Summary of State Trust Land Revenue

Summary of State Trust Land Revenue Data as of June 30, 2010 Narrative Summary: Attached are summary schedules of revenues earned on state trust lands for the period ending June 30, 2010. These schedules reflect various aspects of revenue activity for the permanent land and land income funds, including an analysis of trust land revenue over a period of five (5) years. The following is a listing of the schedules provided: Schedule 1 Schedule 2 Schedule 3 Schedule 4 Schedule 5 Five Year Trust Land Revenue Summary Trust Land Revenue Comparisons Fiscal Years 2010 and 2009 Trust Land Revenue Distributions Mineral Royalty Revenue Comparisons, Fiscal Years 2010 and 2009 Other Trust Land Revenue Comparisons, Fiscal Years 2010 and 2009 Schedule 1 Trust Land Revenue Summary, Five Year Comparison Schedule 1 compares actual revenues received for fiscal years 2006 through 2010. Analysis of a five year revenue trend, total trust land revenues recorded from fiscal year 2006 through fiscal year 2010, shows an average net increase of 11.03%. However, special notation should be made to an event that occurred in the last quarter of this year which significantly influenced revenue recorded for FY2010. The May 12, 2010 Competitive Oil and Gas Lease Auction Sale, conducted by the Mineral Leasing and Royalty Compliance Division, brought a record $45 million to State coffers. Average auction sales of this type, conducted on a semi-annual basis, produce revenues between $2 million to $6 million per sale. Revenue received from the May 12 th sale is the highest in Wyoming State Land history for such sales, eclipsing by far any sale for the last 28 years. The continuing production speculation of a major Niobrara Chalk formation in the Denver-Julesburg Basin of Wyoming and Colorado, which was fueled by recent prolific discoveries in Converse County, Wyoming and Weld County, Colorado, made this a record day for the State. The auction broke all previous historical sales records in Wyoming for both State and Federal (BLM) single day oil and gas lease auctions. The preponderance of the income was distributed to the Common School Permanent Land Income Fund. The State s General Fund received $14.5 million of this revenue. Actual revenues adjusted for the May 12 th sale increased approximately.05% from revenues generated in the prior fiscal period. Fluctuations in the market price and production of Wyoming oil and gas greatly influenced revenues flowing to the state during the fiscal years presented. New drilling technology which will allow for drill string bends and horizontal legs of as much as one mile, along with new completion techniques in the horizontal legs, has brought this prospective area back to a high level of attention. Page 1 of 4

If successfully developed, the expectation for increased revenue from royalty income based on recent activity will add tens-of millions to Wyoming s coffers. In addition to economic changes in price and production of the State s mineral interests, revenue generated from surface activities shows a decrease of 8.55%. The major component of this projected decrease is attributable to the sale of state land. Revenue generated from these sales has been significant over the past fiscal periods, ranging from $3.7 million in fiscal year 2007 to $1.8 million and $1.5 million for fiscal years 2008 and 2009 respectively. Surface lease rentals and mineral royalties continue to be the major contributors to the state s trust land income for the five year period presented, averaging 99.95% of total revenues; 4.75% and 95.2%, respectively. Mineral Royalty Revenue Comparison, Five Year Trend: Revenue from Mineral Royalties totaled $178.5 million in fiscal year 2006, continuing to reflect the higher per barrel price for oil and the elevated natural gas prices the state experienced during fiscal year 2005. Oil and coal prices declined at the outset of FY 2007; however production of oil condensate from southwestern gas production continued to increase. FY 2007 revenues were lower than FY 2006 due to the timing of receipt of royalty payments, market-driven oil and gas lease sale bonus revenue fluctuations, and oil prices which trailed the NYMEX due to location differentials in a period which swung greater than $10/barrel downward from August, 2006 through early February, 2007. Fiscal year end pricing regained an upward trend, adding back about $12/barrel. During FY 2007, the natural gas price basis differential based on the NYMEX at Henry Hub, Louisiana, continued to plague gas pricing in Wyoming, reducing the Wyoming index in amounts from $3 - $5/mmbtu below Henry Hub price over the period August, 2006 through June 30, 2007. Oil and gas and coal prices remained strong throughout FY 08. Although per bbl oil prices and per mmbtu gas prices lagged behind the national postings, these prices increased significantly over the prior fiscal year. FY 08 coal prices reached $20 per ton. Oil and gas prices for the preponderance of FY09 were down significantly from the prior FY and remain as such through the beginning of FY10. Income decreases from state oil and gas leases were blunted in FY09 due to consistent gains in production volumes on State lands, accounting period timing, and audit receipts. The latter part of FY09 and into the first Quarter of FY10 those buffering factors have evaporated and the significantly lower prices posted for these commodities has come to bear. State land well shut-ins for economic conditions sky-rocketed in the first quarter of 2010, generally on the gas side; however, marginal oil wells are also shutting in as costs of power, supplies, etc., have not decreased with the precipitous slide in commodity pricing. Third quarter to date statistics show an increase in active well operations resulting in a projected increase in royalty revenue of $15 million for the fiscal year compared to first quarter projections. Positively, oil prices have remained above the $70/bbl mark for several weeks and gas has returned to a value exceeding $4/mmbtu over the past two months which bodes well even though Wyoming production continues to lag the national price benchmarks. Coal prices continued to fall during FY2010 for the same economic reasons and for environmental concerns and uncertainty. Uranium prices are still significantly higher than in any time in past history, but production is minimal in the state and from State lands; again economics and capital outlays are holding production to almost nothing. In fact, prices for all commodities excepting uranium are down, some more significantly than others. Overall values and volumes are generally down for those commodities being mined, coal, trona to soda ash and bentonite. Based on recent activities, the expectation for the State is for increased sharing in royalties from what may be developed over the next two years in several Wyoming counties that have not seen much attention in the oil and gas arena for some time. Major operators in the oil and gas business as well as new names in the Rockies have purchased leases on State minerals in Goshen, Platte, Converse and Laramie Counties. Page 2 of 4

