Royalty Properties and the net distributable cash of theTrust. The information presented with respect to the third quarter of 2006reflects revenues received and costs and expenses paid by Devon in the secondquarter of 2006. On November 30, 2006, the Trust will make a cashdistribution of $6.1 million, or $0.96390 per Trust Unit, tounitholders of record on November 15, 2006. 

| ** **                                                                       | ** **   | **Three Months Ended  September 30,** | ** **   | **Nine Months Ended  September 30,** | ** **   | **Fourth  Quarter** | ** **   |
|----------------------------------------------------------------------------------|--------------|------------------------------------------------------|--------------|-----------------------------------------------------|--------------|---------------------|--------------|
| ** **                                                                       | ** **   | **2006**                                             | ** **   | **2005**                                            | ** **   | **2006**            | ** **   | **2005** | ** ** | **2006** | ** ** |
| ***Volumes and Prices***                                                         | *** *** | *** ***                                         | *** *** | *** ***                                        | *** *** | *** ***        | *** *** | *** *** | *** *** | *** *** | *** *** |
| Oil volumes (Bbls):                                                              |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Wasson ODC royalty                                                               |         | 62,200                                               |         | 66,400                                              |         | 190,800             |         | 207,700 |   | 62,200 |   |
| Net profits royalties                                                            |         | 35,018                                               |         | 58,992                                              |         | 107,093             |         | 148,177 |   | 34,110 |   |
| Gas volumes (Mcf):                                                               |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Net profits royalties                                                            |         | 191,359                                              |         | 329,763                                             |         | 574,198             |         | 1,092,002 |   | 171,981 |   |
| Oil average prices ($/Bbl):                                                      |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Wasson ODC royalty                                                               |         | $                                                    | 63.94        |                                                | $            | 46.79               |         | $ | 57.74 |   | $ | 44.60 |   | $ | 64.64 |   |
| Net profits royalty                                                              |         | 53.23                                                |         | 38.47                                               |         | 53.55               |         | 38.95 |   | 61.81 |   |
| Gas average prices ($/Mcf):                                                      |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Net profits royalties                                                            |         | 6.55                                                 |         | 5.72                                                |         | 7.95                |         | 5.52 |   | 6.25 |   |
| ***Cash Proceeds and Distributable  Cash (in thousands, except per unit data)*** | *** *** | *** ***                                         | *** *** | *** ***                                        | *** *** | *** ***        | *** *** | *** *** | *** *** | *** *** | *** *** |
| Wasson ODC royalty:                                                              |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Sales                                                                            |         | $                                                    | 3,977        |                                                | $            | 3,107               |         | $ | 11,017 |   | $ | 9,263 |   | $ | 4,021 |   |
| Operating expenses                                                               |         | (264                                                 | )            | (149                                                | )            | (675                | )            | (510 | ) | (266 | ) |
|                                                                             |         | 3,713                                                |         | 2,958                                               |         | 10,342              |         | 8,753 |   | 3,755 |   |
| Net profits royalty:                                                             |         |                                                 |         |                                                |         |                |         |   |   |   |   |
| Sales                                                                            |         | 3,124                                                |         | 4,156                                               |         | 10,323              |         | 11,804 |   | 3,188 |   |
| Proceeds from property  sales                                                    |         | 126                                                  |         | 2,354                                               |         | 482                 |         | 2,354 |   | — |   |
| Operating expenses                                                               |         | (799                                                 | )            | (653                                                | )            | (889                | )            | (2,239 | ) | (466 | ) |
| Capital expenditures                                                             |         | (7                                                   | )            | (71                                                 | )            | (164                | )            | (89 | ) | (125 | ) |
|                                                                             |         | 2,444                                                |         | 5,786                                               |         | 9,752               |         | 11,830 |   | 2,597 |   |
| Total royalties                                                                  |         | 6,157                                                |         | 8,744                                               |         | 20,094              |         | 20,583 |   | 6,352 |   |
| Administrative fee to  Devon Energy Corporation                                  |         | (79                                                  | )            | (76                                                 | )            | (235                | )            | (227 | ) | (79 | ) |
| Payment received                                                                 |         | 6,078                                                |         | 8,668                                               |         | 19,859              |         | 20,356 |   | 6,273 |   |
| Cash withheld for trust  expenses                                                |         | (425                                                 | )            | (350                                                | )            | (625                | )            | (500 | ) | (200 | ) |
| Distributable cash                                                               |         | $                                                    | 5,653        |                                                | $            | 8,318               |         | $ | 19,234 |   | $ | 19,856 |   | $ | 6,073 |   |
| Distributable cash per unit                                                      |         | $                                                    | 0.89734      |                                                | $            | 1.32023             |         | $ | 3.05301 |   | $ | 3.15167 |   | $ | 0.96390 |   |

