<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>def14a2001.txt
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
                                U.S. ENERGY CORP.
                     MINERALS PLAZA, GLEN L. LARSEN BUILDING
                               877 NORTH 8TH WEST
                             RIVERTON, WYOMING 82501
                            -------------------------
                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            -------------------------

         We  are   pleased  to  give  you  notice  of  our  Annual   Meeting  of
Shareholders:

Date:         Friday, December 7, 2001

Time:         10:00 AM MST

Place:        877 North 8th West, Riverton, Wyoming 82501

Purpose:      -   Elect one director to serve until the third succeeding annual
                  meeting of shareholders, and until his successor has been duly
                  elected or appointed and qualified;

              -   Increase our authorized common stock from 20 million shares up
                  to an unlimited number of shares;

              -   Approve a new stock compensation plan;

              -   Approve a new incentive stock option plan;

              -   Ratify appointment of the independent auditors; and

              - Transact any other  business  that may properly  come before
the meeting.


Record Date:  October 5, 2001.  The stock transfer books will not be closed.

         YOUR VOTE IS IMPORTANT.  Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. We appreciate your cooperation.

                  By Order of the Board of Directors


                  Max T. Evans, Secretary

INFORMATION ABOUT ATTENDING THE ANNUAL MEETING

         Only shareholders of record on October 5, 2001 may vote at the meeting.
Only  shareholders  of record,  and  beneficial  owners on the record date,  may
attend the  meeting.  If you plan to attend the meeting,  please bring  personal
identification  and proof of ownership if your shares are held in "street  name"
(i.e., your shares are held of record by brokers,  banks or other institutions).
Proof of  ownership  means a letter or statement  from your broker  showing your
ownership of shares on the record date.

         A list  of  shareholders  entitled  to  vote  at the  meeting  will  be
available for inspection by any record  shareholder  at the company's  principal
executive  offices in Riverton,  Wyoming.  The inspection period begins two days
after the date this Notice is mailed and ends at the conclusion of the meeting.



<PAGE>



                                U.S. ENERGY CORP.

                     MINERALS PLAZA, GLEN L. LARSEN BUILDING
                               877 NORTH 8TH WEST
                             RIVERTON, WYOMING 82501

                                 PROXY STATEMENT
                       FOR ANNUAL MEETING OF SHAREHOLDERS
                           ON FRIDAY, DECEMBER 7, 2001


         The 2001 Annual Report to  Shareholders,  including  audited  financial
statements  for the fiscal year ended May 31,  2001,  is mailed to  shareholders
together  with these proxy  materials on or after  October 10,  2001.  The proxy
materials  consist of this proxy  statement  and notice of annual  meeting,  the
Annual  Report,  the  Audit  Committee  Certification  and the  Audit  Committee
Charter.

         This proxy  statement is provided in connection  with a solicitation of
proxies by the board of  directors of U.S.  Energy  Corp.  for use at the annual
meeting of  shareholders  (the  "meeting") to be held on December 7, 2001 and at
any adjournments of the meeting.

WHO CAN VOTE

         If you held any shares of common  stock on the record date  (October 5,
2001),  then you will be entitled to vote at the  meeting.  If you held stock in
your own name, you may vote directly. If you owned stock beneficially but in the
record name (street name) of an institution,  you may instruct the record holder
how to vote when the record  holder  contacts you about voting and gives you the
proxy materials.

COMMON STOCK OUTSTANDING ON THE RECORD DATE:   9,625,771

QUORUM AND VOTING RIGHTS

         You are entitled to one vote for each share of U.S. Energy Corp. common
stock you hold, except in the election of directors you may cumulate your votes.
Cumulative  voting  generally  allows each  holder of shares of common  stock to
multiply the number of shares owned by the number of  directors  being  elected,
and to distribute the resulting number of votes among nominees in any proportion
that the holder chooses. Nominees in number equal to the seats to be filled, who
receive a plurality of votes cast, are elected.  This year,  only one nominee is
standing  for  re-election  as of the date of this  proxy  statement,  therefore
cumulative  voting  will not be  applicable  unless  there is a motion  from the
meeting floor  proposing a second  nominee to the board of directors.  We do not
have information that such a motion would be made.

         A quorum for the meeting  will exist if a majority of the voting  power
of the  shareholders  is present at the  meeting,  in person or  represented  by
properly  executed proxy delivered to us prior to the meeting.  Shares of common
stock  present at the meeting that abstain from voting,  or that are the subject
of broker non- votes,  will be counted as present for  determining  a quorum.  A
broker  non-vote occurs when a nominee holding stock in street name or otherwise
for a beneficial owner does not vote on a particular  matter because the nominee
does not have  discretionary  voting power with respect to that item and has not
received voting instructions from the beneficial owner.

         We will be voting  on five  matters:  First,  election  of a  director;
second,  increasing  the number of shares of  authorized  common  stock;  third,
approving a new stock compensation plan; fourth, approving a new incentive stock
option plan; and fifth, ratification of the appointment of independent auditors.


                                        2

<PAGE>



         The first and fifth  matters  will be approved and  implemented  if the
number of votes cast in favor exceed the number of votes opposed,  in accordance
with  Wyoming law. The second  matter will be approved  and  implemented  if the
holders of a majority of the common stock vote to approve the second matter,  in
accordance  with Wyoming law. The third and fourth  matters will be approved and
implemented  if a  majority  of the votes cast at the  meeting,  in person or by
proxy,  are in favor of such matters,  in  accordance  with Wyoming law with the
additional or enhanced voting requirement as imposed by the corporate governance
rules of the National  Association  of Securities  Dealers,  Inc. and the Nasdaq
Stock Market Inc. Any other matter which properly comes before the meeting would
be  approved  if the  number of votes  cast in favor  exceed the number of votes
opposed, unless Wyoming law requires a different approval ratio.

         Abstentions and broker non-votes will have no effect on the election of
directors.  Abstentions  as to all other matters which  properly may come before
the meeting will be counted as votes against those matters.  Broker non-votes as
to all other  matters will not be counted as votes for or against,  and will not
be included in calculating  the number of votes  necessary for approval of these
matters.

HOW YOUR PROXY WILL BE VOTED;  RECOMMENDATION OF THE BOARD

         The board of  directors is  soliciting a proxy in the enclosed  form to
provide you with the opportunity to vote on all matters scheduled to come before
the meeting, whether or not you attend in person.

         The board of directors  recommends you vote in favor of each of the six
proposals.

GRANTING YOUR PROXY

         If you sign properly and return the enclosed form of proxy, your shares
will be voted as you specify. If you make no specifications,  your proxy will be
voted in favor of all six proposals.

         We expect no matters to be  presented  for action at the meeting  other
than the items described in this proxy  statement.  However,  the enclosed proxy
will confer  discretionary  authority  with respect to any other matter that may
properly come before the meeting. The persons named as proxies intend to vote in
accordance  with their judgment on any matters that may properly come before the
meeting.

REVOKING YOUR PROXY

         If you  submit a proxy,  you may  revoke  it later or  submit a revised
proxy at any time before it is voted.  You also may attend the meeting in person
and vote by ballot, which would cancel any proxy you previously submitted.

PROXY SOLICITATION

         We will pay all  expenses of  soliciting  proxies for the  meeting.  In
addition to solicitations by mail,  arrangements  have been made for brokers and
nominees to send proxy materials to their principals, and we will reimburse them
for their  reasonable  expenses.  We have not hired a solicitation  firm for the
meeting.  Our employees and directors will solicit proxies by telephone or other
means, if necessary; these people will not be paid for these services.

REQUIREMENT AND DEADLINES FOR SHAREHOLDERS TO SUBMIT PROXY PROPOSALS

         Generally,  we will hold the annual meeting on the first Friday of each
December.  Under  the  rules of the SEC,  if a  shareholder  wants to  include a
proposal  (a  nomination  for  election as director or an item of business to be
considered) in our proxy statement for  presentation to shareholders at our 2002
Annual Meeting

                                        3

<PAGE>



of  Shareholders,  we will have to receive the written proposal at least 60 days
in advance of the meeting  date  (October 7, 2002 for next year's  meeting),  at
U.S. Energy Corp., 877 North 8th West, Riverton,  Wyoming 82501, Attention:  Mr.
Evans, Secretary or Mr. Svilar, Assistant Secretary.

         For a special  meeting,  the  nomination  or item of  business  must be
received by the tenth day following the date of public disclosure of the date of
the meeting.

         If we do  not  receive  notice  by  that  date,  or  if we  meet  other
requirements  of the  Securities  and Exchange  Commission  ("SEC")  rules,  the
persons  named as proxies in the proxy  materials  relating to that meeting will
use their  discretion in voting the proxies when these matters are raised at the
meeting.

         If a shareholder  wants to nominate  someone to the board of directors,
the nomination must contain the following information about the nominee:

        *   name and age;
        *   business and residence addresses;
        *   principal occupation or employment;
        *   the number of shares of common stock held by the nominee;
        *   the information that would be required under the rules of the SEC in
            a proxy statement soliciting proxies for the election of such
            nominee as a director;
        *   a signed consent of the nominee to serve as a director, if elected.

        A notice of a proposed item of business must include:

        *   a brief description of the substance of, and the reasons for
            conducting, such business at the annual meeting;
        *   the shareholder's name and address;
        *   the number of shares of common stock held by the shareholder (with
            supporting documentation where appropriate); and
        *   any material interest of the shareholder in such business.

CORPORATE GOVERNANCE, AUDIT COMMITTEE REPORT AND COMPENSATION COMMITTEE

         MEETINGS OF THE BOARD.  The board of directors,  which held four formal
meetings during fiscal 2001, has primary responsibility for directing management
of the business.  The board currently consists of six members. A seventh member,
Mr. David Brenman,  resigned in fiscal 2002 because he lives abroad. The current
six directors  attended all meetings in 2001 The board  conferred  informally on
several other occasions  during the fiscal year. From time to time the directors
also  approve  various  matters by consent  minutes  without  conducting  formal
meetings.

