Our coal and natural resource management segment primarily involves the management and leasing of coal properties and the subsequent collection of royalties. We do not operate any mines. We enter into long-term leases with experienced, third-party mine operators, providing them the right to mine our coal reserves in exchange for royalty payments. We also earn revenues from other land management activities, such as selling standing timber and real estate rentals, leasing fee-based coal-related infrastructure facilities to certain lessees and end-user industrial plants, collecting oil and gas royalties and from coal transportation, or wheelage, fees.

As of December 31, 2007, we owned or controlled approximately 818 million tons of proven and probable coal reserves in Central and Northern Appalachia, the San Juan Basin and the Illinois Basin. As of December 31, 2007, approximately 89 percent of our proven and probable coal reserves were steam coal used primarily by electric generation utilities, and the remaining 11 percent were metallurgical coal used primarily by steel manufacturers. As of December 31, 2007, approximately 26 percent of our proven and probable coal reserves met compliance standards for the Clean Air Act and approximately 39 percent of our proven and probable coal reserves were low sulfur coal.

For the three months ended March 31, 2008, our lessees produced approximately 7.6 million tons of coal from our properties and paid us coal royalty revenues of approximately $24.0 million, for an average royalty per ton of $3.14. In 2007, our lessees produced approximately 32.5 million tons of coal from our properties and paid us coal royalty revenues of approximately $94.1 million, for an average royalty per ton of $2.89. Approximately 86 percent of our coal royalty revenues for the three months ended March 31, 2008 and 81 percent of our coal royalty revenues in 2007 were derived from coal mined on our properties under leases containing royalty rates based on the higher of a fixed base price or a percentage of the gross sales price. The balance of our coal royalty revenues for the respective periods was derived from coal mined on our properties under leases containing fixed royalty rates that escalate annually.

Our natural gas midstream segment provides natural gas processing, gathering and other related gas services. In 2007, our natural gas midstream revenues were approximately $433.2 million. We own and operate natural gas midstream assets located in Oklahoma and the panhandle of Texas. These assets include approximately 3,716 miles of natural gas gathering pipelines and four natural gas processing facilities having 220 MMcfd of total capacity. We also own a natural gas processing facility in East Texas with 80 MMcfd of total capacity that we expect will commence operations in the second quarter of 2008. Our natural gas midstream business derives revenues primarily from gas processing contracts with natural gas producers and from fees charged for gathering natural gas volumes and providing other related services. In 2007, system throughput volumes at our gas processing plants and gathering systems, including gathering-only volumes, were 67.8 Bcf or approximately 186 MMcfd. We also own a natural gas marketing business, which aggregates third-party volumes and sells those volumes into intrastate pipeline systems and at market hubs accessed by various interstate pipelines.

agreements that hedged approximately 73% of our production under percentage-of-proceeds and keep-whole arrangements. For the remaining nine months of 2008, every $1.00 increase/decrease in natural gas prices from our $7.50/MMBtu budgeted 2008 benchmark price would decrease/increase operating income by approximately $4.0 million and every $5.00 increase/decrease in oil prices from our $80.00/bbl budgeted 2008 benchmark price would increase/decrease operating income by approximately $1.5 million (inclusive of hedges).

In April 2008, we acquired a 25 percent member interest in a joint venture which operates a major gas gathering system in the Powder River Basin in northeast Wyoming. In addition, in June 2008 we announced the acquisition of gathering and transportation assets in the Fort Worth Basin of north Texas.