FORBEARANCE AGREEMENT BETWEEN GALAXY ENERGY CORPORATION AND BRUNER FAMILY TRUST

                                 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 N