Exhibit 10.3

                              EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT, effective as of the 21st day of September, 2004,
by and between ASPEN EXPLORATION CORPORATION, a public Delaware corporation,
Suite 208, 2050 S. Oneida Street, Denver, CO 80224, (303) 639-9860 ("ASPEN"),
and R. V. BAILEY, P.O. Box 1420 (current office is located at 515 Jerry St. but
no mail is delivered to this address), Castle Rock, CO 80104, (303) 660-0966
("BAILEY"), sometimes collectively referred to as the "Parties."

                                   WITNESSETH

     WHEREAS, ASPEN has employed BAILEY since ASPEN'S incorporation in 1980, a
portion of which has been pursuant to employment agreements which have since
expired; and

     WHEREAS, ASPEN wishes to establish an EMPLOYMENT PLAN for BAILEY as well as
to retain BAILEY in the capacity of Vice President and Board Chairman, and
BAILEY wishes to serve ASPEN in such capacity;

     NOW, THEREFORE, in consideration of the conditions and covenants set forth,
it is agreed as follows:

1. TERM OF EMPLOYMENT: BAILEY and ASPEN hereby agree that BAILEY shall be
employed by ASPEN for a period commencing May 1, 2003 and ending May 1, 2009
(the "EMPLOYMENT PERIOD"), in accordance with the terms of this Agreement. All
previous agreements pursuant to which BAILEY was employed by ASPEN (whether
written or oral) be and hereby are terminated to the extent that there are any
obligations remaining due by either party thereunder.

(a) This Agreement does not, however, terminate any rights that BAILEY may have
(or which may be granted to him in the future) to participate in ASPEN's
"Amended Royalty and Working Interest Plan". The June 4, 1993 Stock Purchase
Agreement is hereby terminated and Aspen, therefore, shall not be required to
provide any insurance on the life of BAILEY.

(b) Furthermore, this Agreement does not terminate any rights that BAILEY may
have (or which may be granted to him in the future) to participate in other
benefit programs or undertakings established by ASPEN for the benefit of
employees.

(c) BAILEY may resign from ASPEN and terminate this Agreement upon 30 days
written notice to ASPEN, in which case ASPEN shall pay salary and benefits set
forth in this Agreement through the date of termination and this Agreement shall
terminate.

2.  DUTIES:

(a) During the EMPLOYMENT PERIOD BAILEY shall be employed with the title of Vice
President and shall be subject to the general direction of the President and
Board of Directors of ASPEN. Nothing in this Agreement prevents BAILEY and the
Board of Directors of Aspen from discussing alternative positions as an employee
or officer of, or consultant to, ASPEN in the future.

Employment Agreement - R.V. BAILEY                                        Page 1

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(b) BAILEY shall have such authority and responsibilities as are customarily
performed by a person holding such positions. BAILEY shall devote time,
attention and energies as needed to the business of ASPEN. No specific portion
of BAILEY'S time shall be required. BAILEY shall not engage in any business or
render services to others who directly or indirectly compete in direct or
indirect competition with the oil and gas business of ASPEN. This provision
shall not preclude BAILEY from making investments in any entity or continuing to
maintain BAILEY'S existing investments in certain oil and gas properties as in
the past. In addition, BAILEY may make other passive outside investments in oil
and gas opportunities only after having first offered such investment
opportunity to ASPEN. Such offer, and the response, may take the form of a phone
call or electronic mail between BAILEY and ASPEN.

(c) During the term of this Agreement, BAILEY will continue to provide, at no
cost to ASPEN, so long as BAILEY has such space available, indoor storage space
near Platteville, Colorado, for geological and engineering records related to
several uranium projects in Wyoming, which records are and will remain the sole
property of ASPEN.

3.   COMPENSATION:

     (a) ASPEN shall pay BAILEY a salary of $45,000 per year commencing May 1,
2003, through December 31, 2006, and a salary or $60,000 per year commencing
January 1, 2007 and ending April 1, 2009, subject to such further salary
increases and bonuses as the Board of Directors may determine to be appropriate.
ASPEN shall deduct and withhold such sums as are required by statute and
applicable laws for Social Security, taxes and otherwise, to be deducted or
withheld from compensation. ASPEN shall pay such compensation to BAILEY in equal
monthly installments in arrears after the deduction of appropriate taxes. During
the term of this Agreement BAILEY shall also participate in corporate stock
option plans in amounts deemed appropriate by the Board of Directors.

(b) ASPEN shall provide BAILEY the other benefits and expense reimbursement as
described in Sections 4, 5 and 6, below.

4.  LOCATION:

(a) As long as ASPEN maintains a Denver office, ASPEN will not reimburse BAILEY
for the use of any other office space. If ASPEN no longer maintains a staffed
Denver office, ASPEN will pay to BAILEY a flat fee of $500 per month to
reimburse him for expenses he may incur for rent and utilities for any office
selected by BAILEY, regardless of BAILEY'S actual cost for providing office
space he deems appropriate. This reimbursement, should it commence, will
terminate on December 31, 2007.

