**EXHIBIT10.18**

PURCHASE AND SALE AGREEMENT

##### between

PRB ENERGY, INC

##### “Seller”

AND

##### Arete Industries, inc.

“BUYER”

EFFECTIVE:  SEPTEMBER 1, 2006

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###### **PURCHASE AND SALE AGREEMENT**

ThisPurchase and Sale Agreement (the “Agreement”) entered into this     thday of August, 2006, is the agreement between PRB Energy, Inc., 1875 LawrenceStreet, Suite 450, Denver, Colorado 80202 (the “Seller”) and AreteIndustries, Inc., 7260 Osceola Street, Westminster, Colorado 80030 (the “Buyer”)concerning the sale and purchase of certain coal bed methane gas gatheringpipeline and compressor station-related assets described below.  For purposes of this Agreement, the effectivedate of the purchase and sale shall be 12:01 a.m. Mountain Time on September 1,2006 (the “Effective Date”).  Sellerand Buyer shall close the transaction contemplated by this Agreement on orbefore September 1, 2006, (the “Closing Date”.)

RECITALS:

A.            Buyer and Seller desire to enterinto an agreement whereby the Seller seeks to sell and the Buyer seeks to buythe coal bed methane gas gathering pipeline and compressor station-relatedassets currently associated with the TOP Gathering System in Campbell County,Wyoming (hereinafter referred to as the “TOP”); and

B.            Buyer and Seller desire to enterinto this Agreement to complete said transaction.

Nowtherefore, in consideration of the mutual agreements and covenants containedherein, Buyer and Seller agree as follows:

1.                                       Purchaseand Sale of Assets.  Subject to theterms, conditions and exclusions of this Agreement, Seller agrees to sell andBuyer agrees to purchase Seller’s right, title and interest in and to “TOP”located in Campbell County, Wyoming as depicted on Exhibit A

a.               Real Property.  All easements, rights of way, permits,licenses, prescriptive rights structures or other interests in real propertyassociated with or relating to the Assets as listed on Exhibit A-1;

b.              Equipment.  All pipelines, equipment, valves, vessels,fittings, meters or other measurement facilities, operational and controlequipment, pig launchers, pig catchers, tanks and all other personal property,as depicted on Exhibit A****(onedehydration unit & one ecology pot currently on site are excluded from thepurchase and sale)****;

c.               Contracts etal.  All contracts and agreementsrelating to the use of the assets, as depicted on Exhibit A-1.

d.              Other Interestsin the Assets.  All other rights,titles and interests in and to the Assets as described above are part of theAssets, it being the purpose and intent of this Agreement that Seller sell andBuyer purchase all of Seller’s right, title and interest in and to the Assets.

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2.                                       PurchasePrice.  In consideration of theconveyance of the Assets, upon execution of this Agreement, Buyer shall pay toSeller the sum of Three Hundred and Thirty Thousand Dollars and no cents($330,000.00)  (the “Purchase Price”)

3.                                       Seller’sRepresentations and Warranties. Seller represents and warrants, to the best of its knowledge, thefollowing to Buyer as of the Closing Date:

a.               PreferentialRights to Purchase.  No third partyholds any preferential right to purchase, right of first offer, right of lastrefusal or other preferential right to purchase the Assets.

b.              Signatory forSeller.  The signatory for Seller hasthe full power and authority to bind the Seller to the terms hereof, and tocomplete the sale contemplated hereby.

c.               AgreementRepresents.  This Agreementrepresents the valid and subsisting agreement of Seller, fully binding uponSeller and subject only to general principles of equity and bankruptcy laws.

d.              No Abandonment.  Seller has taken no actions that demonstratean intent to abandon the Assets, or released of record any rights of waypertaining to the Assets.

e.               Fees.  Seller has incurred no liability, contingentor otherwise, for broker’s or finder’s fees in respect to this transaction forwhich Buyer shall have any responsibility whatsoever.

4.                                       Buyer’sRepresentations and Warranties. Buyer represents and warrants, to the best of Buyer’s knowledge, thefollowing to Seller as of the Closing Date:

a.               Consents andApprovals.  No consent, approval,authorization, license, order or permit, or declaration, filing or registrationwith, or notification to any governmental authority or any other person, isrequired to be obtained by the Buyer in connection with the execution anddelivery of this Agreement by the Buyer or the performance of the Buyer’sobligations hereunder;

b.              Fees.  Buyer has not incurred any liability,contingent or otherwise, for brokers’ or finders’ fees relating to thetransactions contemplated by this Agreement for which Seller shall have anyresponsibility whatsoever;

c.               Restoration.  Buyer has the sole responsibility todetermine the necessary measures and to perform all necessary restoration ofthe Assets.