         AUDIT COMMITTEE.  To provide  effective  direction and review of fiscal
matters,  the board has established an audit committee.  The audit committee has
the  responsibility of reviewing our financial  statements,  exercising  general
oversight of the  integrity  and  reliability  of our  accounting  and financial
reporting  practices,  and monitoring the  effectiveness of our internal control
systems.  The audit committee also recommends  selection of an auditing firm and
exercises  general  oversight of the  activities  of our  independent  auditors,
principal  financial and accounting  officers and employees and related matters.
The members of the audit committee are Nick Bebout,  Don Anderson and H. Russell
Fraser, all of whom are independent  directors under criteria established by the
National  Association  of Securities  Dealers,  Inc. and the Nasdaq Stock Market
Inc.


                                        4

<PAGE>



         The audit  committee has reviewed our financial  statements  for fiscal
2001 and discussed them with  management.  The committee also discussed with the
independent audit firm the various matters required to be so discussed in SAS 63
(Codification  of  Statements  on Auditing  Standards,  AU 380).  The  committee
received the written  disclosure and the letter from the independent  audit firm
as  required  by  Independence  Standards  Board  Standard  No. 1  (Independence
Standards Board Standard No. 1, Independence  Discussions with Audit Committee),
and the committee discussed with the audit firm their independence. Based on the
foregoing,  the audit  committee  recommended to the board of directors that the
audited financial statements be included in our Annual Report on Form 10-K which
was filed with the Securities and Exchange Commission in August 2001.

         COMPENSATION COMMITTEE. The company has a compensation committee, whose
members are Harold F. Herron,  Nick Bebout and H. Russell Fraser;  David Brenman
was on this committee in fiscal 2001 but resigned in fiscal 2002. This committee
met  formally  on one  occasion  in fiscal  2001 and also  discuss  compensation
matters informally from time to time.

         The  compensation  committee  reviews  and  recommends  to the board of
directors  compensation  packages  for the  officers of U.S.  Energy  Corp.  and
subsidiaries  (but not Crested Corp. which has its own compensation  committee).
The  committee  takes into account the need for  different  types of  executives
(administrative,  financial,  engineering, etc.), and the pay arrangements which
corporations  of similar  size have adopted in our industry on both the national
and local levels.  Items  considered  include the experience of and contribution
made (or to be made for new hires or promotions) by each person, and the methods
of  paying  them  (principally  salary  and stock  options).  In  addition,  the
compensation  committee  reviews and  recommends  to the board of directors  the
granting of stock options to non-executive employees.

         EXECUTIVE  COMMITTEE.  The  executive  committee  members  are Keith G.
Larsen,  John L. Larsen,  Daniel P. Svilar,  Robert Scott Lorimer and H. Russell
Fraser.   This  committee  helps  implement  the  board  of  directors'  overall
directives as necessary. This committee usually does not conduct formal meetings
(none in fiscal 2001).

         NOMINATING  COMMITTEE.  When  needed  as  determined  by the  board  of
directors,  the  nominating  committee  considers and recommends to the board of
directors individuals who may be suitable to be nominated to serve as directors.
Harold F. Herron and Don Anderson are the nominating committee members.

         MANAGEMENT COST APPORTIONMENT COMMITTEE, established by USE and Crested
in 1982,  reviews the  apportionment  of costs between USE and Crested.  John L.
Larsen, Max T. Evans and Robert Scott Lorimer are members of this committee.

                     PRINCIPAL HOLDERS OF VOTING SECURITIES

         The  following  is a list of all record  holders  who, as of October 5,
2001, beneficially owned more than 5% of the outstanding shares of common stock,
as  reported  in filings  with the SEC or as  otherwise  known to us.  Except as
otherwise noted,  each holder  exercises the sole voting and dispositive  powers
over the shares listed opposite the holder's name,  excluding the shares subject
to forfeiture  and those held in ESOP accounts  established  for the  employee's
benefit.  Dispositive  powers over the forfeitable  shares held by employees and
non-employee  directors who are not officers is shared by the company's board of
directors.  Voting and dispositive  powers over  forfeitable  shares held by the
company's five executive officers ("Officers  Forfeitable Shares") are shared by
the company's non-employee directors (Messrs.  Anderson, Bebout and Fraser). The
ESOP  Trustees  exercise  voting  powers  over  non-allocated  ESOP  shares  and
dispositive  powers  over all ESOP  shares.  It should be noted that  voting and
dispositive  powers over certain  shares are shared by one or more of the listed
holders.  Such  securities  are reported  opposite  each holder  having a shared
interest therein.


                                        5

<PAGE>



         For information on shares held by directors and executive  officers see
"Security Ownership of Nominees, Directors and Executive Officers."

<TABLE>
<CAPTION>

                                                  Amount and Nature of Beneficial Ownership
                                 -------------------------------------------------------------------------
Name and address                    Voting Rights            Dispositive Rights
                                 ----------------------  -------------------------           Total             Percent
of beneficial owner                Sole       Shared         Sole        Shared       Beneficial Ownership    of Class(1)
-------------------                ----       ------         ----        ------       --------------------    -----------

<S>                              <C>          <C>         <C>            <C>               <C>                   <C>
John L. Larsen(2)                889,395      970,307     846,663        1,382,517         2,329,540             23.1%
201 Hill Street
Riverton, WY 82501

Max T. Evans(3)                  167,071      793,726      167,071       1,153,436         1,388,647             14.3%
1410 Smith Road
Riverton, WY 82501

Daniel P. Svilar(4)              359,463      517,359      359,463         517,359           962,672              9.7%
580 S. Indiana Street
Hudson, WY 82515

Michael D. Zwickl(5)              57,069      512,359       57,069         512,359           569,428              6.0%
137 North Beech Street
Casper, WY 82601

Kathleen R. Martin(6)                -0-      512,359          -0-         512,359           512,359              5.3%
309 North Broadway
Riverton, WY 82501

Crested Corp.                    512,359          -0-      512,359             -0-           512,359              5.3%
877 North 8th West
Riverton, WY 82501

Harold F. Herron(7)              255,535      282,948      238,386         695,158           985,491             10.2%
3425 Riverside Road
Riverton, WY 82501

U.S. Energy Corp. ESOP(8)        155,811          -0-      512,359             -0-           517,375              5.4%
877 North 8th West
Riverton, WY 82501

----------
<FN>

         (1)  Percent  of class is  computed  by  dividing  the number of shares
beneficially  owned plus any options held by the reporting person, by the number
of shares outstanding plus the shares underlying options held by that person.

         (2) Mr.  John L. Larsen  exercises  sole  voting  powers  over  243,663
directly  owned  shares,  106,000  shares held in joint  tenancy  with his wife,
497,000  shares  underlying  options and 42,732  shares held in the U.S.  Energy
Corp.  Employee  Stock  Ownership  Plan  ("ESOP")  account  established  for his
benefit.  The directly  owned shares  include  27,500 shares gifted to his wife,
that have remained in Mr. Larsen's name. He exercises  shared voting rights over
155,811  shares  held by the ESOP,  which have not been  allocated  to  accounts
established for specific  beneficiaries and shares held by corporations of which
Mr.  Larsen is a director  consisting  of 512,359  shares held by Crested  Corp.
("Crested"),  125,556  shares  held by Plateau  Resources  Limited  ("Plateau"),
175,000  shares held by Sutter Gold Mining  Company  ("SGMC"),  and 1,581 shares
held by Northwest Gold, Inc.  ("NWG").  Mr. Larsen shares the voting rights over
such shares with the other  directors of those  corporations.  Mr. Larsen shares
voting  powers  over the  unallocated  ESOP  shares in his  capacity  as an ESOP
Trustee with the other ESOP Trustees.  Shares over which sole dispositive rights
are  exercised  consist of  directly  owned  shares,  joint  tenancy  shares and
options, less the 27,500 shares gifted, but not

                                        6

<PAGE>



transferred,  to his wife. Shares for which shared  dispositive  powers are held
consist of the 515,521 shares held by the ESOP,  41,580 shares held by employees
and a  non-employee  director  of the Company  which are  subject to  forfeiture
("Forfeitable  Shares"), the shares held by Crested,  Plateau, SGMC and NWG. The
shares listed under "Total  Beneficial  Ownership"  also include  109,426 shares
beneficially  held by Mr.  Larsen  which are subject to  forfeiture.  The shares
shown as  beneficially  owned by Mr.  Larsen do not include  52,500 shares owned
directly by his wife,  who exercises the sole  investment and voting powers over
those shares.

         (3) Mr. Evans exercises sole voting and  dispositive  powers over 5,158
directly owned shares, 38,973 shares held in joint tenancy with his wife, 15,740
shares  held in an  Individual  Retirement  Account  ("IRA") for his benefit and
107,200 shares underlying options.  Shares over which Mr. Evans exercises shared
voting rights consist of the shares held by Crested, Plateau and the unallocated
ESOP shares.  He  exercises  shared  dispositive  rights over the shares held by
Crested,  Plateau and the ESOP. Mr. Evans shares voting and  dispositive  powers
over the shares held by Crested  and Plateau  with the  remaining  directors  of
those  companies  and over the ESOP  shares  with the other ESOP  Trustees.  The
shares  listed under "Total  Beneficial  Ownership"  also include  66,286 shares
beneficially held by Mr. Evans which are subject to forfeiture.