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(b) During the term of this Agreement, BAILEY may continue to utilize office
equipment (including furniture and computer equipment and accessories) that
ASPEN owns and which are located at BAILEY'S office in Castle Rock, Colorado.
Such equipment may be upgraded from time to time during the term of this
Agreement. BAILEY may, at his option, purchase such office equipment from ASPEN
at any time on or before December 31, 2007, for a total purchase price of
$10.00.

(c) During the term of this Agreement, ASPEN will continue to provide BAILEY an
office at ASPEN'S Denver office for so long as ASPEN maintains offices in
Denver. The parties hereto recognize that this Denver office is also utilized
for filing cabinets and by the auditors and other parties as needed and this use
in the future is expected and approved.

(d) During the term of this Agreement ASPEN will reimburse BAILEY for office
supplies reasonably necessary or appropriate for the conduct of ASPEN'S business
in the same manner and to the same extent as in the past. This will include
reimbursement for office phones (in a proportionate amount), DSL (or equivalent)
and a cell phone. This reimbursement will discontinue on December 31, 2007.

5. BENEFITS AND EXPENSES:

(a)  Non-Accountable Expense Allowance; Other Reimbursements.

     (i) During the term of this Agreement, ASPEN agrees to pay BAILEY quarterly
in arrears the sum of $1,700 per month to reimburse BAILEY for miscellaneous
items such as prescriptions, medical and dental coverage for himself and his
dependents and other expenses which are not subject to reimbursement pursuant to
Sections 4(a) and 4(d), above. It is BAILEY'S responsibility to provide ASPEN
with a quarterly detailed statement listing all accountable expenses not subject
to withholding and wage employment taxes. Should the accountable expenses in any
fiscal year be less than the cumulative $1,700 monthly allowances, ASPEN will
treat the difference as non-accountable expenses subject to withholding and wage
employment taxes and will report the difference on the W-2. The $1,700 allowance
shall be adjusted annually in the month of June to account for inflation.

     (ii) ASPEN recognizes that BAILEY is the founder of the corporation and has
been a trusted employee, officer and director of the corporation for more than
23 years. During the term of this Agreement, if BAILEY desires to incur any
expense on behalf of ASPEN exceeding cumulative $1,000 in any one month for
which he intends to seek reimbursement from ASPEN (such as travel to meetings of
the Board of Directors or to ASPEN'S properties), he shall advise the Board of
Directors or the President of ASPEN telephonically or by electronic mail of such
possible expense and the Board or President shall promptly respond. In the event
no such advisement has been conveyed, or the advisement was conveyed but no
response received, BAILEY may proceed to incur expenditures that he believes are
on behalf of ASPEN but with the understanding that such expenditures may or may
not be reimbursed subsequently by ASPEN.

Employment Agreement - R.V. BAILEY                                        Page 3

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(b)  Termination of Other Benefits.

     (i) ASPEN currently maintains a key man life insurance policy on BAILEY'S
life as required pursuant to Section 2.1 of the Stock Purchase Agreement dated
June 4, 1993. BAILEY agrees that ASPEN shall allow the current key man policy on
BAILEY'S life to expire of its own terms, and ASPEN shall not be obligated to
purchase a new policy due to the excessive costs involved.

     (ii) Prior to January 1, 2004, the Parties agree to terminate the current
split dollar plan between ASPEN and BAILEY. The value of ASPEN'S interest
thereunder will be distributed to ASPEN in accordance with the provisions of the
plan. There is a possibility that a trust established by BAILEY will pay the
amount due to ASPEN.

(c) Vacation. BAILEY shall be entitled to four weeks paid vacation each year
during the EMPLOYMENT PERIOD. No more than one week may be carried forward to
any subsequent year.

(d) Vehicle Expenses. During the term of this Agreement and in addition to the
expense reimbursements set forth elsewhere in this Agreement, ASPEN agrees to
reimburse BAILEY on his monthly expense report submitted to ASPEN for all
expenses associated with the use of ASPEN'S four-wheel drive vehicle. BAILEY may
trade in the current ASPEN vehicle for a new similar vehicle of his choice once
prior to June 30, 2006. During 2007, or thereafter during the term of this
Agreement, ASPEN, upon request by BAILEY, shall sell to BAILEY free from any
liens, for the sum of $500.00, the ASPEN vehicle he is using, or, if BAILEY dies
during the EMPLOYMENT PERIOD, upon request of the personal representative of his
estate, ASPEN shall sell the vehicle to the estate of BAILEY for the
above-stated amount.

(e) Royalty and Working Interest Plan. As part of the benefits hereunder, during
the term of this Agreement, ASPEN will assign to BAILEY overriding royalties in
accordance with ASPEN'S existing Amended Royalty and Working Interest Plan dated
February 2, 1986.