**5.****                                      WARRANTY.   BUYER ACKNOWLEDGES AND AGREES THAT THEASSETS LISTED IN EXHIBITS A, A-1 AND B ARE BEING TRANSFERRED, ASSIGNED ANDCONVEYED FROM SELLER TO BUYER “AS IS, WHERE IS AND WITH ALL FAULTS” IN THEIRPRESENT CONDITION AND STATE OF REPAIR. SELLER HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES**

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**CONCERNING THE ASSETS, EXPRESS ORIMPLIED, WHETHER ARISING IN CONTRACT, TORT OR ANY OTHER THEORY OF LAW,INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF TITLE, MERCHANTABILITY ORFITNESS FOR A GENERAL OR PARTICULAR PURPOSE. FURTHER, BUYER SPECIFICALLY AGREES THAT SELLER IS MAKING NOREPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE ADEQUACY ORCOMPLETENESS OF THE UNDERLYING REAL PROPERTY INTERESTS ASSOCIATED WITH OR USEDIN CONNECTION WITH THE ASSETS, INCLUDING BUT NOT LIMITED TO EASEMENTS ANDRIGHTS OF WAY.**

**6.             Indemnification.**

**a.****                                       BySeller.  Seller agrees to indemnify, defend and hold Buyer harmless on account ofall debts, liabilities or causes of action attributable to Buyer’s ownership ofthe property and to transactions applicable to the Contracts which accruedprior to the date of Closing except as otherwise set forth below; and**

**b.****                                       ByBuyer.  Buyer agrees to indemnify, defend and hold Seller harmless on account ofall debts, liabilities or causes of action attributable to Seller’s ownershipof the property and to transactions applicable to the Contracts which accruedafter to the date of Closing.**

**c.****                                       Allindemnities of or by the parties under this Agreement shall survive the ClosingDate hereof.**

7.                                       ConveyanceDocuments.  At Closing, Seller shallexecute and deliver an Assignment, Conveyance, and Bill of Sale in the form ofwhich is attached as Exhibit B.

8.                                       Conditionsto Closing - Seller.  The Seller’sobligations at Closing are subject, at Seller’s option, to the satisfaction ator prior to the Closing Date of the following conditions precedent:

a.               All representationsand warranties of Buyer contained in Paragraph 4 of this Agreement shall betrue and correct in all material respects, and Buyer shall have performed andsatisfied all covenants and agreements required by this Agreement to beperformed and satisfied by Buyer at or prior to the Closing Date in allmaterial respects;

b.              Buyer shall haveexecuted and delivered to Seller all of the documents that are contemplated tobe executed and delivered pursuant to this Agreement prior to or at the ClosingDate.

9.                                       Conditionsto Closing - Buyer.  The Buyer’sobligations at Closing are subject, at Buyer’s option, to the satisfaction ator prior to the Closing Date of the following conditions precedent:

a.               All representationsand warranties of Seller contained in Paragraph 3 of this Agreement shall betrue and correct in all material respects, and Seller shall have performed and 

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satisfied all covenantsand agreements required by this Agreement to be performed and satisfied bySeller at or prior to the Closing Date in all material respects;

b.              Seller shall haveexecuted and delivered to Buyer all of the documents that are contemplated tobe executed and delivered pursuant to this Agreement prior to or at the ClosingDate.

10.                                 Termination.  This Agreement may be terminated inaccordance with the following provisions:

a.               By Seller if theconditions set forth in Paragraph 8 are not satisfied, through no fault of theSeller, or waived by Seller in writing, as of the Closing Date; or

b.              By Buyer if theconditions set forth in Paragraph 9 are not satisfied, through no fault of theBuyer, or waived by Buyer in writing, as of the Closing Date.

11.                                 Confidentiality.Unless required by applicable law, rules or regulations, neither party heretoshall make a public announcement or communication to any third party concerningthis Agreement or the transactions contemplated hereby without the expresswritten consent of the other party.  Notwithstandingany of the foregoing, Buyer and Seller shall be permitted to communicate asdeemed necessary in its sole discretion regarding change of ownership ofProperty.

12.                                 EntireAgreement.  This Agreement, togetherwith Exhibits “A”, “A-1” and “B” attached hereto and data delivered hereunder,shall constitute the complete agreement between the parties hereto and shallsupersede all prior agreements, whether written or oral, and anyrepresentations or conversations with respect to the purchase and sale of theAssets.

