FARMOUT AND DEVELOPMENT AGREEMENT

MADE AS OF AUGUST 1, 2005

BETWEEN:

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ROCKY MOUNTAIN GAS, INC., a Wyoming corporation (hereinafter called "RMG")

– and –

PRB ENERGY, INC., a Colorado corporation (hereinafter called "Operator")

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WHEREAS RMG and Operator have entered into a Letter of Intent dated July 7, 2005
to facilitate the development of coal bed methane properties in the States of
Montana and Wyoming.

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the following
meanings, unless the context clearly indicates otherwise:

"AMI" means the area of mutual interest, consisting of the States of Montana and
Wyoming, as described in Article IX.

"Business Plan" means the first business plan and budget (which shall be for not
less than $8,750,000 of the Commitment) for the Venture's proposed expenditure
from August 1, 2005 to August 31, 2006, and the second business plan and budget
(to be submitted by July 31, 2006) for the remaining $13,050,000 of the
Commitment to be spent or committed to be spent from September 1, 2006 to
August 31, 2007.  The Business Plan shall set out the Venture's projects, the
drilling program for each such project, the cash requirements for each project
and the overall cash requirements for all of the Venture Properties and include
the items noted in Exhibit A attached hereto.  The parties contemplate that the
projects will initially consist of the following:

•  North Gillette (Airport, Wings and Echo)

• Reno

•  South Gillette (Gap)

• Dilts

•  Castle Rock

"Commitment" means Operator's contractual obligation to spend or commit to be
spent $21,800,000 for Venture Costs.

"Contribution Account" means the account created by contribution of the parties
as provided in Article II and any additions thereto as set forth herein.

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"Cost" or "Costs" with respect to Venture Properties means all costs associated
with the evaluation, acquisition, maintenance and retention of Venture
Properties and the drilling, testing, completion, dewatering and placing on
production or abandoning any well and shall include, without limitation, the sum
of the price paid for a Venture Property, attorneys' fees, title insurance or
examination costs, broker' commissions, filing fees, landmen costs, recording
costs, transfer taxes, if any, and like charges connected with the acquisition
of such Venture Property; bonuses, rentals, delay rentals and ad valorem taxes
and like charges connected with the maintenance of such Venture Property; all
exploration costs, including dry hole and similar contributions; and such
portion of Operator's direct and indirect overhead and administrative expense
for exploration, geological, land, engineering, drafting, accounting, legal and
other services as are directly allocable to the Venture Properties and all such
non-allocable expenses, pro-rated among all such Properties, including, without
limitation, screening costs.  "Cost or "Costs" does not include Costs incurred
under an operating agreement after commencement of first commercial gas sales.

"Force Majeure" means acts of God, applicable orders or restrictions by a
govern­mental authority, failure by a governmental entity to issue a permit,
license or similar document, any injunction by a court duly empowered to force a
halt to a program in progress, strikes or other labor disturbances, riots,
embargoes, power failures, telecommu­nication line failures, revolutions, wars,
fires, floods, or any other causes of circumstances beyond the reasonable
control of either party.

“Operator” means the role as more fully described in Article IV herein and in
the AAPL agreement attached as Exhibit C.

"Properties" means oil and gas leases, any other lease or mineral rights
relating to oil and gas, farmout agreements or other contracts pertaining to oil
and gas leases or other lease or mineral rights, plus any other property or
rights therein or thereon, tangible or intangible, real, personal or mixed.

"Venture" means the joint venture undertaking contemplated by this Agreement
under which Operator becomes agent for all the parties to engage on behalf of
the parties hereto in the exploration for and development of oil and gas with a
primary focus on Coal Bed Methane in the States of Montana and Wyoming.

"Venture Income" means the gross receipts of the Venture and of the parties
received by reason of participation in the Venture, including all proceeds from
the sale or disposition of any Venture Property.

"Venture Property" or "Venture Properties" means Properties owned for the
benefit of the Venture pursuant to this Agreement, including (i) any coal bed
methane interests that are held by RMG as of the date hereof in the States of
Wyoming or Montana, excluding the Oyster Ridge area of Wyoming and the spacing
units of currently existing well bores that are producing or have produced from
the Wyodak/Anderson Coal Strata; and (ii) interests which may be acquired by the
parties jointly in the AMI.