         (4) Mr. Svilar exercises sole voting and dispositive powers over 45,455
directly owned shares,  12,950 shares held in joint tenancy with his wife, 1,000
shares held as custodian for his minor child under the Wyoming Uniform Transfers
to Minors Act (the "Minor's  shares"),  37,158 shares held in an IRA established
for  his  benefit,   and  262,900  shares  underlying  options.  He  holds  sole
dispositive power over his directly held shares,  joint tenancy shares,  Minor's
shares and the shares underlying his options. Mr. Svilar exercises shared voting
and  dispositive  rights over the 512,359  shares held by Crested with the other
directors of Crested and 5,000 shares held by a private  corporation of which he
is a director with the other directors of that company.  The shares listed under
"Total Beneficial Ownership" also include 85,850 shares beneficially held by Mr.
Svilar which are subject to forfeiture.

         (5) Mr. Zwickl exercises sole voting and dispositive  powers over 3,444
shares held in an IRA  established for his benefit and 53,625 shares held by two
limited  partnerships.  He is the sole  officer and  director  of the  corporate
general  partner of those  partnerships.  As a director of Crested,  Mr.  Zwickl
exercises  shared voting and dispositive  powers over the 512,359 shares held by
Crested with the other Crested directors.

         (6)  Consists of shares held by Crested  over which  shared  voting and
dispositive powers are exercised with the other Crested directors.

         (7) Mr. Herron  exercises sole voting powers over 43,486 directly owned
shares,  12,000  shares held for his minor  children  under the Wyoming  Uniform
Transfers  to Minors  Act (the  "Minor's  shares"),  171,900  shares  underlying
options, and 17,149 shares held in the ESOP account established for his benefit.
Sole dispositive powers are exercised over the directly held shares, the Minor's
shares and the shares  underlying  options.  Mr. Herron  exercises shared voting
rights over  125,556  shares held by Plateau,  1,581  shares held by NWG and the
155,811  unallocated ESOP shares.  Shared  dispositive rights are exercised over
the shares held by  Plateau,  NWG,  all ESOP  shares and the 52,500  Forfeitable
Shares.  Mr.  Herron  exercises  shared  dispositive  and voting powers over the
shares held by Plateau and NWG as a director of those  companies  with the other
directors of those companies and over the ESOP shares in his capacity as an ESOP
Trustee with the other ESOP Trustees.  The shares listed under "Total Beneficial
Ownership" also include 61,013 shares  beneficially held by Mr. Herron which are
subject to forfeiture.  The shares shown as beneficially  owned by Mr. Herron do
not include  2,895  shares  owned  directly by his wife who  exercises  the sole
voting and dispositive powers over those shares.

         (8) The  ESOP  holds 515,521  shares,  155,811  of which  have not been
allocated to accounts of individual plan  beneficiaries.  The Trustees  exercise
the voting rights over the  unallocated  shares an  dispositive  rights over all
ESOP shares. Plan participants exercise voting rights over allocated shares.
</FN>
</TABLE>

PROPOSAL ONE - ELECTION OF DIRECTORS

         The directors are divided into three  classes,  each  consisting of two
persons so far as practicable,  to be elected until the third succeeding  annual
meeting and until  their  successors  have been duly  elected or  appointed  and
qualified or until death, resignation or removal. The term of director Harold F.
Herron expires at the meeting and he has been nominated for re-election. Current
directors are:

                                        7

<PAGE>


<TABLE>
<CAPTION>

                                      Other                                              Meeting at
Name, age and                     ositions with                     Director             which term
designation                       th the company                      since              will expire
-----------                       --------------                    ---------         -----------------

<S>                               <C>                                <C>               <C>
Harold F. Herron (48)             Senior Vice President              1989                   2001
 (nominee)                                                                             Annual Meeting

Don C. Anderson (74)                                                 1990                   2002
 (continuing director)                                                                 Annual Meeting

Nick Bebout (50)                                                     1989                   2002
(continuing director)                                                                  Annual Meeting

H. Russell Fraser (59)                                               1996                   2002
(continuing director)                                                                  Annual Meeting

John L. Larsen (69)               Chairman and CEO                   1966                   2003
 (continuing director)                                                                 Annual Meeting

Keith G. Larsen (42)              President                          1997                   2003
(continuing director)                                                                  Annual Meeting

</TABLE>


         It is recommended  that the  shareholders  vote for the  re-election of
Harold F. Herron.

         Executive  officers are elected by the board of directors at the annual
directors' meeting,  which follows each Annual  Shareholders'  Meeting, to serve
until the  officer's  successor  has been duly elected and  qualified,  or until
death, resignation or removal.

FAMILY RELATIONSHIPS.

         Harold  F.  Herron,  a  director  and  Senior  Vice-President,  is  the
son-in-law of John L. Larsen, a principal  shareholder,  Chairman and CEO. Keith
G. Larsen, a director and President,  is a son of John L. Larsen. Nick Bebout, a
director,  is a nephew of Daniel P. Svilar, a principal  shareholder and General
Counsel. There are no other family relationships among the executive officers or
directors of the company.

BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS OF DIRECTORS AND NOMINEES.

         JOHN L. LARSEN has been principally employed as an officer and director
of the company and Crested Corp.  for more than the past five years.  Mr. Larsen
is also Chairman of the Board and Chief Executive Officer. He is also a director
of Northwest Gold, Inc.  ("NWG"),  an affiliate of the company.  Crested and NWG
have registered equity securities under the Securities Exchange Act of 1934 (the
"Exchange Act"). Mr. Larsen is Chief Executive Officer and Chairman of the board
of directors of Plateau  Resources,  Limited and of Sutter Gold Mining  Company,
and he is a director of Rocky Mountain Gas, Inc. and Yellow Stone Fuels Corp.

         KEITH G.  LARSEN  has been  principally  employed  by the  company  and
Crested for more than the past five years. From November 25, 1997, he has been a
director of the company and its President and Chief Operating Officer. Mr. Keith
Larsen is Chief Executive Officer and a director of Rocky Mountain Gas, Inc.


                                        8

<PAGE>



         HAROLD F. HERRON has been the  company's  Vice-President  since January
1989, and now is Senior Vice President. From 1976, Mr. Herron was an employee of
Brunton,  a manufacturer  and/or  marketer of compasses,  binoculars and knives.
Brunton was a wholly owned company subsidiary until Brunton was sold in February
1996. Initially, he was Brunton's sales manager, and was its President from 1987
to April 1998,  and served as its Chairman  until August 1999.  Mr.  Herron is a
director of NWG and  President  and a director  of Plateau,  a director of Rocky
Mountain Gas, Inc., and Chief  Executive  Officer of Sutter Gold Mining Company.
Mr.  Herron  received an M.B.A.  degree  from the  University  of Wyoming  after
receiving  a B.S.  degree in  Business  Administration  from the  University  of
Nebraska at Omaha.

         DON C.  ANDERSON  has been a company  director  since  May  1990.  From
January 1990 until  mid-fiscal 1993, Mr. Anderson was the Manager of the Geology
Department  for the  Company.  Mr.  Anderson  was  Manager  of  Exploration  and
Development for Pathfinder  Mines  Corporation,  a major domestic uranium mining
and milling corporation,  from 1976 until his retirement in 1988. Previously, he
was Mine Manager for Pathfinder's  predecessor,  Utah International,  Inc., from
1965 to  1976.  He  received  a B. S.  degree  in  geology  from  Brigham  Young
University.

         NICK BEBOUT has been  director of the company since 1989. He has been a
director and President of NUCOR, Inc.  ("NUCOR"),  a privately-held  corporation
that provides  exploration and development  drilling services to the mineral and
oil and gas  industries,  since 1987.  Prior to that time,  Mr.  Bebout was Vice
President of NUCOR from 1984. Mr. Bebout is also an officer,  director and owner
of other privately-held entities involved in the resources industry.

         H. RUSSELL  FRASER has been a director of the company  since 1996 and a
director of Rocky  Mountain  Gas,  Inc.  since 1999.  He is past  President  and
director of American  Capital  Access,  Inc., a bond rating company in New York,
New York.  Mr. Fraser was chairman of the board and chief  executive  officer of
Fitch  Investors  Services,  L.P.  for  more  than the past  five  years.  Fitch
Investors  Services,  L.P., New York,  New York, is a nationwide  stock and bond
rating and information  distribution company. From 1980-1989,  Mr. Fraser served
as president and chief  executive  officer of AMBAC,  the oldest  municipal bond
issuer in the United States.

         Before joining AMBAC, Mr. Fraser was senior vice president and director
of  fixed-income  research at  PaineWebber,  Inc. While a member of the board of
directors at  PaineWebber,  Mr.  Fraser  participated  in both the corporate and
public finance  departments and headed  PaineWebber's  trading and sales for all
corporate bond products.  Previously, he managed corporate ratings at Standard &
Poor's,  supervising research analysis of corporate bonds,  preferred stock, and
commercial  paper.  Mr.  Fraser holds a B.S. in finance and  economics  from the
University  of Arizona.  He is a member of the Municipal  Analysts  Group of New
York and founder of the Fixed Income Analysts Society.

ADVISORY BOARD

         In fiscal 1998, the board of directors established an Advisory Board to
be comprised of individuals  with experience in the area of business,  financial
services,  national elected office, and other areas. The members of the Advisory
Board meet to review  topics of interest  or concern to the board of  directors,
and report their  findings and  recommendations  to the board of directors.  The
Advisory  Board does not include any  directors or officers of the company,  and
none of the findings or  recommendations  of the Advisory  Board will be binding
upon the Company.  The Chairman of the Advisory  Board is the Honorable  Alan K.
Simpson, former U.S. Senator for Wyoming. Harmon Watt, formerly President of 1st
Interstate Bank,  Riverton,  Wyoming, was appointed to the Advisory Committee in
1999.