13.                                 BindingEffect.  This Agreement shall bebinding upon and shall inure to the benefit of the parties hereto, and theirsuccessors and assigns.  This Agreementmay be assigned to a party’s parent, subsidiary, member or affiliate without theconsent of the other party provided notice of such assignment is provided tothe other party.  No other assignment byeither party shall be made without the express written consent of the otherparty, which shall not be unreasonably withheld.

14.                                 Counterparts.  This Agreement may be executed in any numberof counterparts each of which shall be considered an original and each of whichshall be an enforceable agreement.

15.                                 LawApplicable.  This Agreement shall begoverned by and construed in accordance with the laws of the State of Wyomingapplicable to contracts made and performed entirely therein.

16.                                 JointDraft.  This Agreement was draftedand prepared by Seller and Buyer with each party having access to their ownlegal counsel.  Seller and Buyer eachwaive any position or claim that it may now have or may have in the futurebased on the argument that the Agreement was drafted by only one of the partiesand not jointly prepared by Seller and Buyer.

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17.                                 Severability:  Each and every provision of this Agreement isintended to be severable.  If any term orprovision is held to be invalid or illegal for any reason whatsoever, all otherconditions and provisions of this Agreement shall nevertheless remain in fullforce and effect so long as the economic or legal substance contemplated bythis transaction is not affected in a materially adverse manner with respect toeither party.

18.                                 Mediation:  No civil action with respect to any dispute,claim or controversy arising out of or relating to this Agreement may becommenced until the matter has been submitted to a mediator for mediation.  Either Party may commence mediation byproviding to the other party a written request for mediation, setting forth thesubject of the dispute, claim or controversy and the relief requested.  It is hereby agreed that the Parties, uponoccasion that such a notice is delivered, shall endeavor for a period of thirty(30) days to reach an accord on the disputed matter prior to going to formal mediation.  Should the Parties fail to reach such anaccord, the Parties agree to cooperate and act in good faith in the selectionof a mutually agreed to mediator and in scheduling the mediationproceedings.  The Parties furthercovenant that they will participate in the mediation in good faith, and thatthey will share equally in its costs. All offers, promises, conduct and statements, whether oral or written,made in the course of the mediation by any of the Parties, their agents,attorneys, employees, or experts, and by the mediator and the mediator’semployees, are confidential, privileged and inadmissible for any purposes,including impeachment, in any litigation or other proceeding involving theparties, provided that evidence that is otherwise admissible or discoverableshall not be rendered inadmissible non-discoverable as a result of its use inthe mediation.  Either Party may seekequitable relief prior to the mediation to preserve the status quo pendingcompletion of the mediation process. Except for an action to obtain equitable relief, neither party maycommence a civil action with respect to the matters submitted to mediationuntil after the completion of the initial mediation session, or 45 days afterthe date of filing of the written request for mediation, whichever occursfirst.  Mediation may continue after thecommencement of a civil action, if the Parties so desire.  The provisions of this clause may be enforcedby any Court of competent jurisdiction in the State of Wyoming, and the Party seekingenforcement shall be entitled to an award of all costs, fees and expenses,including attorneys’ fees, to be paid by the Party against whom the enforcementis ordered.

19.                                 Attorney’sFees.  The prevailing party in anydispute hereunder shall be entitled to recover its reasonable attorneys’ feesand costs.  In addition, should eitherparty decline to complete the closing and associated transaction, the decliningparty shall pay all attorney’s fees and costs of the party seeking to close thetransaction.

20.                                 Waivers.  No party’s rights hereunder will be deemedwaived except by a writing signed by such party.

21.                                 Incorporationof Exhibits.  All exhibits andschedules referred to herein are attached hereto and are made a part hereof bythis reference.  This Agreement shall bethe controlling document to the extent there is any conflict between thelanguage of this Agreement and any of the exhibits.

22.                                 Survival.  Except as otherwise provided herein, therepresentations and warranties contained in 

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this Agreement shall notsurvive the closing.

23.                                 FurtherAssurances and Agreements. Seller and Buyer each agree that it will takesuch further or other action(s) and to execute or deliver such other documentsnecessary to carry out the purposes and intent of this Agreement or anydocument delivered pursuant to this Agreement.

