will replenish the reserve from future quarterly distributions, if any. The Trustee anticipates that it will keep this cash reserve program in place until termination of the Trust.
Amounts set aside for the cash reserve are invested by the Trustee in U.S. government or agency securities secured by the full faith and credit of the United States. Interest income received by the Trust from the investment of the reserve fund is added to the distributions received from BP Alaska and paid to the holders of Units with each quarterly distribution.
As discussed under "CERTAIN TAX CONSIDERATIONS" in Part I, Item 1 of the 2008 Annual Report, amounts received by the Trust as quarterly distributions are income to the holders of the Units, (as are any earnings on investment of the cash reserve) and must be reported by the holders of the Units, even if such amounts are used by the Trustee to repay borrowings or replenish the cash reserve and are not received by the holders of the Units. Results of Operations
Relatively modest changes in oil prices significantly affect the Trust's revenues and results of operations. Crude oil prices are subject to significant changes in response to fluctuations in the domestic and world supply and demand and other market conditions as well as the world political situation as it affects the members of OPEC and other producing countries. The effect of changing economic conditions on the demand for and supply of energy throughout the world and future prices of oil cannot be accurately projected.
Under the terms of the Conveyance of the Royalty Interest to the Trust, the Per Barrel Royalty for any day is the WTI Price for the day less the sum of
(i) Chargeable Costs multiplied by the Cost Adjustment Factor and
(ii) Production Taxes. The narrative under the captions "THE TRUST - Trust Property" and "THE ROYALTY INTEREST" in the 2008 Annual Report explains the meanings of the terms "Conveyance," "Royalty Interest," "Per Barrel Royalty," "WTI Price, "Chargeable Costs" and "Cost Adjustment Factor" and should be read in conjunction with this report. Royalty revenues are generally received on the fifteenth day of the month following the end of the calendar quarter in which the related Royalty Production occurred (the "Quarterly Record Date"). The Trustee, to the extent possible, pays all accrued expenses of the Trust on each Quarterly Record Date from the royalty payment received. Revenues and Trust expenses presented in the statement of cash earnings and distributions are recorded on a modified cash basis and, as a result, royalty revenues and distributions shown in such statements for the three and six-month periods ended June 30, 2009 and 2008, respectively, are attributable to BP Alaska's operations during the three and six-month periods ended March 31, 2009 and 2008, respectively. The following table summarizes the factors which determined the Per Barrel Royalties used to calculate the payments received by the Trust in January and April 2009 and 2008 (see Note 1 of Notes to Financial Statements (Unaudited) in Part I, Item 1). The information in the table has been furnished by BP Alaska.

                                                                           Data for Quarter
                       Is Based                                         Cost          Adjusted         Average         Average
                      on Data for      Average       Chargeable      Adjustment      Chargeable      Production      Per Barrel
Royalty Payment in   Quarter Ended    WTI Price         Costs          Factor           Costs           Taxes          Royalty

Apr. 2009            03/31/2009       $   43.20      $    13.25           1.634       $   21.65      $     5.43      $    16.13
Jan. 2009            12/31/2008       $   58.03      $    13.00           1.636       $   21.26      $    11.42      $    25.35

Apr. 2008            03/31/2008       $   97.78      $    13.00           1.630       $   21.19      $    33.58      $    43.01
Jan. 2008            12/31/2007       $   90.93      $    12.75           1.618       $   20.63      $    22.29      $    48.01

"Royalty Production" for each day in a calendar quarter is 16.4246% of the first 90,000 barrels of the actual average daily net production of oil and condensate for the quarter from the BP Working Interests. So long as BP Alaska's average daily net production from the BP Working Interests exceeds 90,000 barrels, the principal factors affecting the Trust's revenues and distributions to Unit holders are changes in WTI Prices, scheduled annual increases in Chargeable Costs, changes in the Consumer Price Index and changes in Production Taxes. Average daily net production of oil and condensate from the BP Working Interests has been below 90,000 barrels per day during certain quarterly periods since 2006, due to a BP Alaska program of field wide infrastructure renewal, pipeline replacement and well mechanical improvements.
BP Alaska estimates Royalty Production from the BP Working Interests for purposes of calculating quarterly royalty payments to the Trust because complete actual field production data for the preceding calendar quarter generally is not available by the Quarterly Record Date. To the extent that average net production from the BP Working Interests is below 90,000 barrels per day in any quarter, recalculation by BP Alaska of actual Royalty Production data may result in revisions of prior Royalty Production estimates. Revisions by BP Alaska of its Royalty Production calculations cause BP Alaska to adjust its quarterly royalty payments to the Trust to compensate for overpayments or underpayments of royalties with respect to prior quarters. Such adjustments, if material, may adversely affect certain Unit holders who buy or sell Units between the Quarterly Record Dates for the Quarterly Distributions affected.
The Quarterly Distributions received by the Trust from BP Alaska in January 2009 and 2008, were adjusted by BP Alaska to compensate for underpayment of royalties due to the Trust with respect to the quarters ended December 31, 2008 and 2007, respectively. See Note 7 of Notes to Financial Statements (Unaudited) in Item 1. Because the statements of cash earnings and distributions of the Trust are prepared on a modified cash basis, royalty revenues for the three-month periods ended March 31, 2009 and 2008 reflect the amounts of the adjustments with respect to the earlier fiscal periods.
If certain conditions are satisfied, the Trust will receive a lump sum payment, consisting of $29,469,081 plus accrued interest, from an escrow account established in connection with a settlement agreement between BP Alaska and the Trustee. For additional information, see Note 6 of Notes to Financial Statements (Unaudited) in Item 1, the Trust's Current Report on Form 8-K dated May 8, 2009 and the Settlement Agreement dated May 8, 2009, which is filed as Exhibit 10.1 to this report. The Trustee is unable to predict whether, or when, the conditions to the