(f) Participating Interests. During the term of this Agreement and thereafter,
ASPEN shall continue to offer to BAILEY participating working interests in oil
and gas exploration wells, or in production purchases, as has been done in years
past. Such offers shall be in no less amounts than are being offered to other
ASPEN employees or consultants. BAILEY may negotiate with ASPEN management for
greater working interest participation in certain drilling or acquisitions.

6. TERMINATION: The obligations of ASPEN hereunder for compensation during the
term of this Agreement shall remain and continue during the term of this
Agreement.

(a) ASPEN may terminate this Agreement upon BAILEY'S death, in which case ASPEN
will pay BAILEY'S estate all compensation that had accrued, or will accrue, to
the end of the year of the date of death plus an additional $75,000.

(b) ASPEN shall not have the right to unilaterally terminate this Agreement.

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 (c) If, during the term of this Agreement, BAILEY becomes totally and
 permanently disabled, ASPEN shall pay, as its sole and exclusive liability
 hereunder, one half (50%) of the salary and benefits set forth in this
 Agreement for the remainder of the term of this Agreement.

7.   GENERAL PROVISIONS:

(a) The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

(b) If any provision of this Agreement, or the application thereof to any
person, place or circumstance, shall be held by a court of competent
jurisdiction to be illegal, invalid, unenforceable or void, then such provision
shall be enforced to the extent that it is not illegal, invalid, unenforceable
or void, and the remainder of this Agreement, as well as such provision as
applied to other persons, places or circumstances, shall remain in full force
and effect.

(c) With regard to any power, remedy or right provided in this Agreement or
otherwise available to any party, no waiver or extension of time shall be
effective unless expressly contained in a writing signed by the waiving party,
no alteration, modification or impairment shall be implied by reason of any
previous waiver, extension of time, delay or omission in exercise or other
indulgence, and waiver by any party of the time for performance of any act or
condition hereunder does not constitute a waiver of the act or condition itself.

(d) All notices, demands, or other communications to be given or delivered under
or by reason of the provisions of this Agreement will be in writing and shall be
deemed to have been duly given or delivered (i) when delivered personally; (ii)
sent by telephone facsimile transmission; or (iii) sent via a nationally
recognized overnight courier to the recipient. Such notices, demands and other
communications will be sent to the address indicated in the first paragraph
hereof, or to such other address as any party may specify by notice given to the
other party in accordance with this Section. The date of giving any such notice
shall be (i) the date of hand delivery; (ii) the date sent by telephone
facsimile if a business day or the first business day thereafter; or (iii) the
business day after delivery to the overnight courier service.

(e) This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Colorado without giving effect to any choice or
conflict of law provision or rule (whether of the State of Colorado or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Colorado. Without limitation of the foregoing, BAILEY
and ASPEN specifically acknowledge that they do not intend the laws of the State
of California to be applicable to this employment relationship.

(f) This Agreement constitutes the entire agreement among the Parties with
respect to the subject matter of this Agreement and supersedes any prior
agreement or understanding, whether written and oral, among the Parties or
between any of them with respect to the subject matter of this Agreement. There
are no representations, warranties, covenants, promises or undertakings, other
than those expressly set forth or referred to herein.

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(g) This Agreement may be amended, modified or waived only by a written
agreement signed by each of the Parties hereto.

(h) This Agreement shall be binding upon and shall inure to the benefit of the
Parties and their respective successors and, if applicable, permitted assigns.

(i) Each party intends that this Agreement shall not benefit or create any right
or cause of action in any person other than the Parties or as specifically
expressed in this Agreement.

(j) This Agreement may be executed in one or more counterparts, each of which
shall constitute an original but when taken together shall constitute but one
instrument.

(k) Aspen shall reimburse BAILEY for BAILEY'S reasonable expenses, not to exceed
$1,500, in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, including without limitation
all fees and expenses of its agents, representatives, counsel and accountants.

9. REMEDIES: In the event of any disagreement or dispute arising hereunder, the
same shall be subject to Colorado law and be submitted to arbitration before the
Judicial Arbiter Group, Inc., Denver, Colorado, in accordance with the rules of
such group.

IN WITNESS WHEREOF, the Board of Directors of ASPEN has approved this Agreement
by resolutions dated April 26, 2004, and the Parties have executed this
Agreement this 21st day of September 2004, to be effective as of the first day
of May 2003.

ASPEN EXPLORATION CORPORATION


By:  /s/  Robert A. Cohan
  ----------------------------------
          Robert A. Cohan, President

Date:  September 23, 2004


EMPLOYEE


By:  /s/  R. V. Bailey
  ------------------------------------
          R. V. Bailey, Vice President

Date:  September 21, 2004

Employment Agreement - R.V. BAILEY                                        Page 6