1

                              UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549

                               FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006.

                                   OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE TRANSITION FROM _______ TO ________.

                    COMMISSION FILE NUMBER 000-31945

                        POWDER RIVER BASIN GAS CORP.
          (Exact name of registrant as specified in its charter)

              COLORADO                              84-1521645
   (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)            Identification No.)

                          202, 1212 31st Ave NE
                           Calgary, AB T2E 7S8
                (Address of principal executive offices)

                Issuer's telephone number: (403) 228-9222

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 [X]    No [ ]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

At June 30, 2006, there were outstanding 120,694,807 shares of the
Registrant's Common Stock, $.001 par value.

Transitional Small Business Disclosure Format: Yes [X]   No [ ]



 2

                                  PART I

                             FINANCIAL INFORMATION

                                  Item 1.

                             FINANCIAL STATEMENTS
                                 (UNAUDITED)

     TABLE OF CONTENTS
                                                                       Page
                                                                       ----

Part I Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
June 30, 2006 (Unaudited) and December 31, 2005. . . . . . . . . . . . .3

Consolidated Statements of Operations (Unaudited)
For the three months and six months ended June 30, 2006 and 2005 . . . .4

Consolidated Statements of Cash Flows (Unaudited)
For the six months ended June 30, 2006 and 2005. . . . . . . . . . . . .5

Notes to the Consolidated Financial Statements . . . . . . . . . . . . .7

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations. . . . . . . . . . . . . . 10

Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . . . 13

Part II Other Information

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 14

Item 2. Unregistered Sales of Equity Securities
        and Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . 14

Item 3. Defaults by the Company on its
        Senior Securities. . . . . . . . . . . . . . . . . . . . . . . 14

Item 4. Submission of Matter to a Vote
        Of Security Holders. . . . . . . . . . . . . . . . . . . . . . 14

Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 14

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14



 3
                        POWDER RIVER BASIN GAS CORP
                        Consolidated Balance Sheets



                                   ASSETS
                                   ------
                                                   June 30,    December 31,
                                                     2006          2005
                                                 ------------  ------------
                                                  (Unaudited)
                                                         
CURRENT ASSETS
  Cash                                           $ 2,128,320   $   382,861
  Accounts receivable, net                         6,209,126     2,521,853
                                                 ------------  ------------
   Total Current Assets                            8,337,446     2,904,714
                                                 ------------  ------------
PROPERTY AND EQUIPMENT (Net)                          28,098        26,721
                                                 ------------  ------------
OIL AND GAS PROPERTIES USING
 FULL COST ACCOUNTING
  Properties not subject to amortization           5,742,279     3,535,724
  Properties being amortized                       1,881,220     1,367,251
  Accumulated amortization                           (54,248)      (25,241)
                                                 ------------  ------------
   Net Oil and Gas Properties                      7,569,251     4,877,734

OTHER ASSETS
  Deposits and other assets                          137,115        15,500
                                                 ------------  ------------
   Total Other Assets                                137,115        15,500
                                                 ------------  ------------
   TOTAL ASSETS                                  $16,071,910   $ 7,824,669
                                                 ============  ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------
CURRENT LIABILITIES
  Accounts payable                               $   201,651   $    51,739
  Stock deposits                                     185,000           -
  Income taxes payable                             3,494,612       811,355
  Note payable, related party                            -          46,902
  Notes payable                                      806,000     1,368,700
                                                 ------------  ------------
   Total Current Liabilities                       4,687,263     2,278,696
                                                 ------------  ------------
   Total Liabilities                               4,687,263     2,278,696
                                                 ------------  ------------

