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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2003
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.)

TexasBank, Trust Department
2525 Ridgmar Boulevard, Suite 100
Fort Worth, Texas 76116
(Address of principal executive offices)
(Zip Code)

Telephone Number: (866) 809-4553
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x No o

Number of Units of beneficial interest outstanding at August 13, 2003:
46,608,796





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TABLE OF CONTENTS



|                                               |                                                                                             |                                                              |  |  |  |  |  | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                  
|                                               | Item 1. Financial Statements.                                                              
|                                               |                                                                                             | CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
|                                               |                                                                                             | CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)    
|                                               |                                                                                             | CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) 
|                                               |                                                                                             | NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)         
|                                               | Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
|                                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk.                        
|                                               | Item 4. Controls and Procedures.                                                           
|PART II OTHER INFORMATION                     
|                                               | Item 1. Legal Proceedings.                                                                 
|                                               | Item 6. Exhibits and Reports on Form 8-K.                                                  
|SIGNATURES                                    
|INDEX TO EXHIBITS                             
|EX-31 Certification Required by Rule 13a-14(a)
|EX-32 Certification Required by Rule 13a-14(b)



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SAN JUAN BASIN ROYALTY TRUST




PART IFINANCIAL INFORMATION




Item 1. Financial Statements.

The condensed financial statements included herein have been prepared by
the independent accountants for the San Juan Basin Royalty Trust (the Trust),
at the request of TexasBank, the Trustee of the Trust, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 47, released September 16, 1982, the Trust continues to prepare its
financial statements in a manner that differs from accounting principals
generally accepted in the United States of America (GAAP); such presentation
is customary to other royalty trusts. Certain information and footnote
disclosures normally included in annual financial statements have been
condensed or omitted pursuant to Rule 10-01 of Regulation S-X promulgated under
the Securities and Exchange Act of 1934, although the Trustee believes that the
disclosures are adequate to make the information presented not misleading.
These condensed financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Trusts annual
report on Form 10-K/A for the year ended December 31, 2002. In the opinion of
the Trustee, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the assets, liabilities and trust corpus of the San
Juan Basin Royalty Trust at June 30, 2003, and the distributable income and
changes in trust corpus for the three-month periods and six-month periods ended
June 30, 2003 and 2002 have been included. The distributable income for such
interim periods is not necessarily indicative of the distributable income for
the full year.

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SAN JUAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

---

|                                                                                                                                                                                           |  |             |            |              |  |   |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ---------- | ------------ |  | - | ---------- | 
|                                                                                                                                                                                           |  | June 30,    |            | December 31,
|ASSETS                                                                                                                                                                                     |  | 2003        |            | 2002        
|                                                                                                                                                                                           |  |             |            |             
|                                                                                                                                                                                           |  | (Unaudited) |            |              |  |  
|Cash and short-term investments                                                                                                                                                            |  | $           | 6,075,502  |              |  | $ | 4,274,790  | 
|Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $101,553,168 and $99,577,622
at June 30, 2003 and December 31, 2002, respectively) |  |             | 31,722,360 |              |  |   | 33,697,906 | 
|                                                                                                                                                                                           |  |             |            |              |  |   |            | 
|                                                                                                                                                                                           |  | $           | 37,797,862 |              |  | $ | 37,972,696 | 
|                                                                                                                                                                                           |  |             |            |              |  |   |            | 
|LIABILITIES AND TRUST CORPUS                                                                                                                                                               |  |             |            |              |  |   |            | 
|Distribution payable to Unit Holders                                                                                                                                                       |  | $           | 5,960,644  |              |  | $ | 4,159,932  | 
|Cash reserves                                                                                                                                                                              |  |             | 114,858    |              |  |   | 114,858    | 
|Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding                                                                                                          |  |             | 31,722,360 |              |  |   | 33,697,906 | 
|                                                                                                                                                                                           |  |             |            |              |  |   |            | 
|                                                                                                                                                                                           |  | $           | 37,797,862 |              |  | $ | 37,972,696 | 
|                                                                                                                                                                                           |  |             |            |              |  |   |            | 




CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)

---

|                                                 |  |                    |            |                  |  |      |           |      |  |   |            |  |  |   |            | 
|------------------------------------------------ |  | ------------------ | ---------- | ---------------- |  | ---- | --------- | ---- |  | - | ---------- |  |  | - | ---------- | 
|                                                 |  | Three Months Ended |            | Six Months Ended
|                                                 |  | June 30,           |            | June 30,        
|                                                 |  |                    |            |                 
|                                                 |  | 2003               |            | 2002             |  | 2003 |           | 2002
|                                                 |  |                    |            |                  |  |      |           |     
|Royalty income                                   |  | $                  | 26,051,389 |                  |  | $    | 9,559,569 |      |  | $ | 45,962,457 |  |  | $ | 13,484,924 | 
|Interest income                                  |  |                    | 15,801     |                  |  |      | 2,104     |      |  |   | 23,254     |  |  |   | 2,851      | 
|Decrease in cash reserves                        |  |                    |           |                  |  |      |          |      |  |   |           |  |  |   | 76,761     | 
|                                                 |  |                    |            |                  |  |      |           |      |  |   |            |  |  |   |            | 
|                                                 |  |                    | 26,067,190 |                  |  |      | 9,561,673 |      |  |   | 45,985,711 |  |  |   | 13,564,536 | 
|General and administrative
expenditures          |  |                    | 448,456    |                  |  |      | 546,871   |      |  |   | 868,829    |  |  |   | 1,022,721  | 
|                                                 |  |                    |            |                  |  |      |           |      |  |   |            |  |  |   |            | 
|Distributable income                             |  | $                  | 25,618,734 |                  |  | $    | 9,014,802 |      |  | $ | 45,116,882 |  |  | $ | 12,541,815 | 
|                                                 |  |                    |            |                  |  |      |           |      |  |   |            |  |  |   |            | 
|Distributable income per Unit
(46,608,796 Units) |  | $                  | .549655    |                  |  | $    | .193414   |      |  | $ | .967992    |  |  | $ | .269087    | 
|                                                 |  |                    |            |                  |  |      |           |      |  |   |            |  |  |   |            | 

The accompanying notes to condensed financial statements are an integral part of these statements.