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ARTICLE II

PARTIES' COMMITMENTS

2.1

Commitments.  The parties hereby agree immediately to commit to the Venture the
consideration set forth below:

RMG:

All Venture Properties valued at

$  21,800,000

Operator:

Commitment to pay Venture Costs

    21,800,000

Total:

$  43,600,000

Initially, RMG owns 100% in the Venture and Operator will proportionately earn
an interest in the Venture Properties as it makes expenditures and will own 50%
of any Venture Property jointly acquired by the parties in the AMI, as defined
in the Operating Agreement.  By drilling a well on Venture Properties,
Operator will earn a 50% interest in an 80-acre spacing unit to all depths on
which the well is located and will also earn a proportionate interest in the
balance of the Venture Properties as follows:

Costs

in U.S. $

Percentage Interest Earned by Operator

Above $10.9 million

          25.0%

 Above $21.8 million

          50.0%

If Operator fails to expend $21.8 million by September 1, 2007 or if Operator
elects in writing not to proceed with its Commitment, then the Venture will
forthwith convey to Operator one half of that percentage interest in the balance
of the Venture Properties equal to the amount expended by Operator divided by
$21.8 million (“True Up”) and terminate.  

The parties agree that:

(a)

In the Gap project, Foundation Coal and RMG have an agreement which provides
that Foundation Coal has the option on a well-by-well basis to pay all of the
costs of drilling, completion and dewatering to first production (i.e.,
Foundation Coal carries RMG).  If Foundation Coal elects to drill and carry RMG,
then Operator will have earned its 50% interest.  However, if Foundation Coal
elects not to drill, Operator must drill the balance to earn its 50% interest
in Gap.

(b)

In the Dilts and Reno projects, if Operator completes and dewaters any well
described in Exhibit B, then Operator will earn 50% therein.

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ARTICLE III

OPERATING COMMITTEE

3.1

Operating Committee.  Subject to the provisions hereof, the decisions required
for the conduct of the Venture shall be made by an Operating Committee
(hereinafter sometimes called the "Committee") initially consisting of two
persons.  The Committee shall have the following specified powers and duties and
no other powers and duties:

(a)

To approve and modify the Business Plan at least annually and to determine the
strategic direction of the Venture.

(b)

To authorize any specific additional powers of Operator that may be required
from time to time and in the ordinary course of business, so as to permit the
orderly and efficient execution of the Business Plan.

(c)

To authorize the negotiation of acquisitions, dispositions, trades or exchanges
of any of the Venture Properties to improve the performance of the Venture.

(d)

To authorize the leasing of tangible property (whether or not in the ordinary
course of business) used or to be used in connection with the operations of the
Venture.

3.2

Committee Membership.  Each party shall designate in writing a person to serve
on the Committee and shall also designate another person, as an alternate to
serve in the stead of its member of the Committee in the event its member is not
available to act in that capacity.  Each such designation shall state the
address and telephone number (business and home) of the member of the Committee
and of his designated alternate.  Each member and alternate shall be vested by
the party appointing him with the authority to act and vote at the meetings of
the Committee.  Any written notice to any such member or to any such alternate
to be given under the terms of this Agreement shall be addressed to him at his
address so stated.  Any designation of a member of the Committee or an alternate
may be rescinded by the party appointing such member or alternate by delivering
written notice to that effect to the Chairman of the Committee, or his
alternate, and designating another person to act in the stead of the member or
alternate whose authority has been rescinded.  The member appointed by Operator,
or his alternate, shall act as Chairman of the Committee.

3.3

Committee Meetings.  The Chairman may call a meeting of the Committee at any
time, and he shall call a meeting upon request of any other party.  When
feasible, the Chairman shall give each member notice at least twenty-four (24)
hours in advance of each meeting.  Any member of the Committee who will not be
present at a meeting of the Committee may vote on any item to be con­sidered at
such meeting by telephone communication to the Chairman, or by mail or wire,
addressed to the Chairman.  The vote of each member present on any question
submitted to the meeting shall also be recorded in the Minutes.  All action
taken by the Committee (whether or not at a meeting) shall require a unanimous
favorable vote, whether or not present at the meeting, and any action so
approved shall be binding on the parties.  

