SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d  ) OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE TRANSITION PERIOD FROM ___________ TO _____________.



Commission file number: 000-28015

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TREATY ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 86-0884116                          
|(State or other Jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)



|                                                
|------------------------------------------------
|310 North Willis, Suite 212
Abilene, Texas 79603
|(Address of principal executive offices)        



|                                                    
|----------------------------------------------------
|(325) 676-0099                                      
|(Registrants telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No  ̈

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.

|                                                                        |                            
|----------------------------------------------------------------------- | ---------------------------
|Large accelerated filer  ̈                                               | Accelerated filer  ̈        
|Non-accelerated filer   ̈  (do not check if a smaller reporting company) | Smaller reporting company þ



Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes  ̈    No þ

The number of shares of the registrants common stock outstanding as of July 24, 2009, was 460,110,701.









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TREATY ENERGY CORPORATION

FORM 10-Q

INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I  FINANCIAL INFORMATION
1
Item 1  Financial Statements
1
Item 2 - Managements Discussion And Analysis Of Financial Condition And Results Of Operations
9
Item 3 - Quantitive and Qualitative Disclosures About Market Risk
10
Item 4  Controls and Procedures
10
PART II  OTHER INFORMATION
12
Item 1  Legal Proceedings
12
Item 1A  Risk Factors
12
Item 2 - Unregistered Sales of Equity Securities
12
Item 3  Defaults Upon Senior Securities
12
Item 4 - Submission of Matters to a Vote of Security Holders
12
Item 5  Other Information
12
Item 6  Exhibits
13
SIGNATURES
14







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PART I  FINANCIAL INFORMATION

Item 1  Financial Statements

TREATY ENERGY CORPORATION

(Formerly Alternate Energy Corp.)

BALANCE SHEETS



|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---------------------- | - | -------- | -
|                                                                                                                                                                                 |  | June 30,
2009
(Unaudited) |          |   | Dec 31,
2008
(Audited) |  
|ASSETS                                                                                                                                                                           |  |                           |          |   |                        |  
|                                                                                                                                                                                 |  |                           |          |   |                        |  
|Cash and equivalents                                                                                                                                                             |  | $                         | 2,796    |   |                        | $ | 971      |  
|Accounts receivable                                                                                                                                                              |  |                           | 6,983    |   |                        |   | 7,206    |  
|Total current assets                                                                                                                                                             |  |                           | 9,779    |   |                        |   | 8,177    |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|Oil and gas properties (proved), net (successful 
efforts method of accounting)                                                                                                  |  |                           | 67,326   |   |                        |   | 68,846   |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|TOTAL ASSETS                                                                                                                                                                     |  | $                         | 77,105   |   |                        | $ | 77,023   |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|LIABILITIES                                                                                                                                                                      |  |                           |          |   |                        |   |          |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|Accounts payable and accrued liabilities                                                                                                                                         |  | $                         | 460,043  |   |                        | $ | 497,643  |  
|Asset retirement obligation                                                                                                                                                      |  |                           | 23,342   |   |                        |   | 22,444   |  
|Notes and accrued interest to related parties                                                                                                                                    |  |                           | 160,044  |   |                        |   | 135,838  |  
|Short-term portion of long-term related party debt                                                                                                                               |  |                           | 5,292    |   |                        |   | 5,292    |  
|Total current liabilities                                                                                                                                                        |  |                           | 648,721  |   |                        |   | 661,217  |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|Long-term debt to related party, net of short-term portion and net of 
discount of $911,368 and $918,634 as of June 30, 2009 and 
December 31, 2008, respectively                |  |                           | 79,757   |   |                        |   | 72,651   |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|TOTAL LIABILITIES                                                                                                                                                                |  |                           | 728,478  |   |                        |   | 733,868  |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|STOCKHOLDERS' DEFICIT                                                                                                                                                            |  |                           |          |   |                        |   |          |  
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|Common stock  par value $0.001, 500 million shares authorized. 460,110,701 and 460,061,553 shares issued and 
outstanding at June 30, 2009 and December 31, 2008, respectively. |  |                           | 460,111  |   |                        |   | 460,062  |  
|Additional paid in capital                                                                                                                                                       |  |                           | (473,638 | ) |                        |   | (629,320 | )
|Accumulated deficit                                                                                                                                                              |  |                           | (637,846 | ) |                        |   | (487,587 | )
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|Total stockholders' deficit                                                                                                                                                      |  |                           | (651,373 | ) |                        |   | (656,845 | )
|                                                                                                                                                                                 |  |                           |          |   |                        |   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                      |  | $                         | 77,105   |   |                        | $ | 77,023   |  







The accompanying notes are an integral part of these financial statements.