STOCKHOLDERS' EQUITY
  Common stock, 200,000,000 shares authorized
   of $0.001 par value, 120,694,807 and
   115,314,807 shares issued
   and outstanding, respectively                     120,694       115,314
  Capital in excess of par value                   8,583,014     7,678,394
  Subscriptions receivable                          (539,333)     (259,333)
  Other comprehensive income                           2,705         2,705
  Accumulated deficit                              3,217,567    (1,991,107)
                                                 ------------  ------------
   Total Stockholders' Equity                     11,384,647     5,545,973
                                                 ------------  ------------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $16,071,910   $ 7,824,669
                                                 ============  ============





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

 4
                        POWDER RIVER BASIN GAS CORP
                   Consolidated Statements of Operations
                                (Unaudited)


                                        For the                    For the
                                  Three Months Ended            Six Months Ended
                                        June 30,                   June 30,
                               --------------------------  --------------------------
                                   2006         2005          2006          2005
                               ------------ -------------  ------------  ------------
                                                            
REVENUE
  Oil and gas sales            $   556,517   $   312,239   $   795,797   $   388,460
  Property and working
   interest sales                5,800,000           -      11,600,000     2,300,000
                               ------------ -------------  ------------  ------------
   Total Revenue                 6,356,517       312,239    12,395,797     2,688,460

EXPENSES
  Depreciation, depletion and
   amortization                     20,087         2,802        32,232         5,202
  General and administrative       936,829       254,750     1,232,912       486,150
  Commission on working
   interest sales                1,205,000           -       2,385,000       425,000
  Value of warrants granted
   for marketing and legal
   costs                               -             -             -          91,650
  Lease operating costs            477,235        57,766       543,190       112,225
                               ------------ -------------  ------------  ------------
      Total Expenses             2,639,151       315,318     4,193,334     1,120,227
                               ------------ -------------  ------------  ------------
NET OPERATING INCOME (LOSS)      3,717,366        (3,079)    8,202,463     1,568,233
                               ------------ -------------  ------------  ------------
OTHER INCOME (EXPENSE)
  Other expense                   (300,000)          -        (300,000)      (90,000)
  Gain on sale of assets               -           2,841           -           2,841
  Interest income                    1,017           -           1,017           -
  Interest expense                 (10,142)       (2,208)      (11,549)      (11,514)
                               ------------ -------------  ------------  ------------
   Total Other Income (Expense)   (309,125)          633      (310,532)      (98,673)

NET INCOME (LOSS) BEFORE
INCOME TAXES                     3,408,241        (2,446)    7,891,931     1,469,560

INCOME TAXES                    (1,158,802)          -      (2,683,257)     (530,400)
                               ------------ -------------  ------------  ------------

NET INCOME (LOSS)              $ 2,249,439   $    (2,446)  $ 5,208,674   $   939,160
                               ============ =============  ============  ============
BASIC INCOME (LOSS)
PER COMMON SHARE               $      0.02   $     (0.00)  $      0.04   $      0.01
                               ============ =============  ============  ============
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING    120,694,807   106,050,961   119,566,188   105,233,281
                               ============ =============  ============  ============





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



 5
                        POWDER RIVER BASIN GAS CORP
                   Consolidated Statements of Cash Flows
                                (Unaudited)


                                                       For the Six Months Ended
                                                               June 30,
                                                      --------------------------
                                                          2006          2005
                                                      ------------  ------------
                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                          $ 5,208,674   $   939,160
  Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation, depletion and amortization              32,232         5,202
     Gain on sale of assets                                   -          (2,841)
     Common stock issued for services rendered            399,000           -
     Additional expense for granting of warrants              -          91,650
  Changes in operating assets and liabilities:
   Increase in accounts receivable                     (3,687,273)   (1,004,654)
   Increase in deposits and other assets                 (121,615)     (309,089)
   Increase in taxes payable                            2,683,257       530,400
   Increase in accounts payable and accrued expenses      149,912        63,867
                                                      ------------  ------------
     Net Cash Provided by Operating Activities          4,664,187       313,695
                                                      ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for oil and gas property development    (1,605,524)     (289,930)
  Expenditures for property and equipment                  (4,602)      (17,198)
  Proceeds from sale of interest in leases                    -         200,000
                                                      ------------  ------------
     Net Cash Used in Investing Activities             (1,610,126)     (107,128)
                                                      ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable and long-term
   liabilities                                                -          90,000
  Payments on notes payable and long-term liabilities  (1,609,602)     (219,976)
  Stock deposits received                                 185,000           -
  Proceeds from issuance of common stock                  116,000           -
                                                      ------------  ------------
     Net Cash Used in Financing Activities             (1,308,602)     (129,976)
                                                      ------------  ------------
     NET INCREASE IN CASH                               1,745,459        76,591

     CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     382,861       168,539
                                                      ------------  ------------
     CASH AND CASH EQUIVALENTS AT END OF PERIOD       $ 2,128,320   $   245,130
                                                      ============  ============




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


 6
                        POWDER RIVER BASIN GAS CORP
             Consolidated Statements of Cash Flows (Continued)
                                (Unaudited)


                                                       For the Six Months Ended
                                                               June 30,
                                                      --------------------------
                                                          2006          2005
                                                      ------------  ------------
                                                              
SUPPLEMENTAL CASH FLOW INFORMATION

CASH PAID FOR:
  Interest                                            $    11,549   $     5,252
  Income taxes                                        $       -     $       -


NON-CASH FINANCING ACTIVITIES
  Common stock issued for acquired oil and
   gas properties                                     $   115,000   $   200,000
  Oil and gas properties acquired through the
   issuance of debt                                   $ 1,000,000   $   565,000
  Common stock issued for retirement of payables      $       -     $       -
  Common stock issued for subscriptions receivable    $   280,000   $       -


















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



 7
                        POWDER RIVER BASIN GAS CORP.
               Notes to the Consolidated Financial Statements
                    June 30, 2006 and December 31, 2005

NOTE 1 -  BASIS OF PRESENTATION

     The financial information included herein is unaudited and has been
     prepared consistent with generally accepted accounting principles for
     interim financial information and with the instructions to Form 10-QSB
     and Item 310(b) of Regulation S-B.  Accordingly, these financial
     statements do not include all information and footnotes required by
     generally accepted accounting principles for complete financial
     statements.  These statements should be read in conjunction with the
     audited financial statements and notes thereto included in the
     Company's annual report on Form 10-KSB for the year ended December 31,
     2005.  In the opinion of management, these financial statements
     contain all adjustments (consisting solely of normal recurring
     adjustments) which are, in the opinion of management, necessary for a
     fair statement of results for the interim period presented.

     The results of operations for the six months ended June 30, 2006 and
     2005 are not necessarily indicative of the results to be expected for
     the full year.

NOTE 2 -  DILUTED INCOME (LOSS) PER SHARE

     Following is a reconciliation of the diluted income (loss) per share
     for the three months and six months ended June 30, 2006 and 2005:



                                                           For the
                                                    Three Months Ended
                                                          June 30,
                                                     2006          2005
                                                 ------------  ------------
                                                         
     Net income available to
      common shareholders                        $ 2,249,439   $    (2,446)
                                                 ============  ============
     Weighted average shares                     120,694,807   106,050,961
     Effect of dilutive securities                 8,100,000             -
                                                 ------------  ------------
                                                 128,794,807   106,050,961
                                                 ============  ============
     Basic income per share (based
      on weighted average
      shares)                                    $       0.02  $     (0.00)
                                                 ============  ============


     The diluted income per share for the three months ended June 30, 2006
     includes common stock equivalents, consisting of 8,100,000 warrants,
     which were granted during 2005.  Weighted average shares issuable upon
     the exercise of stock warrants (4,100,000 warrants) were not included
     in the foregoing calculation for the three months ended June 30, 2005
     because they are antidilutive.