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All meetings of the Committee shall be held in Operator's office in Denver,
Colorado, or at such other places unanimously agreed upon by the Committee.

3.4

Committee Action Without Meeting.  The Committee may take action without an
assembled meeting by communications between the Chairman and the other member of
the Committee.  The Chairman may submit any matter or matters by giving the
other member notice by mail, telegram, or telephone (confirmed in writing as
soon there­after as practicable).  Each member of the Committee may communicate
his vote thereon to the Chairman by mail, facsimile, electronic mail or
telephone (confirmed in writing as soon thereafter as practicable).  All action
so taken by the Committee shall have the same effect and be binding on the
parties to the same extent as though taken at a duly called meeting.

3.5

Liability of Committee Members.  No member of the Committee shall be liable for
any act or omission of any other member of the Committee, nor for any act or
omission on his own part, excepting his own willful misconduct or gross
negligence.

3.6

Minutes of Committee Meetings.  Minutes of each Committee meeting and Committee
action taken without a meeting shall be kept and copies of all such Minutes
shall be mailed by the Chairman to each party and to each member and alternate
sitting on the Committee promptly after the meeting or action.

ARTICLE IV

POWERS AND DUTIES OF OPERATOR

4.1

Powers.  In conducting the Venture con­templated in this Agreement, Operator
shall have full, exclusive and complete discretion, power and authority, subject
to the specific provisions of the Operating Agreement attached hereto as
Exhibit C (the "Operating Agreement") and the require­ments of applicable law,
to manage, control, administer and operate the business and affairs of the
Venture for the purposes herein stated, to make all decisions affecting such
business and affairs as it deems appropriate in the conduct of the business and
affairs of the Venture, including without limitation (whether similar or
dissimilar) the power and authority:

(1)

to receive and expend capital and receipts of the Venture, maintain and operate
books of account of the Venture (including, without limitation, production
accounting) and to incur obligations and liabilities on behalf of the Venture;

(2)

to acquire Venture Properties in the AMI as provided herein;

(3)

to explore for and develop oil and gas, including geological and geophysical
activities in connection therewith or in connection with the evaluation of
Properties, and to produce such oil and gas;

(4)

to manage, operate and develop the Venture Properties, and to enter into
operating agreements with respect to Venture Properties, containing such terms,
provisions and conditions as Operator shall approve.

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(5)

to enter into and execute division orders, unitization and pooling agreements,
drilling contracts, leases, assignments, reassignments, farmout or farm-in
agreements, transfer orders, dry and bottom hole and acreage contribution
agreements, participation agree­ments, partnership agreements, joint venture
agreements and any and all other contracts, documents or instruments customarily
employed in the oil and gas industry in connection with the acquisition, sale,
exploration, development, operation or exploitation of oil and gas properties,
and all other instruments deemed by Operator to be necessary or appropriate to
the operations of the Venture and the Venture Properties or to perform its
duties or exercise its powers;

(6)

to enter into agreements and contracts with parties and to give receipts,
releases and dis­charges with respect to the Venture's operations, business and
any matters incident thereto as Operator may deem advisable or appropriate;

(7)

to purchase liability and other insurance to protect the Venture and the Venture
Properties;

(8)

to maintain offices, staff and equipment and to furnish such accounting services
as may be necessary to carry on the activities contemplated by the Venture;

(9)

to obtain such legal and independent geologi­cal, geophysical, engineering,
brokerage and other services as in its sole discretion may be necessary to carry
on the activities contemplated by the Venture;

(10)

to conduct and control all operations of the Venture except where such power is
granted to the Committee; and

(11)

to exercise such other duties and powers as are conferred on Operator elsewhere
in this Agreement.

The parties, with respect to their interest in Venture Properties (including,
without limitation, farm-in and farmout agreements entered into on behalf of the
Venture) hereby agree that any person, firm or corporation dealing with Operator
may rely upon the execution by Operator alone as being fully binding upon the
interest of each of the parties hereto and no person, firm or corporation
dealing with the Venture shall have any duty to inquire into the authority of
Operator to take any action or make any decision.

4.2

Duties.