                                        9

<PAGE>



        SECURITY OWNERSHIP OF NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS

         The following  table sets forth,  as of October 5, 2001,  the shares of
common  stock,  and the common  stock of the  company's  majority-owned  (70.5%)
subsidiary,  Crested  Corp.,  held  by each  director  and  nominee,  and by all
officers and directors as a group.  Unless  otherwise  noted,  the listed record
holder exercises sole voting and dispositive  powers over the shares reported as
beneficially owned, excluding the shares subject to forfeiture and those held in
ESOP accounts  established for the employee's  benefit.  Dispositive powers over
the   forfeitable   shares  held  by  employees  and  a  non-employee   director
("Forfeitable  Shares"),  is shared by the company's board of directors.  Voting
and  dispositive  powers  are  shared by the  company's  non-employee  directors
(Messrs.  Anderson,  Bebout and  Fraser)  over  forfeitable  shares  held by the
company's five executive officers  ("Officers'  Forfeitable  Shares").  The ESOP
Trustees (John L. Larsen, Harold F. Herron and Max Evans) exercise voting powers
over  unallocated  ESOP shares and dispositive  powers over all ESOP shares.  It
should be noted that voting and dispositive powers for certain shares are shared
by or more of the listed holders.  Such shares are reported opposite each holder
having  a  shared  interest   therein,   but  are  only  included  once  in  the
shareholdings of the group presented in the table.

<TABLE>
<CAPTION>
                                 Company Common Stock                              Crested Common Stock
                         -------------------------------------            ------------------------------------
                                Amount and             Percent                   Amount and            Percent
                                 Nature of               of                       Nature of              of
                           Beneficial Ownership       Class(1)              Beneficial Ownership      Class(1)
                           --------------------       --------              --------------------      --------

<S>                             <C>                     <C>                     <C>                     <C>
John L. Larsen                  2,338,606(2)            23.1%                   12,199,733(9)           71.4%

Keith G. Larsen                   480,758(3)             4.8%                  12,020,848(10)           70.4%

Harold F. Herron                  994,557(2)            10.2%                  12,091,665(11)           70.8%

Don C. Anderson                   469,775(4)             4.9%                  12,020,848(10)           70.4%

Nick Bebout                       484,226(5)             5.0%                  12,020,848(10)           70.4%

H. Russell Fraser                 468,120(6)             4.9%                  12,020,848(10)           70.4%

Max T. Evans                    1,386,793(2)            14.3%                     214,236(12)            1.3%

Daniel P. Svilar                  962,672(2)             9.7%                     231,850(13)            1.4%

R. Scott Lorimer                  331,811(7)             3.4%                      15,000(14)            *

All officers and
directors as a
group (nine persons)            4,145,664(8)            36.5%                  12,562,751(15)           73.5%

---------
<FN>

         * Less than one percent.

         (1)  Percent  of class is  computed  by  dividing  the number of shares
beneficially  owned plus any options held by the reporting  person or group,  by
the number of shares  outstanding plus the shares underlying the options held by
that person or group.

         (2) See  footnotes  for this  person to the table  presented  under the
heading "Principal Holders of Voting Securities".

         (3) Consists of 1,774  directly held shares,  6,000 shares held for the
minor children of Keith G. Larsen under the Wyoming Uniform  Transfers to Minors
Act (the "Minor's  shares"),  23,584 shares held in an ESOP account  established
for his benefit,  396,900 shares underlying options and 52,500 shares subject to
forfeiture.

                                       10

<PAGE>



Mr. K. Larsen  exercises  sole voting powers over his directly held shares,  the
ESOP shares,  8,820 shares  subject to  forfeiture,  the Minor's  shares and the
shares  underlying his options.  Sole dispositive  powers are exercised over the
directly held shares,  Minor's shares and the shares underlying his options.  He
shares  dispositive  powers over the Forfeitable Shares with the other directors
of the Company.

         (4) Consists of 11,912  directly  held shares,  3,055 shares held in an
IRA established for Mr. Anderson's benefit,  52,500 Forfeitable Shares,  379,808
Officers'  Forfeitable Shares and 22,500 shares underlying options. Mr. Anderson
exercises sole voting and dispositive  power over the directly held shares,  IRA
shares and the shares  underlying  his options.  He exercises  sole voting power
over  21,000  shares he holds  which are  subject to  forfeiture.  Mr.  Anderson
exercises shared  dispositive  powers over the Forfeitable Shares with the other
directors of the Company.  As a non-employee  director,  Mr. Anderson  exercises
shared voting and dispositive rights over the Officers' Forfeitable Shares, with
the other non-employee directors.

         (5) Consists of 21,868  shares held  directly,  50 shares held in joint
tenancy  with his wife,  22,500  shares  underlying  options and 379,808  shares
subject to forfeiture.  Mr. Bebout exercises sole voting and dispositive  powers
over  the  directly  held  shares,  the  joint  tenancy  shares  and the  shares
underlying  his  options.  He  exercises  shared  dispositive  powers  over  the
Forfeitable Shares with the other directors of the Company and as a non-employee
director,  Mr. Bebout  exercises  shared voting and dispositive  powers over the
Officers' Forfeitable Shares, with the other non-employee directors.

         (6) Consists of 9,312 directly held shares, 4,000 shares held in an IRA
for Mr. Fraser's benefit,  22,500 shares  underlying  options and 379,808 shares
subject to forfeiture.  Mr. Fraser exercises sole voting and dispositive  rights
over the directly  held  shares,  the IRA shares and the shares  underlying  his
options.  Mr. Fraser  exercises shared  dispositive  powers over the Forfeitable
Shares with the other directors of the company. As a non-employee  director, Mr.
Fraser  exercises  shared  voting  and  dispositive  rights  over the  Officers'
Forfeitable Shares, with the other non-employee directors.

         (7)  Consists  of  15,285  directly  held  shares  and  226,600  shares
underlying  options over which Mr. Lorimer exercises sole voting and dispositive
rights,  and 32,693 shares held in the ESOP account  established for his benefit
over which he  exercises  sole voting  rights.  The shares  listed  under "Total
Beneficial  Ownership"  also  include  57,233  shares  beneficially  held by Mr.
Lorimer which are subject to forfeiture.

         (8) Consists of 2,521,817  shares over which the group members exercise
sole voting rights,  including  1,730,000 shares underlying  options and 116,158
shares allocated to ESOP accounts  established for the benefit of group members.
The  listed  shares  include  2,375,839  shares,   including   1,730,000  shares
underlying  options,  over which group members exercise sole dispositive rights.
Shared voting and dispositive rights are exercised with respect to 1,357,615 and
1,769,825 shares (including 432,308 shares subject to forfeiture), respectively.

         (9) Consists of 12,020,848 Crested shares held by the Company,  100,000
shares held by SGMC, 60,000 shares held by Plateau and 3,885 shares held by NWG,
with respect to which shared  voting and  dispositive  powers are exercised as a
director with the other  directors of those  Companies,  and 15,000  forfeitable
shares  held  by  an  employee,  over  which  Mr.  J.  Larsen  exercises  shared
dispositive powers with the remaining Crested directors.

         (10) Consist of the Crested  shares held by the Company with respect to
which shared voting and dispositive  powers are exercised as a director with the
other directors of the Company.

         (11)  Consists of 6,932  directly  held  shares  over which Mr.  Herron
exercises sole voting and investment  powers, and the Crested shares held by the
company,  NWG and Plateau,  with respect to which shared voting and  dispositive
powers are exercised as a USE, NWG and Plateau director with the other directors
of those companies.

                                       11

<PAGE>



         (12)  Consists of 139,236  directly  held  shares over which Mr.  Evans
exercises  sole voting and  dispositive  rights,  60,000 shares held by Plateau,
with respect to which shared  voting and  dispositive  powers are exercised as a
director with the other directors of Plateau, and 15,000 forfeitable shares held
by an employee,  over which Mr. Evans exercises shared  dispositive  powers with
the remaining Crested directors.

         (13) Consists of 216,850  directly  held shares,  over which Mr. Svilar
exercises sole voting and dispositive  powers and 15,000 forfeitable shares held
by an employee,  over which Mr. Svilar exercises shared  dispositive powers with
the remaining Crested directors.

         (14)  Consists of 15,000  shares which are subject to  forfeiture.  Mr.
Lorimer  exercises  sole  voting  power  over such  shares,  while  the  Crested
directors share the dispositive powers over the shares.

         (15) Consists of 378,018  shares over which the group members  exercise
sole voting rights,  including  15,000 shares subject to forfeiture.  The listed
shares include 363,018 shares over which group members exercise sole dispositive
rights.  Shared  voting and  dispositive  rights are  exercised  with respect to
12,184,733  and   12,199,733   shares   (including   15,000  shares  subject  to
forfeiture), respectively.
</FN>
</TABLE>

         Each director  beneficially  holds the 7,562,219 and 255,000,000 shares
of NWG and Four Nines Gold, Inc. ("FNG") common stock, respectively, held by the
company. They exercise shared voting and dispositive powers over those shares as
company directors with the other company directors. Those shares represent 96.8%
and 50.9% of the  outstanding  shares  of NWG,  and FNG,  respectively.  John L.
Larsen  beneficially  holds 272,500,000 shares of FNG common stock (54.4% of the
outstanding  shares),  which  includes  255,000,000  shares held by the company,
5,000,000 held by USECC Joint Venture and 5,000,000 shares held by Crested, over
which Mr.  Larsen  shares  voting  and  dispositive  powers  with the  remaining
directors of the company and  Crested.  Mr. J. Larsen also holds 1,000 shares of
NWG over which he exercises sole voting and dispositive powers. Harold F. Herron
beneficially  holds 7,567,794 and 265,000,000  shares of the common stock of NWG
and FNG,  respectively,  representing  96.9% and 52.9%,  respectively,  of those
classes of stock.  Daniel P. Svilar  beneficially  owns 14,000,000 shares of the
common  stock of FNG  (4,000,000  shares  directly in joint  tenancy  with other
family members), representing 2.8% of that class. None of the other directors or
officers  directly  hold any other shares of stock of NWG or FNG. All  executive
officers and directors of the company as a group (7 persons) hold  7,809,794 and
284,500,000 shares of the stock of NWG, and FNG, representing 96.9% and 56.2% of
the outstanding shares of those companies, respectively.