distribution to the Trust of the escrow funds will be satisfied or waived and thus no representation is made that the escrow funds will be received and distributed to Unit holders. If the escrow funds are received by the Trust, the Trustee intends to add such funds to the next scheduled quarterly royalty distribution received from BP Alaska and distribute the total amount to holders of Units on the Quarterly Record Date for such distribution. Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
As explained above, Trust royalty revenues received during the second quarter of the fiscal year are based on Royalty Production during the first quarter of that fiscal year. WTI Prices during the first quarter of 2009 recovered from the lows reached at the end of December 2008, but did not regain the levels that prevailed during the first quarter of 2008. As a consequence, royalty revenues received by the Trust in the quarter ended June 30, 2009 decreased approximately 63% from the corresponding quarter of 2008, reflecting a 56% period-to-period decrease in the Average WTI Price from $97.78 per barrel during the quarter ended March 31, 2008 to $43.20 per barrel during the quarter ended March 31, 2009, and the average Per Barrel Royalty decreased by 62% across the same periods. Increases in inflation adjusted Chargeable Costs in the first quarter of 2009 from those in the first quarter of 2008 failed to offset an 84% period-to-period decrease in average Production Taxes, which fell from $33.58 per barrel in the quarter ended March 31, 2008 to $5.43 per barrel in the quarter ended March 31, 2009. Trust administrative expenses decreased 70% in the quarter ended June 30, 2009 from the corresponding period in 2008, primarily due to reduced legal activity, and a consequent decline in legal fees and expenses, related to issues arising from the August 2006 shutdown of the Prudhoe Bay field.
Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Trust royalty revenues decreased 54% in the six months ended June 30, 2009 from the corresponding period of 2008, reflecting the cumulative effect of a 46% decrease in the Average WTI Price during the six-month period ended March 31, 2009 from the six-month period ended March 31, 2008. The average Per Barrel Royalty payable with respect to the six months ended March 31, 2009 decreased 54% across the same periods. Average Production Taxes chargeable with respect to the six-month period ended March 31, 2009 decreased 70% from the average Production Taxes chargeable with respect to the six months ended March 31, 2008, since the progressivity feature of the Alaska oil and gas production taxes resulted in lower marginal tax rates during the more recent period. Trust administrative expenses were 47% lower during the six months ended June 30, 2009 than in the corresponding period in 2008, primarily due to reduced legal activity, and a consequent decline in legal fees and expenses, related to issues arising from the August 2006 shutdown of the Prudhoe Bay field. Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Trust is a passive entity and except for the Trust's ability to borrow money as necessary to pay liabilities of the Trust that cannot be paid out of cash on hand, the Trust is prohibited from engaging in borrowing transactions. 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 investments and limitations on the types of investments which may be held by the Trust, 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 related market risk or invest in derivative financial instruments. It has no foreign operations and holds no long-term debt instruments. Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Trustee has disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. These controls and procedures include but are not limited to controls and procedures designed to ensure that information required to be disclosed by the Trust in the reports that it files or submits under the Exchange Act is accumulated and communicated to the responsible trust officers of the Trustee to allow timely decisions regarding required disclosure.
Under the terms of the Trust Agreement and the Conveyance, BP Alaska has significant disclosure and reporting obligations to the Trust. BP Alaska is required to provide the Trust such information concerning the Royalty Interest as the Trustee may need and to which BP Alaska has access to permit the Trust to comply with any reporting or disclosure obligations of the Trust pursuant to applicable law and the requirements of any stock exchange on which the Units are listed. These reporting obligations include furnishing the Trust a report by February 28 of each year containing all information of a nature, of a standard and in a form consistent with the requirements of the SEC respecting the inclusion of reserve and reserve valuation information in filings under the Exchange Act and with applicable accounting rules. The report is required to set forth, among other things, BP Alaska's estimates of future net cash flows from proved reserves attributable to the Royalty Interest, the discounted present value of such proved reserves, the assumptions utilized in arriving at the estimates contained in the report, and the estimate of the quantities of proved reserves (including reductions of proved reserves as a result of modification of BP Alaska's estimates of proved reserves from prior years) added during the preceding year to the total proved reserves allocated to the BP Working Interests as of December 31, 1987.
In addition, the Conveyance gives the Trust and its independent accountants certain rights to inspect the books and records of BP Alaska and discuss the affairs, finances and accounts of BP Alaska relating to the BP Working Interests with representatives of BP Alaska; it also requires BP Alaska to provide the Trust with such other information as the Trustee may reasonably request from time to time and to which BP Alaska has access.
The Trustee's disclosure controls and procedures include ensuring that the Trust receives the information and reports that BP Alaska is required to furnish to the Trust on a timely basis, that the appropriate responsible personnel of the Trustee examine such information and reports, and that information requested from and provided by BP Alaska is included in the reports that the Trust files or submits under the Exchange Act.

As of the end of the period covered by this report, the trust officers of the Trustee responsible for the administration of the Trust conducted an evaluation of the Trust's disclosure controls and procedures. Their evaluation considered, among other things, that the Trust Agreement and the Conveyance impose enforceable legal obligations on BP Alaska, and that BP Alaska has provided the information required by those agreements and other information requested by the Trustee from time to time on a timely basis. The officers concluded that the Trust's disclosure controls and procedures are effective. Internal Control Over Financial Reporting There has not been any change in the Trust's internal control over financial reporting identified in connection with the evaluation required by paragraph
(d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the Trust's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting.
Item 4T. Controls and Procedures.
Not applicable.