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SAN JUAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)

---

|                                                |  |                    |             |                  |  |      |            |      |  |   |             |   |  |   |             |  
|----------------------------------------------- |  | ------------------ | ----------- | ---------------- |  | ---- | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                                |  | Three Months Ended |             | Six Months Ended
|                                                |  | June 30,           |             | June 30,        
|                                                |  |                    |             |                 
|                                                |  | 2003               |             | 2002             |  | 2003 |            | 2002
|                                                |  |                    |             |                  |  |      |            |     
|Trust corpus, beginning of period               |  | $                  | 32,652,361  |                  |  | $    | 37,479,045 |      |  | $ | 33,697,906  |   |  | $ | 37,859,749  |  
|Amortization of net overriding
royalty interest |  |                    | (930,001    | )                |  |      | (1,124,730 | )    |  |   | (1,975,546  | ) |  |   | (1,505,434  | )
|Distributable income                            |  |                    | 25,618,734  |                  |  |      | 9,014,802  |      |  |   | 45,116,882  |   |  |   | 12,541,815  |  
|Distributions declared                          |  |                    | (25,618,734 | )                |  |      | (9,014,802 | )    |  |   | (45,116,882 | ) |  |   | (12,541,815 | )
|                                                |  |                    |             |                  |  |      |            |      |  |   |             |   |  |   |             |  
|Total corpus, end of period                     |  | $                  | 31,722,360  |                  |  | $    | 36,354,315 |      |  | $ | 31,722,360  |   |  | $ | 36,354,315  |  
|                                                |  |                    |             |                  |  |      |            |      |  |   |             |   |  |   |             |  

The accompanying notes to condensed financial statements are an integral part of these statements.

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SAN JUAN BASIN ROYALTY TRUST




NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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|1. |  | BASIS OF ACCOUNTING                                                                                                                                
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The San Juan Basin Royalty 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 by the working interest owner, Burlington Resources Oil & Gas
Company LP (BROG), to the Trustee for the Trust. Royalty income
consists of the amounts received by the owner of the interest
burdened by the net overriding royalty interest (Royalty) 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%.
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | 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 overriding royalty
interest to the Trust provides that any excess of production costs
over gross proceeds must be recovered from future net profits.                                                                                                                                                                                                                                                                                                                       



|   |  | 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; and amortization of the Royalty calculated on a
unit-of-production basis is charged directly to 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 and presents the revenues
and expenditures that are actually distributed to the Unit Holders.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|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.                                                                                                                                                                             
|  
|   |  | 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 the tax
treatment described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | The Trust began receiving royalty income from coal seam gas wells
beginning in 1989. Under Section 29 of the Internal Revenue Code, coal
seam gas production from wells drilled prior to                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|   |  | January 1, 1993 (including certain wells recompleted in coal seam
formations thereafter), generally qualifies for the federal income tax
credit for producing non-conventional fuels if such production and the
sale thereof occurs before January 1, 2003. For 2002, this tax credit was
approximately $1.09 per MMBtu. The Trust also receives production from
wells producing from a tight sands formation, which likewise generally
qualifies for the federal income tax credit for producing non-conventional
fuels if such production and the sale thereof occurs before January 1,
2003, and certain other conditions are met. Unlike the credit for coal
seam gas, the credit for tight formation gas is not adjusted for
inflation, therefore the credit remains fixed at .517241 per MMBtu. For
qualifying production of the Trust, each Unit Holder must determine from
the tax information the Unit Holder receives from the Trust, its pro rata
share of such production based upon the number of Units owned during each
month of the year and the amount of available credit per MMBtu for the
year, and then apply the tax credit against the Unit Holders own income
tax liability, but such credit may not reduce the Unit Holders regular
tax liability (after the foreign tax credit and certain other
nonrefundable credits) below its tentative minimum tax. Section 29 also
provides that any amount of Section 29 credit disallowed for the tax year
solely because of this limitation will increase a taxpayers credit for
prior year minimum tax liability, which may be carried forward
indefinitely as a credit against the taxpayers regular tax liability,
subject, however, to the limitations described in the preceding sentence.
There is no provision for the carryback or carryforward of the Section 29
credit in any other circumstances.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Although both houses of Congress
have passed an energy bill, the final form of the legislation is not
yet known. Unless new legislation is passed
extending the Section 29 credit on existing eligible production or
allowing for a credit on eligible new production for which some
portion of the Trusts production could qualify, there will be no further
Section 29 credit on the Trusts production sold in the year 2003 or later
years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | The Trustee is provided summary Section 29 tax credit information related
to Trust properties by BROG, which information is then provided to the
Unit Holders. In 1999, the U.S. Court of Appeals for the 10th Circuit
upheld the position of the Internal Revenue Service and the Tax Court that
nonconventional fuel such as coal seam gas does not qualify for the
Section 29 credit unless the producer has received an appropriate well
category determination from the Federal Energy Regulatory Commission
(FERC). The FERCs certification authority expired effective January 1,
1993. However, on July 14, 2000, the FERC issued a final ruling amending
its regulations to reinstate certain regulations involving well category
determinations for all wells and tight formation areas that could qualify
for the Section 29 tax credit. BROG has informed the Trustee that it has
identified approximately 250 wells as non-certified. Of those, BROG has
determined that six do not qualify for the Section 29 tax credit. BROG
has informed the Trustee that it will seek certification of all qualified
wells and that two additional wells were certified in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | 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 will generally be treated as portfolio income
and will not reduce passive losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|3. |  | CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | See Part II  Item 1, Legal Proceedings concerning the status of
litigation matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|4. |  | SETTLEMENT OF CLAIMS RELATING TO GAS IMBALANCE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In June 2000, the Trust and BROG entered into a partial settlement of
claims relating to a gas imbalance with respect to production from mineral
properties currently operated by BROG. Under the terms of the partial
settlement BROG paid the Trust $3,490,000 to settle the imbalance insofar
as it relates to some of the wells located on the subject properties. The
remainder of the imbalance is to be addressed through volume adjustments
whereby the Trusts net overriding royalty interest will be applied to 50%
of the overproduced parties interest, on a monthly basis, until the
imbalance is corrected. The Trust is in communication with BROG in order
to determine the estimated value of the volume adjustments and the time
during which the remainder of the imbalance will be corrected. Such volume
adjustments will be monitored by the Trusts consultants.
|  
|5. |  | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | At December 31, 2001, BROG had incurred excess production costs of
$2,259,628 on the underlying properties due primarily to high capital
costs. The Trust conveyance provides for the deduction of excess
production costs in determining royalty income until such costs are fully
recovered and allows for interest to be charged on excess production costs
at the prime rate. Interest in the amount of $10,545 was added to such
excess production costs. Of the total, $1,702,630 is attributable to the
Trust and has been deducted in determining royalty income for the six
months ended June 30, 2002.                                                                                                                                                                                                                                                                         
|  
|6. |  | MMS SETTLEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | As part of a settlement between BROG and the Mineral Management Service of
the United States Department of the Interior, $901,776 was deducted from
the Trusts April 2003 royalty payment. This represents the Trusts 75%
interest of the total settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Information

