EX. 10.36 LETTER AGREEMENT AVALON



                      [AVALON EXPLORATION, INC. LETTERHEAD]


VIA FAX 918-495-1077

September 7, 2001

Ms. Janet McGehee
Beta Oil & Gas, Inc.
6120 South Yale
Suite 813
Tulsa, OK 74136

Reference:  WEHLU Joint Venture Development Agreement

Dear Janet:

In accordance with our verbal and written communications, Avalon Exploration,
Inc. (Avalon) requests the following changes and amendments to be incorporated
into the Joint Venture Development Agreement (JVDA) dated August 8, 2000 by and
between Avalon and Beta. Avalon's amendments are as follows:

1.   Article 1(j) - The  geographical  area shall be amended to the area set out
     on the attached Exhibit A and all other portions of the WEHLU lying outside
     the Exhibit A area shall be released  from the JVDA.  The recount  #1-32 is
     not  included in the  geographic  area of the  revised  JVDA set out on the
     attached Exhibit A of this letter;  however, the Recount #1-32 well located
     in Section 32-14N-4W shall be deemed to be in the contractual JVDA area for
     purposes of defining  payout and  $200,000.00 of the cost of such well will
     be included in the JVDA payout  calculation and said well shall be deemed a
     Pilot Project Well.

2.   Article 7: Beta's  right to purchase  shall be amended  from a 40% to a 10%
     interest and Beta will have the right to a 30% reversionary  interest after
     Payout on all  leasehold  interest  earned by Avalon under the terms of the
     JVDA for the Pilot Project Wells.  Payout shall be defined as the moment in
     time when the  cumulative  cash proceeds  from the  production of the Pilot
     Project  Wells after  deducting  taxes,  transportation,  compression,  and
     royalty  expenses  equal the  cumulative  cost incurred by Avalon to drill,
     complete,  test and operate,  including  but not limited to the cost of any
     water injection wells,  pumps,  down hole equipment and surface  facilities
     and gas or oil  transmission  lines  required  to produce  and  operate the
     respective  pilot project area subject  however to the  understanding  that
     only  $200,000.00  of  the  costs  incurred  in  the  drilling   operation,
     completing and plugging of the Recount #1-32 will be included in the Payout
     calculation.

3.   Article 4 Earning  Interest:  The test period  shall be amended to a 90-day
     test period with the understanding  that Avalon's providing written request
     to Beta for an additional 30-day testing period will  automatically  extend
     this  period.  In addition to the other terms and  conditions  of the pilot
     well  description  (Article 3) in the JDVA, there shall be a time period to
     define  completion  of the wells.  A well shall have a 120-day  test period
     from the time it is  perforated  and the 121st day will be  considered  the
     "Completion  Date" as defined in the JVDA.  Following  the  completion of a
     well,  Avalon must commence  operations for the drilling of each subsequent
     Pilot Well within thirty (30) days from the Completion Date of the previous
     Pilot Well or the continuous  drilling  option shall expire as described in
     the JVDA.

4.   Beta confirms and ratifies the validity and effectiveness of the JVDA dated
     August 8, 2000 and  Avalon's  work program and capital  expenditures  going
     forward will be governed by the terms of such agreement as amended.

5.   Avalon will commence operations to plug and abandon the Recourt #1-32 on or
     before  October15,   2001  and  commence   operations  on  the  de-watering
     completion of the Mabel T. 1-18 on or before October 15, 2001.

The changes Avalon has set out above are necessary and hopefully will be
acceptable to our partners based in London. We are attempting to reach agreement
with all parties involved and accommodate each party's individual changes to the
original JVDA. Beta's acceptance of this conditional letter will enable Avalon
to proceed with attempting to receive our partner's approval of Beta's
amendments to the agreement. Obtaining our partner approval is critical to the
timely commencement of the proposed completion attempt.

If the terms and conditions set out above meet with your approval, please
indicate the same by signing in the appropriate place below and returning to the
undersigned at y our earliest convenience.

Sincerely,



Randall L. Sullivan
Vice President

Agreed and accepted this 21st day of September 2001.

Beta Oil and Gas, Inc. successor to Red River Energy, LLC

By:      /ss/  Janet McGehee
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