 

8

----

Sales decreased $0.2 million from the thirdquarter of 2005 to the third quarter of 2006. Production on a barrels of oilequivalent (“Boe”) basis decreased approximately 51,000 Boe from the thirdquarter of 2005 to the third quarter of 2006, causing sales to decrease $2.0million. This decrease in production was primarily the result of the sale ofcertain Net Profits Properties in 2005 and natural production declines. Salesincreased $1.8 million due to a $17.20 per barrel increase in the averageprice of oil from $42.88 per barrel in the third quarter of 2005 to $60.08 perbarrel in the third quarter of 2006 and due to a $0.83 per Mcf increase in theaverage gas price from $5.72 per Mcf in the third quarter of 2005 to $6.55 inthe third quarter of 2006.

Sales increased $0.3 million from the first ninemonths of 2005 to the first nine months of 2006. Sales increased $5.6 milliondue to a $13.98 per barrel increase in the average price of oil from $42.25 perbarrel during the first nine months of 2005 to $56.23 per barrel during thefirst nine months of 2006 and due to a $2.43 per Mcf increase in average gasprice from $5.52 per Mcf during the first nine months of 2005 to $7.95 per Mcfduring the first nine months of 2006. Production on a Boe basis decreasedapproximately 144,000 Boe from the first nine months of 2005 to the first ninemonths of 2006, causing sales to decrease $5.3 million. This decrease inproduction was primarily the result of the sale of certain Net Profits Propertiesin the third quarter of 2005 and natural production declines.

Sales increased $0.1 million from the third quarter of2006 to the fourth quarter of 2006. Sales increased $0.3 million primarily dueto a $3.56 per barrel increase in the average oil price from $60.08 per barrelin the third quarter of 2006 to $63.64 per barrel in the fourth quarter of 2006.Production on a Boe basis from the third quarter of 2006 to the fourth quarterof 2006 decreased approximately 4,000 Boe, causing sales to decrease by $0.2million.

Reported in the third quarter of 2006 are sales by theTrust of interests in wells in Love County, Oklahoma for proceeds of $0.1million, or $0.02000 per Trust Unit. Reported in the second quarter of 2006 aresales by the Trust of interests in wells in Ward County, Texas for proceeds of$0.4 million, or $0.05643 per Trust Unit. Reported in the third quarter of 2005are sales by the Trust of interests in certain Net Profits properties forproceeds of $2.4 million, or $0.37372 per Trust Unit.

Operating expenses increased $0.3 million from thethird quarter of 2005 to the third quarter of 2006 primarily due to increasedworkover activity. Operating expenses decreased $1.2 million from the firstnine months of 2005 to the first nine months of 2006. This decrease wasprimarily due to an out-of-period adjustment related to the Net ProfitsRoyalties. In the second quarter of 2006, Devon determined that in priorperiods, it had overstated certain of the Trust’s operating expenses in thecalculations of the Net Profits Royalties. Accordingly, in the second quarterof 2006, Devon remitted $1.3 million or $0.20973 per Trust Unit to the Trust toadjust for the prior periods’ overstatement of expenses. Operating expensesdecreased $0.3 million from the third quarter of 2006 to the fourth quarter of2006 primarily due to decreased workover activity.

Proceeds from the Net Profits Royalties are net ofcapital expenditures with respect to the development of the Net ProfitsProperties. Capital expenditures were $7,000, $71,000, $164,000, $89,000 and$125,000 for the third quarter of 2006, the third quarter of 2005, the ninemonths ended 2006, the nine months ended 2005 and the fourth quarter of 2006,respectively.

Cash withheld for trustexpenses decreased $225,000 from the third quarter of 2006 to the fourthquarter of 2006 because during the third quarter of 2006 an additional amountwas withheld to repay an 

9

----

advancefrom Devon Energy Corporation for $225,000 related to trust expenses incurredduring that quarter.