Other Trust Land Revenue Comparison, Five Year Trend: Trend analysis of other trust land revenue shows little change in period revenues for fiscal years 2007, 2008 and 2009. Revenues for these fiscal years were significantly influenced by increases in surface damage fee collections, which were not seen in fiscal year 2006. Revenue from the sale of state lands, recorded on the installment method, is another factor that contributes to the fluctuation of surface revenues. At June 30, 2010, (fiscal year 2010), outstanding land sale contracts totaled $239,266. Contract sale dates range from 1976 to 2007, with thirty year (30) loan amortization schedules and interest rates from 5.5% to 8% on individual contracts. Fiscal year 2007 land sale activities produced revenue totaling $3.7 million. Included in this amount are five (5) cash state grazing lease purchases and annual installment principal payments, and two installment sale contract payoffs. Trust land sales revenue for fiscal years 2008 and 2009 included nine (9) cash sales and three (3) installment sale contract payoffs in the amount of $2,810,028. Fiscal year 2010 revenue decreased substantially from prior years showing $180,054 for two (2) cash land sales and two (2) installment sale contract payoffs. Annual installment principal payments make up the balance of revenue reported in this category. Within any fiscal period, this revenue may include additional cash sales for lands which would influence the comparative analysis between years. These sales are typically sale of state grazing lease lands which are surrounded by privately held land. Revenue from CBM activity (coal bed methane) in the form of surface impact payments, easements and temporary use permits, as well as increased grazing lease fees provided increased revenues for fiscal years 2006 through 2007, with slight decreases in fiscal years 2008 and 2009. Grazing lease income decreased approximately 5% during fiscal year 2010 due to a reduction in AUM fees. Timber Sales, Five Year Trend: Revenues generated from the sale of timber are influenced by a number of factors, the greatest being the lumber market. Timber sales continue to be affected by the drought conditions and related fire activities, as well as a continuing decline of the forest products industry. FY 2010 revenue of $125,376 shows a 55% decrease compared to the five (5) year average sales revenue of $282,630. Other Revenues: Other revenues include miscellaneous fee income, publication sales and current and prior year recoveries, i.e. timing of federal program reimbursements and forfeitures of trust land deposits, which comprise less than.01% of total trust land revenue. Schedule 2 Trust Land Revenue Comparison by Category Schedule 2 compares trust land revenues for the fiscal years 2010 and 2009. Revenues are presented by category and shown as a percentage of total revenue collected for the period. Royalties from mineral leasing and production comprise the majority of this revenue, averaging 94.87%. Surface leasing, surface impact payments and easements follow with 5.07 % and all other revenues, including timber sales, total less than 1%. Notation has been made on the schedule relative to material changes in revenue collections for each fiscal period. Schedule 3 Schedule 3 presents revenue distributions to the permanent land funds, land income funds and the general fund, as designated by W.S. 9-4-310. Additional presentation is made showing distribution of revenue to the individual funds within these fund classes. Again, notation has been made on the schedule relative to individual revenue sources which provide income to these funds. Schedule 4 Page 3 of 4

Mineral Royalty Revenue by Source Schedule 4 details subsurface revenues by source and as a percentage of total revenue collected by the division. Comparisons are made between fiscal years 2010 and 2009. Additional notation is made on the schedule to present trend information and/or material differences in collections between years. Other Trust Land Revenue by Source Schedule 5 Similar to Schedule 4, Schedule 5 is a presentation of trust land revenue collected by the surface division. Schedule 5 details revenues by source and as a percentage of total collections for fiscal years 2010 and 2009. Notation is again made to present trend information and/or material differences in collections between years. Page 4 of 4