IN WITNESS WHEREOF, theParties to this Agreement have executed this Agreement as of the Effective Datefirst above written.
| **ARETE INDUSTRIES, INC.** |               |
|----------------------------|--------------------|
| ** **                 |               |   |
| By:                        | /s/ Charles Gamber |   |
| Name:                      | Charles Gamber     |   |
| Title:                     | CEO/President      |   |
|                       |               |   |
|                       |               |   |
| **PRB ENERGY, INC.**       |               |
| ** **                 |               |
| By :                       | /s/ Bill Hayworth  |   |
| Name:                      | Bill Hayworth      |   |
| Title:                     | President          |   |

 

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**EXHIBIT A**

**ATTACHEDTO AND MADE A PART OF THAT CERTAINPURCHASE AND SALE AGREEMENT BY AND BETWEENARETE INDUSTRIES, INC. and PRB ENERGY, INC.**

**DESCRIPTIONOF ASSETS**

**Pipelines**

·                  4.5Miles 8” coated steel pipe, hydro-tested, welds x-rayed and cathodically protected

·                  Piglauncher/receiver

**Interconnect**

·                  Building

·                  Slugcatcher

·                  LevelController/Scrubber pot

·                  400BBL Tank

·                  Piglauncher/receiver

**Buff Station**

·                  InletSeparator

·                  Separatorflash tanks (2)

·                  400BBL Tank

·                  VariousPiping and various valves — heat traced and insulated

·                  Emergencyshut down system — fire eyes (4), gas detectors (4)

·                  Meterhouses (3) — Barton Chart meter, Total Flow Meters

·                  Oxygenanalyzer

·                  Suctioncontrol valves (4)

·                  Regulators

·                  Buildings(4)

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**EXHIBITA-1**

**ATTACHEDTO AND MADE A PART OF THAT CERTAINPURCHASE AND SALE AGREEMENT BY AND BETWEENARETE INDUSTRIES, INC. and PRB ENERGY, INC.**

**Real Property and Leasehold Interests**

·                  CompressorSite Agreement by and between the WYO Davis Family Limited Partnership and PRBGas Transportation, Inc. successor to TOP Gathering LLC, dated June 3, 2002

·                  PipelineRight-of-Way Grant by and between Ohmans, Inc. a Wyoming Corporation and PRBGas Transportation, Inc. successor to TOP Gathering LLC, dated September26,2001

·                  ReceiptPoint Site Lease by and between Ohmans, Inc., a Wyoming Corporation and PRB GasTransportation, Inc. successor to TOP gathering, LLC dated December 31, 2001

·                  GasCompressor Equipment Master Rental Agreement by and between UniversalCompression and PRB Gas Transportation, Inc. successor to TOP Gathering LLC,dated December 17, 2001

**Governmental Authorizations**

·                  Stateof Wyoming, Department of Environmental Quality Air Quality Permit CT-2598,Buff Compressor Station, dated November 23, 2001 as modified by Permit No.MD-837, dated December 17, 2002

**Contracts and Agreements**

·                  GatheringServices Agreement by and between Bear Paw Energy, LLC and PRB GasTransportation, Inc. successor to TOP Gathering LLC, dated September 20, 2001

·                  GatheringServices Agreement by and between PRB Gas Transportation, Inc. successor to TOPgathering LLC and United Energy Trading, dated July 18, 2002

·                  GatheringServices Agreement by and between PRB Gas Transportation, Inc. successor to TOPGathering LLC and Natural Gas Fuel Company, Inc. dated October 15, 2001

·                  GatheringServices Agreement by and between PRB Gas Transportation, Inc. successor to TOPGathering LLC and Natural Gas Fuel Company, Inc. — Emerald  dated July 18, 2002 (Expired)

·                  OperatingAgreement of TOP Gathering LLC dated October 15, 2001 (Expired)

·                  ContributionAgreement dated October 15, 2001, by and among Pete Haman, Knorstar Energy,LLC, data management Consultants, Inc. and Crescent Holding, LLC (Expired)

·                  LetterAgreement dated June 12, 2002 by and between TOP Gathering LLC and GlobalVision Solutions LLC for an internet based monitoring system (Expired)

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**EXHIBIT B**

**ATTACHEDTO AND MADE A PART OF THAT CERTAINPURCHASE AND SALE AGREEMENT BY AND BETWEENARETE INDUSTRIES, INC. and PRB ENERGY, INC.**

**ASSIGNMENT,CONVEYANCE, and BILL OF SALE**
| STATE OF WYOMING    | ) |
|---------------------|---|
|                | ) |
| COUNTY OF  CAMPBELL | ) |

 

THISASSIGNMENT, CONVEYANCE, AND BILL OF SALE (the “Assignment”) dated as ofSeptember    , 2006 is entered into between ARETEINDUSTRIES, INC. (“Assignee”) and PRB ENERGY, INC. (“Assignor”).