**Forward Looking Statements**

Management’s Discussionand Analysis of Financial Condition and Results of Operations includes certainstatements (other than statements of historical fact) that constitute forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. When used herein,the words “anticipates,” “expects,” “believes,” “intends” or “projects” andsimilar expressions are intended to identify forward-looking statements.It is important to note that actual results could differ materially from thoseprojected by such forward-looking statements. Although it is believedthat the expectations reflected in such forward-looking statements arereasonable and such forward-looking statements are based upon the bestdata available at the time this report is filed with the Securities andExchange Commission, no assurance can be given that such expectations willprove correct. Factors that could cause results to differ materially from theresults discussed in such forward-looking statements include: productionvariances from expectations, volatility of oil and gas prices, the need todevelop and replace reserves, capital expenditures required to fund operations,environmental risks, uncertainties about estimates of reserves, competition andgovernment regulation and political risks. All such forward-lookingstatements in this document are expressly qualified in their entirety by thecautionary statements in this paragraph.

***Item 3.*****                          Quantitativeand Qualitative Disclosures About Market Risk**

**Disclosures About Market Risk**

Not applicable.

***Item 4.*****                          Controlsand Procedures**

**Evaluation of Disclosure Controls and Procedures**

The Trustee maintainsdisclosure controls and procedures designed to ensure that information requiredto be disclosed by the Trust in the reports that it files or submits under theExchange Act of 1934, as amended, is recorded, processed, summarized andreported within the time periods specified in the SEC’s rules and regulations.Disclosure controls and procedures include controls and procedures designed toensure that information required to be disclosed by the Trust is accumulatedand communicated by Devon to The Bank of New York Trust Company, N.A., asTrustee of the Trust, and its employees who participate in the preparation ofthe Trust’s periodic reports as appropriate to allow timely decisions regardingrequired disclosure.

As of the end of theperiod covered by this report, the Trustee carried out an evaluation of the Trustee’sdisclosure controls and procedures. Mike Ulrich, as Vice President of theTrustee, has concluded that the controls and procedures are effective.

Due to the contractualarrangements of (i) the Trust Agreement and (ii) Devon’s conveyancesof the Royalty Interests to the Trust regarding information furnished by theworking interest owners, the Trustee relies on (a) information provided byDevon and the working interest owners, including all information relating tothe Royalty Properties burdened by the Royalty Interests, such as operatingdata, data regarding operating and capital expenditures, geological datarelating to reserves, information regarding 

10

----

environmentaland other conditions relating to the Royalty Properties, liabilities andpotential liabilities potentially affecting the revenues to the Trust’sinterest, the effects of regulatory changes and of the compliance of theoperators of the Royalty Properties with applicable laws, rules andregulations, the number of producing wells and acreage, and plans for futureoperating and capital expenditures, and (b) conclusions of independentreserve engineers regarding reserves. The conclusions of the independentreserve engineers are based on information received from Devon and the workinginterest owners.

**Changes in Internal Controls**

To the knowledge of theTrustee, there have been no significant changes in the Trustee’s internalcontrols or in other factors that could significantly affect the Trustee’sinternal controls subsequent to the date the Trustee completed its evaluation.The Trustee notes for purposes of clarification that it has no authority over,and makes no statement concerning, the internal controls of Devon and theworking interest owners.

Due tothe nature of the Trust, as well as the nature of the underlying RoyaltyInterests, there may be inherent weaknesses that are not subject to change ormodification by the Trustee or its employees. Devon operates only a smallnumber of the Royalty Properties and is not expected to be able to significantlyinfluence the operations of future development of the Royalty Properties thatare royalty interests or that consist of relatively small working interests. Suchoperations will generally be controlled by persons unaffiliated with theTrustee and Devon. Devon, however, owns a working interest in the Wasson ODCUnit and may be able to exercise some influence, though not control, over unitoperations. The contractual limitations creating inherent weaknesses indisclosure controls and procedures may be deemed to include:

·       Theworking interest owners alone control (i) historical operating data,including production volumes, marketing of products, operating and capitalexpenditures, environmental and other liabilities, the effects of regulatorychanges and the number of producing wells and acreage, (ii) plans forfuture operating and capital expenditures, (iii) geological data relatingto reserves and (iv) projected production. Neither the Trustee nor Devon(to the extent Devon is not also the working interest owner) control thisinformation, and they rely entirely on the working interest owners to provideaccurate and timely information when requested for use in the Trust’s reports.