 8
                        POWDER RIVER BASIN GAS CORP.
               Notes to the Consolidated Financial Statements
                    June 30, 2006 and December 31, 2005

NOTE 2 -  DILUTED INCOME (LOSS) PER SHARE (Continued)



                                                           For the
                                                    Three Months Ended
                                                          June 30,
                                                     2006          2005
                                                 ------------  ------------
                                                         
     Net income available to
      common shareholders                        $ 5,208,674   $   939,160
                                                 ============  ============
     Weighted average shares                     119,566,188   105,233,281
      Effect of dilutive securities                8,320,442     3,416,665
                                                 ------------  ------------
                                                 127,886,630   108,649,946
                                                 ============  ============
     Basic income per share (based
      on weighted average
      shares)                                    $      0.04   $      0.01
                                                 ============  ============


     The diluted income per share for the six months ended June 30, 2006
     and 2005 includes common stock equivalents, consisting of 8,100,000
     and 4,100,000 warrants, respectively, which were granted during 2005.

NOTE 3 -  OIL AND GAS PROPERTIES

     The full cost method is used in accounting for oil and gas properties.
     Accordingly, all costs associated with acquisition, exploration, and
     development of oil and gas reserves, including directly related
     overhead costs, are capitalized.  In addition, depreciation on
     property and equipment used in oil and gas exploration and interest
     costs incurred with respect to financing oil and gas acquisition,
     exploration and development activities are capitalized in accordance
     with full cost accounting.  Capitalized interest for the three months
     and six months ended June 30, 2006 and 2005 was $0.  All capitalized
     costs of proved oil and gas properties subject to amortization are
     being amortized on the unit-of-production method using estimates of
     proved reserves.  Investments in unproved properties and major
     development projects not subject to amortization are not amortized
     until proved reserves associated with the projects can be determined
     or until impairment occurs.  If the results of an assessment indicate
     that the properties are impaired, the amount of the impairment is
     added to the capitalized costs to be amortized.  As of June 30, 2006
     and December 31, 2005, proved oil and gas reserves had been identified
     on certain of the Company's oil and gas properties.  During the six
     months ended June 30, 2006 and 2005, the Company recorded depletion of
     $29,007 and $3,200 on its producing properties.  All other wells are
     incomplete as of June 30, 2006 and December 31, 2005.








 9
                        POWDER RIVER BASIN GAS CORP.
               Notes to the Consolidated Financial Statements
                    June 30, 2006 and December 31, 2005

NOTE 4 -  SIGNIFICANT TRANSACTIONS

     During the six months ended June 30, 2006, the Company issued the
     following shares of common stock:

     -    1,100,000 shares through the exercise of common stock warrants at
          prices ranging from $0.10 to $0.16 per share, for total proceeds
          of $116,000.
     -    1,900,000 shares for services rendered to various outside
          consultants at $0.21 per share, for a total value of $399,000.
     -    500,000 shares for work to be performed on one of the Company's
          oil and gas properties, valued at $115,000, or $0.23 per share.
     -    2,000,000 shares to an unrelated individual in exercise of common
          stock warrants at prices ranging from $0.12 to $0.16 per share,
          for total proceeds of $280,000.  The $280,000 was not received by
          the Company at June 30, 2006, thus the amount is recorded as a
          subscription receivable.

     Also during the six months ended June 30, 2006, the Company sold 25%
     of a working interest in a producing property to an unrelated party
     for a total of $11,800,000, less a commission of $2,360,000.  The
     carrying value of the 25% working interest at the date of the sale was
     $200,000.  Since the Company is in the business of buying and selling
     working interests in producing oil and gas properties, the sale of
     working interests is being recorded as revenue in the accompanying
     statements of operations for the three months and six months ended
     June 30, 2006 and 2005.

     During 2005, the Company purchased a 75% working interest in a
     producing property for a total of $800,000.  During 2006, the Company
     purchased an additional 20% working interest on this same producing
     property for an additional $1,000,000.  At June 30, 2006, the balance
     owing on this note was $750,000, payable at $100,000 every ninety
     days, with no interest.

