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CORRESP
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      Correspondence Proxy changes

    The
      Law Office of Stephen E. Rounds

    1544
      York Street, Suite 110

    Denver,
      Colorado USA 80206

    Tel.
      303.377.6997 Fax 303.377.0231

    sercounsel@msn.com

    Admin.
      Office T 307.856.4748 F 307.857.0319

    sra@wyoming.com

    May
      5,
      2006

    Fax
      202.772.9369

    Edgar

    Securities
      and Exchange Commission

    Division
      of Corporation Finance

    100
      F
      Street NE

    Washington,
      D.C. 20549-2001

    Re: U.S.
      Energy Corp.

    Preliminary
      Proxy Statement

    Supplemental
      Information

    Attn: Mellissa
      Duru

    Dear
      Ms.
      Duru:

    Further
      to my discussions with you as securities counsel to U.S. Energy Corp. regarding
      the oral comment on the registrant’s preliminary proxy statement, attached is
      revised disclosure for Proposal 3 (to lift Nasdaq’s 20% limit on new share
      issuance). Changes are red lined. Please let me know if the revisions are
      responsive to the comment. This letter and the changed pages will be filed
      on
      Edgar as correspondence immediately.

    You
      will
      note that there also is (new) disclosure of the termination of the original
      SEDA
      with Cornell, and the entering into of a new SEDA. The new SEDA will have a
      ‘price floor,’ as disclosed in the attached pages. This new SEDA will be signed
      today and a Form 8-K filed for the event on either Monday or Tuesday, May 8,
      2006. We understand that your review will not address the new financing terms
      with Cornell.

    The
      registrant still hopes to meet the mailing deadline (Tuesday afternoon, May
      9)
      for its June 23, 2006 shareholder meeting. If you can give me a response on
      Monday to the changes for your comment, we will file the Form 8-K and the
      definitive proxy statement, on Monday or Tuesday. This procedure will ensure
      that the definitive proxy statement’s disclosures about the SEDA, and the new
      SEDA are consistent.

    Yours
      Sincerely,

    /s/Stephen
      E. Rounds

    SER/sra

    Enc.

    cc:
      U.S.
      Energy Corp.

      Proposal
        3: Approval
        of the Future Issuance of Shares to Cornell Capital Partners,
        LP. to
        Comply
        with Nasdaq Marketplace Rule 4350(i)(1)(D).

      General

        On
          May 5,
          2006, we signed a Standby Equity Distribution Agreement with Cornell Capital
          Partners, LP (”Cornell”), under which Cornell has committed to provide up to $50
          million of equity financing to U.S. Energy Corp. over 36 months. We had
          signed a
          previous Standby Equity Distribution Agreement with Cornell on April 11,
          2006.
          That agreement was terminated by agreement with Cornell, and a new Standby
          Equity Distribution Agreement (the “SEDA”) was signed with Cornell on May 5,
          2006, which also provides a $50 million equity financing.  All references
          to SEDA in the following discussion mean the SEDA signed on May 5,
          2006.

      Each
        advance under the SEDA will have a maximum amount of $5 million, and there
        must
        be at least five trading days between each advance. Access to the SEDA financing
        is subject to the company having an effective re-sale registration statement
        on
        file with the SEC for the securities underlying the SEDA.

        Each
          advance under the SEDA will be a sale by us to Cornell of newly-issued
          shares of
          common stock. Subject to a re-sale registration statement being in effect,
          we
          will determine whether and when to request an advance, and the amount of
          the
          advance (subject to the $5 million maximum). The number of shares (the
“SEDA
          shares”) to be sold to Cornell will be determined by dividing the advance amount
          by 98% of the market price for our stock. Market price is defined in the
          SEDA as
          the lowest daily volume weighted average price (“VWAP”) of our common stock
          during the five trading days (the “pricing period”) immediately following the
          date we send an advance notice to Cornell.