         The company has  reviewed  reports on Forms 3, 4 and 5 of  ownership of
common  stock in the company,  which have been filed with the SEC under  Section
16(a) of the Exchange Act, and received written  representations from the filing
persons.  Based solely upon review of the reports and  representations,  John L.
Larsen,  Keith G. Larsen,  Max T. Evans,  Daniel P. Svilar and R. Scott  Lorimer
each had one late filing, and Harold F. Herron had two late filings.  We know of
no other untimely or not-made filings during fiscal 2001.

INFORMATION CONCERNING EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

         The following information is provided pursuant to Item 401 of Reg. S-K,
regarding the executive officers of the company who are not also directors.

         MAX T.  EVANS,  age 76, has been  Secretary  for USE and  President  of
Crested for more than the past five years.  Mr. Evans had been a director of USE
for more  than the past  five  years,  prior to April  17,  1997.  He is also an
officer  and  director  of  Plateau.  He  serves  at the  will of each  board of
directors.  There are no  understandings  between Mr. Evans and any other person
pursuant  to which he was named as an  officer.  He has no family  relationships
with any of the other executive officers or directors of USE or Crested.  During
the past five years, Mr. Evans has not been involved in any Reg. S-K Item 401(d)
proceeding.


                                       12

<PAGE>



         DANIEL P. SVILAR,  age 72, has been General Counsel for USE and Crested
for more  than the past  five  years.  He also has  served  as  Secretary  and a
director of Crested,  and  Assistant  Secretary of USE. His positions of General
Counsel to, and as officers of the  companies,  are at the will of each board of
directors.  There are no understandings  between Mr. Svilar and any other person
pursuant to which he was named as officer or General  Counsel.  He has no family
relationships  with any of the other  executive  officers or directors of USE or
Crested,  except his nephew Nick Bebout is a USE director.  During the past five
years, Mr. Svilar has not been involved in any Reg. S-K Item 401(f) proceeding.

         ROBERT SCOTT LORIMER, age 50, has been Chief Accounting Officer,  Chief
Financial  Officer and Treasurer for both USE and Crested for more than the past
five years.  Mr. Lorimer also has been their Vice President  Finance since April
1998.  He  serves  at  the  will  of  each  board  of  directors.  There  are no
understandings  between Mr.  Lorimer and any other person,  pursuant to which he
was named as an officer, and he has no family relationship with any of the other
executive  officers or directors of USE or Crested.  During the past five years,
he has not been involved in any Reg. S-K Item 401(f) listed proceeding.

EXECUTIVE COMPENSATION

         Under a  Management  Agreement  dated  August 1, 1981,  USE and Crested
share certain general and administrative expenses, including compensation of the
officers and directors of the companies  (but excluding  directors'  fees) which
have been paid through the USECC Joint Venture ("USECC").  Substantially all the
work  efforts of the  officers of USE and Crested are devoted to the business of
both companies.

         All USECC  personnel  are  company  employees,  in order to utilize the
company's ESOP as an employee benefit  mechanism.  The company charges USECC for
the direct and indirect  costs of its employees for time spent on USECC matters,
and USECC charges one-half of that amount to each of Crested and the company.

         The following table sets forth the  compensation  paid to the USE Chief
Executive  Officer,  and those of the four most highly compensated USE executive
officers who were paid more than  $100,000 cash in any of the three fiscal years
ended May 31, 2001. The table includes compensation paid such persons by Crested
for 1998, 1999 and 2000 for such persons' services to such subsidiaries.


                                       13

<PAGE>



<TABLE>
<CAPTION>

                                                                                    Long Term Compensation
                                                                            -------------------------------------
                                              Annual Compensation                    Awards             Payouts
                                  -------------------------------------------------------------------------------
(a)                     (b)            (c)           (d)         (e)            (f)            (g)         (h)          (i)
                                                                Other
Name                                                           Annual       Restricted                               All Other
and                                                            Compen-         Stock                      LTIP        Compen-
Principal                                                      sation        Award(s)       Options/     Payouts      sation
Position               Year         Salary($)     Bonus($)       ($)            ($)          SARs(#)       ($)        ($)(1)
--------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>        <C>           <C>            <C>           <C>             <C>        <C>          <C>
John L. Larsen         2001       $157,300      $  -0-         $   -0-       $107,000(5)     $  -0-     $  -0-       $   -0-
 CEO and               2000        159,500         -0-            22,600       60,000(2)        -0-        -0-          15,879
 Chairman              1999        166,700        85,000(3)        -0-         80,000(3)        -0-        -0-          16,000

Keith G. Larsen        2001       $157,500      $  -0-         $   -0-       $  -0-          $  -0-     $  -0-       $   -0-
 President             2000         97,800         -0-            11,700        -0-             -0-        -0-          11,433
 and COO               1999        105,500        46,000(3)        -0-          -0-             -0-        -0-          15,100

Daniel P. Svilar       2001       $144,400      $  -0-         $   -0-       $ 80,250(2)     $  -0-     $  -0-       $   -0-
 General Counsel       2000        150,900         -0-             7,800       45,000(2)        -0-        -0-          13,623
 and Assistant         1999        132,700       459,400(3)        -0-         60,000(2)        -0-        -0-          16,000
 Secretary

Harold F. Herron       2001       $137,200      $  -0-         $   -0-       $ 53,500(2)     $  -0-     $  -0-        $  -0-
 Vice President        2000        128,400         -0-             3,600       30,000(2)        -0-        -0-        $ 13,782
                       1999        112,800         -0-             -0-         40,000(2)        -0-        -0-          11,300

R. Scott Lorimer       2001       $140,900      $  -0-         $   -0-       $ 53,500(2)     $  -0-     $  -0-        $  -0-
 Treasurer             2000        144,900         -0-            10,100       30,000(2)        -0-        -0-        $ 15,990
 and CFO               1999        134,100       459,000(3)        -0-         40,000(2)        -0-        -0-          16,000

</TABLE>
-----


(1)  Dollar values for ESOP contributions and 401K matching contributions.

(2) Includes  shares  issued under the 1996 stock award  program  multiplied  by
$3.00,  $4.00 and $5.35 (the closing bid price on the issue dates in 1999,  2000
and 2001).  These shares are subject to forfeiture on termination of employment,
except for retirement, death or disability.

(3) Includes cash bonuses of $50,000,  $25,000, $125,000 and $125,000 to Messrs.
John L.  Larsen,  Keith G.  Larsen,  Daniel  P.  Svilar  and R.  Scott  Lorimer,
respectively.  Also includes  stock bonuses of 50,000  restricted  shares of the
Company's  Common Stock each to Mr. Svilar and Mr. Lorimer,  at $2.94 per share,
the closing bid price of at the time of receipt.  These  bonuses  were issued as
compensation for the extraordinary amount of work beyond the normal work load of
these  individuals  in the  litigation  with Nukem,  Inc. The board of directors
authorized the payment of taxes on these bonuses.

EXECUTIVE COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS

         The company has adopted a plan to pay the estates of Messrs. J. Larsen,
Evans and Svilar  amounts  equivalent  to the salaries they are receiving at the
time of their death,  for a period of one year after death,  and reduced amounts
for up to five years thereafter. The amounts to be paid in such subsequent years
have  not yet been  established,  but  would be  established  by the  boards  of
directors of the company and Crested.

         Mr.  Svilar has an employment  agreement  with the company and Crested,
which  provides for an annual  salary in excess of $100,000,  with the condition
that Mr. Svilar pay an unspecified amount of expenses

                                       14

<PAGE>



incurred by him on behalf of the company  and its  affiliates.  In the event Mr.
Svilar's  employment  is  involuntarily  terminated,  he is to receive an amount
equal to the salary he was being paid at  termination,  for a year. If he should
voluntarily terminate his employment,  the company and Crested will pay him that
salary for nine months thereafter.  The foregoing is in addition to Mr. Svilar's
Executive Severance and Non-Compete Agreement with the company (see below).

         In fiscal 1992, the company signed Executive  Severance and Non-Compete
Agreements with Messrs. John L. Larsen, Evans, Svilar and Lorimer, providing for
payment to such person upon  termination  of his  employment  with the  company,
occurring  within  three years after a change in control of the  company,  of an
amount equal to (i)  severance pay in an amount equal to three times the average
annual  compensation  over the prior five taxable  years ending before change in
control,  (ii) legal fees and  expenses  incurred by such persons as a result of
termination,  and  (iii)  the  difference  between  market  value of  securities
issuable on exercise of vested  options to purchase  securities  in USE, and the
options' exercise price.  These Agreements also provide that for the three years
following  termination,  the terminated  individual will not compete with USE in
most of the western  United  States in regards to  exploration  and  development
activities  for uranium,  molybdenum,  silver or gold.  During fiscal 2001,  the
company  signed  similar  Agreements  with Keith  Larsen,  Mark Larsen,  Richard
Larsen,  Harold Herron, Robin Kindle and Pete Schoonmaker.  For such non-compete
covenant,  such  persons will be paid monthly over a three year period an agreed
amount for the value of such covenants. These Agreements are intended to benefit
the company's shareholders, by enabling such persons to negotiate with a hostile
takeover offeror and assist the board of directors  concerning the fairness of a
takeover,  without the  distraction of possible  tenure  insecurity  following a
change in  control.  As of this proxy  statement,  the company is unaware of any
proposed hostile takeover.