(a)

Each party may own, and may from time to time after the formation of the
Venture, acquire oil and gas properties in Montana and Wyoming subject to the
AMI requirements.  Operator shall, for the parties' information and accounting
purposes, submit a report showing leasehold working interests acquired, burdens
thereon, summaries of any farmout agreements, any marketing agreements or
restrictions on Operator's right to purchase natural gas under Section 6.4
hereof and a geological and

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economic analysis, and Operator's program, if any, for drilling evaluation,
including the estimated costs and expenses thereof and status of title to the
drill site.  During the drilling of any well on a Prospect, the parties shall be
furnished, if requested, copies of daily drilling reports, logs, test
information, results of surveys, and core analyses, as such information relates
to the well or Prospect, together with such other information as may be
appropriate.  The parties shall at all times during business hours have access
to all information pertaining to a Property and the wells thereon.

(b)

Operator shall acquire from time to time for the Venture such tangible
properties and equipment as Operator may consider necessary or appropriate for
the conduct of the Venture's operations.

(c)

All transfers of Properties to the Venture shall be by assign­ment or conveyance
or other appropriate means (which need not be recorded) delivered to the
Venture.

(d)

Operator will:

(1)

conduct geological, geophysical or other appropriate exploration operations to
evaluate Venture Properties and to ascertain and delineate additional Properties
for acquisition by or for the Venture;

(2)

acquire, assemble and arrange the Venture Properties and select sites and
arrange for the drilling of wells thereon, and, with the assistance of such
geologists, engineers or other experts as it may deem appropriate, make such
decisions of a technical nature as may be required in connection with operations
here­under, conduct, direct and have full control of all operations of the
Venture Properties and otherwise perform the duties of operator;

(3)

prepare and distribute monthly, quarterly and annual operations reports and
financial quarterly and annual reports to the parties;

(4)

maintain complete and accurate records of all Venture Properties and of all
equipment acquired and disposed of with reference thereto as well as maintain
complete and accurate records and accounts of all Venture Income and Costs and
furnish the parties with statements of account (using the calendar year for the
fiscal year of the Venture) from time to time and, once annually, financial
statements of the Venture prepared on a tax basis, together with all reasonably
necessary tax reporting information.  Operator shall also maintain the insurance
policies (or copies or certificates thereof) insuring any Venture activities;
opinions of counsel received by the Venture relating to any Venture Properties;
copies of drilling logs and reports of rig time, drill-stem tests, core
analyses, electrical surveys and other records obtained in connection with the
drilling and testing of any well drilled by the Venture; and the reports of
geologists or other consultants furnished to Operator in the course of
exploration, drilling or other operations of the Venture.  Such documents,
reports, opinions, records and accounts, together

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with receipts, vouchers and other supporting evidence thereof, will be available
upon reasonable notice for inspection by any party or its duly authorized
representative (at such party's expense) during business hours at the principal
operating office of the Venture located at Operator's Denver office; however,
Operator shall not be required to maintain such records and material referred to
herein for a period in excess of seven years from the date of the making or
receipt thereof, except that the title opinions and other evidence of title
shall be held for the life of any property to which they relate and insurance
policies shall be held for a period of seven years after their expiration dates;

(5)

determine from time to time the amount of Venture Income received by the
Operator for the Venture and to make such dis­tribution as Operator shall deem
to be in the best interests of the Venture.

ARTICLE V

PAYMENT OF COSTS AND CONTRIBUTIONS

5.1

Payment.  The Costs incurred on behalf of the Venture or in connection with the
Venture and the Venture Properties pursuant to the provisions hereof shall be
contributions to the Contribution Account.

5.2

Allocation.  All Costs of the Venture (including, without limitation, completion
and dewatering costs) shall be allocated to Operator until expenditure of
$21,800,000 of Costs, and, if the Venture is extended by unanimous action of the
parties, thereafter by the parties in accordance with their interests.

ARTICLE VI

OWNERSHIP OF VENTURE PROPERTIES

6.1

Division Among Parties.  All Venture Properties shall be owned at any given time
by the parties in accordance with their respective Interests.

