U.S. ENERGY CORP. ANNOUNCES INVESTMENT IN GEOTHERMAL ENTITY.

U.S. Energy Corp. (Nasdaq:USEG), Riverton, Wyo., has invested $3.445 million in Standard Steam Trust LLC ("SST"), a private geothermal exploration and development company based in Denver, Colorado. Current capitalization of SST (with other partners) is $13.8 million (25% USE), which now includes approximately 60,000 acres of BLM, state and fee leases in seven prospect areas in three states. Acreage accumulation is ongoing, with 15,216 acres (included in the figure above) acquired at the December 19, 2008 BLM lease sale in Utah. Such acreage accumulation will continue and substantial additional capital is expected to be raised in 2009.

Today there are 66 geothermal-powered electrical generation plants in the United States, providing 2960 MW of base load (constant) power to utilities, which represents less than 1% of the electrical generation nationwide. Twenty-six states have implemented mandatory renewable energy portfolio standards, requiring utilities to be generating from 5% to 33% of their power from renewable sources. The deadlines for compliance with these standards take effect from 2009 to 2025 depending on the state.

Geothermal plants are "zero emission" and thus meet the renewable energy mandates. The plants use existing technology to circulate hot water from wells through binary or flash heat exchangers to produce the power to drive turbines. All the water is injected back into the earth to recharge the resource.

Geothermal power offers a number of advantages over other alternative energy sources, including continuous and reliable output, as geothermal is not weather dependent. It is the only base load renewable power source. Additional advantages include minimal pricing volatility, limited environmental impact, high sustainability and improved security of supply. When viewed over the life of the project, geothermal is among the least expensive options when compared with both fossil fuel and alternative energy. Initial infrastructure costs are substantially lower than some other alternative forms of production, and nominal energy inputs are required once the power plants are in production.

We intend to advance each individual prospect through the exploration and feasibility stages before determining whether to: 1) sell a prospect to a utility, 2) bring an industry partner on a joint venture basis, or 3) pursue further financing with institutional capital to further advance revenue generating capabilities, which may include the operation of power plants. The first phase of the project (through 2009) will be assembling a portfolio of industrial scale prospects with a total targeted power resource of approximately 2,000 MW; individual prospects are targeted at 100 to 500 MW. The second phase is expected to be completed in 2010, consisting of early science of geology, geophysics and temperature gradient drilling. The third phase of work is scheduled for 2011 and will consist of production well drilling on one of the prospects to quantify the geothermal resource present there. Permitting and construction would follow beginning as early as the end of 2011.

"Meeting the growing renewable portfolio standards at both the state and federal levels is driving considerable interest in the geothermal space, and we expect interest to grow substantially in the next few years. We will be working closely with our partners to assemble a strong portfolio of assets and a clear strategic plan to create value in both the near and mid- term," stated Keith Larsen, CEO of U.S. Energy Corp.

"After spending considerable time reviewing the renewable energy sector, we firmly believe that our entry into geothermal provides our company with a strong position in a market that has tremendous growth potential," said Mark Larsen, president of U.S. Energy Corp. "Geothermal is a renewable subsurface fuel, and our partners are applying their extensive experience in modern oil and gas plays to geothermal exploration. This sector shows significant promise at a time when carbon management is playing an increasing role in the generation of clean energy in our nation," he added.

About U.S. Energy Corp.

U.S. Energy Corp. is a diversified natural resource company with interests in molybdenum, oil and gas, and real estate. The company is headquartered in Riverton, Wyoming and its common stock is listed on The NASDAQ Capital Market under the symbol "USEG".

For more information, call 800/776-9271 or 403/538-4845.