         The company and Crested  provide all of their  employees  with  certain
forms of insurance  coverage,  including life and health  insurance.  The health
insurance  plan does not  discriminate  in favor of  executive  employees;  life
insurance  of $50,000 is  provided  to each  member of upper  management  (which
includes all persons in the  compensation  table),  $25,000 of such  coverage is
provided  to  middle-management  employees,  and  $15,000  of such  coverage  is
provided to other employees.

         EMPLOYEE STOCK  OWNERSHIP  PLAN  ("ESOP").  An ESOP has been adopted to
encourage ownership of the common stock by employees, and to provide a source of
retirement  income to them. The ESOP is a combination stock bonus plan and money
purchase  pension  plan.  It is expected  that the ESOP will  continue to invest
primarily  in the common  stock.  Messrs.  J.  Larsen,  Herron and Evans are the
trustees of the ESOP.

         Contributions  to  the  stock  bonus  plan  portion  of  the  ESOP  are
discretionary  and are  limited  to a maximum of 15% of the  covered  employees'
compensation  for each year ended May 31.  Contributions  to the money  purchase
portion of the ESOP are mandatory  (fixed at ten percent of the  compensation of
covered employees for each year), are not dependent upon profits or the presence
of accumulated  earnings,  and may be made in cash or shares of company's common
stock.

         The company made a contribution of 53,837 shares to the ESOP for fiscal
2001, all of which were  contributed  under the money purchase  pension plan. At
the time the shares were contributed,  the market price was $5.35 per share, for
a total  contribution  with a market value of $288,022 (which has been funded by
the company).  The company and Crested each are responsible for one-half of that
amount,  and Crested  currently owes its one-half to the company.  14,611 of the
shares  were  allocated  to  the  ESOP  accounts  of  the  executive   officers.
Additionally,  4,651 shares were allocated to the ESOP accounts of the executive
officers from ESOP shares  forfeited by terminated  employees who were not fully
vested.

         Employee  interests  in the ESOP are  earned  pursuant  to a seven year
vesting schedule; after three years of service, the employee is vested to 20% of
the ESOP  account,  and  thereafter  at 20% per year.  Any portion  which is not
vested is forfeited upon  termination  of employment,  other than by retirement,
disability, or death.

                                       15

<PAGE>



         The  maximum  loan   outstanding   during  fiscal  2001  under  a  loan
arrangement  between the company and the ESOP was $1,014,300 at May 31, 2001 for
loans made in fiscal 1992 and 1991.  Interest owed by the ESOP was not booked by
the company. Crested pays one-half of the amounts contributed to the ESOP by the
company.  Because the loans are  expected to be repaid by  contributions  to the
ESOP,  Crested may be considered to indirectly  owe one-half of the loan amounts
to the company.  The loan was reduced by $183,785 plus  interest of  $168,574.84
through the contribution of shares by the ESOP to the ESOP in 1996. There was no
similar reduction, however, for fiscal 1997, 1998, 1999, 2000 or 2001.

         INCENTIVE  STOCK OPTION PLAN. The company has an incentive stock option
plan  ("ISOP"),  reserving an aggregate of 2,750,000  shares of common stock for
issuance upon exercise of options granted thereunder.  Awards under the plan are
made by a committee of or more persons selected by the Board (presently  Messrs.
Herron, Bebout and Fraser) and ratified by the board of directors.

         Options expire no later than ten years from the date of grant, and upon
termination  of employment  for cause.  Subject to the ten year maximum  period,
upon termination, unless terminated for cause, options are exercisable for three
months or in the case of retirement, disability or death, for one year.

         For information  about options,  please see the consolidated  Financial
Statements  for  fiscal  year ended May 31,  2001.  In fiscal  2001,  options on
1,499,000 shares were granted,  and previously granted options on 118,703 shares
were  exercised as of May 31, 2001.  Subsequent  to May 31, 2001,  an additional
140,049 shares were purchased on exercise of previously granted options.

           All but 50,100 shares  authorized  under the current ISOP are covered
by options  now  granted,  therefore  it is  proposed  to adopt a new ISOP,  see
Proposal 4 below.

OPTION GRANTS TO EXECUTIVE OFFICERS IN 2001 (QUALIFIED AND NONQUALIFIED)

<TABLE>
<CAPTION>
                                                PERCENT
                           NUMBER OF            OF ALL OPTIONS
                           SHARES UNDER-        GRANTED TO
                           LYING OPTIONS        EMPLOYEES          EXERCISE        EXPIRATION      GRANT DATE
NAME                       GRANTED              IN 2001            PRICE           DATE            PRES. VALUE(1)

<S>                            <C>                <C>                <C>             <C>           <C>
John L. Larsen                 184,400            12.3%              $2.69           01/09/11      $   337,452
Keith G. Larsen                309,400            20.6%              $2.69           01/09/11      $   566,202
Harold F. Herron                96,900             6.5%              $2.69           01/09/11      $   177,327
Daniel P. Svilar               121,900             8.1%              $2.69           01/09/11      $   223,077
R. Scott Lorimer               121,900             8.1%              $2.69           01/09/11      $   223,077
<FN>

(1)The  Black-Scholes  option-pricing model was used to determine the grant date
present value of the stock options that were granted to the named  officer.  The
following  facts  and  assumptions  were  used in making  this  calculation:  An
exercise  price of $2.69 per share,  which was equal to the market  value of the
stock on the grant date; a zero dividend  yield;  expected  volatility of 73.1%;
risk-free interest rate of 4.29%, and an expected life of 10 years.
</FN>
</TABLE>


                                       16

<PAGE>



AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

         The following table shows  unexercised  options,  how much thereof were
exercisable,  and the dollar values for  in-the-money  options,  at May 31, 2001
(closing sale price on that date was $6.00).

<TABLE>
<CAPTION>
      (a)                          (b)              (c)                     (d)                        (e)
                                                                                                    Value of
                                                                         Number of                 Unexercised
                                                                        Unexercised               In-the-Money
                                                                      Options/SARs at            Options/SARs at
                                 Shares                                   FY-End                    FY-End
                                Acquired           Value               Exercisable/                Exercisable
Name                         on Exercise (#)    Realized($)            Unexercisable              Unexercisable
----                         ---------------    -----------            -------------              -------------

<S>                                <C>              <C>                 <C>                      <C>
John L. Larsen,                    -0-              -0-                   177,718                 $710,872 (1)
      CEO                                                               exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   100,100                 $310,310 (2)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   34,782                  $108,694 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   184,400                 $663,840 (4)
                                                                        exercisable              exercisable and
                                                                                                   unexercised


Keith G. Larsen                    -0-              -0-                   52,718                  $210,872 (1)
      President                                                         exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   34,782                  $108,694 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   309,400                $1,113,840 (4)
                                                                        exercisable              exercisable and
                                                                                                   unexercised
</TABLE>


                                       17

<PAGE>



AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>

      (a)                          (b)              (c)                     (d)                        (e)
                                                                                                    Value of
                                                                         Number of                 Unexercised
                                                                        Unexercised               In-the-Money
                                                                      Options/SARs at            Options/SARs at
                                 Shares                                 FY-End (#)                  FY-End($)
                                Acquired           Value               Exercisable/                Exercisable
Name                         on Exercise (#)    Realized($)            Unexercisable              Unexercisable
----                         ---------------    -----------            -------------              -------------

<S>                                <C>              <C>                 <C>                      <C>
Max T. Evans,                      -0-              -0-                   57,200                  $177,320 (2)
      Secretary                                                         exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   50,000                  $156,250 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

Harold F. Herron,                11,000         $34,100 (2)               40,218                  $160,872 (1)
      Sr. Vice President                                                exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   34,782                  $108,694 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   96,900                  $348,840 (4)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

Daniel P. Svilar                   -0-              -0-                   40,218                  $160,872 (1)
      Assistant Secretary                                               exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   66,000                  $204,600 (2)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   34,782                  $108,694 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   121,900                 $438,840 (4)
                                                                        exercisable              exercisable and
                                                                                                   unexercised
</TABLE>

                                       18

<PAGE>



AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>

      (a)                          (b)              (c)                     (d)                        (e)
                                                                                                    Value of
                                                                         Number of                 Unexercised
                                                                        Unexercised               In-the-Money
                                                                      Options/SARs at            Options/SARs at
                                 Shares                                 FY-End (#)                  FY-End($)
                                Acquired           Value               Exercisable/                Exercisable
Name                         on Exercise (#)    Realized($)            Unexercisable              Unexercisable
----                         ---------------    -----------            -------------              -------------


<S>                                <C>              <C>                 <C>                      <C>
R. Scott Lorimer                   -0-              -0-                   40,218                  $160,872 (1)
      Treasurer                                                         exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   34,782                  $108,694 (3)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   121,900                 $438,840 (4)
                                                                        exercisable              exercisable and
                                                                                                   unexercised

                                   -0-              -0-                   29,700                   $96,525 (5)
                                                                        exercisable              exercisable and
                                                                                                   unexercised
<FN>

(1)   Equal to $6.00, the closing bid on last trading day in FY 2001, less $2.00
      per share option exercise price, multiplied by all shares exercisable.

(2)   Equal to $6.00, the closing bid on last trading day in FY 2001, less $2.90
      per share option exercise price, multiplied by all shares exercisable.

(3)   Equal to $6.00, the closing bid on last trading day in FY 2001, less
      $2.875 per share option exercise price, multiplied by all shares exercisable.

(4)   Equal to $6.00, the closing bid on last trading day in FY 2001, less $2.40
      per share option exercise price, multiplied by all shares exercisable.

(5)   Equal to $6.00, the closing bid on last trading day in FY 2001, less $2.75
      per share option exercise price, multiplied by all shares exercisable.