6.2

Conveyance to Parties.  All Venture Properties shall be acquired in the name of
Operator subject to the terms and conditions of this Agreement.  Each of the
parties shall own a direct interest to the extent set forth in Section 6.1 in
each Venture Property as distin­guished from a mere interest in the production
therefrom.  After the drilling of a well on Venture Properties, Operator will
assign the 80-acre spacing unit on which the well is located to the parties in
accordance with their interests and such well will thereafter be subject to the
Operating Agreement, except that Operator will pay all of the completion and
dewatering costs until $21,800,000 has been expended or committed to be
expended.  After expenditure of $21,800,000, Operator will deliver to the
parties a copy of a recorded assignment or conveyance transferring its interest
in the Venture Properties.  The interest of each of the parties shall be subject
to its pro­por­tionate share of any and all applicable royalty interests,
over­riding royalty interests, production payments, and ay and all other burdens
of whatever nature.

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6.3

Ownership of Production.  Each party shall have the right to take in kind or
separately dispose of its pro­por­tionate share of all oil and gas produced from
Venture Properties, exclusive or production which may be used in development and
producing operations and in preparing and treating oil or gas for marketing
purposes and production unavoid­ably lost.  In the event the share is taken in
kind, Operator shall deliver the share of such party into facilities furnished
by such party at the well site, and such party so receiving such production in
kind shall bear any extra expense incurred by Operator in such delivery and all
risk incident thereto.  In the event any party shall fail to make the
arrange­ments necessary to take in kind or separately dispose of its
proportionate share of the oil and gas produced from Venture Properties,
Operator shall have the right, but not the obligation, to purchase such oil and
gas or sell it to others for such reasonable periods of time as are consistent
with the minimum needs of the industry under the circumstances, but not to
exceed one year, at a price equal to the price which Operator receives for its
portion of the oil and gas produced from such Venture Properties.
 Not­with­standing the foregoing, Operator shall not make a sale into interstate
commerce of a party's share of gas production without first giving such party
ten (10) days' notice of such intended sale.

6.4

Operator's Right to Gather and Process Natural Gas.  RMG hereby dedicates the
Venture Properties to Operator to the extent not previously dedicated to third
parties.  The parties agree that Operator's expenses in connection with the
gathering of gas are not includible as part of the Commitment and that neither
the Venture nor RMG shall have any ownership therein. Operator shall, subject to
any prior call rights, have the right to gather and process any natural gas
produced and attributable to the parties' interest, on the following terms:

(a)

Exercise Date.  This right to gather gas shall be exercisable 20 days after
Operator receives notice of the commence­ment of production of at least 2 mmcf/d
from a project.

(b)

Transportation and Other Charges.  Transportation and other charges shall be
substantially the same as those being offered by Operator in the area to third
parties which such charges shall be reasonably competitive with those being then
offered in the area by bona-fide gatherers.

(c)

Contract.  The form and terms of the trans­por­tation and processing contract(s)
other than charges shall be agreed to by the parties following as nearly as
possible Operator's standard form of contract then in use in the area involved.

(d)

In the event the parties are unable to agree on the pricing, form or other terms
of the contract, either party may invoke the right to arbitrate as provided in
Section 13.2 hereof.

6.5

Transferability.  Each party may deal with, convey, sell, assign, sublease,
promote and make other arrangements with respect to all or a portion of its
interest hereunder, all on such terms and conditions as such party may desire,
subject to Operator's right to gather and process natural gas as provided in
Section 6.4 hereof and subject to obtaining the other party's consent thereto,
which such consent shall not be unreasonably withheld.  Regardless of any such
arrangement made by a party, such party shall remain obligated hereunder as
fully as though

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such arrangement had not been made and the purchasing party shall not become a
party to this Agreement or have any rights hereunder, but shall be obligated
specifically to become a party to any operating agreement entered into under the
terms hereof.

ARTICLE VII

REIMBURSEMENT OF OPERATOR

7.1

Reimbursement.  Operator shall be entitled to reimbursement by the Venture for
all Costs reasonably incurred by it in acting on behalf of or in carrying out
the business of the Venture in the form of a contribution to the Contribution
Account.

ARTICLE VIII

OPERATION OF VENTURE PROPERTIES

8.1

Drilling of Wells.  All operations for the drilling, completion and dewatering
of wells shall be conducted under the terms and provisions of the Operating
Agreement, and the rights and obligations of the parties hereto shall be
governed thereby; provided, however, that in the event of a conflict between the
provisions of such operating agreement and those hereof, the provisions of this
Agreement shall control.

