Setting, according to Literature: An Introduction to Reading and Writing, is:
...the natural, manufactured, political, cultural, and temporal [time] environment, including everything that characters know and own.
So if you've read "An Occurrence at Owl Creek Bridge" all you have to do is apply the above to the story. I can't write your paragraphs for you, but I'll mention some details to get you started.
Natural environment: northern Alabama, a bridge at Owl Creek, near a local farmer's home.
Political/cultural: North vs. the South, at war during the Civil War.
Temporal: during the Civil War.
What characters know: the importance of bridges during war time.
You can fill in the details and elaborate just by rereading or skimming the story.
The short answer to this is that the story is set in the South (Alabama to be precise) during the American Civil War.
All of the actual action of the story takes place on a railroad bridge over Owl Creek. On that bridge, Peyton Farquhar is being hanged. He is going to be executed for trying to commit sabotage, which is not legal according to the rules of war.
There is some action in the story that goes on in a flashback. For that, the setting is a "rustic bench" near to Farquhar's estate. That is where a Union soldier in disguise gets Farquhar to thinking about sabotaging the bridge.
Although the actual setting of Ambrose Bierce's short story, "An Occurrence at Owl Creek Bridge," is restricted to the railroad bridge over the aforementioned body of water in Alabama, the main character does imagine escaping his captors and returning home. Destined to hang for spying and sabotage during the Civil War, protagonist Peyton Farquar imagines that the hangman's noose breaks, and he falls into the creek below. He manages to elude the Union soldiers' guns and swims to safety. From the shore, he walks through the night and emerges on the outskirts of his home, where he sees his wife coming to greet him. But it is only a final, fleeting thought, because no rope has broken: Peyton Farquar has been hanged, and his escape was but a final hope as he breathed his last.
In Bierce's "An Occurence at Owl Creek Bridge", the story takes place in northern Alabama during the Civil War. Union forces are in control and martial law prevails. There are no civil rights, no safeguards for enemies of the Union, and no trials beyond those of a military court. From Section II, it is inferred that Farquhar, almost literally the only character, was lured or even entrapped into an attempt to blow up Owl Creek Bridge. It is also assumede that he had tried to overcome the guard and then had been arrested, summarily tried, and condemned to death by hanging from the bridge which he had tried to destroy.