</FN>
</TABLE>

         1996 STOCK AWARD  PROGRAM.  Since 1996 we have had an annual  incentive
compensation  arrange-  ment for the  issuance of up to 67,000  shares of common
stock each year (from 1997 through  2002) to executive  officers of the company,
in amounts  determined  each year based on earnings of the company for the prior
fiscal.

         Shares are issued  annually,  but each officer to whom shares are to be
issued  must be  employed by the company as of the issue date of the grant year,
and the company must have been  profitable  in the  preceding  fiscal year.  The
officers  receive  up to an  aggregate  total of 67,000  shares per year for the
years 1997 through  2002,  although if in prior years,  starting in 1997,  fewer
than 67,000 shares are awarded in any year,  the unissued  balance of the 67,000
share maximum would be available for issue in subsequent  years (through  2007).
One-half of the compensation  expense under the Program is the responsibility of
Crested. The board of directors determines the date each year when shares are to
be issued.

                                       19

<PAGE>



         Each  allocation  of shares is issued in the name of the  officer,  and
earns  out  (vests)  over 5 years,  at the rate of 20% as of May 31 of each year
following the date of issue. However, none of the vested shares become available
to or come under the control of the officer until  termination  of employment by
retirement,  death or disability. Upon termination,  the share certificates will
be released to the officer; until termination,  the certificates are held by the
Treasurer of the company.  Voting  rights are  exercised  over the shares by the
non-employee  directors of the company;  dividends or other  distributions  with
respect  to the  shares  will be held by the  Treasurer  for the  benefit of the
officers.

         The number of shares to be awarded each year out of such 67,000  shares
aggregate limit is determined by the compensation  committee,  based on criteria
including  the  company's  earnings per share for the prior  fiscal year.  Other
factors may be taken into consideration by the compensation committee. The total
shares issued are divided among the officers based on the following percentages:
John L. Larsen 29.85%,  Daniel P. Svilar 22.39%, Max T. Evans 17.91%,  Harold F.
Herron 14.93% and R. Scott Lorimer  14.93%.  For fiscal 2001,  the  compensation
committee  awarded  67,000 shares to the officers,  based on the revenues of the
company for that year.

         In  addition  to the 1996 Stock Award  Program,  which  expires in 2002
(2007 for the 52,842 unissued shares),  the company is proposing for approval at
the meeting the 2001 Stock Compensation  Plan, see Proposal 3 below.  Except for
the unissued shares under the current  Program,  if the 2001 Stock  Compensation
Plan is approved at the meeting it will be the sole  mechanism for  compensating
management  with stock.  Options will,  however,  be granted to  management  and
others in fiscal 2002,  and may also be granted in future  years to  management,
under the new ISOP, see Proposal 4 below.

DIRECTORS' FEES AND OTHER COMPENSATION

         The  company  pays  non-employee  directors  a fee of $150 per  meeting
attended.  All directors are  reimbursed  for expenses  incurred with  attending
meetings.

         Non-employee  directors  are  compensated  for  services  with $400 per
month, payable each year by the issue of shares of USE common stock based on the
closing  stock market price as of January 15. In fiscal 2001,  8,532 shares were
issued to non-employee directors for service in that year.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         DEBT OWED BY  DIRECTORS.  In the early  1990s,  Harold  F.  Herron,  an
officer  and  director,  had been  living in and caring for a house owned by the
company.  In fiscal 1995, Mr. Herron  purchased the house for $260,000 (equal to
appraised  value),  and was  reimbursed  by the company for $22,830 of leasehold
improvements he had made to the property. The company accepted a promissory note
for $112,170 of the purchase price,  with 7% annual interest;  the maturity date
for  this  note  has  been  extended  to  December  31,  2001.  This  note was a
nonrecourse note secured by 30,000 shares of the company's common stock owned by
Mr.  Herron.  At May 31, 2001 he owed $150,000 on the note;  during that year he
gave up 5,000 shares of the collateral to reduce the debt.

          As of May 31,  2001,  David F.  Brenman,  a director  who  resigned in
September  2001,  owed the  company  $25,000  (secured  by 5,000  shares  of the
company's common stock) plus accrued interest of $34,400.  The loan was provided
as partial consideration for Mr. Brenman's  representation of the company to the
financial community in New York City in the early 1990s.

         FAMILY  EMPLOYMENT.  Three of John L. Larsen's sons, three  sons-in-law
and one grandson are employed by the company or subsidiaries.  Collectively, Mr.
Larsen  and  these  family  members  received   $901,500  in  total  gross  cash
compensation for services in fiscal 2001.

                                       20

<PAGE>



         TRANSACTIONS  INVOLVING  USECC AND  CRESTED.  The  company  and Crested
conduct most activities  through their  equally-owned  joint venture USECC. From
time to time the company and Crested advance funds to or make payments on behalf
of  USECC,  which  create  intercompany  debt.  The  party  extending  funds  is
subsequently reimbursed by the other venturer. The company had a note receivable
of $5,704,200  from Crested at May 31, 2001.  During  fiscal 2001,  the debt was
reduced by $3,000,000, by Crested issuing another 6,666,666 shares of its common
stock to the company,  thereby increasing the company's  ownership of Crested to
70.5%.

PROPOSAL 2 - INCREASE AUTHORIZED COMMON STOCK

         The board of directors  has  approved the  amendment of our articles of
incorporation to increase the number of shares of common stock we are authorized
to issue from the current  number (20 million  shares) to an  unlimited  number.
Section  17-16-202(a)(ii) of the Wyoming Business Corporation Act allows Wyoming
corporations to issue an unlimited number of shares, if provision to that effect
is contained in the articles of incorporation. The board of directors recommends
that you vote in favor of the change to unlimited shares of common stock.

         Why is the amendment necessary ?

         We now are  authorized to issue 20 million  shares of common stock.  On
the record date for this meeting,  9,625,771  shares of common stock were issued
and  outstanding.  In  addition,  a total of  2,725,830  shares are reserved for
future issue under the current  incentive  stock option plan and another 366,900
are reserved for other options and warrants.

         Also,  the  board  of  directors  has  adopted  a  shareholder   rights
(sometimes  referred  to as a "poison  pill").  Under  this  plan,  assuming  an
unsolicited  hostile  takeover  of the  company  were to begin  and the board of
directors  did not  approve  the  terms  of the  takeover,  up to  approximately
9,000,000 more shares of common stock could be issued to the shareholders (i.e.,
one  additional  share  for each  outstanding  share  except  the 15% owned by a
hostile  takeover  party).  While the plan is designed  to  encourage a party to
negotiate with us about an acquisition  and thereby avoid  triggering the poison
pill  features  (issuing  more  stock to our  shareholders  other than a hostile
takeover  party),  we have  reserved the  necessary  shares to  implement  those
features if the need arises.  We emphasize that we have no information about any
proposed acquisition, friendly or otherwise.

         Therefore,  if shares  were  issued  under all  existing  warrants  and
options,  and if shares were issued on activation of the shareholder rights plan
(if that step should become  necessary),  the current number of unissued  shares
would be exhausted.  The board of directors also believes the company could need
additional  authorized shares for possible equity financing,  acquisitions,  and
other corporate  purposes.  While we do not have current plans for raising money
or  acquiring  other  companies,  it is very  important  that we be able to move
quickly if the need or opportunity arises in the future.

         How would the additional authorized stock be issued?

         As before,  our articles of  incorporation  and Wyoming law empower the
board of directors to issue stock for  consideration  they  determine is fair to
the company.  This  provision  will not change.  Shareholders  will not have the
right to approve or disapprove of a stock issue.


                                       21

<PAGE>



         Is there any  disadvantage  to  having  the  added  authorized  shares,
without a limit to the number which could be issued?

         No. Under our articles of incorporation  and Wyoming law,  shareholders
do not have preemptive rights to acquire more shares, i.e., they do not have the
right to buy for themselves (to prevent dilution of their percentage  ownership)
any shares of new stock proposed to be issued to others. This provision will not
change.

         Will the change in authorized stock affect shareholders' voting rights?

         No.  Shareholders'  voting rights under the articles of  incorporation,
and Wyoming law, with respect to mergers and  acquisitions  (and  divestitures),
sale of assets, and other matters (like amending the articles of incorporation),
as well as their rights to exercise dissenters' rights to not vote and seek cash
for fair  value of their  stock in  merger/acquisition/  divestiture  or sale of
asset  transactions,  will not be affected at all by  authorizing  an  unlimited
number of shares of common stock.  These  so-called  'substantive'  or 'organic'
transactions  still will have to be approved by the holders of a majority of the
shares of common stock issued and outstanding at that time.

         Why has the board of directors approved such a large increase?

         The board of  directors  does not have any current  plans to issue more
shares,  except as might be necessary  for warrants  and options.  However,  the
company may need the ability to issue more shares to raise  capital,  or acquire
business  opportunities,  in the future. The board of directors,  under law, has
the  responsibility  for setting the selling  price for the shares,  seeking the
best price possible under the circumstances at that time. The board of directors
recommends  the  shareholders  vote for the increase to  unlimited  common stock
authorization  to forever  eliminate  the need to seek  shareholder  approval to
increase the amount of authorized stock again.

PROPOSAL 3 - 2001 STOCK COMPENSATION PLAN

         In 1996 the board of  directors  approved and we adopted the 1996 Stock
Award Program for issue of up to 67,000 shares each year to executive  officers.
The maximum of 67,000 shares has been issued each year, except for one year when
14,158 shares were issued, resulting in an unissued allocation of 52,842 shares,
which still may be issued until final  expiration of the current program in 2007
for the limited purpose of issuing leftover allocations.  The program expires in
2002 with respect to the annual 67,000 share allocation and issuance.

         The board of directors has approved the recommendation of the executive
committee  to adopt  the new 2001  Stock  Compensation  Plan (the  "plan"),  and
recommends that shareholders approve the new plan at the meeting.