     During the six months ended June 30, 2005, the Company purchased a 75%
     working interest in a producing property for a total of $800,000.  For
     the purchase price of $800,000, the Company paid $30,000 in cash,
     signed a promissory note for $570,000 payable by December 31, 2005
     bearing no interest, and issued a total of 2,000,000 shares of common
     stock valued at $0.10 per share (or $200,000).  The shares issued were
     valued at the market price of the common stock on the date that the
     agreement was entered into.

     On March 1, 2005, the Company sold 25% of the acquired working
     interest in the producing property as described above, to an unrelated
     party for a total of $2,500,000, less a commission of $425,000.




 10

ITEM 2   Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Cautionary Statement Regarding Forward-looking Statements
_________________________________________________________
This report may contain "forward_looking" statements.  Examples of
forward_looking statements include, but are not limited to: (a) projections
of revenues, capital expenditures, growth, prospects, dividends, capital
structure and other financial matters; (b) statements of plans and
objectives of our management or Board of Directors; (c) statements of our
future economic performance; (d) statements of assumptions underlying other
statements and statements about us and our business relating to the future;
and (e) any statements using the words "anticipate," "expect," "may,"
"project," "intend" or similar expressions.

Plan of Operation
_________________

The Company is in the business of acquiring the working interest in leases
of oil and gas leases with the intent of reselling a portion of the working
interests acquired.  The Company reviews and evaluates the geological and
other technical data applicable lease in order to determine the likely
viability and possible profitability of commencing and completing multiple
well drilling programs on the properties covered by the leases.  If
determined to be viable, the Company also engages third party contractors
to explore for, drill, re-work and further develop the properties in order
to maximize economically justified oil and gas production from those leases
in a cost effective manner.

The Company's focus has been in obtaining leasehold interests in acreage
within the Powder River Basin, currently a most prolific coalbed methane
gas exploration play in the domestic United States.  Its attributes include
low cost, shallow depth drilling and completion; a proven play with major
operators and an existing and expanding infrastructure; greater and longer
production yields when comparing cost/benefit analyses to other basins and,
a very low exploration risk.

During 2005, the Company acquired the Monroe project containing
approximately 300 acres.  The Company is working to activate the wells on
this project.

During 2005, the Company acquired the Kirby lease in Polk County, TX
containing one producer and on injection well.  These wells were re-
completed and put in production in 2005.

During 2005, the Company acquired a 75% working interest in Lincoln County,
Oklahoma containing approximately 960 acres.  The Company plans to rework
the wells on this project.

During 2005, the Company purchased a 75% working interest in the Weesatche
project in Goliad County, Texas.  This is a drilling project which the
Company plans to drill in 2006 and contains approximately 2300 acres.  An
additional 20% interest was purchased during 2006 for an additional
$1,000,000.

During 2005, the Company purchased a project in the San Juan Basin in New
Mexico.  This is a re-work program as well as an offset drilling program
which is planned to commence in 2006.


 11

At December 31, 2005, the Company held 80 to 100% working interest in the
following lease properties in Wyoming, all of which were purchased prior to
2003, for future development:




Lease               WY County           Net Acres      Gross Acres
-------             ---------           ---------      -----------
                                              

Cranston            Crook               1,934          1,934
Franklin            Crook                 620          1,944
Griffith (1)        Crook                 320            640
Griffith (2)        Crook                 160            320
Griffith (3)        Crook                 440            600
Kanode              Crook                 920          1,000
Olds (D Road)       Crook                 200            640
Olds (Keyhole)      Crook                 120            480
Karmon              Johnston              320            320
Noteboom            Johnston              800            800
Legerski            Sheridan              340            360
Robb                Sheridan            1,486          2,520
Zullig              Sheridan              256            320



The 2 wells were completed on the Zullig Lease in 2002 and tested again in
2004.  Management of the Company has decided to seek to farm out further
development on these wells.  As of December 31, 2005, the Company had no
material or significant production from any of these properties in WY.