Certain information included in this report contains, and other materials
filed or to be filed by the Trust with the Securities and Exchange Commission
(as well as information included in oral statements or other written statements
made or to be made by the Trust) may contain or include, forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, and Section 27A of the Securities Act of 1933. Such forward-looking
statements may be or may concern, among other things, capital expenditures,
drilling activity, development activities, production efforts and volumes,
hydrocarbon prices and the results thereof, and regulatory matters. Such
forward-looking statements generally are accompanied by words such as may,
will, estimate, expect, predict, project, anticipate, goal,
should, assume, believe, plan, intend, or other words that convey the
uncertainty of future events or outcomes. Such statements reflect BROGs
current view with respect to future events; are based on our assessment of, and
are subject to, a variety of factors deemed relevant by the Trustee and BROG
and involve risks and uncertainties. Should one or more of these risks or
uncertainties occur, actual results may vary materially and adversely from
those anticipated.

Three Months Ended June 30, 2003 and 2002

The Trust received royalty income of $26,051,389 and interest income of
$15,801 during the second quarter of 2003. After deducting administrative
expenses of $448,456, distributable income for the quarter was $25,618,734
($.549655 per Unit). In the second quarter of 2002, royalty income was
$9,559,569, interest income was $2,104, administrative expenses were $546,871
and distributable income was $9,014,802 ($.193414 per Unit). The tax credit
relating to production from coal seam and tight sand wells totaled
approximately $.03 per Unit for the second quarter of 2002. Although both
houses of Congress have passed an energy bill, the final form of the
legislation is not yet known. Unless new legislation is passed
extending the Section 29 credit on existing eligible production or
allowing for a credit on eligible new production for which some
portion of the Trust's production could qualify, there will be no
further Section 29 credit on the Trust's production sold in the year
2003 or later years. For further
information concerning this tax credit, Unit Holders should refer to the
Trusts Annual Report for 2002. Based on 46,608,796 Units outstanding, the per
Unit distributions during the second quarter of 2003 were as follows:

|              |  |   |         | 
|------------- |  | - | ------- | 
|April         |  | $ | .158234 | 
|May           |  |   | .263534 | 
|June          |  |   | .127887 | 
|              |  |   |         | 
|Quarter Total |  | $ | .549655 | 
|              |  |   |         | 

The royalty income distributed in the second quarter of 2003 was higher
than that distributed in the second quarter of 2002, primarily due to an
increase in the average gas price from $2.18 per Mcf for the second quarter of
2002 to $4.48 per Mcf for the second quarter of 2003. Interest earnings for
the quarter ended June 30, 2003, as compared to the quarter ended June 30,
2002, were higher, primarily due to an increase in funds available for
investment. Administrative expenses were lower primarily as a result of
differences in timing in the receipt and payment of these expenses but also
because administrative expenses in the second quarter of 2002 included expenses
incurred in an arbitration proceeding involving BROG and the Trust undertaken
to resolve certain gas marketing issues.

