UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended September 30, 2008
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the transition period from to
 Commission File No. 1-8032
 SAN JUAN BASIN ROYALTY TRUST
   Texas
    
    75-6279898(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 
 
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
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SAN JUAN BASIN ROYALTY TRUST
 PART I
FINANCIAL INFORMATION
 Item 1. Financial Statements.
  2




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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash and short-term investments
    
    $
    21,133,743
    
    
    $
    9,042,528Net overriding royalty interest in producing oil and
gas properties (net of accumulated amortization of
$114,843,066 and $111,452,138 at September 30,
2008 and December 31, 2006, respectively)
    
    
    18,432,462
    
    
    
    19,880,888$
    39,566,205
    
    
    $
    28,923,416LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    20,977,954
    
    
    $
    8,927,670Cash reserves
    
    
    155,789
    
    
    
    114,858Trust corpus  46,608,796 Units of beneficial
interest authorized and outstanding
    
    
    18,432,462
    
    
    
    19,880,888$
    39,566,205
    
    
    $
    28,923,416
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Royalty income
    
    $
    52,541,763
    
    
    $
    37,086,982
    
    
    $
    113,730,327
    
    
    $
    87,324,045Interest income
    
    
    32,508
    
    
    
    561,866
    
    
    
    216,621
    
    
    
    1,275,679Total Revenue
    
    
    52,574,271
    
    
    
    37,648,848
    
    
    
    113,946,948
    
    
    
    88,599,724General and
administrative
expenditures
    
    
    351,221
    
    
    
    263,629
    
    
    
    1,554,074
    
    
    
    1,411,072Distributable income
    
    $
    52,223,050
    
    
    $
    37,385,219
    
    
    $
    112,392,874
    
    
    $
    87,188,652Distributable
income per Unit
(46,608,796 Units)
    
    $
    1.120455
    
    
    $
    .802107
    
    
    $
    2.411409
    
    
    $
    1.870650
  3




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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Trust corpus, beginning of period
    
    $
    18,975,921
    
    
    $
    21,004,120
    
    
    $
    19,880,888
    
    
    $
    21,823,390Amortization of net overriding
royalty interest
    
    
    (543,459
    )
    
    
    (605,548
    )
    
    
    (1,448,426
    )
    
    
    (1,424,818
    )Distributable income
    
    
    52,223,050
    
    
    
    37,385,219
    
    
    
    112,392,874
    
    
    
    87,188,652Distributions declared
    
    
    (52,223,050
    )
    
    
    (37,385,219
    )
    
    
    (112,392,874
    )
    
    
    (87,188,652
    )Trust corpus, end of period
    
    
    18,432,462
    
    
    
    20,398,572
    
    
    
    18,432,462
    
    
    
    20,398,572
  4




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SAN JUAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF ACCOUNTING
  
    
    Royalty income recorded for a month is the amount computed and paid with respect to
the Trusts 75% net overriding royalty interest (the Royalty) in certain oil and gas
leasehold and royalty interests (the Underlying Properties) by 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 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 development and 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.
  2.
    
    FEDERAL INCOME TAXES
   5




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3.
    
    CONTINGENCIES
  4.
    
    SETTLEMENTS AND LITIGATION
   San Juan Basin Royalty Trust vs. Burlington Resources Oil & Gas Company, L.P.
 6




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San Juan Basin Royalty Trust v.
Burlington Resources Oil & Gas Company LP
 7




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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
  Business Overview
      8




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Three Months Ended September 30, 2008 and 2007
  July
    
    $
    .321518August
    
    
    .348851September
    
    
    .450086Quarter Total
    
    $
    1.120455
   9




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.
     10




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Three Months EndedSeptember 30,2008
    
    2007Gas:Total sales (Mcf)
    
    
    8,737,027
    
    
    
    9,954,324Mcf per day
    
    
    94,968
    
    
    
    108,199Average price (per Mcf)
    
    $
    10.62
    
    
    $
    6.55Oil:Total sales (Bbls)
    
    
    12,793
    
    
    
    16,936Bbls per day
    
    
    139
    
    
    
    184Average price (per Bbl)
    
    $
    120.99
    
    
    $
    64.16
  Three Months EndedSeptember 30,2008
    
    2007Gas sales (Mcf)
    
    
    5,326,507
    
    
    
    6,117,289Oil sales (Bbls)
    
    
    7,724
    
    
    
    10,379
    11




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Nine Months Ended September 30, 2008 and 2007
     12




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Nine Months EndedSeptember 30,2008
    
    2007Gas:Total sales (Mcf)
    
    
    25,133,676
    
    
    
    27,533,964Mcf per day
    
    
    91,729
    
    
    
    100,857Average price (per Mcf)
    
    $
    8.72
    
    
    $
    6.33Oil:Total Sales (Bbls)
    
    
    36,168
    
    
    
    51,172Bbls per day
    
    
    132
    
    
    
    187Average price (per Bbl)
    
    $
    101.88
    
    
    $
    58.87
  Nine Months EndedSeptember 30,2008
    
    2007Gas sales (Mcf)
    
    
    14,579,826
    
    
    
    14,887,130Oil sales (Bbls)
    
    
    20,787
    
    
    
    27,074
  United States of
America ex rel. Harrold E. (Gene) Wright v. AGIP Petroleum Co. et al.
  13




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Calculation of Royalty Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Gross proceeds of sales from
the Underlying Properties:Gas proceeds
    
    $
    92,813,502
    
    
    $
    65,197,892
    
    
    $
    212,607,028
    (1)
    
    $
    174,231,856Oil proceeds
    
    
    1,547,800
    
    
    
    1,086,618
    
    
    