1



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TREATY ENERGY CORPORATION

(Formerly Alternate Energy Corp.)

STATEMENTS OF OPERATIONS



|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|-------------------------------------------------------------- |  | ------------------------- | ----------- | - | --------------------------- | - | ----------- | ---------------- |  | - | ---------------- | - |  | - | ----------- | -
|                                                               |  | Six months ended June 30, |             |   | Three months ended June 30, |  
|                                                               |  | 2009
(Unaudited)          |             |   | 2008
(Unaudited)            |   |             | 2009
(Unaudited) |  |   | 2008
(Unaudited) |  
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |  
|REVENUES                                                       |  |                           |             |   |                             |   |             |                  |  |   |                  |  
|Sales of oil                                                   |  | $                         | 7,406       |   |                             | $ | 21,782      |                  |  | $ | 1,739            |   |  | $ | 8,516       |  
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|Total revenues                                                 |  |                           | 7,406       |   |                             |   | 21,782      |                  |  |   | 1,739            |   |  |   | 8,516       |  
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|EXPENSES                                                       |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|Lease operating expenses                                       |  |                           | 27,813      |   |                             |   | 44,506      |                  |  |   | 15,982           |   |  |   | 28,267      |  
|Transportation costs                                           |  |                           | 809         |   |                             |   | 711         |                  |  |   | 294              |   |  |   | (483        | )
|Production taxes                                               |  |                           | 366         |   |                             |   | 1,396       |                  |  |   | 352              |   |  |   | 786         |  
|General and administrative                                     |  |                           | 109,058     |   |                             |   | 40,165      |                  |  |   | 39,219           |   |  |   | 17,726      |  
|Depreciation, depletion and amortization                       |  |                           | 1,520       |   |                             |   | 1,806       |                  |  |   | 321              |   |  |   | 1,150       |  
|Accretion of asset retirement obligation                       |  |                           | 898         |   |                             |   | 832         |                  |  |   | 449              |   |  |   | 416         |  
|Interest expense, related parties                              |  |                           | 17,201      |   |                             |   | 9,328       |                  |  |   | 10,820           |   |  |   | 3,634       |  
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|Total expenses                                                 |  |                           | 157,665     |   |                             |   | 98,744      |                  |  |   | 67,437           |   |  |   | 51,496      |  
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|NET LOSS                                                       |  | $                         | (150,259    | ) |                             | $ | (76,962     | )                |  | $ | (65,698          | ) |  | $ | (42,980     | )
|                                                               |  |                           |             |   |                             |   |             |                  |  |   |                  |   |  |   |             |  
|Net loss per common shares - basic and diluted                 |  | $                         |           |   |                             | $ |           |                  |  | $ |                |   |  | $ |           |  
|Weighted average common shares outstanding - basic and diluted |  |                           | 460,092,407 |   |                             |   | 460,061,553 |                  |  |   | 460,110,701      |   |  |   | 460,061,553 |  



The accompanying notes are an integral part of these financial statements.



2



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TREATY ENERGY CORPORATION

(Formerly Alternate Energy Corp.)