The capital costs attributable to the properties from which the Trusts
Royalty was carved (the Underlying Properties) for the second quarter of 2003
were reported by BROG as approximately $2.9 million. BROGs capital
expenditure budget for the Underlying Properties for 2003 is estimated at $14.2
million; however, BROG reports that based on its actual capital requirements,
its mix of projects, and swings

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in the price of natural gas, the actual capital expenditures for 2003
could range from $10 million to $22 million. Capital expenditures were
approximately $3.4 million for the second quarter of 2002. In 2002,
approximately $21.5 million in capital expenditures were deducted in
calculating the Royalty. In February 2003, BROG informed the Trust that for
2003 it anticipates 351 projects, including the drilling of 38 new wells to be
operated by BROG and 26 new wells to be operated by third parties. Of the new
BROG operated wells, 14 are projected to be conventional wells completed in the
Pictured Cliffs, Mesaverde and/or Dakota formations, and the remaining 24 are
projected as coal seam wells completed in the Fruitland Coal formation. A
total of 21 of the new wells operated by third parties are projected to be
conventional wells and the remaining five are predicted to be coal seam wells.
BROG projects approximately $10.6 million to be spent on the new wells, and
$3.6 million to be expended in working over existing wells and in the
maintenance and improvement of production facilities.

BROG indicates its budget for 2003 reflects continued, significant
developments in which the Trusts net overriding royalty interest is relatively
high, as well as a sustained focus in conventional formations, including infill
drilling to the Mesaverde and Dakota formations, development of the Fruitland
Coal formation and multiple formation completions.

In February 2002, BROG informed the Trust that the New Mexico Oil
Conservation Division had approved plans for 80-acre infill drilling of the
Dakota formation in the San Juan Basin. In October 2002, the New Mexico Oil
Conservation Division approved reduced, 160-acre spacing in selected portions
of the Fruitland Coal formation. BROG has informed the Trust that, principally
as a result of this approval, its budget for 2003 reflects a focus on the
Fruitland Coal formation. The New Mexico Oil Conservation Division has asked
BROG and other interested parties to study whether the change in spacing
requirements should be expanded to cover other portions of the Fruitland Coal
formation. Eighty-acre spacing has been permitted in the Mesaverde formation
since 1997.

BROG has informed the Trust that lease operating expenses and property
taxes were $3,902,841 and $135,000 respectively, for the second quarter of
2003, as compared to $3,663,386 and $71,100, respectively, for the second
quarter of 2002.

BROG has informed the Trustee that during the second quarter of 2003, five
gross (2.54 net) conventional wells, 19 gross (.81 net) payadds, 13 gross (9.54
net) restimulations, and eight gross (2.50 net) coal seam wells were completed
on the Underlying Properties.

Fifty-four gross (16.04 net) conventional wells, 19 gross (5.27 net)
payadds, 20 gross (5.55 net) recompletions, 18 gross (11.51 net)
restimulations, 39 gross (14.25 net) coal seam wells, one gross (.002 net)
recavitation, and five gross (.17 net) recompletions were in progress at June
30, 2003.

Twelve gross (5.16 net) conventional wells, seven gross (1.93 net)
conventional recompletions, three gross (2.29 net) coal seam wells, and five
gross (1.97 net) coal seam recompletions were completed as of June 30, 2002.

Sixty-five gross (19.41 net) conventional wells, four gross (0.22 net)
conventional recompletions, six gross (2.98 net) coal seam wells, and six gross
(3.22 net) coal seam recompletions were in progress as of June 30, 2002.

Gross acres or wells, for purposes of this discussion, means the entire
ownership interest of all parties in such properties, and BROGs interest
therein is referred to as the net acres or wells. A payadd is the completion
of an additional productive interval in an existing completed zone in a well.

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Royalty income for the quarter ended June 30, 2003 is associated
principally with actual gas and oil production during February 2003 through
April 2003 from the Underlying Properties. Gas and oil sales from the
Underlying Properties for the three months ended June 30, 2003 and 2002 were as
follows:

|     |                         |  |      |            |      |  |   |            | 
|---- | ----------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|     |                         |  | 2003 |            | 2002
|     |                         |  |      |            |     
|Gas: |                         |  |      |            |      |  |   |           
|     | Total sales (Mcf)       |  |      | 10,454,608 |      |  |   | 11,129,745 | 
|     | Mcf per day             |  |      | 117,468    |      |  |   | 125,053    | 
|     | Average price (per Mcf) |  | $    | 4.48       |      |  | $ | 2.18       | 
|Oil: |                         |  |      |            |      |  |   |           
|     | Total sales (Bbls)      |  |      | 24,381     |      |  |   | 28,204     | 
|     | Bbls per day            |  |      | 274        |      |  |   | 317        | 
|     | Average price (per Bbl) |  | $    | 27.91      |      |  | $ | 19.14      | 

Gas and oil sales attributable to the Royalty for the three months ended June
30, 2003 and 2002 were as follows:

|                 |  |  |           |  |  |  |           | 
|---------------- |  |  | --------- |  |  |  | --------- | 
|                 |  |  | 2003      |  |  |  | 2002      | 
|                 |  |  |           |  |  |  |           | 
|Gas sales (Mcf)  |  |  | 6,498,418 |  |  |  | 5,252,787 | 
|Oil sales (Bbls) |  |  | 15,091    |  |  |  | 13,935    | 

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 that is dependent on such factors as price
and cost, including capital expenditures, the aggregate production volumes from
the Underlying Properties may not provide a meaningful comparison to volumes
attributable to the Royalty.

During the second quarter of 2003, average gas prices were $2.30 higher
than the average prices reported during the second quarter of 2002. The
average price per barrel of oil during the second quarter of 2003 was $8.77 per
barrel higher than received for the second quarter of 2002 due to increases in
oil prices in world markets generally, including the posted prices applicable
to oil sales attributable to the Royalty.

