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                                                                   EXHIBIT 10.17

                              EMPLOYMENT AGREEMENT

      EMPLOYMENT AGREEMENT made and entered into as of the 23d day of June,
2004, by and between ENERGY WEST, INCORPORATED (the "Company"), a Montana
corporation, and John Allen (the "Executive");

      WHEREAS, the Company desires to secure the employment of the Executive as
its Senior Vice President, General Counsel and Secretary;

      WHEREAS, the Executive is willing to commit himself to be employed by the
Company on the terms and conditions herein set forth and thus to forego
opportunities elsewhere; and

      WHEREAS, the parties desire to enter into this Agreement, as of the
Effective Date, as hereinafter defined, setting forth the terms and conditions
for the employment relationship of the Executive with the Company during the
Employment Period (as hereinafter defined).

      NOW, THEREFORE, IN CONSIDERATION of the premises, and the covenants and
agreements set forth below, it is hereby agreed as follows:

      1. Employment and Term.

      (a) Employment. The Company agrees to employ the Executive, and the
Executive agrees to be employed by the Company, in accordance with the terms and
provisions of this Agreement during the term hereof (as described below).

      (b) Term. The term of this Agreement shall commence as of July 1, 2004
(the "Effective Date") and shall continue until June 30, 2005, unless sooner
terminated in accordance with Section 4 hereof (the "Employment Period"). The
Executive shall remain employed by the Company following the end of the
Employment Period on such terms and conditions as the Company and the Executive
mutually agree.

      2. Duties and Powers of Executive.

      (a) Position; Location. Initially, the Executive shall serve as Senior
Vice President, General Counsel and Secretary of the Company and shall report to
the Chief Executive Officer of the Company and the Board of Directors of the
Company (the "Board"), as appropriate. The Executive shall perform such duties
and services appertaining to such position as reasonably directed by the Chief
Executive Officer and the Board and commensurate with the duties and authority
of officers holding comparable positions in similar businesses of similar size
in the United States. The Executive shall use his reasonable best efforts to
carry out such responsibilities faithfully and efficiently. The Executive's
services shall be performed primarily at the Company's headquarters, which shall
be located in the Great Falls, Montana metropolitan area.

      (b) Attention. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote substantially all of

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his full business time, energy and best efforts to the business and affairs of
the Company. The Executive may not engage, directly or indirectly, in any other
business, investment or activity that interferes with the Executive's
performance of his duties hereunder, is contrary to the interests of the
Company, or requires any significant portion of the Executive's business time.
It shall not be considered a violation of the foregoing for the Executive to
serve on corporate, industry, civic or charitable boards or committees, so long
as such activities do not materially interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. The Executive may serve on boards of directors of up to two
non-competing for profit businesses which do not materially interfere with his
duties hereunder.

      3. Compensation. The Executive shall receive the following compensation
for his services hereunder to the Company:

      (a) Salary. The Executive's initial annual base salary (the "Annual Base
Salary"), payable in accordance with the Company's general payroll practices, in
effect from time to time, shall be at the annual rate of $135,000. The Board may
from time to time direct such upward adjustments in Annual Base Salary as the
Board deems to be necessary or desirable, including, without limitation,
adjustments in order to reflect surveys of compensation for comparable positions
at other companies. The Annual Base Salary shall not be reduced after any
increase thereof. Any increase in the Annual Base Salary shall not serve to
limit or reduce any other obligation of the Company under this Agreement.

      (b) Incentive Compensation. The Company shall award the Executive a bonus
under the Company's Balanced Goal Card Program for fiscal year 2004 of ten
percent (10%) of Executive's annual base salary for fiscal year 2004. For fiscal
year 2005, the Executive shall be eligible to receive an annual cash bonus under
the Company's current Balanced Goal Card Program, provided, however, the Company
has the right to modify, eliminate, or add to its short-term and long-term
incentive compensation plans, and to provide for the Executive's participation
in any such plans, at any time in its sole discretion. Such bonus will be
payable upon the achievement of performance goals determined in advance by
mutual agreement of the Board and the Executive. The target opportunity under
the Balanced Goal Card Program for fiscal year 2005 is to be ten percent (10%)
of Annual Base Salary. Written performance goals under the Balanced Goal Card
Program shall be determined within the first thirty (30) days of the beginning
of fiscal year 2005.