STATEMENT OF SHAREHOLDERS DEFICIT



|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|---------------------------------------------------------- |  | ------------ | ----------- |  | ------------------ | - | ------- | ----------- |  | - | -------- | - |  | ----- | -------- | - |  | - | -------- | -
|                                                           |  | Common Stock |             |  | Additional Paid In |   |         | Accumulated |  |   |          |  
|                                                           |  | Shares       |             |  | Amount             |   |         | Capital     |  |   | Loss     |   |  | Total |         
|Balances, December 31, 2006                                |  |              | 254,322     |  |                    | $ | 255     |             |  | $ | 53,024   |   |  | $     | (62,723  | ) |  | $ | (9,444   | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Shares issued for cash                                     |  |              | 2,029,481   |  |                    |   | 2,029   |             |  |   | 97,721   |   |  |       |        |   |  |   | 99,750   |  
|Founder's shares                                           |  |              | 457,777,750 |  |                    |   | 457,778 |             |  |   | (457,778 | ) |  |       |        |   |  |   |        |  
|Interest imputed on related 
party note payable            |  |              |             |  |                    |   |         |             |  |   | 2,825    |   |  |       |          |   |  |   | 2,825    |  
|Net loss, year ended 12/31/07                              |  |              |             |  |                    |   |         |             |  |   |          |   |  |       | (183,350 | ) |  |   | (183,350 | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Balances, December 31, 2007                                |  |              | 460,061,553 |  |                    | $ | 460,062 |             |  | $ | (304,208 | ) |  | $     | (246,073 | ) |  | $ | (90,219  | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Interest imputed on related 
party note payable            |  |              |             |  |                    |   |         |             |  |   | 5,240    |   |  |       |          |   |  |   | 5,240    |  
|Expenses paid on behalf of the 
Company by a related party |  |              |             |  |                    |   |         |             |  |   | 169,648  |   |  |       |          |   |  |   | 169,648  |  
|Debt acquired in reverse merger                            |  |              |             |  |                    |   |         |             |  |   | (500,000 | ) |  |       |          |   |  |   | (500,000 | )
|Net loss, year ended 12/31/08                              |  |              |             |  |                    |   |         |             |  |   |          |   |  |       | (241,514 | ) |  |   | (241,514 | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Balances, December 31, 2008                                |  |              | 460,061,553 |  |                    | $ | 460,062 |             |  | $ | (629,320 | ) |  | $     | (487,587 | ) |  | $ | (656,845 | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Interest imputed on related 
party note payable            |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Cashless exercise of options                               |  |              | 49,148      |  |                    |   | 49      |             |  |   | (49      | ) |  |       |          |   |  |   |        |  
|Cash provided by a related party                           |  |              |             |  |                    |   |         |             |  |   | 90,000   |   |  |       |          |   |  |   | 90,000   |  
|Expenses paid on behalf of the 
Company by a related party |  |              |             |  |                    |   |         |             |  |   | 59,547   |   |  |       |          |   |  |   | 59,547   |  
|Interest imputed on related 
party note payable            |  |              |             |  |                    |   |         |             |  |   | 6,184    |   |  |       |          |   |  |   | 6,184    |  
|Net loss, six months ended 06/30/09                        |  |              |             |  |                    |   |         |             |  |   |          |   |  |       | (150,259 | ) |  |   | (150,259 | )
|                                                           |  |              |             |  |                    |   |         |             |  |   |          |   |  |       |          |   |  |   |          |  
|Balances, June 30, 2009                                    |  |              | 460,110,701 |  |                    | $ | 460,111 |             |  | $ | (473,638 | ) |  | $     | (637,846 | ) |  | $ | (651,373 | )



The accompanying notes are an integral part of these financial statements.



3



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TREATY ENERGY CORPORATION

(Formerly Alternate Energy Corp.)

STATEMENTS OF CASH FLOWS
(Unaudited)