    3,684,910
    
    
    
    3,012,266Other
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    45,066
    (2)Total
    
    
    94,361,302
    
    
    
    66,284,510
    
    
    
    216,291,938
    
    
    
    177,289,188Less production costs:Severance tax  gas
    
    
    8,391,694
    
    
    
    6,085,096
    
    
    
    19,856,326
    
    
    
    16,615,175Severance tax  oil
    
    
    152,033
    
    
    
    109,607
    
    
    
    369,512
    
    
    
    291,005Lease operating expense and
property tax
    
    
    8,224,170
    
    
    
    7,438,787
    
    
    
    24,566,288
    
    
    
    21,602,463Capital expenditures
    
    
    7,537,721
    
    
    
    3,201,710
    
    
    
    19,859,376
    
    
    
    22,348,485Total
    
    
    24,305,618
    
    
    
    16,835,200
    
    
    
    64,651,502
    
    
    
    60,857,128Net profits
    
    
    70,055,684
    
    
    
    49,449,310
    
    
    
    151,640,436
    
    
    
    116,432,060Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    52,541,763
    
    
    $
    37,086,982
    
    
    $
    113,730,327
    
    
    $
    87,324,045
 
 (1)
    
    In March, 2008, gas proceeds were reduced by $6,562,104 as the amount BROG determined to be
the Trusts portion of BROGs settlement of a legal matter with the MMS and the Bureau of Indian
Affairs.(2)
    
    In May, 2007, as part of the ongoing negotiations between the Trust and BROG concerning a
number of revenue and expense audit issues, $45,066 was allocated to the Trust as additional
revenue. Contractual Obligations
  14




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Effects of Securities Regulation
  Critical Accounting Policies
  
    
    Royalty income recorded for a month is the amount computed and paid pursuant to
the Conveyance 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 development and 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.
  Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  15




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Item 4. Controls and Procedures.
     16




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PART II
OTHER INFORMATION
 Item 1. Legal Proceedings.
  San
Juan Basin Royalty Trust vs. Burlington Resources Oil & Gas Company, L.P.
  San Juan Basin Royalty Trust v. Burlington
Resources Oil & Gas Company LP
  17




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Jicarilla
Apache Nation v. Department of Interior
  Item 6. Exhibits.
 (4)(a)
    
    Amended and Restated Royalty Trust Indenture, dated September 30, 2002 (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), heretofore
filed as Exhibit 99.2 to the Trusts Current Report on Form 8-K filed with the
Commission on October 1, 2002, is incorporated herein by reference.*(4)(b)
    
    Net Overriding Royalty Conveyance from Southland Royalty Company to the Fort Worth
National Bank, as Trustee, dated November 3, 1980 (without Schedules), heretofore filed
as Exhibit 4(b) to the Trusts Annual Report on Form 10-K filed with the Commission for
the fiscal year ended December 31, 2007, is incorporated herein by reference.*(4)(c)
    
    Assignment of Net Overriding Interest (San Juan Basin Royalty Trust), dated September
30, 2002, between Bank One, N.A. and TexasBank, heretofore filed as Exhibit 4(c) to the
Trusts Quarterly Report on Form 10-Q filed with the Commission for the quarter ended
September 30, 2002, is incorporated herein by reference.*31
    
    Certification required by Rule 13a-14(a), dated November 10, 2008, by Lee Ann
Anderson, Vice President and Senior Trust Officer of Compass Bank, the Trustee of the
Trust.**
 18




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32
    
    Certification required by Rule 13a-14(b), dated November 10, 2008, by Lee Ann
Anderson, Vice President and Senior Trust Officer of Compass Bank, on behalf of Compass
Bank, the Trustee of the Trust.***
 
 *
    
    A copy of this exhibit is available to any Unit Holder (free of charge) upon written request
to the Trustee, Compass Bank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith. 19




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SIGNATURES
  COMPASS BANK, AS TRUSTEE OF THE
SAN JUAN BASIN ROYALTY TRUSTBy:
    /s/ Lee Ann AndersonLee Ann AndersonVice President and Senior Trust Officer




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INDEX TO EXHIBITS
 ExhibitNumber
    
    Description(4)(a)
    
    Amended and Restated Royalty Trust Indenture, dated September 30,
2002 (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), heretofore filed as
Exhibit 99.2 to the Trusts Current Report on Form 8-K filed with
the Commission on October 1, 2002, is incorporated herein by
reference.*(4)(b)
    
    Net Overriding Royalty Conveyance from Southland Royalty Company
to the Fort Worth National Bank, as Trustee, dated November 3,
1980 (without Schedules), heretofore filed as Exhibit 4(b) to the
Trusts Annual Report on Form 10-K filed with the Commission for
the fiscal year ended December 31, 2007, is incorporated herein by
reference.*(4)(c)
    
    Assignment of Net Overriding Interest (San Juan Basin Royalty
Trust), dated September 30, 2002, between Bank One, N.A. and
TexasBank, heretofore filed as Exhibit 4(c) to the Trusts
Quarterly Report on Form 10-Q with the Commission for the quarter
ended September 30, 2002, is incorporated herein by reference.*31
    
    Certification required by Rule 13a-14(a), dated November 10, 2008,
by Lee Ann Anderson, Vice President and Senior Trust Officer of
Compass Bank, the Trustee of the Trust.**32
    
    Certification required by Rule 13a-14(b), dated November 10, 2008,
by Lee Ann Anderson, Vice President and Senior Trust Officer of
Compass Bank, on behalf of Compass Bank, the Trustee of the
Trust.***
 
 *
    
    A copy of this exhibit is available to any Unit Holder (free of charge) upon written request
to the Trustee, Compass Bank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith.