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CORRESP
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      Reponse to SEC letter dated Nov 28 2006

    Hallador
      Petroleum Company

    1660
      Lincoln
      Street, Suite 2700

    Denver,
      CO
      80264

    303/839-5504
      -
      phone

    303/832-3013
      -
      fax

      January
        25, 2007

      Mr.
        Karl
        Hiller

      Branch
        Chief

      United
        States

      Securities
        and
        Exchange Commission

      Washington,
        DC
        20549-7010

      Re:
 Hallador
        Petroleum
        Company:

      Form
        10-KSB for the
        year ended December 31, 2005

      Form
        10-QSB for the
        quarter ended June 30, 2006

      Form
        10-QSB for the
        quarter ended September 30, 2006

      Form
        8-K/A
        (amendment No. 1) filed October 16, 2006

      File
        No.
        0-14731

      Dear
        Mr.
        Hiller:

      This
        letter is in
        response to your letter dated November 28, 2006, which we received on January
        4,
        2007 via fax. The information below corresponds to your numbered comments
        in
        your letter.

      Form
        10-KSB for
        the year ended December 31, 2005

      General

                1.

                Please
                  submit
                  your letter of correspondence to us dated October 9, 2006 on EDGAR,
                  as
                  well as any future correspondence.

      OUR
        RESPONSE:

      We
        will comply.

                2.

                An
                  amendment
                  will be required to comply with your reporting obligations, which
                  include
                  filing a statement of changes in stockholders' equity, correcting
                  the
                  characterization of various transactions in your statements of
                  cash flows,
                  identifying the preparer of your oil and gas reserve information,
                  providing details of your coal sales agreement, and correcting
                  information
                  about your reporting of changes in internal controls over financial
                  reporting. These matters were detailed in prior comments 1, 2,
                  4, 5, 6, 8
                  and 9. We have provided further clarification on some of these
                  points in
                  this comment letter, and are requesting that you provide additional
                  information about your accounting and disclosure for certain transactions.
                  You may wish to submit draft amendments with proposed revisions
                  marked to
                  show all changes and cross referenced by comment
                  number.

      OUR
        RESPONSE:

      Attached
        as Exhibit
        A is our Statement of Changes in Stockholders’ Equity for the two years ended
        December 31, 2005 which we will include as an amendment to our 2005 Form
        10-KSB.

          1

      Also
        attached as
        Exhibit B is a marked copy of our Statement of Cash Flows to reflect the
        revisions which we will also include as an amendment to our 2005 Form 10-KSB.

      We
        will also include the name of the preparer of our oil and gas reserves as
        an
        amendment to our 2005 Form 10-KSB. See our response to your Comment # 6
        below.

      You
        asked that we
        revise the wording on internal controls in our June 30, 2006 Form 10-QSB.
        We
        would rather make the change to our September 30, Form 10-QSB since we will
        be
        filing an amendment to such filing anyway. The wording we propose to use
        in the
        amendment is as follows: “There were no changes during our last fiscal quarter
        that materially affected, or are reasonably likely to materially affect,
        our
        internal controls over financial reporting.”

      Financial
        Statements

                3.

                We
                  have read
                  your response to prior comment one explaining that you have chosen
                  to
                  disregard the requirement of Item 310(a) of Regulation S-B to file
                  a
                  statement of changes in stockholders' equity because you do not
                  wish to
                  burden readers with unnecessary disclosure. As the accommodation
                  in Rule
                  3-04 of Regulation S-X is not available to small business filers,
                  we
                  believe you will need to amend your filing to include a statement
                  of
                  changes in stockholders' equity covering each of your two preceding
                  fiscal
                  years.

      OUR
        RESPONSE:

      As
        mentioned above we will comply.

                4.

                We
                  have read
                  your response to prior comment two, indicating that you believe
                  presenting
                  the expenditure to purchase limited partner interests in Hallador
                  Petroleum, LLP, a separate legal entity in which you held a 70
                  percent
                  interest, as a $1.2 million financing cash outflow is consistent
                  with the
                  guidance in paragraph 20 of SFAS 95.

                  The
                    guidance
                    you should cite would generally pertain to acquisitions of your
                    own equity
                    securities (i.e. those of Hallador Petroleum Company), rather
                    than those
                    of other separate legal entities, whether or not consolidated.
                    The
                    guidance in paragraph 17(b) is mostly typically followed when
                    reporting
                    cash expenditures to acquire equity instruments of other enterprises.
                    Tell
                    us why you believe this guidance does not apply to
                    you.

      OUR
        RESPONSE:

      We
        believe that the payments made to the limited partners in substance were
        more
        akin to a final distribution and retirement of our equity securities, as
        the
        distribution was in response to the previous sale of a significant property
        and
        minimal operations remained after that date. As a result, we did not view
        this
        as an investment or business acquisition due to the minimal operations which
        remained. However, we will reclassify the outlay as an investment activity
        in
        accordance with paragraph 17(b) of SFAS 95. See Exhibit B.

      Note
        3 - Stock
        Options and Bonus Plans, page 23

                5.

                In
                  response
                  to prior comment 4 you acknowledge that you did not properly report
                  cash
                  expenditures related to your purchase of stock options from employees
                  in
                  your statements of cash flows for 2004. We believe it will be necessary
                  to
                  amend your filing to correct your financial statements for this
                  item. As
                  previously advised, we believe you should disclose how you have
                  been
                  accounting for the options since issuance, along with details sufficient
                  to understand the circumstances under which you decided to repurchase
                  the
                  earlier awards, and the manner of determining that $2.80 was the
                  appropriate reference in calculating the amounts paid. On a related
                  point,
                  please also disclose the line item in your statements of operations
                  reflecting the $1,305,000 expense in 2004, and your rationale for
                  reporting the charge in this
                  manner.

      OUR
        RESPONSE:

      As
        stated above we will file an amended cash flow statement to reflect these
        payments as an operating activity.

          2

      In
        addition we will replace the first paragraph of Note 3- Stock Options and
        Bonus
        Plans on page 23 of our 2005 Form 10-KSB with the following two paragraphs
        as
        follows:

      “We
        account for
        stock options in accordance with APB 25. Accordingly, no compensation expense
        has been recorded for options granted as those grants have been issued with
        exercise prices at or above market. When we sold the Cuyama oil and gas field
        in
        August 2004 we concluded to reward our employees by giving them cash bonuses
        and
        also through purchases of their respective stock options. Because our stock
        is
        (i) traded on the OTC Bulletin Board, (ii) thinly traded and (iii) over 85%
        of
        the outstanding shares are controlled by our board members and their affiliates,
        our board concluded our employees would not receive a fair price if they
        exercised their options and then sold the stock.

      On
        October 8, 2004, we purchased from our employees 749,273 outstanding options
        at
        a price equal to $2.80 per share less the exercise price of each option for
        a
        total amount of $1,305, 000. These options were cancelled and are available
        for
        re-issuance. All options were granted at fair value. Such amount was expensed
        in
        2004 and is reflected in the Gain on sale of discontinued operations in the
        accompanying statement of operations. The $2.80 was determined by our
        non-employee board members and they concluded such amount represented a fair
        price. At December 31, 2004 there were no options outstanding."

      The
        paragraph above
        answers your question regarding the location of the $1,305,000 in our statement
        of operations. The $1,305,000 payment was directly related to the sale of
        the
        property and in our opinion to present the payment as part of any other line
        item in our statement of operations is misleading.

      Note
        6 - Reserve
        Data (Unaudited), page 25

                6.

                We
                  note your
                  response to prior comment five, stating that you are not aware
                  of any
                  requirement to identify the individual who prepared your reserve
                  estimates, and that you would like to understand the purpose of
                  our
                  request.

                While
                  there
                  is no requirement to have information about your oil and gas reserves
                  prepared by external parties, or to disclose instances where you
                  have
                  engaged third parties in this capacity, since voluntary disclosure
                  indicating you have placed reliance on others in preparing your
                  report may
                  be interpreted as suggesting a division of responsibility, and
                  given the
                  general significance of reserve estimates to the preparation of
                  financial
                  statements, such disclosure should include the identity of the
                  individual
                  or firm rendering the service to provide a minimal degree of clarity.
                  Of
                  course, the expectation is that you also obtain permission from
                  the
                  external party in making this
                  reference.

                Since
                  you
                  have chosen to disclose that your oil and gas reserve estimates
                  were
                  prepared by a "sole-proprietor consulting petroleum engineer,"
                  further
                  clarification is appropriate.

      OUR
        RESPONSE:

      Thank
        you for
        explaining the staff’s position. As mentioned above we will disclose in Note 6
        that Edwin James, a sole-proprietor, prepared the oil and gas reserve
        report.

      Form
        10-QSB for
        Fiscal Quarter Ended June 30, 2006

      Financial
        Statements

      Balance
        Sheet,
        page 2

                7.

                We
                  have read
                  your response to prior comment seven in which you indicated that
                  you have
                  assigned a value of $1.5 million to your guarantee of Sunrise's
                  $30
                  million line of credit, and recorded that item as an investment
                  in Sunrise
                  as of June 30, 2006 in accordance with FIN 45. However, it is unclear
                  why
                  you have recorded this amount as an asset on your balance sheet,
                  rather
                  than as a liability. Please submit the analysis that you prepared
                  under
                  FIN 45 in support of your accounting
                  treatment.

      OUR
        RESPONSE:

      The
        amount recorded
        on our balance sheet is reflected as a long-term liability and in accordance
        with paragraph 11 (c) of FIN 45 we reflected the offset as an investment
        in
        Sunrise as this guarantee was in contemplation of a significant investment
        in
        Sunrise, which was actually consummated on July 31, 2006.

          3

      Management's
        Discussion and Analysis, page 8

                8.

                We
                  note your
                  response to prior comment 8, indicating that you believe the coal
                  agreement is not significant. We believe that it will be necessary
                  to
                  revise your disclosure to provide further details of your arrangement,
                  and
                  to clarify your views on significance. Please ensure that you identify
                  the
                  parties to the contract and explain which party will be paying
                  the $0.10
                  to $0.25 per ton figures mentioned in your reply, and which party
                  will be
                  selling the coal at $27 per ton. As you describe the agreement
                  as a
                  settlement, the nature of the claim being settled should be clear.
                  Please
                  revise accordingly.

      OUR
        RESPONSE:

      At
        the time of filing the June 30 Form 10-QSB we did not know the particulars
        of
        the settlement discussions between Sunrise and Indiana Power and Light (IPL)
        and
        were under the impression that the ultimate outcome would not be all that
        significant to Sunrise.

      In
        October when we responded to your first comment letter we stated in our response
        our understanding of the proposed settlement with IPL. Sunrise is still in
        negotiations with IPL.

      In
        our September 30, 2006 Form 10-QSB, we recorded as a liability an estimate
        of
        the discounted contract termination obligation (using a discount factor of
        8.5%). The proposed settlement agreement has a term equal to the life of
        the
        recoverable reserves which we estimate to be twenty years. We estimate the
        current portion to be $92,000 and the long-term portion to be $3,873,000.
        Based
        on current negotiations the amounts will