8.2

Drilling and Operation After Drilling of a Well or Upon Termination of the
Venture.  Immediately upon the drilling, completion and dewatering of a well or
the termination of the Venture, the 80-acre spacing unit on which the well is
located or the Venture Properties, as the case may be, shall be assigned to the
parties as provided in Section 6.2 and shall be subject to the Operating
Agreement naming Operator, or if Operator declines, a party designated by the
Committee, as operator.  Thereafter, except for the application of provisions of
this Agreement specifically governing the rights of the parties subsequent to
such time, such Venture Properties no longer shall be subject to the terms of
this Agreement, and the rights and obligations of the parties shall be governed
by the Operating Agreement; provided, however, that in the event of a conflict
between the provisions of this Agreement which specifically govern the rights of
the parties subsequent to such time, as aforesaid, and the provisions of the
Operating Agreement, the provisions of this Agreement shall prevail.
 All expenditures and charges made, and revenues received, pursuant to the terms
of the Operating Agreement shall be shared by the parties in proportion to their
respective ownership interests in the Property or Properties covered thereby.

Should any of the Venture Properties that are subject to the Operating Agreement
also be subject to an operating agreement in effect at the time of acquisition
thereof by Operator or thereafter entered into by Operator on behalf of the
parties hereto with any party or parties owning an operating interest in such
property, or should the agreement by which such property was acquired by
Operator provide for a form of operating agreement applicable to the property
thus acquired, the assignments from Operator to the parties hereto with respect
to any such property shall be made subject to the terms and provisions of any
such operating agreement in addition to being subject to the operating agreement
in the form attached hereto as Exhibit B, which latter agreement shall govern
the rights between the parties hereto; provided, however, that at the option of
Operator exercised at or prior to the assignment of interest to the parties
hereto, the form of operating agreement attached hereto as Exhibit B shall not
be applicable to

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such property and the form of operating agreement in effect when such property
was acquired, or thereafter entered as provided above, or applicable to such
property under the terms of the agreement by which such property was acquired
shall be solely applicable to such property and shall govern the relations of
the parties hereto with respect to such property.

ARTICLE IX

AREA OF MUTUAL INTEREST

9.1

Area of Mutual Interest:  In this Agreement “Area of Mutual Interest” or “AMI”
means the ownership or leased interests now held or in the future acquired by
either RMG or PRB in coal bed methane assets in the states of Wyoming and
Montana, including the RMG Assets and excluding RMG’s proved developed producing
assets, being the spacing units for the currently existing wellbores which are
either currently producing or capable of production from the Wyodak coal strata
and excluding RMG’s assets in the Oyster Ridge area of Wyoming.  The AMI
includes the other potential oil and gas producing formations on all leased
interests.    

9.2

Term and Condition of AMI.  The AMI will be in effect until July 31, 2010,
unless earlier terminated (a) after August 1, 2007 by a party giving two months'
written notice of termination to the other party/ies or (b) the Commitment,
as herein­after defined, has not been spent or committed to be spent.  Any party
that wishes to acquire assets, a majority of which are coal bed methane assets
within the AMI, must propose the acquisition to the other party/ies by written
notice.  If the parties elect to acquire the assets (such election to be made
within ten days of the submitting party's notice of interest to acquire), then
the ownership of those assets shall be purchased and jointly owned 50% by each
party and 50% of the amount expended shall be credited against Operator's
Commitment.  If no election is made, then the party/ies is/are deemed to have
elected not to participate.  If the parties do not wish to participate in the
acquisition of the assets within the AMI, then the proposing party may proceed
to acquire those assets, and the other party/ies will have no right to acquire
an interest in those assets.

ARTICLE X

TERM OF VENTURE

10.1

Commencement of Venture.  The Venture shall commence as of the date first above
written.

10.2

Partial Termination.  This Agreement shall terminate (except insofar as it may
govern rights and obligations theretofore accrued hereunder) as to any Venture
Property, or any portion thereof, at the earlier of the drilling, completion and
dewatering of a well or when same is no longer owned by the parties hereto,
except as may otherwise be specifically provided herein.