BROG has entered into two contracts for the sale of all volumes of gas
subject to the Royalty (the Trust gas). These contracts provide for (i) the
sale of Trust gas in two packages to Duke Energy and Marketing, L.L.C. and PNM
Gas Services, respectively, (ii) the delivery of Trust gas at various delivery
points through March 31, 2005, and from year-to-year thereafter until
terminated by either party on twelve months notice, and (iii) for the sale of
Trust gas at prices which fluctuate in accordance with published indices for
gas sold in the San Juan Basin of New Mexico. Unit Holders are referred to
Note 6 of the Notes to Financial Statements in the Trusts 2002 Annual Report
for further information concerning the marketing of gas produced from the
Underlying Properties. Prior to April 1, 2002, the Trust gas was sold under a
contract dated November 10, 1999 between BROG and Duke Energy and Marketing
L.L.C.

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, gas receipt points, etc. Such disclosure could compromise the
ability to compete effectively in the marketplace for the sale of gas produced
from the Underlying Properties.

Six Months Ended June 30, 2003 and 2002

For the six months ended June 30, 2003, distributable income was
$45,116,882 ($0.967992 per Unit) as compared to the $12,541,815 ($.269807 per
Unit) of income distributed during the same period in 2002. The increase in
distributable income from 2002 to 2003 resulted primarily from higher gas and
oil prices

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during the first half of 2003. Interest income for the six months ended
June 30, 2003 was $23,254 compared to $2,851 during the first six months of
2002. This increase is due to the timing of receipt of interest income and an
increase in cash to be invested. General and administrative expenses were
$869,829 for the six months ended June 30, 2003, as compared to $1,022,721
during the same period in 2002 primarily due to differences in timing of the
receipt and payment of these expenses, but also as a result of expenses
incurred in 2002 in an arbitration proceeding involving BROG and the Trust,
undertaken to resolve certain gas marketing issues.

Capital expenditures incurred by BROG, attributable to the Underlying
Properties, for the first six months of 2003 amounted to approximately $9.4
million. Capital expenditures were approximately $14.7 million for the first
six months of 2002. Lease operating expenses and property taxes totaled
$7,824,408 and $271,250, respectively, for the first six months of 2003 as
compared to $7,799,633 and $146,667, respectively, for the first six months of
2002.

BROG informed the Trustee that during the six months ended June 30, 2003,
14 gross (9.10 net) conventional wells and three gross (.94 net) miscellaneous
capital projects were completed on the Underlying Properties. Thirty-eight
gross (1.73 net) payadds and 18 gross (12.74 net) restimulations were completed
during the first six months of 2003. During the six months ended June 30,
2003, 15 gross (3.37 net) coal seam wells and two gross (.88 net) coal seam
miscellaneous capital projects were completed.

Royalty income for the six months ended June 30, 2003 is associated with
actual gas and oil production during November 2002 through April 2003 from the
Underlying Properties. Gas and oil sales from the Underlying Properties for
the six months ended June 30, 2003 and 2002 were as follows:

|     |                         |  |      |            |      |  |   |            | 
|---- | ----------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|     |                         |  | 2003 |            | 2002
|     |                         |  |      |            |     
|Gas: |                         |  |      |            |      |  |   |           
|     | Total sales (Mcf)       |  |      | 22,092,156 |      |  |   | 22,600,721 | 
|     | Mcf per day             |  |      | 122,056    |      |  |   | 124,866    | 
|     | Average price (per Mcf) |  | $    | 3.97       |      |  | $ | 2.19       | 
|Oil: |                         |  |      |            |      |  |   |           
|     | Total Sales (Bbls)      |  |      | 40,488     |      |  |   | 49,658     | 
|     | Bbls per day            |  |      | 224        |      |  |   | 274        | 
|     | Average price (per Bbl) |  | $    | 26.53      |      |  | $ | 18.33      | 

Gas and oil sales attributable to the Royalty for the six months ended
June 30, 2003 and 2002 were as follows:

|                 |  |      |            |      |  |  |           | 
|---------------- |  | ---- | ---------- | ---- |  |  | --------- | 
|                 |  | 2003 |            | 2002
|                 |  |      |            |     
|Gas sales (Mcf)  |  |      | 12,649,546 |      |  |  | 7,177,930 | 
|Oil sales (Bbls) |  |      | 23,430     |      |  |  | 18,259    | 

During the first six months of 2003, gas and oil prices were higher than
during the first six months of 2002. Since the oil and gas sales attributable
to the Royalty are based on an allocation formula that is dependant 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.

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Calculation of Royalty Income

Royalty income received by the Trust for the three months and six months
ended June 30, 2003 and 2002, respectively, was computed as shown in the
following table:

|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | ------------------ | ---------- | ---------------- |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | Three Months Ended |            | Six Months Ended
|                                                        |  | June 30,           |            | June 30,        
|                                                        |  |                    |            |                 
|                                                        |  | 2003               |            | 2002             |  | 2003 |            | 2002
|                                                        |  |                    |            |                  |  |      |            |     
|Gross proceeds of sales from the
Underlying Properties: |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Gas proceeds                                            |  | $                  | 46,884,002 |                  |  | $    | 24,268,350 |      |  | $ | 87,747,042 |   |  | $ | 49,485,237 |  
|Oil proceeds                                            |  |                    | 680,484    |                  |  |      | 539,877    |      |  |   | 1,074,147  |   |  |   | 910,026    |  
|Other                                                   |  |                    | (1,206,368 | )                |  |      | (2,666,666 | )    |  |   | (1,202,368 | ) |  |   | (2,666,666 | )
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Total                                                   |  |                    | 46,362,118 |                  |  |      | 22,141,561 |      |  |   | 87,618,821 |   |  |   | 47,728,597 |  
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Less production costs:                                  |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Severance tax  Gas                                     |  |                    | 4,640,748  |                  |  |      | 2,251,404  |      |  |   | 8,678,515  |   |  |   | 4,750,541  |  
|Severance tax  Oil                                     |  |                    | 59,305     |                  |  |      | 37,575     |      |  |   | 93,514     |   |  |   | 73,529     |  
|Lease operating expense and property tax                |  |                    | 4,037,841  |                  |  |      | 3,734,486  |      |  |   | 8,095,658  |   |  |   | 7,946,300  |  
|Other                                                   |  |                    | 26,850     |                  |  |      | 5,000      |      |  |   | 41,850     |   |  |   | 15,000     |  
|Capital expenditures                                    |  |                    | 2,862,189  |                  |  |      | 3,367,004  |      |  |   | 9,426,009  |   |  |   | 14,693,156 |  
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Total                                                   |  |                    | 11,626,933 |                  |  |      | 9,395,469  |      |  |   | 26,335,545 |   |  |   | 27,478,526 |  
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Less excess production and interest
from prior year     |  |                    |           |                  |  |      |           |      |  |   |           |   |  |   | 2,270,173  |  
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Net profits                                             |  |                    | 34,735,185 |                  |  |      | 12,746,092 |      |  |   | 61,283,276 |   |  |   | 17,979,898 |  
|Net overriding royalty interest                         |  |                    | 75         | %                |  |      | 75         | %    |  |   | 75         | % |  |   | 75         | %
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  
|Royalty income                                          |  | $                  | 26,051,389 |                  |  | $    | 9,559,569  |      |  | $ | 45,962,457 |   |  | $ | 13,484,924 |  
|                                                        |  |                    |            |                  |  |      |            |      |  |   |            |   |  |   |            |  

Contractual Obligations

Under the Trusts indenture, 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 for time
in excess of 300 hours annually. In no case will the
administrative fee due under items (i) and (ii) above be less than $36,000 per
year (as adjusted annually to reflect the increase (if any) since
January 1, 2003, 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, the rules and regulations of the NYSE and the Sarbanes-Oxley Act of 2002.
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

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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 SEC) of certain rules and regulations
that may be impossible for the Trust to literally satisfy because of its nature
as a pass-through trust. For example, the SEC is required to adopt rules and
regulations pursuant to the Sarbanes-Oxley Act of 2002 that would require a
publicly-traded companys board of directors, audit committee or executive
directors (or similar body) to act with respect to certain corporate governance
matters. The Trust does not have, nor does the Indenture governing the Trust
provide for, a board of directors, an audit committee or any executive
officers. Accordingly, the Trust could not literally comply with such rules
and regulations. It is the Trustees intention to follow the SEC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.

Critical Accounting Policies

In accordance with the SEC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 for a month is the amount
computed and paid by BROG to the Trustee for the Trust.                                                            
| |  |   |  |                                                                                                                                                                      
| |  |  |  | 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 over gross proceeds
must be recovered from future net profits.

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;
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 and presents the revenues and expenditures that are actually
distributed to the Unit Holders.




Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Trust invests in no derivative financial instruments, and has no
foreign operations or long-term debt instruments. The Trust is a passive
entity and other than the Trusts ability to periodically borrow money as
necessary to pay expenses, liabilities and obligations of the Trust that cannot
be paid out of cash held by the Trust, the Trust is prohibited from engaging in
borrowing transactions. The amount of any such borrowings is unlikely to be
material to the Trust. The Trust periodically holds short term investments
acquired with funds held by the Trust pending distribution to Unit Holders and
funds held in reserve for the payment of Trust expenses and liabilities.
Because of the short-term nature of these borrowings and investments and
certain limitations upon the types of such investments which may be held by the
Trust, the Trustee believes that the Trust is not subject to any material
interest rate risk. The Trust does not engage in transactions in foreign
currencies which could expose the Trust or Unit Holders to any foreign currency

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related market risk. The Trust does not market the Trust gas, oil and/or
natural gas liquids. BROG is responsible for such marketing.




Item 4. Controls and Procedures.

The Trust maintains a system of disclosure controls and procedures that is
designed to provide reasonable assurance that information required to be
disclosed in the Trusts filings under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the SECs rules and forms. Disclosure controls and procedures include
controls and procedures designed to ensure that information required to be
disclosed by the Trust is accumulated and communicated by BROG to the Trustee
and its employees who participate in the preparation of the Trusts periodic
reports as appropriate to allow timely decisions regarding required disclosure.
Due to the pass-through nature of the Trust, BROG provides much of the
information disclosed in this Form 10-Q and the other periodic reports filed by
the Trust with the SEC.

The Trustee receives periodic updates from BROG regarding activities
related to the Trust. Accordingly, the Trusts ability to timely report
certain information required to be disclosed in the Trusts periodic reports is
dependent on BROGs timely delivery of such information to the Trust. In order
to help ensure the accuracy and completeness of the information required to be
disclosed in the Trusts periodic reports, the Trust employs independent public
accountants, joint interest auditors, marketing consultants, attorneys and
petroleum engineers. These outside professionals assist the Trustee in
reviewing and compiling this information for inclusion in this Form 10-Q and
the other periodic reports provided by the Trust to the SEC.

The Trustee has evaluated the Trusts disclosure controls and procedures
within the 90 days prior to the filing of this Quarterly Report on Form 10-Q
and has determined that, subject to BROGs delivery of timely and accurate
information to the Trust, such disclosure controls and procedures are
effective. The Trustee has not reviewed the Trusts disclosure controls and
procedures in concert with management, a board of directors or an independent
audit committee. The Trust does not have, nor does the indenture pursuant to
which the Trust was created provide for, officers, a board of directors or an
independent audit committee.

Subsequent to the Trustees evaluation, there were no significant changes
in internal controls or other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

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PART II
OTHER INFORMATION




Item 1. Legal Proceedings.

