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I am trying to create a grid in QGIS and keep getting a error saying "Horizontal Spacing is too Large for covered area". I'm trying to create a 63.93m x 63.93m square grid.

I am using the projection UTM Zone 10N or EPSG:26910. Both the project CRS and Layer are in this Projection.

I feel my error is somewhere in the projection. Even if I try to simply measure a line the units are very small. I have attached some images for reference. Where am I going wrong?

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From what I can see, the spatial reference of your layer appears to be wrong. The measure tool showing a length of 0.004, and the coordinates of the extent of your layer being -123.1859, -123.1777, 45.0864, 45.0941, this suggests that the underlying coordinates of your layer are in degrees, not meters, and the crs assigned to it should be geographic, like NAD83 (EPSG:4269) or WGS84 (EPSG:4326).

So in order to resolve the issue, you will have to set your layer crs to one of those geographic crs, then save it as a new layer with EPSG:26910. Then you should be able to generate the grid correctly.

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