At December 31, 2005, the Company owned working interests in producing oil
and gas leases:



                                                         Percent of
                                                         Working Interest
Lease               WY County                Net Acres   Owned by the Co.
-------             ---------                ---------   -----------------
                                                
Leonard Heirs       Arcadia Parish, LA         960        75%
Osage Project       Osage County, OK           960        25%
Springhill A        Webster Parish, LA         154        75%
Springhill B        Bossier Parish, LA         440        75%
Converse            Converse County, WY      1,815       100%
Monroe Project      Franklin Parish, TX        300       100%
Kirby Lease         Polk County, TX             40       100%
Sparks Project      Lincoln County, OK         960        75%
Weesatche           Goliad County, TX        2,300        75%
San Juan            San Juan, New Mexico     3,560        75%


During the six months ended June 30, 2006, the Company sold 25% of a
working interest in a producing property to an unrelated party for a total
of $11,800,000, less a commission of $2,360,000.  The carrying value of the
25% working interest at the date of the sale was $200,000.  Since the
Company is in the business of buying and selling working interests in
producing oil and gas properties, the $11,600,000 has been included as
revenue in the accompanying statement of operations for the six months
ended June 30, 2006.


 12

Results of Operations
_____________________
Six Months Ended June 30, 2006 compared with 2005
__________________________________________________________________

Revenues:  During the six months ended June 30, 2006, the Company reported
an increase in oil and gas sales compared to the six months ended June 30,
2005 of approximately $407,000 or 105%.  The Company also reported revenues
related to property and working interest sales of $11,600,000 during the
six months ended June 30, 2006.  The Company expects to continue to sell
property and working interests in its properties in the future as the
properties are developed and additional properties are acquired.

Expenses:  During the six months ended June 30, 2006, the Company reported
a substantial increase in expenses of approximately $3,073,000 compared to
the six months ended June 30, 2005, primarily due to the increased
commissions on working interest sales, increased lease operating costs
related to the increase in production revenue, and consulting services
rendered.

Liquidity and Capital Resources
_______________________________

On June 30, 2006, the Company had $4,687,263 in current liabilities, which
includes notes payable due within the next twelve months of $806,000, and
taxes payable estimated at $3,494,612.  The current accounts payable
include payments to auditors, accounting and legal as well as start up
costs. The accrued expenses include accumulated interest on the outstanding
notes owed by the Company, and stock deposits received totaling $185,000
for which shares will be issued during the next few months.

The Company's ability to meet any future debt service will be dependant
upon the Company's future performance, which will be subject to oil and
natural gas prices, the Company's level of production, general economic
conditions and financial, business and other factors affecting the
operations of the Company, many of which are beyond its control.  There can
be no assurance that the Company's future performance will not be adversely
affected by such changes in oil and natural gas prices and / or production
nor by such economic conditions and / or financial, business and other
factors.  In addition, there can be no assurance that the Company's
business will generate sufficient cash flow from operations or that future
bank credit will be available in an amount to enable the Company to service
its indebtedness or make necessary expenditures.  In such event, the
Company would be required to obtain such financing from the sale of equity
securities or other debt financing.  There can be no assurance that any
such financing will be available on terms acceptable to the Company. Should
sufficient capital not be available, the Company may not be able to
continue to implement its business strategy.

Impact of Inflation
___________________
At this time, we do not anticipate that inflation will have a material
impact on our current or future operations.

Critical Accounting Policies and Estimates
__________________________________________

Except with regard to the estimated future cash flows of the capitalized
oil and gas properties, the Company does not employ any critical accounting
policies or estimates that are either selected from among available
alternatives or require the exercise of significant management judgment to


 13

apply or that if changed are likely to materially affect future periods.
Management reviews the carrying value of the capitalized oil and gas
properties annually for evidence of impairment and considers, based on its
current marketing activities, plans and expectations, and the perceived
effects of competitive factors, whether any write-downs should be taken or
whether the estimated reserves should be changed.