10.3

Final Termination.  This Agreement shall terminate, except for necessary
winding-up of the affairs of the Venture (including the drilling, testing,
completing and dewatering of any well or any other Costs if Operator had agreed
to do so prior thereto), on the

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date that Operator has spent or contributed $21,800,000 unless otherwise
unanimously agreed by the parties; provided, however, that those provisions of
this Agreement that govern rights and obligations theretofore accrued hereunder,
or which govern the rights and obligations of the parties hereto beyond the term
of the Venture, shall survive.

ARTICLE XI

INSURANCE

11.1

Insurance.  Operator shall carry or cause to be carried for the protection of
the parties at least the following insurance coverage set forth in the Operating
Agreement.  The cost of such insurance attributable to the Venture shall be
charged to the Venture on an expenditure basis. Copies of all insurance policies
currently in force will, upon request, be furnished to each party.  Operator is
not a warrantor of the financial responsibility of the insurer with whom such
insurance is carried and, except for gross negligence, fraud or willful
misconduct of Operator, Operator shall not be liable for any loss suffered on
account of the insufficiency of the insurance carried, or of the insurer with
whom carried.  Operator shall not be liable for any loss accruing by reason of
Operator's inability to procure or maintain the insurance above mentioned;
provided that Operator shall as quickly as practicable notify the parties hereto
in writing of such inability.

ARTICLE XII

NOTICES

12.1

Address of Parties.  Any notice, communication report, bill, statement, call or
other document required or permitted to be given or delivered under the
provisions hereof shall be addressed to the parties hereto at the following
respective addresses:

To Operator:

PRB Energy, Inc.

1875 Lawrence Street, Suite 450

Denver, Colorado 80202

United States

Attention:  William Hayworth, President

Telephone: (303) 308-1330

Facsimile:  (303) 308-1590

e-mail:  bhayworth@Operatortrans.com

To RMG:

Enterra Energy Trust

Suite 2600, 500 Fourth Avenue Southwest

Calgary, Alberta  T2P 2V6

Canada

Attention:  E. Keith Conrad

Telephone:  403-263-0262

Fax:  403-265-1241

e-mail:  ekconrad@enterraenergy.com

12.2

Change of Address.  Any notice required herein may be given by telephone to the
herein­above designated repre­sen­tative of the parties or such as may be
hereafter designated.  

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Such notice should be confirmed in writing or e-mail but shall effective
never­the­less from the time of completion of the telephone or e-mail notice.
 Any party by written notice to Operator may specify a different address,
in which event notice shall be addressed to the different address so specified.

ARTICLE XIII

MISCELLANEOUS

13.1

Headings.  The headings of the several articles and sections of this Agreement
are inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.

13.2

Arbitration.  In the event of any dispute between the parties hereto, the
following procedures shall be used to commence an arbitration, which shall take
place in Denver, Colorado:

One party shall appoint one arbitrator, and the other party shall appoint one
arbitrator.  The two arbitrators so appointed shall select a third arbitrator.
 If the other party shall fail to appoint an arbitrator within ten days after a
request for such appointment is made by the other party in writing, or if the
two arbitrators so appointed shall fail within ten days after the appointment of
the second of them to agree on a third arbitrator, the arbitrator or arbitrators
necessary to complete a board of three arbitrators shall be appointed, upon
application by either party hereto, by the United States District Judge, senior
in point of service, of the District Court for Denver, Colorado.  If such Judge
should fail or refuse to act, then either party hereto may request the American
Arbitration Association to select the arbitrator or arbitrators to com­plete the
board of three.  After three arbitrators are appointed pursuant to the foregoing
pro­visions of this Section, they shall promptly meet, hear the parties with
respect to the matter to be arbitrated, and issue a decision thereon.
 Any decision agreed to in writing by at least two of the said arbitrators shall
be final and binding on the parties hereto.  Costs of arbitration shall be paid
as determined by the arbitrators.

13.3

Controlling Law.  This Agreement is made under the laws of the State of Wyoming,
which shall control in all matters relating hereto and involving the
construction hereof.

13.4

Entire Agreement.  The terms and provisions herein contained constitute the
entire agreement between the parties hereto and shall supersede all previous
communications, representations or agreements, either verbal or written, between
the parties hereto with respect to the subject matter hereof.

13.5

Counterpart Execution.  This Agreement may. be executed in separate
counter­parts but shall be binding upon the executing parties only when all of
the named parties have executed a counterpart.  Thereafter each counterpart so
executed shall have the same force and effect as if all of the parties executing
the aggregate counterparts had executed the same counterpart.

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13.6

Assurances.  Each of the parties hereby agrees to execute all such certificates
and. other documents conforming hereto and to do all such filing, recording,
pub­lishing and other acts as may be deemed by Operator approp­riate to comply
with the requirements of law for the formation and operation of the Venture and
any amendment or cancellation of any certificate thereof in all jurisdictions
where the Venture shall conduct business.

Each of the parties hereby agrees to execute and deliver to Operator, within
five days after receipt of Operator's written request therefor, such statements
of interest and holdings, designations, powers of attorney and other instruments
which Operator deems necessary to comply with any laws, rules or regulations
relating to the acquisition, operation or holding of any lands under the
jurisdiction of the United States or any political subdivision thereof.

13.7

Representations of the Parties.  Each of the parties represents that its
interests, direct or indirect, including those acquired under this Agreement, do
not exceed 200,000 acres in Federal oil and gas options or 246,080 chargeable
acres in Federal oil and gas options, offers to lease and leases in any one
state, and that it is the sole party in interest in its Venture interest under
this Agree­ment (unless notice to the contrary is given by one party to the
other) , and as such is vested with all legal and equitable rights in such
Venture interest.  Each of the parties covenants that such repre­sen­tations
shall remain true and accurate during the term of this Agreement (unless notice
to the contrary is given by one party to the other) and that it will neither
take action nor permit action to be taken which would cause either of such
representations to be no longer true.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

RMG:

ROCKY MOUNTAIN GAS, INC.

By:

E. Keith Conrad   

Its:

PRB:

PRB ENERGY, INC.

By:

William F. Hayworth

Its:

14

STATE OF

  )

  )  ss.

COUNTY OF

  )

On this

 day of

, 2005, before me appeared                                                  , to
me personally known, who, being by me duly sworn, did say that he is the
                                   of ROCKY MOUNTAIN GAS, INC. and that the
foregoing instrument was signed on behalf of its Board of Directors, and said
person acknowledged said instrument to be the free act and deed of said
corporation.

Notary Public

My commission expires:

[SEAL]

STATE OF

  )

  )  ss.

COUNTY OF

  )

On this ________ day of

, 2005, before me appeared                                                  , to
me personally known, who, being by me duly sworn, did say that he is the
                                   of PRB ENERGY, INC. and that the foregoing
instrument was signed on behalf of its Board of Directors, and said person
acknowledged said instrument to be the free act and deed of said corporation.

Notary Public

My commission expires:

[SEAL]

15

1)

Executive Summary

2)

Results of the "first business plan" (August 1, 2005 to August 31, 2006),
including capital spending to the Contribution Account

3)

Goals and Objectives of Current Plan

4)

Activity Forecast by Area, including

a)

Number of holes drilled

b)

Land acquisition and main­tenance

c)

Specific operating performance, including production, revenue, expenses and net
profit

d)

Improvement targets

e)

Maintenance capital items

f)

Revenue forecast

5)

Capital and Operating Budget for September 1, 2006 to August 31, 2007

6)

Summary of any key risk factors facing the Venture's second year and contingency
plans, if any

1

Dilts Property

     

Dilts 23-14

T40N, R73W, Sec. 23, SWSW

Dilts

 

100.00%

80.00%

75.00%

Dilts 23-23

T40N, R73W, Sec. 23, NESW

Dilts

 

100.00%

80.00%

75.00%

Dilts 23-34

T40N, R73W, Sec. 23, SWSE

Dilts

 

100.00%

80.00%

75.00%

Dilts 23-43

T40N, R73W, Sec. 23, NESE

Dilts

 

100.00%

80.00%

75.00%

Dilts 26-21

T40N, R73W, Sec. 26, NENW

Dilts

 

100.00%

80.00%

75.00%

Dilts 26-41

T40N, R73W, Sec. 26, NENW

Dilts

 

100.00%

80.00%

75.00%

1