Settlements

An administrative claim was initiated on March 17, 1997 by the Mineral
Management Service of the United States Department of the Interior (the MMS)
against BROG regarding a gas contract settlement dated March 1, 1990, between
BROG and certain other parties thereto. The claim alleged that additional
royalties were due on production from federal and Indian leases in the State of
New Mexico on properties burdened by the Trust. On December 3, 2001, BROG
settled this claim by paying the Jicarilla Apache Nation the sum of $2,853,974
and the MMS the sum of $1,224,043. MMS also retained certain overpayments by
BROG in the amount of $1,127,623 as part of the settlement. Certain properties
included in this settlement are burdened by the Royalty. BROG previously
offset the entire $2,853,974 Jicarilla component of the settlement against
amounts otherwise distributed in payment of the Royalty, and deducted $901,776
from the April 2003 distribution to the Trust as the Trusts 75% portion of the
remaining $1,224,043 component of the settlement, slightly reduced by agreement
of the parties. BROG has indicated that it does not appear that any of the
$1,127,623 in overpayments retained by the MMS is attributable to the Trust.

In June 2000, the Trust and BROG entered into a partial settlement of
claims relating to a gas imbalance with respect to production from mineral
properties currently operated by BROG. Under the terms of the partial
settlement, BROG paid the Trust $3,490,000 to settle the imbalance insofar as
it relates to some of the wells located on the Underlying Properties. The
remainder of the imbalance is to be addressed through volume adjustments
whereby the Trusts Royalty will be increased by the proceeds from 50% of the
overproduced parties interest, on a monthly basis, until the imbalance is
corrected. The Trustee and its consultants remain in communication with BROG in
order to determine the estimated value of the volume adjustments and the time
during which the remainder of the imbalance will be corrected. BROG indicates
that the volume adjustment commenced in August 2000. The Trusts consultants
continue to monitor those adjustments.

Administrative Proceedings

The following information was provided to the Trust by BROG. Please note
that the proceedings described below apply to the collective interest of BROG
and the Trust. BROG is not able to estimate the amount of any potential loss
to the Trust in each of the outstanding proceedings, or the portion of any such
potential loss that would be allocated to the Royalty.

MMS Proceedings

Blanco Pool. This appeal arises from a MMS Demand Letter dated October 20,
1995, and bears MMS Appeal Docket No. MMS-95-0740. The demand letter
challenges the valuation benchmark utilized by BROG for gas sold by BROG from
the Blanco Pool during the audit period of January 1, 1989 through December
31, 1991. BROG paid royalties on sales to its marketing affiliate based on
gross proceeds received by BROG from its affiliate. The demand letter states
that BROG paid incorrectly under MMS regulations. The MMS methodology in
calculating the amounts demanded does not attempt to trace resale proceeds.
Instead, MMS auditors use published index prices at pipeline interconnect
points in the San Juan Basin as a proxy for actual comparable sales, and net
out certain actual costs to move the gas to those index points. While BROG
had deducted prevailing field transportation rates in computing its monthly
prices in the San Juan Basin, the auditors limited the deduction to the actual
rate paid to El Paso Natural Gas under a

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backhaul agreement. The demand letter directs BROG to pay additional
royalties of $518,304, to recalculate royalties in accordance with the MMS
interpretation of the regulations and to pay the difference between total
royalty due and royalty paid.

Affiliate Proceeds Demand  Conventional Gas. This appeal arises from a
MMS demand letter dated June 9, 1997, and bears MMS Appeal Docket No.
MMS-97-0168. The demand letter is a blanket demand relating to all of BROGs
non-coalbed methane gas production nationwide for the audit period of January
1, 1989 through December 31, 1994. The demand letter is based primarily on
the MMS theory that royalties are to be based on BROGs marketing affiliate
gross proceeds rather than BROGs gross proceeds (e.g. the affiliate resale
proceeds issue). The demand letter directs BROG to recalculate its royalties
on these sales using a netback calculation of the proceeds of the affiliate,
and pay the difference between total royalties due under such calculation and
the royalties actually paid by BROG. This demand letter is in furtherance of
the demand letter described in the prior paragraph.

Coalbed Methane. This appeal arises from a MMS demand letter dated
October 28, 1996, and bears MMS Appeal Docket No. MMS-96-0437. The demand
letter relates to BROGs coalbed methane production from the Northeast Blanco
Unit for the audit period of May 1, 1990 through December 31, 1993, and from
the San Juan 30-6 Unit for the audit period of January 1, 1989 through December
31, 1991. Like the Blanco Pool demand letter, the demand letter does not
attempt to trace resale proceeds. The issues are whether MMS should bear its
share of CO2 extraction costs and, if so, whether the costs should be based on
market rates or actual costs of the system, and whether MMS share of
transportation costs (which MMS does not dispute it must bear) should be based
on market rates or actual costs of the system. BROG is directed to pay
additional royalties of $3,600,584 for underpayment of royalty for gas produced
from the units mentioned above, to recalculate royalties for gas produced from
other federal leases in accordance with MMS interpretation of the regulations
and to pay the difference between total royalty due and royalty paid.

Due to the similarity of the claims in the Blanco Pool, Affiliate Proceeds
Demand and the Coalbed Methane administrative appeals, to the claims in the
suits in the In re Natural Gas Royalties qui tam litigation described below,
settlement discussions between BROG and the federal government in the gas qui
tam litigation will, if successful, include the settlement of each of the MMS
Proceedings.