|                                                                                            |  |                           |          |   |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                            |  | Six Months Ended June 30, |         
|                                                                                            |  | 2009                      |          |   | 2008 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                                        |  |                           |          |   |      |  
|Net loss                                                                                    |  | $                         | (150,259 | ) |      | $ | (76,962 | )
|                                                                                            |  |                           |          |   |      |   |       |  
|Adjustments to reconcile net loss to net cash provided 
by / (used in) operating activities |  |                           |          |   |      |   |       |  
|Depreciation, depletion and amortization                                                    |  |                           | 1,520    |   |      |   | 1,806   |  
|Amortization of discount on related-party note                                              |  |                           | 7,266    |   |      |   | 7,267   |  
|Accretion of asset retirement obligation                                                    |  |                           | 898      |   |      |   | 832     |  
|Interest imputed on related-party notes                                                     |  |                           | 6,184    |   |      |   | 1,288   |  
|                                                                                            |  |                           |          |   |      |   |       |  
|Changes in operating assets and liabilities:                                                |  |                           |          |   |      |   |       |  
|Accounts receivable                                                                         |  |                           | 223      |   |      |   | (9,995  | )
|Accounts payable and accrued liabilities                                                    |  |                           | (37,805  | ) |      |   | 22,613  |  
|Interest payable                                                                            |  |                           | 2,233    |   |      |   |       |  
|                                                                                            |  |                           |        |   |      |   |         |  
|Net cash provided by / (used in) operating activities                                       |  |                           | (169,740 | ) |      |   | (53,151 | )
|                                                                                            |  |                           |          |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                        |  |                           |          |   |      |   |         |  
|                                                                                            |  |                           |          |   |      |   |         |  
|Net cash provided by / (used in) investing activities                                       |  |                           |        |   |      |   |       |  
|                                                                                            |  |                           |          |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                        |  |                           |          |   |      |   |         |  
|                                                                                            |  |                           |          |   |      |   |         |  
|Expenses paid by related-parties on the Companys behalf                                    |  |                           | 83,547   |   |      |   | 24,000  |  
|Cash contributed by related parties                                                         |  |                           | 90,000   |   |      |   |       |  
|Principal payments on related-party notes payable                                           |  |                           | (1,982   | ) |      |   |       |  
|                                                                                            |  |                           |          |   |      |   |         |  
|Net cash provided by / (used in) financing activities                                       |  |                           | 171,565  |   |      |   | 24,000  |  
|                                                                                            |  |                           |          |   |      |   |         |  
|Net increase / (decrease) in cash and cash equivalents                                      |  |                           | 1,825    |   |      |   | (29,151 | )
|Cash and cash equivalents, beginning of period                                              |  |                           | 971      |   |      |   | 33,347  |  
|Cash and cash equivalents, end of period                                                    |  | $                         | 2,796    |   |      | $ | 4,196   |  
|                                                                                            |  |                           |          |   |      |   |         |  
|SUPPLEMENTAL CASH FLOW INFORMATION                                                          |  |                           |          |   |      |   |         |  
|Cash paid for interest                                                                      |  | $                         | 1,518    |   |      | $ |       |  
|Cash paid for income taxes                                                                  |  |                           |        |   |      |   |       |  
|Cashless exercise of warrants                                                               |  |                           | 49       |   |      |   |       |  





The accompanying notes are an integral part of these financial statements.



4



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TREATY ENERGY CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1  ORGANIZATION AND NATURE OF BUSINESS

Information Regarding Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described below and elsewhere in this report. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

History

Treaty Energy Corporation, (Treaty, the Company, we, or us) was incorporated in the State of Nevada in August, 1997. As is more fully explained in Note 10 of our annual report as of December 31, 2008 filed on Form 10-K, in December, 2008, we merged with Treaty Petroleum, Inc., a Texas Corporation under a transaction commonly referred to as a reverse merger.

We own a 100% working interest and 68% revenue interest in two oil leases in Crockett County, Texas containing four oil wells and one water disposal well. We are currently focused on operating, developing and increasing the production of our oil wells on those leases and acquiring additional working interests in oil and gas properties.

We are a crude oil and natural gas producing company.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principals in the United States.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates underlying these consolidated financial statements include the estimated quantities of proved oil reserves used to compute depletion of oil and natural gas properties and the estimated fair value of asset retirement obligations.

All of the Companys accounting policies are not included in this Form 10-Q. A more comprehensive set of accounting policies adopted by the Company are included on our Form 10-K as of December 31, 2008 and are herein incorporated by reference.

NOTE 3  RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements and accordingly, does not require any new fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the impact of the adoption of SFAS 157 will have on its statements of operations and financial condition.



5



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The Company has adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  This pronouncement requires us to review for impairment long-lived assets, such as property, plant, equipment, and acquired intangible assets subject to amortization, whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. We assess recoverability of assets to be held and used by comparing their carrying amount to the expected future undiscounted net cash flows they are expected to generate. If an asset or group of assets is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset or group of assets exceeds fair value. We report long-lived assets meeting the criteria to be considered as held-for-sale at the lower of their carrying amount or fair value less anticipated disposal costs. In the years presented, the Company did not recognize any impairment charges on long-lived assets.

In June, 2006, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, which is an interpretation of FASB Statement No. 143 Accounting for Asset Retirement Obligations. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. The Company estimates a fair value of the obligation on each well in which it owns an interest by identifying costs associated with the future dismantlement and removal of production equipment and facilities and the restoration and reclamation of a production operations surface to a condition similar to that existing before oil and natural gas extraction began.

