June 17, 2002; Historic Change of SJT Trustee

A proposed change of trustee of the San Juan Basin Royalty Trust is an important event subject to the approval of unitholders.  Bank One headquartered in Chicago apparently has no further interest in the specialized oil and gas trust business handled in the Fort Worth office acquired in a wave of consolidation in the banking industry.  A new trustee may be named in a few weeks and must be approved by unitholders, perhaps in mid-September.  The change of trustee is potentially a high-risk event and unitholders need to be vigilant.  Otherwise our buy recommendation of the units of the trust appears bolstered by a renewed upturn in natural gas price.

Thanks to the Trustee's Representatives for a Job Well Done

The trustee performs a vital role in assuring that the operator of the trust’s properties and the processors, transporters and marketers of the trust’s gas perform their services competently and are compensated fairly, but not excessively.  The successor trustee is likely to be another bank with trust and oil and gas experience.  There also appears to be a strong possibility that the individuals who have represented Bank One and its predecessors in guarding the trust’s interests will be performing the same role with the successor bank.  We can say from long association and occasional close involvement that Ms. Lee Ann Anderson and her associate, Ms. Kay Wilke, are honest, capable and have been of invaluable help to the trust.  We would like to see them continue to work for the benefit of unitholders and, in any event, thank them for their loyal and worthy efforts for most of the years since the trust was formed in 1980. 

Trustee's Role Will Continue To Be Critical

As infrastructure in the San Juan Basin moves into the hands of high greed partnerships

sponsored by Duke Energy and El Paso the trustee must be vigilant to protect the producer interests of the trust.  The trust's coal bed methane production is processed in the Val Verde plant being sold by Burlington Resources, the operator of the trust's properties, to TEPPCO Partners, L. P.  Some of the trust's gas is also processed in the Chaco plant transferred by El Paso to El Paso Energy Partners.  El Paso further proposes to transfer gathering lines that handle some of the trust's gas to El Paso Energy Partners.  The new owners have general partners that extract an excessive share of the cash paid by producers for services.  Fortunately the trust has been aided in the past by capable advisors who are at least as knowledgeable as those who operate, process, gather, transport and market the trust's gas.