      (c) Retirement and Welfare Benefit Plans. In addition to the benefits
available under Section 3(b), during the Employment Period and so long as the
Executive is employed by the Company, he shall be immediately eligible to
participate in all other savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees and/or senior executive
officers of the Company in accordance with the terms of such plans, all on a
basis no less favorable than for any other senior executive of the Company of
equal or subordinate rank. The Company reserves the right to modify, eliminate
or add to its retirement and welfare benefit plans, practices and policies at
any time in its sole discretion.

      (d) Options. The Company shall grant the executive stock options for
20,000 shares of Company common stock on the Effective Date, pursuant to the
terms of the Company's 2002

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Stock Option Plan (the "Option Plan"). One-half of such options are being
granted in recognition of the Executive's previous service as Interim President
and Chief Executive Officer of the Company. Twenty-five percent (25%) of the
options shall vest on the Effective Date and the balance of the options shall
vest ratably on the next three anniversaries of the Effective Date, provided
that Executive remains employed by the Company on such anniversary date. In
addition, the Company shall grant the Executive options for not less than 10,000
shares of Company common stock on the first anniversary of the Effective Date
with ratable vesting of not more than three years, subject to any limitations
under the Option Plan. The exercise price for each option granted pursuant to
this Section 3(d) shall be equal to the fair market value of a share of the
Company's common stock on the date of grant.

      (e) Expenses. The Company shall reimburse the Executive for all expenses,
including those for travel and entertainment, properly incurred by him in the
performance of his duties hereunder, subject to any reasonable policies
established from time to time by the Board.

      (f) Fringe Benefits. During the Employment Period and so long as the
Executive is employed by the Company, he shall be entitled to receive vacation
and fringe benefits in accordance with the plans, practices, programs and
policies of the Company from time to time in effect, commensurate with his
position, which benefits shall be at least the same as those received by any
senior executive officer of the Company of equal or subordinate rank; provided,
however, the Company reserves the right to modify, eliminate or add to its
fringe benefits at any time in its sole discretion.

      4. Termination of Employment.

      (a) Death. The Executive's employment shall terminate automatically upon
the Executive's death during the Employment Period.

      (b) Disability. The Executive shall be relieved of his position as an
officer of the Company automatically upon the Executive being unable to perform
the material duties of his position due to physical or mental illness or injury
for a period of 60 consecutive days, or for 90 days within any one-year time
period and his employment shall terminate automatically 120 days after the date
that he is relieved of his position.

      (c) By the Company for Cause. The Company, by action of the Board, may
terminate the Executive's employment during the Employment Period for Cause. For
purposes of this Agreement, "Cause" shall mean (i) conduct which is a material
breach of this Agreement and is not cured within 30 days after written notice to
Executive or willfully repeated thereafter, (ii) conduct which is a material
violation of Company policies; (iii) willful failure to perform substantially
all of Executive's duties as lawfully delineated by the Board; (iv) conduct that
constitutes fraud, gross negligence of willful misconduct; or (v) the Executive
is convicted of, or enters a plea of guilty or no contest to, any felony or
other criminal offense involving moral turpitude.

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      (d) By the Company Without Cause. During the term of this Agreement, the
Company, by action of the Board, may terminate the Executive's employment for
any reason other than for Cause during the Employment Period upon 30 days'
advance written notice.

      (e) By the Executive. The Executive may terminate his employment during
the Employment Period, either with Good Reason, or without Good Reason upon 30
days' advance written notice to the Board. For purposes of this Agreement, "Good
Reason" shall mean:

                  (i) Without the prior consent of the Executive: any change in
            title; any material diminution in the Executive's duties or
            authority; assignment of duties materially inconsistent with the
            Executive's duties; any requirement imposed by the Company that the
            Executive relocate his principal residence; or

                  (ii) Any material breach by the Company of this Agreement not
            cured within thirty days after written notice to the Company.