·       TheTrustee relies on information provided by Devon that is collected by Devon fromworking interest owners. While the Trustee may request information throughDevon, only Devon has authority to request and receive financial informationregarding the Royalty Properties from the working interest owners. The Trusteegenerally does not have any direct contact with working interest owners, otherthan Devon, and relies on Devon to request and obtain information for use inthe Trust’s reports.

·       Underthe terms of the Trust Agreement, the Trustee is entitled to, and in fact doesrely, upon certain experts in good faith, including the independent reserveengineer with respect to the annual reserve report. The conveyances alsorestrict access to and the review of confidential data provided by Devon andworking interest owners. While the Trustee has no reason to believe itsreliance upon experts is unreasonable, this reliance on experts and restrictedaccess to information may be viewed as a weakness.

·       TheTrustee does not intend to expand its responsibilities beyond those permittedor required by the Trust Agreement.

11

----

**PART IIOTHER INFORMATION**

**Item 1.**                        *Legal Proceedings.*

The Royalty Propertiesrelated to the Trust are the subject of lawsuits and governmental proceedingsfrom time to time arising in the ordinary course of business. While the outcomeof lawsuits or other proceedings involving the Royalty Properties cannot bepredicted with certainty, these matters are not expected to have a materialadverse effect on the financial position or cash proceeds and distributablecash of the Trust.

**Item 1A.**                *Risk Factors.*

There have been nomaterial changes to risk factor information included in Item 1A. “Risk Factors”in our 2005 Annual Report on Form 10-K.

**Item6.****                        *Exhibits***

(a)           Exhibits

| ** ** | ** ** | ** **                                                                                                                                                   | ** ** | **SEC File or  Registration Number** | ** ** | **Exhibit  Number** | ** ** |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------|------------|
| 3(a)*      |       | Form of  Trust Agreement of Santa Fe Energy Trust                                                                                                       |       |                                                | 33-51760   |                |       |   | 3.1 |   |   |
| 4(a)*      |       | Form of  Custodial Deposit Agreement                                                                                                                    |       |                                                | 33-51760   |                |       |   | 4.2 |   |   |
| 4(b)*      |       | Form of  Secure Principal Energy Receipt (included as Exhibit A   to Exhibit 4(a))                                                            |       |                                                | 33-51760   |                |       |   | 4.1 |   |   |
| 10(a)*     |       | Form of Net  Profits Conveyance (Multi-State)                                                                                                           |       |                                                | 33-51760   |                |       |   | 10.1 |   |   |
| 10(b)*     |       | Form of  Wasson Conveyance                                                                                                                              |       |                                                | 33-51760   |                |       |   | 10.2 |   |   |
| 10(c)*     |       | Form of  Louisiana Mortgage                                                                                                                             |       |                                                | 33-51760   |                |       |   | 10.3 |   |   |
| 31         |       | Certification required by Rule 13a-14(a) or  Rule 15d-14(a) under  the Securities Exchange Act of 1934.                                  |       |                                                |       |                |       |   |   |   |   |
| 32         |       | Certification required by Rule 13a-14(b) or  Rule 15d-14(b) under  the Securities Exchange Act of 1934 and 18 U.S.C.  Section 1350. |       |                                                |       |                |       |   |   |   |   |

----

                 * Indicates exhibit previously filed with the SECas indicated and incorporated herein by reference.

12

----

**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

|            | SANTA FE ENERGY  TRUST |
|------------|------------------------|
| ** ** | ** **             | **(Registrant)** | ** ** |
| ** ** | By                     | THE BANK OF NEW YORK  TRUST COMPANY, N.A., TRUSTEE |
|       | By                     | /s/  MIKE ULRICH |
|       |                   | Mike Ulrich |
|       |                   | *Vice  President* |

 

Date: November 7, 2006

The Registrant, Santa Fe Energy Trust, has noprincipal or chief executive officer, principal or chief financial officer,controller or principal accounting officer, board of directors or personsperforming similar functions. Accordingly, no additional signatures areavailable and none have been provided.

13

----