EXHIBIT 10.54

          FORBEARANCE AGREEMENT BETWEEN GALAXY ENERGY CORPORATION AND
             BRUNER FAMILY TRUST UTD MARCH 28, 2005 DATED EFFECTIVE
                                DECEMBER 1, 2006




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                              FORBEARANCE AGREEMENT

         This Forbearance  Agreement (this "Agreement") is dated to be effective
as of  December  1,  2006,  and is entered  into by and  between  Galaxy  Energy
Corporation,  a Colorado  corporation  ("Borrower")  and Bruner Family Trust UTD
March 28, 2005 ("Note Holder").

                                    RECITALS:

         WHEREAS,   Borrower  and  Note  Holder  are  parties  to  that  certain
Promissory Note in the principal  amount of $2,600,000,  dated January 14, 2004,
as amended by that certain Note Modification Agreement, dated April 1, 2006 (the
Promissory Note and the Note Modification Agreement are collectively referred to
herein as the "Note");

         WHEREAS,  Borrower  has  failed to make the  mandatory  payment  of the
principal  and  interest  owing as  required  under  Section  1 of the Note (the
"Primary Payment"); and
         WHEREAS,  Note Holder is willing to forbear from  enforcing  its rights
that arise as a result of the failure by  Borrower  to make the Primary  Payment
for a limited period of time,  provided that Borrower complies with the terms of
this Agreement.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

                                  I. AGREEMENT

         Note  Holder  hereby  agrees to  refrain  through  5:00  p.m.  Mountain
Standard Time on June 30, 2007 (the  "Termination  Date") from exercising any of
its rights and  remedies  under the Note that may exist by virtue of the failure
by Borrower to make the Primary  Payment and hereby waives any such rights until
the Termination Date.

         1. Except as expressly  provided  herein,  the  execution  and delivery
of this Agreement  shall not: (a) constitute an extension or modification of any
aspect of the Note;  (b)  extend the terms of the Note or the due date of any of
the  obligations  set forth in the Note;  (c) give rise to any obligation on the
part of the Note Holder to extend,  modify or waive any term or condition of the
Note; (d) give rise to any defenses or counterclaims to the right of Note Holder
to otherwise  enforce its rights and remedies under the Note; or (e) establish a
custom or course of dealing.

         2.   From and after the Termination Date, Note Holder shall be entitled
to enforce the Note according to the original terms thereof.

                       II. REPRESENTATIONS AND WARRANTIES

         In  consideration  of the limited  agreement  of Note Holder to forbear
from the exercise of its rights and remedies as set forth above, Borrower hereby
represents and warrants to Note Holder as of the date hereof as follows:


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         1.   The  execution,  delivery and  performance  of  this  Agreement by
Borrower are within Borrower's  corporate power and have been duly authorized by
all necessary corporate action.

         2.  This  Agreement  constitutes a  valid and legally binding Agreement
enforceable against Borrower in accordance with its terms subject to the effects
of  bankruptcy,  insolvency,  fraudulent  conveyance  and other  laws  affecting
creditors' rights generally and to general equitable principles.

         3.  The Note  constitutes  a valid and legally  binding  obligation  of
Borrower,  enforceable  against  Borrower in  accordance  with the terms thereof
subject to the effects of  bankruptcy,  insolvency,  fraudulent  conveyance  and
other laws  affecting  creditors'  rights  generally  and to  general  equitable
principles.

                               III. MISCELLANEOUS

         1.  HEADINGS. Section headings in this Agreement  are  included  herein
for  convenience  of  reference  only and  shall not  constitute  a part of this
Agreement for any other purpose.

         2.  GOVERNING  LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED  AND  ENFORCED IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF WYOMING
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

         3.  COUNTERPARTS.  This  Agreement  may  be  executed  in any number of
counterparts, and by different parties hereto in separate counterparts,  each of
which when so executed and delivered  shall be deemed an original,  but all such
counterparts together shall constitute but one and the same instrument.

         4.  CONTINUED EFFECTIVENESS.  Except  as  expressly  set  forth in this
Agreement,  the terms of the Note  remain  unchanged,  and shall  remain in full
force and effect and are hereby confirmed and ratified.

         5.  NO  NOVATION.  This Agreement  shall  not be  deemed  or  construed
to be a satisfaction,  reinstatement, novation or release of the Note or, except
as expressly  provided  herein, a waiver by Note Holder of any of its rights and
remedies under the Note, or at law or in equity.

         6.   REAFFIRMATION.  Borrower hereby reaffirms each and every covenant,
condition, obligation and provision set forth in the Note, as modified hereby.

         7.   CONSTRUCTION.  Borrower  acknowledges that it has been represented
by its own legal counsel in connection  with its execution of this Agreement and
the Note,  that it has  exercised  independent  judgment  with  respect  to this
Agreement  and the  Note,  and that it has not


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relied on Note Holder or Note  Holder's  counsel for any advice with  respect to
this Agreement or the Note.

         8.  INTEGRATION;  WAIVERS.  This  Agreement,  the  Note  and the  other
written  agreements,  instruments  and  documents  entered  into  in  connection
therewith (collectively, the "Borrower/Note Holder Documents") set forth in full
the terms of agreement  between the parties  with respect to the subject  matter
thereof and are intended as the full,  complete and exclusive contract governing
the relationship between the parties with respect thereto, superseding all other
discussions,    promises,    representations,    warranties,    agreements   and
understandings  between  the parties  with  respect  thereto.  Any waiver of any
condition in, or breach of, any of the foregoing in a particular  instance shall
not  operate as a waiver of other or  subsequent  conditions  or breaches of the
same or a different kind.

         9.   Note  Holder's  exercise or failure to exercise  any rights  under
any of the foregoing in a particular  instance  shall not operate as a waiver of
its right to exercise the same or different rights in other instances. Except as
expressly provided to the contrary in this Agreement,  all the terms, conditions
and  provisions of the  Borrower/Note  Holder  Documents  shall continue in full
force and effect.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed  as of the  date  first  set  forth  above,  by their  respective  duly
authorized officers.


BORROWER                                  NOTE HOLDER

GALAXY ENERGY CORPORATION                 BRUNER FAMILY TRUST UTD MARCH 28, 2005


By:                                       By:  /s/ MARC E. BRUNER
     ---------------------------             -----------------------------------
Name:                                     Name:  MARC E. BRUNER, TRUSTEE
     ---------------------------
Title:
       -------------------------
                                          By:
                                             -----------------------------------
                                          Name:  CYNTHIA L. GAUSVIK, TRUSTEE