      5. Obligations of the Company Upon Termination.

      (a) Obligations Upon Termination for any Reason. If, during the Employment
Period, the Executive's employment shall terminate for any reason (termination
in any such case being referred to as a "Termination"), the Company shall pay to
the Executive a lump sum amount in cash equal to the sum of (A) the Executive's
salary at the rate of the Annual Base Salary earned through the date of
Termination to the extent not theretofore paid, provided that in the case of
termination because of the Executive's disability, the Executive shall be
entitled only to the amount provided in the Company's sick leave policy, (B) any
earned but unpaid annual cash bonus or other incentive award for a prior fiscal
year, and (C) accrued but unpaid vacation pay. In addition, the Company shall
provide benefit continuation or conversion rights (including COBRA) as provided
under Company benefit plans and vested benefits under Company benefit plans. The
amounts specified in this Section 5(a)(A), (B), and (C) shall be paid within 30
days after the date of Termination.

      (b) Obligations Upon Termination with Good Reason or Without Cause. In the
event of Termination by the Executive with Good Reason or by the Company without
Cause, in addition to the amounts and benefits set out in Section 5(a), the
Company shall pay to the Executive (A) Annual Base Salary and annual cash bonus
described in Section 3(b) of this Agreement at the target level payable monthly
for twelve months following the date of Termination; (B) a lump sum amount, in
cash, equal to the annual cash bonus benefit described in Section 3(b) of this
Agreement at the target level for the fiscal year of the Company that includes
the date of Termination multiplied by a fraction the numerator of which shall be
the number of days from the beginning of such fiscal year to and including the
date of Termination and the denominator of which shall be 365, which calculation
shall be based on the terms of the Company's Balanced Goal Card Plan, assuming
that all performance goals in effect on the date of termination were met at the
target level for such year, such amount to be paid within 30 days of such date
of Termination; (C) executive level career transition assistance services by a
firm designated by the Executive (up to a maximum of $10,000); (D) full vesting
of any unvested options with such options to be exercisable for the remaining
term of the option or one year,

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whichever occurs first; (E) full vesting of any shares of restricted stock and
elimination of any restrictions, and (F) continuation of medical benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided had the Executive remained employed for twelve months, such
benefits to be in accordance with the most favorable medical benefit plans,
practices, programs or policies of the Company as in effect and applicable to
any senior executive officer of the Company of equal or subordinate rank and his
or her family immediately preceding the date of Termination, provided, however,
that if the Executive becomes employed with another employer and is eligible to
receive medical benefits under another employer-provided plan, the benefits
under the Company's health insurance plans shall be secondary to those provided
under such other plan during such applicable period of eligibility.

      (c) Termination Following a Change of Control. Nothing in this Agreement
shall adversely affect or change the Executive's eligibility for benefits under
the Company's Change of Control Severance Plan (the "Plan") (whether as a result
of the Change of Control as defined in the Plan that occurred in April 2004 upon
the acquisition by a single person of aggregate ownership of more than 20% of
the Company's outstanding common stock, or any subsequent Change of Control as
defined in the Plan); provided that nothing in this Section 5(c) shall affect
the Company's right to amend or terminate the Plan to the extent permitted under
the terms of the Plan. In the event that Executive's employment with the Company
is terminated under circumstances entitling the Executive to benefits under the
terms of the Plan, any benefits to which the Executive is entitled under Section
5(b) of this Agreement shall be offset to the extent of any benefits to which
Executive is entitled under the Plan so long as such benefits under the Plan are
paid or provided to Executive in accordance with the terms of the Plan.

      (d) Stock Incentive Awards. No grants or awards of nonqualified stock
options or restricted stock will be made to the Executive on or after the date
the notice of Termination is given.

      (e) Suspension. The Company may, in its sole discretion, suspend the
Executive with or without pay for any act or omission that may otherwise
constitute a basis for termination of this Agreement by the Company, or that is
otherwise in violation of the Company's policies, practices, procedures, rules
or regulations and/or this Agreement. Such suspension may be in lieu of
termination or as an interim action pending a final decision by the Company as
to whether termination of the Executive's employment is appropriate.

      (f) Payments in the Event of Application of An Excise Tax. In the event
that any payments under this Agreement or any other compensation, benefit or
other amount from the Company for the benefit of the Executive are subject to
the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (including any applicable interest and penalties, the "Excise
Tax"), the payments provided for under this Agreement shall be reduced (except
for required tax withholdings) to an amount that is $1.00 less than the amount
that would trigger such Excise Tax.

      6. Nonexclusivity of Rights. Except as provided in Section 5(d), nothing
in this Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, plan, program, policy or practice provided by the
Company and for which the Executive may

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qualify (except with respect to any benefit to which the Executive has waived
his rights in writing), nor, except as provided in Sections 5(d) and 12(g),
shall anything herein limit or otherwise affect such rights as the Executive may
have under any other contract or agreement entered into after the Effective Date
with the Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any benefit, plan, policy, practice or
program of, or any contract or agreement entered into with, the Company shall be
payable in accordance with such benefit, plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.

      7. Full Settlement; Mitigation. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts (including amounts for damages for breach) payable to the
Executive under any of the provisions of this Agreement and, except as provided
in Section 5(a), such amounts shall not be reduced whether or not the Executive
obtains other employment.

      8. Confidential Information. The Executive agrees not to disclose during
the term hereof or thereafter any of the Company's confidential or trade secret
information, except as required by law. The Executive recognizes that the
Executive shall be employed in a sensitive position in which, as a result of a
relationship of trust and confidence, the Executive will have access to trade
secrets and other highly confidential and sensitive information. The Executive
further recognizes that the knowledge and information acquired by the Executive
concerning the Company's materials regarding employer/employee contracts,
customers, pricing schedules, advertising and interviewing techniques, manuals,
systems, procedures and forms represent the most vital part of the Company's
business and constitute by their very nature, trade secrets and confidential
knowledge and information. The Executive hereby stipulates and agrees that all
such information and materials shall be considered trade secrets and
confidential information. If it is at any time determined that any of the
information or materials identified in this paragraph 8 are, in whole or in
part, not entitled to protection as trade secrets, they shall nevertheless be
considered and treated as confidential information in the same manner as trade
secrets, to the maximum extent permitted by law. The Executive further agrees
that all such trade secrets or other confidential information, and any copy,
extract or summary thereof, whether originated or prepared by or for the
Executive or otherwise coming into the Executive's knowledge, possession,
custody, or control, shall be and remain the exclusive property of the Company.

      9. Conflict of Interest. The Executive acknowledges and agrees that he
owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in
the best interests of the Company and to do no act which would injure the
Company's business, its interests or its reputation. It is agreed that any
direct or indirect interest in, connection with, or benefit from any outside
activities, particularly commercial activities, which interest might in any way
adversely affect the Company or any of its affiliates, involves a possible
conflict of interest. In keeping with the Executive's fiduciary duty to the
Company, the Executive agrees that he shall not knowingly become involved in a
conflict of interest with the Company affiliates, or upon discovery thereof,
allow such a conflict to continue. Moreover, the Executive agrees that he shall
disclose to the Board any facts which might involve such a conflict of interest
that has not been approved by the Board. The Executive and the Company recognize
that it is impossible to provide an exhaustive list of actions or interests
which constitute a conflict of interest.

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Moreover, the Executive and the Company recognize there are many borderline
situations. In some instances, full disclosure of facts by the Executive to the
Board may be all that is necessary to enable the Executive, the Company or its
affiliates to protect its interests. In others, if no improper motivation
appears to exist and the interests of the Company or its affiliates have not
suffered, prompt elimination of the outside interest will suffice. In still
others, it may be necessary for the Company to terminate the employment
relationship. The Company and the Executive agree that the Company's
determination as to whether a conflict of interest exists shall be conclusive.
The Company reserves the right to take such action as, in its judgment, will end
the conflict.