In general, the amount of an Asset Retirement Obligation (ARO) and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor up to the estimated settlement date which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO is accreted to its future estimated value using the same assumed cost of funds and the liability is increased each period as the retirement obligation approaches. See Note 7 for a discussion of our estimated Asset Retirement Obligation.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS 162 becomes effective 60 days following the SECs approval of the Public Company Accounting Oversight Board (PCAOB) amendment to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles and is not expected to have a significant impact on our consolidated financial statements.

NOTE 4  GOING CONCERN

The accompanying financial statements have been prepared assuming that Treaty will continue as a going concern. As shown in these financial statements, we have had continuing negative cash flows from operations and working capital deficits. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Management intends to finance these deficits by making additional shareholder notes and seeking additional outside financing through either debt or sales of its common stock.

NOTE 5  OIL PRODUCING PROPERTIES

The history of our producing properties is found in our report on Form 10-K as of December 31, 2008, filed on March 31, 2009. There have been no changes to our properties for the six months ended June 30, 2009, except that the wells are not producing as of June 30, 2009 and are effectively shut in.

For more information on the status of our wells as of this report, see Results of Operations in Item 2  Management Discussion and Analysis of Operations included in this report on Form 10-Q.

NOTE 6  NOTES PAYABLE

Note Payable for the Conveyance of Oil Producing Properties

On March 2, 2005, Phoenix Oil and Gas, LLC purchased the working interest in the producing properties in Crockett County, Texas by issuing a $1 million note. For a complete discussion of the terms of this note and its history, please refer to Note 5 of our report filed on Form 10-K as of December 31, 2008, filed March 31, 2009.



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During the six months ended June 30, 2009, we made approximately $205 of principal payments on the note and amortized $7,266 of note discount which is included in interest expense. According to the terms of the note, payments are to be made out of production. When we resume production, principal and interest payments on this note will resume.

Notes Payable for Working Capital

During 2007 and 2008, much of our working capital to finance our negative cash flows came from shareholders. During the six months ended June 30, 2009, these shareholders funded an additional $24,000 in principal and we accrued an additional $3,751 in interest. At June 30, 2009, our principal balance to these shareholders was $156,428 with unpaid accrued interest of $3,616.

These notes are revolving in nature, are callable at any time by the maker and bear simple interest at 3%. Management believes that the stated interest on these notes is not equivalent to the Companys realistic cost of capital. We therefore imputed an additional 5% interest and charged interest expense with an additional $6,184 for the six months ended June 30, 2009.

NOTE 7  ASSET RETIREMENT OBLIGATION

In June, 2006, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, which is an interpretation of FASB Statement No. 143 Accounting for Asset Retirement Obligations. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. The Company estimates a fair value of the obligation on each well in which it owns an interest by identifying costs associated with the future dismantlement and removal of production equipment and facilities and the restoration and reclamation of a fields surface to a condition similar to that existing before oil and natural gas extraction began.

In general, the amount of an Asset Retirement Obligation (ARO) and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor up to the estimated settlement date which is then discounted back to the date that the abandonment obligation was incurred using an assumed cost of funds for the Company. After recording these amounts, the ARO is accreted to its future estimated value using the same assumed cost of funds and the liability is increased each period as the retirement obligation approaches.

Management has estimated the ARO at $40,000. The well lives are estimated at 15 years.For the six months ended June 30, 2009 and the year ended December 31, 2008, we accreted to expense according to the following table:

|                                 |  |                          |        |  |                     |   |        | 
|-------------------------------- |  | ------------------------ | ------ |  | ------------------- | - | ------ | 
|                                 |  | Six Months
Ended 6/30/09 |        |  | Year Ended
12/31/08 |  
|Beginning balance                |  | $                        | 22,444 |  |                     | $ | 20,781 | 
|Liabilities incurred             |  |                          |      |  |                     |   |      | 
|Liabilities settled              |  |                          |      |  |                     |   |      | 
|Accretion expense                |  |                          | 898    |  |                     |   | 1,661  | 
|Revision of existing liabilities |  |                          |      |  |                     |   |      | 
|Ending balance                   |  | $                        | 23,342 |  |                     | $ | 22,444 | 



The asset retirement obligation is secured by a $25,000 Certificate of Deposit, held in trust in lieu of a performance bond, by the Bank of Fayette County, Tennessee with the Texas Railroad Commission as beneficiary should the Company fail to honor its asset retirement obligation. The Certificate of Deposit was purchased and offered as collateral by our Corporate Secretary.