         Under the plan,  which will have an initial term of seven years,  up to
10,000 shares of common stock would be issued in January of each year  (starting
2002) to six individuals (five officers: John L. Larsen, Keith G. Larsen, Robert
Scott  Lorimer,  Harold F.  Herron,  Daniel  P.  Svilar;  and Peter  Schoonmaker
(president and a director of Rocky Mountain Gas, Inc.).  The number of shares to
be  issued  in any year  would be  determined  by the  executive  committee  and
approved by the board of directors,  taking into account our public stock prices
at date of grant and over the  prior  calendar  year,  the  company's  financial
condition and business  prospects,  and other factors  deemed  appropriate.  The
company will pay the income taxes owed by  recipients  as a result of receipt of
the stock.


                                       22

<PAGE>



         The stock  recipients  will agree not to sell or  transfer  such shares
during their employment with the company.

         The  executive  committee  and the board of directors  believes the new
plan is needed and appropriate to provide enhanced  incentives for the officers'
work on behalf of all  shareholders,  in  addition  to their  cash  compensation
(salaries) and benefits,  and options received over the years (all of which have
been issued at market prices on grant dates).

PROPOSAL 4 - APPROVE NEW INCENTIVE STOCK OPTION PLAN

         The current incentive stock option plan ("ISOP") share issue limits are
nearly exhausted.  The board of directors has approved the recommendation of the
executive  committee  to replace the  current  ISOP with a new  incentive  stock
option plan (the "new ISOP"),  and recommends that the shareholders  approve the
new ISOP at the meeting.

         The new ISOP, if approved at the meeting, will provide for the issuance
of options to purchase up to 3.0 million shares of common stock; the options are
intended to qualify  under  section 422 of the Internal  Revenue  Code.  Options
would be issued with exercise  prices equal to (or for holders of 10% of more of
the  outstanding  stock at the time,  110% of) market price on grant dates,  and
would vest (become  exercisable) at various times as determined by the executive
committee  and  approved  by  the  board  of  directors.  All  options  will  be
exercisable  for cash,  or through  other means as  determined  by the executive
committee  and approved by the board of directors,  in  accordance  with similar
plans of public companies.  However,  "cashless  exercise" will not be permitted
(cashless exercise is a technique in some plans where the holder receives shares
equal to the "equity" in the option, being market value less exercise price, and
forfeits the balance of the option).

         It is expected that options  under the new ISOP (if  approved)  will be
issued annually to employees  including  officers of the company and significant
subsidiaries,  as has been effected under the current ISOP. Specifically, if the
new ISOP is approved,  options will granted to five officers and three employees
of the company,  and to the president of Rocky Mountain Gas,  Inc.,  each in the
amount of 100,000 shares. Another option in the amount of 50,000 shares would be
granted  to Robert  Nicholas,  assistant  general  counsel to the  company.  The
individuals proposed to receive the 100,000 options are John L. Larsen, Keith G.
Larsen,  Daniel  P.  Svilar,  Robert  Scott  Lorimer,  Harold F.  Herron,  Peter
Schoonmaker  (president  of Rocky  Mountain  Gas,  Inc.),  Mark Larsen,  Richard
Larsen, and Robin Kindle.

         If approved at the  meeting,  the options  will have a term of 10 years
from  meeting  date and be  exercisable  at the closing  market price on meeting
date.

         The  issuance of shares on  exercise of options  under the new ISOP (if
the new ISOP is approved at the meeting) will be registered  with the Securities
and Exchange Commission on Form S-8.

PROPOSAL 5:  RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS

         The board of directors  seeks  shareholder  ratification of the board's
appointment of Grant Thornton LLP, certified public  accountants,  to act as the
auditors of our  financial  statements  for the fiscal year ending May 31, 2002.
The audit committee has recommended that the board retain this auditing firm for
year 2002. Grant Thornton audited our financial  statements for fiscal 2001. The
board  has not  determined  what  action,  if any,  would  be taken  should  the
appointment of Grant Thornton not be ratified at the meeting.


                                       23

<PAGE>



         ACCOUNTANT'S FEES.  Grant Thornton billed us the following fees in
                             fiscal 2001:

         Audit Fees:  $37,500

         Financial Information Systems Design and Implementation Fees: $ -0-

         All Other Fees:  $1,400*

         *        For review of third quarter  financial  information filed with
                  the Securities and Exchange  Commission on Form 10-Q, pursuant
                  to review requirements imposed by the Commission.No other fees
                  were  paid to Grant  Thornton  LLP as they  were not  retained
                  until the fourth fiscal quarter in 2001.

         The audit  committee of the board of directors  considers the provision
of services described above to be compatible with Grant Thornton's independence.

                    RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

         Grant Thornton LLP has audited the company's  financial  statements for
the fiscal year ended May 31, 2001. A representative  of Grant Thornton LLP will
be present at the meeting in person or by  telephone  to respond to  appropriate
questions,  and will be provided  the  opportunity  to make a  statement  at the
meeting. There have been no disagreements between the company and Grant Thornton
LLP, or Arthur Andersen LLP,  concerning any matter of accounting  principles or
practices, financial statement disclosure, or auditing scope or procedure, which
were not resolved to the  satisfaction  of those firms.  For  information on the
change  of audit  firms,  see the  Annual  Report on Form  10-K  filed  with the
Securities and Exchange Commission in August 2001.

                             COPIES OF OUR FORM 10-K

         Promptly upon receiving a request from any shareholder,  without charge
we will  send to the  requester  a copy of our  Annual  Report  on Form 10-K for
fiscal  2001,  with  exhibits,   as  filed  with  the  Securities  and  Exchange
Commission.   Please  address  your  request  to  Daniel  P.  Svilar,  Assistant
Secretary,  at U.S. Energy Corp., 877 North 8th West,  Riverton,  Wyoming 82501.
You also may call or fax him at T 307.856.9271, F 307.857.3050.

                                  EXHIBIT INDEX

Exhibit No.           Description of Exhibit

     99.1             Audit Committee Charter
     99.2             Certification by Audit Committee


                                       24

<PAGE>



PROXY                           U.S. ENERGY CORP.                          PROXY

     KNOW ALL PERSONS:  That the  undersigned  shareholder of U.S.  Energy Corp.
(the  "Company")  in the amount noted  below,  hereby  constitutes  and appoints
Messrs.  John L. Larsen and Max T.  Evans,  or either of them with full power of
substitution,  as attorneys and proxies,  to appear,  attend and vote all of the
shares of stock standing in the name of the undersigned at the Annual Meeting of
the Company's  shareholders to be held at the Company's Offices at 877 North 8th
West, Riverton,  Wyoming 82501 on Friday,  December 7, 2000 at 10:00 a.m., local
time, or at any adjournments thereof upon the following:

     THE PROXIES WILL VOTE: (1) AS YOU SPECIFY ON THIS CARD; (2) AS THE BOARD OF
DIRECTORS  RECOMMENDS  WHERE YOU DO NOT SPECIFY YOUR VOTE ON A MATTER  LISTED ON
THIS CARD, AND (3) AS THE PROXIES DECIDE ON ANY OTHER MATTER.

     THE  BOARD OF  DIRECTORS  RECOMMENDS  YOU  VOTE IN  FAVOR  OF THE  DIRECTOR
NOMINEE,  IN FAVOR OF  INCREASING  THE  AUTHORIZED  COMMON STOCK TO AN UNLIMITED
AMOUNT,  IN FAVOR OF A NEW STOCK  COMPENSATION  PLAN, IN FAVOR OF A NW INCENTIVE
STOCK  OPTION  PLAN,  AND IN FAVOR OF RATIFYING  THE  SELECTION  OF  INDEPENDENT
AUDITORS.

     If you wish to vote on all  matters  as the Board of  Director  recommends,
please  sign,  date  and  return  this  card.  If you  wish  to  vote  on  items
individually, please also mark the appropriate boxes below.

     INSTRUCTION: Mark only one box to each item.

1.   Election of Director:

         _ FOR the nominee         _  AGAINST the nominee        _  ABSTAIN

                                Harold F. Herron

2.   Increase authorized common stock to an unlimited amount, as allowed by
     Wyoming law:

         _  FOR the increase       _  AGAINST the increase       _  ABSTAIN

3.   Approve 2001 Stock Compensation Plan

         _  FOR the Plan           _  AGAINST the Plan           _  ABSTAIN

4.   Approve 2001 Incentive Stock Option Plan

         _  FOR the ISOP           _  AGAINST the ISOP           _  ABSTAIN

5.   Ratification of appointment of Grant Thornton LLP as independent auditors
     for the current fiscal year.

         _  FOR the appointment    _  AGAINST the appointment    _  ABSTAIN


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PROXY                          U.S. ENERGY CORP.                           PROXY

     THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.  THE SHARES  REPRESENTED
HEREBY WILL BE VOTED AS PROVIDED ON THE REVERSE SIDE.

     Sign your name  exactly as it appears on the  mailing  label  below.  It is
important to return this Proxy  properly  signed in order to exercise your right
to vote, if you do not attend in person. When signing as an attorney,  executor,
administrator,  trustee,  guardian,  corporate officer, etc., indicate your full
title as such.


                                     -------------------------------------------
                                     (Sign on this line - joint holders may
                                     sign appropriately)

                                     ----------------     ----------------------
                                     (Date)               (Number of Shares)
                                     PLEASE NOTE: Please sign, date and place
                                     this Proxy in the enclosed self-addressed,
                                     postage prepaid envelope and deposit it
                                     in the mail as soon as possible.
                                     Please check if you are planning to
                                     attend the meeting  __

                                     If the address on the mailing label is not
                                     correct, please provide the correct address
                                     in the following space.

                                     -------------------------------------------
                                     -------------------------------------------




                                       26

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</TEXT>
</DOCUMENT>