Jicarilla Indian Tribe Proceedings

This appeal arises from an MMS Order to Perform dated June 10, 1998. The
Order to Perform states that, in valuing production for royalty purposes, BROG
must, among other things, perform a major portion analysis (i.e., calculate
value on the highest price paid or offered for a major portion of the gas
produced from the field where the leased lands are situated). BROG believes
that producers do not have access to prices received by other producers in a
field, so a major portion calculation must be done by MMS.

Litigation

In re Natural Gas Royalties Qui Tam Litigation

BROG and other oil and gas companies have been named as defendants in
various lawsuits alleging violations of the civil False Claims Act. These
lawsuits were consolidated during 1999 and 2000 for pre-trial proceedings by
the United States Judicial Panel on Multidistrict Litigation in the matter of
In re Natural Gas Royalties Qui Tam Litigation, MDL-1293, United States
District Court for the District of Wyoming (MDL-1293). The plaintiffs contend
that defendants underpaid royalties on natural gas and natural gas liquids
produced on federal and Indian lands through the use of below-market prices,
improper deductions, improper measurement techniques and transactions with
affiliated companies. Plaintiffs allege that the royalties paid by defendants
were lower than the royalties required to be paid under federal regulations and
that the forms

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filed by defendants with the MMS reporting these royalty payments were
false, thereby violating the civil False Claims Act. The United States has
intervened in certain of the MDL-1293 cases as to some of the defendants,
including BROG.

If successful, this litigation could result in a decrease in royalty
income received by the Trust. The plaintiffs and the intervenor have not
specified in their pleadings the amount of damages they seek from BROG. The
Trust has been informed that BROG has established a substantial reserve for
potential liability arising from this litigation. However, at this time, no
estimate can be made as to the amount of any potential loss in this litigation,
or the portion, if any, of such potential loss that would be allocated to the
Trusts interest. Any proposed allocation of loss to the Trust will be
reviewed by the Trusts consultants.

Quinque Litigation

In September 1999, BROG was served with a class action petition styled
Quinque Operating Company on behalf of Gas Producers v. Gas Pipelines, et al.,
Case No. 99 C 30, in the District Court of Stevens County, Kansas, naming
certain of its current or former affiliates as defendants, along with hundreds
of other gas production and gas pipeline companies. On February 21, 2002, the
District Court granted leave for plaintiffs to file a third amended class
action petition substituting in new class representative plaintiffs thereby
changing the style of the case to Will Price, Stixon Petroleum, Inc. and Thomas
F. Boles on behalf of Gas Producers v. Gas Pipelines, et al., Case No. 99 C 30,
in the District Court of Stevens County, Kansas. The petition alleges that the
defendants engaged in the mismeasurement of volumes and wrongful analysis of
heating content of natural gas and engaged in other activities which resulted
in the underpayment of revenue owed to working interest owners, royalty
interest owners, overriding royalty interest owners and state taxing
authorities. If successful, this litigation could result in a decrease in
royalty income received by the Trust. At this time, no estimate can be made as
to the amount of any loss in this litigation, or the portion of any such
potential loss that would be allocated to the Trust. Any proposed allocation
of loss to the Trust will be reviewed by the Trusts consultants.




Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | 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 of the Trusts Current Report
on Form 8-K filed with the SEC 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 SEC for the fiscal year ended December 31, 1980, 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 SEC for the
quarter ended September 30, 2002, is incorporated herein by
reference.                                                                                      

17



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##### Table of Contents



| |  |    |  |                                                                                                                                                                                         
| |  | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 31 |  | Certification required by Rule 13a-14(a), dated
August 13, 2003, by Lee Ann Anderson, Vice President and Trust
Officer of TexasBank, the Trustee for the Trust.**                       
| |  |    |  |                                                                                                                                                                                         
| |  | 32 |  | Certification required by Rule 13a-14(b), dated
August 13, 2003, by Lee Ann Anderson, Vice President and Trust
Officer of TexasBank, on behalf of TexasBank, the Trustee of
the Trust.**



---

|** |  | Filed herewith.
|-- |  | ---------------



| | (b) |  | Reports on Form 8-K.                                                                                                                                                                                                          
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Trust filed a report on Form 8-K on April 24, 2003. In the
report, the Trust reported, under Items 9 and 12, that on April 17,
2003, it had issued a press release announcing a monthly cash
distribution to Unit Holders.
|
| |     |  | The Trust filed a report on Form 8-K on June 26, 2003. In the
report, the Trust reported, under Items 9 and 12, that on June 20,
2003, it had issued a press release announcing a monthly cash
distribution to Unit Holders.  

18



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

| |                                                            |                                                                            |  | 
| | ---------------------------------------------------------- | -------------------------------------------------------------------------- |  | 
| | TEXASBANK, AS TRUSTEE FOR
THE SAN JUAN BASIN ROYALTY TRUST
|
| | By                                                         | /s/ Lee Ann AndersonLee Ann Anderson
     Vice President and Trust Officer

Date: August 13, 2003

(The Trust has no directors or executive officers.)





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##### Table of Contents






INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|Number  |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                              
|       
|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 of
the Trusts Current Report on Form 8-K filed
with the SEC 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 SEC for the fiscal year ended December
31, 1980, 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 SEC for the quarter
ended September 30, 2002, is incorporated herein
by reference.                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|31      |  | Certification required by Rule 13a-14(a), dated
August 13, 2003, by Lee Ann Anderson, Vice
President and Trust Officer of TexasBank, the
Trustee for the Trust.**                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|32      |  | Certification required by Rule 13a-14(b), dated
August 13, 2003, by Lee Ann Anderson, Vice
President and Trust Officer of TexasBank, on
behalf of TexasBank, the Trustee of the Trust.**                                                                                                                                                                                                             



---

|** |  | Filed herewith
|-- |  | --------------