Schedule 1: Five Year Trust Land Revenue Summary Five Year Trust Land Revenue Summary,As of June 30, 2010 $250,000,000 $233,467,253 $208,638,288 $200,000,000 $197,931,129 $179,410,517 $188,413,016 $150,000,000 $100,000,000 $50,000,000 ACTUAL FY10 ACTUAL FY09 ACTUAL FY08 ACTUAL FY07 ACTUAL FY06 Fiscal Year Five Year Trust Land Revenue Summary by Category, as of June 30,2010 $250,000,000 $222,259,026 $200,000,000 $185,728,544 $194,090,016 $165,271,608 $178,505,879 $150,000,000 $100,000,000 $50,000,000 $1,167 $125,378 $11,081,682 $1,754 $171,965 $12,028,866 $1,049,338 $310,665 $13,188,269 $13,906,539 $766 $231,604 $9,481,548 $9,302 $416,287 $- ACTUAL FY10 ACTUAL FY09 ACTUAL FY08 ACTUAL FY07 ACTUAL FY06 MINERAL ROYALTY OTHER TRUST LAND REVENUE TIMBER MISCELLANEOUS

Schedule 2: Trust Land Revenue Comparison Fiscal Year 2010 $233,467,253 Trust Land Revenue, MINERAL ROYALTY $222,259,026.36 95.20% MISCELLANEOUS $1,166.75 0.00% TIMBER $125,377.75 0.05% OTHER TRUST LAND REVENUE $11,081,681.73 4.75% Fiscal Year 2009 $197,931,129 Trust Land Revenue MINERAL ROYALTY $185,728,543.99 93.83% MISCELLANEOUS $1,754.02 0.00% TIMBER $171,965.48 0.09% OTHER TRUST LAND REVENUE $12,028,865.89 6.08%

Schedule 3: Trust Land Revenue Distributions Fiscal Year 2010 $233,467,253 Distribution to Funds, INCOME FUNDS $39,205,466.80 16.79% PERMANENT FUNDS $168,166,434.09 72.03% SCHOOL CAP CON $8,000,000.00 3.43% GENERAL FUND $18,095,351.70 7.75% Fiscal Year 2010 $168,166,434 Distribution to Permanent Funds, COMMON SCHOOL $157,437,106.91 93.62% ALL OTHER $9,239,734.87 5.49% UNIVERSITY $220,914.45 0.13% PENITENTIARY $770,629.90 0.46% STATE HOSPITAL $498,047.96 0.30% Note: Permanent lands funds receive income from sale of public lands, mineral royalties and any money designated by the Wyoming constitution or statute (any depletable land resource). Permanent funds remain in perpetuity. Fiscal Year 2010 $39,205,467 Trust Land Revenue Distributions to Permanent Income Funds, COMMON SCHOOL $37,108,469.65 94.65% MINERS HOSPITAL $771,573.58 1.97% STATE HOME BLIND $1,215.93 0.00% OMNIBUS $843,226.23 2.15% AG COLLEGE $344,573.03 0.88% UNIV OF WY $136,408.38 0.35% Note: Permanent land income funds receive income from rental and lease of granted lands, from the investment of the corpus of the corresponding permanent land account and from the investment of the funds in the permanent land income funds themselves. Income funds may be expended for the establishment, maintenance and support of institutions to which they are tied. Ag College, University and Common School income accounts can only be spent for those specific institutions. Money in Common School account is distributed to school districts by a statutory formula.

Schedule 4: Mineral Royalty Revenue Fiscal Year 2010 $222,259,026 Mineral Royalty Revenue, SODIUM & TRONA $8,979,264.66 4.04% OIL & GAS $196,410,301.59 88.37% ALL MINERAL LEASES $3,778,403.45 1.70% COAL $11,513,017.57 5.18% BENTONITE SAND & GRAVEL $400,066.25 $977,939.72 OTHER (INCLUDES 0.18% 0.44% URANIUM) $200,033.12 0.09% Fiscal Year 2009 $185,728,544 Mineral Royalty Revenue SODIUM & TRONA $12,302,749.86 6.62% OIL & GAS $163,642,872.35 88.11% ALL MINERAL LEASES $2,386,727.50 1.29% SAND & GRAVEL $1,042,440.25 0.56% OTHER (INCLUDES URANIUM) $94,676.44 0.05% BENTONITE $496,501.80 0.27% COAL $5,762,575.79 3.10%

Schedule 5: Other Trust Land Revenue Fiscal Year 2010 $11,081,682 Other Trust Land Revenue, FEES $75,511.33 0.68% TRUST LAND LEASES $6,804,722.25 61.41% RIGHT OF WAY EASEMENTS $1,026,881.87 9.27% LAND SALES $293,647.84 2.65% SURFACE DAMAGE $2,011,316.31 18.15% TEMPORARY LEASES/PERMITS $869,602.13 7.85% Fiscal Year 2009 $12,028,866 Other Trust Land Revenue TRUST LAND LEASES $6,415,515.76 53.33% FEES $52,918.75 0.44% RIGHT OF WAY EASEMENTS $1,012,110.28 8.41% LAND SALES $2,117,836.55 17.61% SURFACE DAMAGE $1,671,115.74 13.89% TEMPORARY LEASES/PERMITS $759,368.81 6.31%.