NOTE 8  SHAREHOLDERS EQUITY

We are authorized to issue 500 million shares of our common stock. At December 31, 2008, we had 460,061,553 shares issued and outstanding.

During the six months ended June 30, 2009 we issued 49,148 shares to a consultant to Alternate Energy Corp. upon his cashless exercise of 74,695 options to purchase our stock.

At June 30, 2009, we had 460,110,701 shares issued and outstanding.



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Shareholder Contribution of Capital

During the six months ended June 30, 2009, a shareholder contributed $90,000 in cash for working capital and paid expenses on behalf of the Company totaling $59,547. This shareholder elected to have those cash contributions and expenses treated as a contribution of capital. We recorded the expenses and with an offsetting credit to Additional Paid in Capital in those amounts.

NOTE 9  RELATED PARTY TRANSACTIONS

As is discussed in Note 6, we have partially funded our working capital with loans from shareholders, accruing interest payable to them, and paying interest and principal.

Also as discussed in Note 6, we made payments to a shareholder related to the promissory note that arose from the conveyance of the oil producing properties that we acquired from this shareholder.

As is discussed in Note 8, a shareholder paid expenses totaling $59,547, made cash contributions of $90,000. This shareholder elected to have them treated as capital contributions.

The operator of all of our oil producing properties is a related-party shareholder. Since we own a 100% working (but non-operating) interest, the shareholder-operator controls all decisions with respect to additional development, re-completions and lease operating expenses.

NOTE 10  SUBSEQUENT EVENTS

Change of Board of Directors and Appointment of Chief Executive Officer

On July 8, 2009, shareholders representing seventy four percent (74%) of the voting power of Treaty Energy Corporation (the Company) took certain corporate action by written consent of shareholders pursuant to Nevada corporate law. The shareholders voted to elect Randall Newton a director and as Chairman of the Board of Directors of the Company, and simultaneously voted to remove Ronda Hyatt, David Hallin, and Gary Dunham as directors of the Company. After these actions, Randall Newton remained as the only director of the Company.

Mr. Newton, as sole director of the Company, then was appointed Chief Executive Officer of the Company.

We signed a one-year agreement with Mr. Newton, compensating him at $250,000 per year which is all payable in common stock of the Company.

In addition, we signed an agreement with Newton Collaboration, LLC, a Texas Limited Liability Company owned by Mr. Newton to provide accounting and SEC filing services to the Company. Under this contract, Newton Collaboration is to receive $5,000 per month payable in cash or common stock.

Acquisition Activity

Vago #1 Project

On July 30, 2009, we entered into an asset purchase agreement to acquire the Vago #1 oil and gas lease in Taylor County, Texas from HiGround of Texas, LLC, a related party. We closed the acquisition on August 10, 2009.

The asset purchase agreement provides that the price for the assets is $175,000, which is to be paid by issuing HiGround 7,000,000 shares of Treaty common stock (an implied valuation of $0.025 per share).

The Vago project property is a 212 acre site that lies within an older natural gas storage unit. It includes two productive well bores. The first well bore will require a fishing job to remove certain equipment that was dropped in the well prior to being returned to production. The second well bore will require a pump change to restore production.

We are currently seeking financing to undertake these repairs.



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Item 2 - Managements Discussion And Analysis Of Financial Condition And Results Of Operations

You should read the following discussion in conjunction with managements discussion and analysis contained in our 2008 Annual Report on Form 10-K, as well as the financial statements and notes hereto included in this quarterly report on Form 10-Q. The following discussion contains forward-looking statements that involve risks, uncertainties, and assumptions, such as statements of our plans, objectives, expectations, and intentions. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future events.

Results of Operations

Six Months Ended June 30, 2009, compared with Six Months Ended June 30, 2008

Our revenues were significantly reduced for the six months ended June 30, 2009 compared with the same period in 2008. Our oil wells had a small amount of production during January, 2009, but then went off-line and did not produce during February through June of 2009. As of June 30, 2009, the wells are effectively shut in. We need additional capital to work these wells over and as of the date of this report, we have not received this capital. We are however, intensely working to obtain the capital and are hopeful that we will re-enter these wells in the third quarter of 2009 and bring these wells back to previous production levels. In addition, we are in the process of negotiating with several owners of oil and gas properties to acquire their properties for cash and common stock of the Company. We hope to acquire several of these properties before the end of the calendar year and are seeking financing to drill additional wells on these properties, as well as drill additional wells on our existing leases in Crockett County, Texas.