**WITNESSETH:**

FORTEN DOLLARS ($10.00) AND OTHER GOOD AND VALUABLE CONSIDERATION, the receipt andsufficiency of which are hereby acknowledged, Assignor hereby GRANTS, CONVEYS,QUITCLAIMS and ASSIGNS to Assignee all of Assignor’s right, title and interestin and to the following properties (real, personal, or mixed) and rights(contractual or otherwise) unless expressly reserved or excluded herein:together with all rights incident thereto as set forth in Exhibits A and A-1.  All properties, real, personal, or mixed andrights (contractual or otherwise) included hereinabove are sometimes referredto hereinafter as the “Property” or “Properties”.

TOHAVE AND TO HOLD the Properties subject to the following terms and conditions:

1.             The terms, covenants, andconditions hereof bind and inure to the benefit of the parties hereto and theirrespective successors and assigns.  Allfuture conveyances of any portion of the Properties and/or their associatedfacilities and equipment shall recognize and perpetuate the rights andobligations set out herein.

2.             ASSIGNEE ACKNOWLEDGES AND AGREES THAT THE ASSETSLISTED IN EXHIBITS A and A-1 ARE BEING TRANSFERRED, ASSIGNED AND CONVEYED FROM ASSIGNOR TO ASSIGNEE “AS IS, WHERE IS AND WITH ALL FAULTS” IN THEIR PRESENT CONDITION ANDSTATE OF REPAIR.  ASSIGNOR HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONSAND WARRANTIES CONCERNING THE ASSETS, EXPRESS OR IMPLIED, WHETHER ARISING INCONTRACT, TORT OR ANY OTHER THEORY OF LAW, INCLUDING, WITHOUT LIMITATION, ANY 

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WARRANTYOF TITLE, MERCHANTABILITY OR FITNESS FOR A GENERAL OR PARTICULAR PURPOSE.  FURTHER ASSIGNEE SPECIFICALLY AGREES THAT ASSIGNOR IS MAKING NO REPRESENTATION OR WARRANTY,EITHER EXPRESS OR IMPLIED, AS TO THE ADEQUACY OR COMPLETENESS OF THE UNDERLYINGREAL PROPERTY INTERESTS ASSOCIATED WITH OR USED IN CONNECTION WITH THE ASSETS,INCLUDING BUT NOT LIMITED TO EASEMENTS AND RIGHTS OF WAY.

3.             This Assignment and its performanceshall be construed in accordance with, and governed by, the laws of the Stateof Wyoming without regard to the choice of law rules of any jurisdiction, andAssignor and Assignee submits to the exclusive jurisdiction of State Courtslocated in Gillette, Campbell County, Wyoming.

EXECUTEDthis        day of August, 2006.
|            | **ASSIGNOR:**              | ** ** |
|------------|----------------------------|------------|
| ** ** | **PRB Energy, Inc.**       | ** ** |
| ** ** | ** **                 | ** ** |
|       | /s/ Bill Hayworth          |       |
|       | Bill Hayworth              |       |
|       | President                  |       |
|       |                       |       |
|       |                       |       |
| ** ** | **ASSIGNEE:**              | ** ** |
| ** ** | **Arete Industries, Inc.** | ** ** |
| ** ** | ** **                 | ** ** |
|       | /s/ Charles Gamber         |       |
|       | Charles Gamber             |       |
|       | CEO/President              |       |

 

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| STATE OF WYOMING   | ) |
|--------------------|---|
|               | ) |
| COUNTY OF CAMPBELL | ) |

 

Theforegoing instrument was acknowledged before me this        day of August, 2006, by Bill Hayworth on behalf of PRB Energy, Inc.

Witnessmy hand and official seal.
|        |          |
|--------|---------------|
|   |          |
|   | Notary Public |

 

 

 

My CommissionExpires:
| STATE OF COLORADO | ) |
|-------------------|---|
|              | ) |
| COUNTY OF         | ) |

 

Theforegoing instrument was acknowledged before me this       day of August, 2006, by Charles Gamber on behalf of Arete Industries, Inc.

Witnessmy hand and official seal.
|        |          |
|--------|---------------|
|   |          |
|   | Notary Public |

 

My CommissionExpires:

 

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