Recent Accounting Pronouncements
________________________________

In December, 2004, the Financial Accounting Standards Board (FASB) issued
SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R
requires that compensation cost related to share-based employee
compensation  transactions be recognized in the financial statements.
Share-based employee compensation transactions within the scope of SFAS
123R include stock options, restricted stock plans, performance-based
awards, stock appreciation rights and employee share purchase plans. The
provisions of SFAS 123R are effective as of the first interim period that
begins after December 15, 2005.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, an Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions.  The amendments made by SFAS 153 are based on the principle
that exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged. Further, the amendments eliminate the narrow
exception in APB Opinion No. 29 for nonmonetary exchanges of similar
productive assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have commercial substance. The Statement is
effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after September 15, 2005. We do not expect to enter into any
transactions that would be affected by adopting SFAS 153.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, a Replacement of APB Opinion No. 20 and SFAS No. 3.  SFAS No.
154 replaces APB Opinion No. 20, Accounting Changes and SFAS No 3,
Reporting Accounting Changes in Interim Financial Statements and changes
the requirement for the accounting for and reporting of a change in
accounting principles.  SFAS No. 154 applies to all voluntary changes in
accounting principles.  It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement
does not include specific transition provisions.  When a pronouncement
includes specific transition provisions, those provisions should be
followed.  The provisions of SFAS No. 154 will be effective for accounting
changes made in fiscal year beginning after December 15, 2005.  We do not
expect that the adoption of SFAS No. 154 will have a material impact on the
Company's financial condition or operations in future years.

ITEM 3.  CONTROLS AND PROCEDURES

Our principal executive and principal financial officer has participated
with management in the evaluation of effectiveness of the controls and
procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under
the Exchange Act as of the end of the period covered by this report.  Based
on that evaluation, our principal executive and principal financial officer
believes that our disclosure controls and procedures (as defined in Rule
13a-15(e) or Rule 15d-15(e) under the Exchange Act) are effective as of the
end of the period covered by the report.  There have been no changes in our
internal controls that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting during
the period covered by this report.


 14

                             PART II
                         OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

The Company is not subject to any legal proceedings at June 30, 2006.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the six months ended June 30, 2006, the Company issued the following
shares of common stock:

-    1,100,000 shares through the exercise of common stock warrants at
prices ranging from $0.10 to $0.16 per share, for total proceeds of
$116,000.
-    1,900,000 shares for services rendered to various outside consultants
at $0.21 per share, for a total value of $399,000.
-    500,000 shares for work to be performed on one of the Company's oil
and gas properties, valued at $115,000, or $0.23 per share.
-    2,000,000 shares to an unrelated individual in exercise of common
stock warrants at prices ranging from $0.12 to $0.16 per share, for total
proceeds of $280,000.  The $280,000 was not received by the Company at June
30, 2006, thus the amount is recorded as a subscription receivable.

The shares issued in the foregoing transactions were issued in reliance on
the exemption from registration and prospectus delivery requirements of the
Act set forth in Section 3(b) and/or Section 4(2) of the Securities Act and
the regulations promulgated thereunder.


ITEM 3 - DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES

     None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5 - OTHER INFORMATION

     None.

ITEM 6 - EXHIBITS

Exhibit 31.1 -   Certification of principal executive officer and
                 principal financial officer as adopted pursuant to
                 Section 302 of the Sarbanes-Oxley Act Of 2002

Exhibit 32.1 -   Certification of principal executive officer and
                 principal financial officer pursuant to 18 U.S.C.
                 Section 1350, as adopted pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002


                                SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

                                Powder River Basin Gas Corp.

Date: August 14, 2006           By: /s/ Brian Fox
                                ----------------------------------------
                                        Brian Fox, President and Chief
                                        Financial Officer