Our lease operating expenses, transportation expenses and production-based taxes are lower for the six months ended June 30, 2009 compared with the same period in 2008, principally due to lower production levels and lower operating activities.

General and administrative expenses have increased dramatically. They increased from $40,165 for the six months ended June 30, 2008 to $109,058 for the same period in 2009. Most of this increase is a result of an increase in costs associated with out statutory filings and other compliance costs. We did not incur these costs in 2008 because we were not a publicly reporting entity.

Our depreciation, depletion and amortization expenses were also lower since most of those costs are amortized on the unit of production method and have production as their amortization base which was lower.

Interest expense to related parties is increased due to higher debt levels to these related parties than existed during 2008.

Three Months Ended June 30, 2009, compared with Three Months Ended June 30, 2008

Whereas we recorded revenues of $8,516 for the six months ended June 30, 2008, we had no production for the same period in 2009 because of the status of the shut in wells. The small amount of recorded revenues for the three months ended June 30, 2009 resulted from an increase in the value of oil in storage.

Our lease operating expenses, transportation costs and production taxes are all significantly reduced, owing to the reduced activities in the field resulting from the shut in wells.

General and administrative expenses were significantly higher during the three months ended June 30, 2009, due to public filing and compliance costs.

Liquidity and Capital Resources

Our financial statements have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

Currently, we are not able to maintain our existing operations through the existing cash balances and internally generated cash flows from sales of oil production. Moreover, we have determined that our existing capital structure is not adequate to fund our planned growth. We intend to finance our drilling, work over and acquisition program by issuing additional common stock and through loans from our shareholders.There can be no assurance that we will be successful in procuring the financing we are seeking. Future cash flows are subject to a number of variables,



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including the level of production, natural gas prices and successful drilling efforts. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures.

Plan of Operation

Over the next twelve months we intend to develop the following initiatives:

Revenue Generation

We intend to spend approximately $160,000 repairing existing equipment on our four production wells. We believe this will increase production to approximately 1,500 barrels per month which, assuming a $50 price per barrel, will yield around $48,450 per month of net revenues (after taxes and transportation costs).

We intend to also seek acquisitions of oil and gas properties with production capabilities and proven reserves and have signed several letters of intent with oil and gas property owners to acquire their properties.

There is no guarantee that we can raise the funds to accomplish our production goals or consummate our intended acquisitions, or that the expenditures on our existing leases will produce the increases in production we anticipate.

Drilling and Work-Over Programs

We have identified 14 locations on our existing leases that we believe will significantly increase our production. Our current estimate is that the capital cost of each well will be $505,000 and that each well will generate an additional 15 to 65 barrels of production per day. Assuming a conservative oil price of $50 per barrel, that would generate between $14,000 and $63,000 in monthly incremental revenues.

We currently do not have adequate cash to undertake these plans.

Financing

We hope to finance our work over, drilling and acquisition programs by issuing additional common stock and taking shareholder loans. We are currently seeking $5 million in financing to accomplish our objectives.

There is no guarantee that we can raise the required capital to repair our existing equipment, make additional acquisitions, drill in our current leases, or that undertaking such repairs, acquisitions and drilling program will make us profitable or self-sustaining.

Item 3 - Quantitive and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this item.

Item 4  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.



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Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Change In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II  OTHER INFORMATION

Item 1  Legal Proceedings

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

Item 1A  Risk Factors

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our common stock are described under Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, filed March 31, 2009.

This information should be considered carefully, together with other information in this report and other reports and materials we file with the Securities and Exchange Commission.

Item 2 - Unregistered Sales of Equity Securities

During the six months ended June 30, 2009, we issued 49,148 shares upon cashless exercise of 74,695 options by a consultant to Alternate Energy Corp.

At June 30, 2009, we had 460,110,701 shares issued and outstanding.