      10. Nonsolicitation. During the period of his business affiliation with,
or employment by, the Company and for a period of two years after the
Executive's termination of employment for any reason whatsoever, the Executive
will not directly or indirectly, individually or as a consultant to, or as
employee, officer, director, stockholder, partner or other owner or participant
in any business entity other than the Company, solicit or endeavor to entice
away from the Company, or otherwise materially interfere with the business
relationship of the Company with, (i) any person who is, or was within the
12-month period immediately prior to the termination of the Executive's business
affiliation with or employment by the Company, employed by or associated with
the Company or (ii) any person or entity who is, or was within the 12-month
period immediately prior to the termination of the Executive's business
affiliation with or employment by the Company, a customer or client of the
Company.

      11. Successors.

      (a) Assignment by Executive. This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives. Without the prior written consent of the
Executive, no assignment of this Agreement by the Company or any successor of
the Company shall relieve the assignor of its financial responsibility for
performance of the Company's obligations hereunder.

      (b) Successors and Assigns of Company. This Agreement shall inure to the
benefit of and be binding upon the Company, its successors and assigns.

      12. Miscellaneous.

      (a) Remedies. The Company and the Executive agree that if a dispute arises
out of or is related to this Agreement or Executive's employment by the Company,
such dispute shall, if not earlier resolved by negotiations of the parties, be
submitted to binding arbitration by a single arbitrator under the American
Arbitration Association National Rules for Resolution of Employment Disputes in
Great Falls, Montana, or the equivalent. Either party may provide written notice
to the other party that the dispute is not able to be resolved by negotiation
and such notifying party shall then contact the American Arbitration Association
for appointment of an

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arbitrator to resolve such dispute. Attorneys' fees and costs shall be awarded
to the prevailing party as determined by the arbitrator.

      (b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Montana, without reference to its
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a committee thereof,
shall have authority on behalf of the Company to agree to amend, modify, repeal,
waive, extend or discharge any provision of this Agreement or anything in
reference thereto.

      (c) Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return-receipt requested, postage prepaid, addressed, in
either case, at the Company's headquarters or to such other address as either
party shall have furnished to the other in writing in accordance herewith.
Notices and communications shall be effective when actually received by the
addressee.

      (d) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

      (e) Withholding. The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

      (f) No Waiver. The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 4(e) of this Agreement,
or the right of the Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.

      (g) Entire Agreement. This instrument contains the entire agreement of the
Executive, the Company or any predecessor or subsidiary thereof with respect to
the subject matter hereof, and may be modified only by a writing signed by the
parties hereto. All promises, representations, understandings, arrangements and
prior agreements, other than the terms of the Company's Change of Control
Severance Plan and any non-qualified stock option grants entered into or made
prior to the Effective Date, are merged herein and superseded hereby. Any
agreement with regard to severance benefits entered into after the Effective
Date shall be effective only if it expressly references this Agreement.

      In the event of any difference between the terms of this Agreement and the
terms of any Company benefit, option or other plan or policy, the terms of this
Agreement shall control, unless such terms violate applicable law, or would
require shareholder approval or would cause the

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Company to be in material breach of its obligations under such other benefit,
option or other plan or policy. The Company shall not amend any benefit, option
or other plan or policy in a manner that would cause the agreements set forth
herein to be nullified, provided that nothing herein shall limit the Company's
discretion in establishing, maintaining and amending its generally applicable
welfare benefit programs such as health coverage.

      (h) Indemnification. The Company shall indemnify the Executive pursuant to
the Company's bylaws and the articles of incorporation. In addition, the Company
shall maintain directors and officers liability insurance coverage covering the
Executive during the term of employment and thereafter, so long as the Company
elects to continue such coverage for its active officers and directors.

      (i) Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.

      (j) Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.

      (k) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

      (l) Construction. The parties acknowledge that this Agreement is the
result of arm's-length negotiations between sophisticated parties each afforded
representation by legal counsel. Each and every provision of this Agreement
shall be construed as though both parties participated equally in the drafting
of same, and any rule of construction that a document shall be construed against
the drafting party shall not be applicable to this Agreement.

      IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from
its Board of Directors, the Company have caused this Agreement to be executed as
of the day and year first above written.

                                        /s/ John C. Allen
                                        ----------------------------------------
                                        John C. Allen

                                        ENERGY WEST, INCORPORATED

                                        By: /s/ JoAnn S. Hogan
                                            ------------------------------------
                                        Name:  JoAnn S. Hogan
                                        Title: Vice President

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