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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 March 31, 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
(State or other jurisdiction 
of incorporation or organization)
    
    75-6279898
(I.R.S. Employer
Identification No.)
 
 
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  PART IItem 1. Financial StatementsItem 2. Trustees Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART IIItem 1. Legal ProceedingsItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSCertification Required by Rule 13a-14(a)Certification Required by Rule 13a-14(b)    Table of Contents  SAN JUAN BASIN ROYALTY TRUST
 
 PART I
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash and short-term investments
    
    $
    3,873,014
    
    
    $
    9,042,528Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $113,837,466 and $113,394,640
at March 31, 2008 and December 31, 2007, respectively)
    
    
    19,438,062
    
    
    
    19,880,888$
    23,311,076
    
    
    $
    28,923,416LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    3,758,156
    
    
    $
    8,927,670Cash reserves
    
    
    114,858
    
    
    
    114,858Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding
    
    
    19,438,062
    
    
    
    19,880,888$
    23,311,076
    
    
    $
    28,923,416
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 Three Months EndedMarch 31,2008
    
    
    2007Royalty income
    
    $
    25,576,418
    
    
    $
    23,948,749Interest income
    
    
    164,379
    
    
    
    624,78125,740,797
    
    
    
    24,573,530General and administrative expenditures
    
    
    610,074
    
    
    
    565,648Distributable income
    
    $
    25,130,723
    
    
    $
    24,007,882Distributable income per Unit (46,608,796 Units)
    
    $
    0.539184
    
    
    $
    0.515094
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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 Three Months EndedMarch 31,2008
    
    
    2007Trust corpus, beginning of period
    
    $
    19,880,888
    
    
    $
    21,823,390Amortization of net overriding royalty interest
    
    
    (442,826
    )
    
    
    (374,714
    )Distributable income
    
    
    25,130,723
    
    
    
    24,007,882Distributions declared
    
    
    (25,130,723
    )
    
    
    (24,007,882
    )Total corpus, end of period
    
    $
    19,438,062
    
    
    $
    21,448,676
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SAN JUAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF ACCOUNTING
 The San Juan Basin Royalty Trust (the Trust) was established as of November 1, 1980. The
financial statements of the Trust are prepared on the following basis:
 
    
    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.
 The financial statements of the Trust differ from financial statements prepared in
accordance with 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 the Trust corpus instead of as an expense. The basis of accounting used
by the Trust is widely used by royalty trusts for financial reporting purposes.
 2.
    
    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.
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Additionally, 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 revenues of the Trust as ordinary
income from oil and gas royalties and are entitled to claim depletion with respect to such
income. 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 45K Tax
Credit). Congress has at various times since 2002 considered energy legislation, including
provisions to reinstate the Section 45K 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, on August 8, 2005, new energy tax legislation was enacted which,
among other things, modified the Section 45K 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 on the Trust and the Unit Holders.The classification of the Trusts income for purposes of the passive loss rules may be
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 and will not
be subject to reduction by a Unit Holders passive losses.
 3.
    
    CONTINGENCIES
 See Part II, Item 1  Legal Proceedings, concerning the status of litigation matters.
 4.
    
    SETTLEMENTS AND LITIGATION
 During the first quarter of 2008, as a result of the ongoing
joint interest audit process, BROG paid $128,827 to the Trust as
interest on the late payment of gross proceeds. During the first
quarter of 2007, as part of the negotiations between the Trust and
BROG concerning a number of revenue and expense items, an aggregate
of $768,069 was
included in calculating net proceeds paid to the Trust.On March 14, 2008, BROG notified the Trust that the distribution for March would be reduced
by $4,921,578, an amount described in the notice as the Trusts portion of what BROG had
paid to settle a legal matter. On March 16, 2008, following inquiry from the Trust, BROG
reported that on August 15, 2007 it reached an agreement settling all claims asserted by the
United States of America, acting through the Department of Justice and the United States
Department of the Interior, itself acting through the Minerals Management Service and the
Bureau of Indian Affairs on behalf of itself and on behalf of various individual Native
American mineral owners, the Cheyenne and Arapaho Tribes, the Jicarilla Apache Tribe, the
Southern Ute Tribe, and the Ute
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Mountain Ute Tribe in the United States District Court for the Eastern District of Texas,
captioned United States of America ex rel. Harrold E. (Gene) Wright v. AGIP Petroleum
Co. et al., Civil Action No. 5:03CV264 (formerly 9:98-CV-30) (E.D. Tex.). BROG, on
behalf of itself and the Trust, paid $105,304,226 to settle claims for underpayment of
royalty alleged to be owed on natural gas production, including production from properties
burdened by the Trust, for production periods between March 1, 1988 and March 31, 2005.BROG determined that the portion of that settlement allocable to the Trust was $6,078,917 in
principal, together with $486,187 of interest, totaling $6,562,104. That amount was offset
against the revenues used in calculating net profits for the month of March and the royalty
distribution was calculated based on the Trusts 75% net overriding royalty interest which
resulted in the $4,921,578 reduction in the March distribution. BROG indicated that the
portion allocated to the Trust was determined by it based upon a comparison of the
properties burdened by the Trust in proportion to all of the properties associated with the
litigation settlement. The Trusts consultants will analyze the settlement and audit the
calculation of the amount determined by BROG to be allocable to the Trust.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, L.P., 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 has indicated
it will again pursue its claim for attorneys fees and costs. With respect to that fifth
issue, 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.
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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
  Business Overview
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Three Months Ended March 31, 2008 and 2007
  January
    
    $
    0.222595February
    
    
    0.235957March
    
    
    0.080632Quarter Total
    
    $
    0 .539184
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Three Months EndedMarch 312008
    
    2007Gas:Total sales (Mcf)
    
    
    8,559,117
    
    
    
    8,943,584Mcf per day
    
    
    93,033
    
    
    
    97,213Average price (per Mcf)
    
    $
    6.97
    
    
    $
    6.04Oil:Total sales (Bbls)
    
    
    12,698
    
    
    
    18,382Bbls per day
    
    
    138
    
    
    
    200Average price (per Bbl)
    
    $
    88.58
    
    
    $
    54.76
  Three Months EndedMarch 312008
    
    2007Gas sales (Mcf)
    
    
    4,723,823
    
    
    
    4,278,905Oil sales (Bbls)
    
    
    6,922
    
    
    
    8,908
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United States of
America ex rel. Harrold E. (Gene) Wright v. AGIP Petroleum Co. et al.
  12




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Calculation of Royalty Income
  CALCULATION OF ROYALTY INCOME
 Three Months EndedMarch 31,2008
    
    
    2007Gross proceeds of sales from the Underlying Properties:Gas proceeds
    
    $
    53,108,214
    
    
    $
    53,976,801Oil proceeds
    
    
    1,124,793
    
    
    
    1,006,513Total
    
    
    54,233,007
    
    
    
    54,983,314Less production costs:Severance tax  Gas
    
    
    5,436,476
    
    
    
    5,288,138Severance tax  Oil
    
    
    117,911
    
    
    
    91,501Lease operating expense and property tax
    
    
    8,329,283
    
    
    
    6,737,076Capital expenditures
    
    
    6,247,446
    
    
    
    10,934,934Total
    
    
    20,131,116
    
    
    
    23,051,649Net profits
    
    
    34,101,891
    
    
    
    31,931,665Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    25,576,418
    
    
    $
    23,948,749
 Contractual Obligations
  Effects of Securities Regulation
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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.
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Item 4. Controls and Procedures.
     15




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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.
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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 May 12, 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 May 12, 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. 17




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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 May 12, 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 May 12, 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.