Options and Warrants

Our options and warrants activity for the six months ended June 30, 2009 is as follows:

|                              |  |             |  |                                          |           |  |                           |  |    |           |  |  |          |   |  |             |          |   |  |  |           | 
|----------------------------- |  | ----------- |  | ---------------------------------------- | --------- |  | ------------------------- |  | -- | --------- |  |  | -------- | - |  | ----------- | -------- | - |  |  | --------- | 
|                              |  |             |  |                                          |           |  | Six Months Ended 06/30/09 | 
|Weighted
Average
Strike Price |  | Expiry Date |  | No. of Warrants / Options O/S @ 12/31/08 |           |  | New
Grants                |  |    | Exercises |  |  | Expiries |   |  | O/S
6/30/09 |         
|$     0.02                    |  | 03/09/09    |  |                                          | 290,067   |  |                           |  |  |           |  |  | (74,695  | ) |  |             | (215,372 | ) |  |  |         | 
|$     0.02                    |  | 11/28/09    |  |                                          | 62,246    |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 62,246    | 
|$     0.05                    |  | 06/05/10    |  |                                          | 561,250   |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 561,250   | 
|$     0.01                    |  | 06/22/12    |  |                                          | 124,492   |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 124,492   | 
|$     0.01                    |  | 06/22/13    |  |                                          | 138,435   |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 138,435   | 
|$     0.01                    |  | 06/22/14    |  |                                          | 124,492   |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 124,492   | 
|$     0.01                    |  | 06/22/15    |  |                                          | 2,300,000 |  |                           |  |  |           |  |  |        |   |  |             |        |   |  |  | 2,300,000 | 
|TOTALS                        |  |             |  |                                          | 3,600,982 |  |                           |  |  |           |  |  | (74,695  | ) |  |             | (215,372 | ) |  |  | 3,310,915 | 



Item 3  Defaults Upon Senior Securities

None.

Item 4 - Submission of Matters to a Vote of Security Holders

On July 8, 2009, shareholders representing seventy four percent (74%) of the voting power of Treaty Energy Corporation (the Company) took certain corporate action by written consent of shareholders pursuant to Nevada corporate law. The shareholders voted to elect Randall Newton a director and as Chairman of the Board of Directors of the Company, and simultaneously voted to remove Ronda Hyatt, David Hallin, and Gary Dunham as directors of the Company. After these actions, Randall Newton remained as the only director of the Company.

Mr. Newton, as sole director of the Company, then was appointed Chief Executive Officer of the Company.

Item 5  Other Information

None.



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Item 6  Exhibits



|            |  |                                                                                                                                                                                                 
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                          
|3.1         |  | Articles of Incorporation, as filed August 1, 1997 (included as Exhibit 3.1 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).                                
|3.2         |  | Bylaws (included as Exhibit 3.2 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).                                                                            
|3.3         |  | Articles of Amendment to the Articles of Incorporation, as filed August 23, 1997 (included as Exhibit 3.3 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).  
|3.4         |  | Articles of Amendment to the Articles of Incorporation, as filed November 20, 1998 (included as Exhibit 3.4 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
|3.5         |  | Articles of Amendment to the Articles of Incorporation, as filed May 16, 2003 (included as Exhibit 3.5 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).     
|4.1         |  | 2003 Stock Benefit Plan, dated July, 1, 2003 (included as Exhibit 4.1 to the Form S-8 filed July 23, 2003, and incorporated herein by reference).                                               
|4.2         |  | Form of Class A Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).                                                                     
|4.3         |  | Form of Class B Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).                                                                     
|4.4         |  | Form of Class C Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).                                                                     
|4.5         |  | Subscription Agreement between the Company and various subscribers (included as Exhibit 10.1 to the Form SB-2/A filed September 14, 2005, and incorporated herein by reference).                
|4.6         |  | Subscription Agreement between the Company and various subscribers (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).                          
|14.1        |  | Corporate Code of Ethics (included as Exhibit 14 to From 10-KSB filed March 16, 2004, and incorporated herein by reference).                                                                    
|2.1         |  | Subsidiaries of the registrant (filed herewith).                                                                                                                                                
|31.1        |  | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                              
|32.1        |  | Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                             





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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |                           |                                       
|--------------------- | ------------------------- | --------------------------------------
|Date: August 14, 2009 | Treaty Energy Corporation
|                      |                          
|                      | By:                       | /s/ RANDALL NEWTON                    
|                      |                           | Randall Newton
Chief Executive Officer





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