        The
          SEDA
          gives the Company a floor price below which we can’t sell stock to Cornell: The
“market price” cannot be less than 95% of the VWAP price (defined in the SEDA as
          the “minimum acceptable price”) on the trading day before we send an advance
          notice to Cornell. If, during the pricing period, the market price is less
          than
          the minimum acceptable price, then the amount of the advance will be reduced
          20%
          for each day in the pricing period when the minimum acceptable price is
          less
          than the market price during the pricing period. We also will pay Cornell
          a cash
          fee equal to 2% of each advance we receive, plus $500, for each advance
          under
          the SEDA.

      On
        signing of the SEDA, we paid Cornell $20,000 for a structuring and due diligence
        fee, and issued to Cornell (i) 68,531 shares of restricted common stock (the
        “investor shares”); and (ii) a three year warrant (the “initial warrant”) to
        purchase 100,000 shares of restricted common stock at $7.15 per share (the
        “initial warrant shares”). If the closing bid price for our stock exceeds 150%
        of the exercise price of the applicable exercise price in a ten consecutive
        trading day period, the warrant will expire 20 trading days later unless
        exercised (but will not expire to the extent not exercised, if the closing
        bid
        price should be equal to or lower than $7.15 during the 20 day period). This
        kind of provision is often referred to as “forced exercise.”

          -1-

      In
        addition, each time we take advances aggregating $5 million under the SEDA,
        we
        will issue a “milestone warrant” to Cornell, to purchase 100,000 shares at the
        average VWAP for our stock for the ten trading days immediately preceding
        the
        date of the $5 million advance (or the last advance which brings the aggregate
        to $5 million). Like the initial warrant, the milestone warrants will have
        a
        forced exercise provision.

      We
        engaged Newbridge Securities Corporation, a registered broker-dealer, to
        act as
        our placement agent in connection with the SEDA. We have issued 1,399 restricted
        shares of common stock (the “Newbridge shares”) to Newbridge as compensation for
        services.

        By
          a
          registration rights agreement with Cornell, we have agreed to file with
          the SEC
          a registration statement covering public resale of the SEDA shares to be
          sold to
          Cornell, the investor shares, the Newbridge shares, and the initial warrant
          shares. If we issue milestone warrants to Cornell, we will file additional
          registration statements to cover resale of shares issued on exercise thereof.
          No
          registration statements have been filed as of May 5, 2006.

      The
        Nasdaq Official Closing Price for our common stock on April 19, 2006 was
        $7.02;
        the price on the record date (April 25, 2006) was $6.96.

      Whether
        and to what extent the SEDA financing will be used cannot be predicted. On
        hand
        at December 31, 2006 are substantial cash (and investments, for example,
        the
        Enterra Trust Units which we will receive on June 1, 2006) for continued
        exploration and development work on our uranium and molybdenum properties.
        Management continues to seek industry partners and/or direct investment by
        industry partners or institutional investors for the joint venture development
        of the properties. We also might sell some of the properties
        outright.

      In
        the
        meantime, we signed the SEDA to have back up financing available, if needed,
        for
        possible substantial capital and exploration/development expenditures, as
        well
        as for general and administrative expenses. SEDA financing also might be
        used
        for business acquisitions or other purposes in the future. However, we have
        not
        yet identified any specific application of SEDA financing. The company’s board
        of directors believes that the effective 4% cost of funds under the SEDA
        is very
        competitive in the equity capital markets.

      While
        Cornell will have the right to sell shares in the market as soon as we submit
        an
        advance request to Cornell, Cornell may or may not do so. If it does not,
        Cornell will have the right to sell, or keep, the SEDA shares, like any other
        investor, based on its assessment of the company’s financial condition, current
        business, and its position in the minerals sector.

      Why
        We Need Shareholder Approval

      The
        Company is authorized under Wyoming law to issue an unlimited number of shares
        of common stock. However, the company’s common stock is traded on the Nasdaq
        Capital Market (“Nasdaq”). Therefore, we are subject to the NASD’s Nasdaq
        Marketplace Rules of the Nasdaq Stock Market. Unless shareholder approval
        is
        obtained, under Nasdaq Marketplace Rule 4350(i)(1)(D) - the “20% rule” - we
        would not be allowed to issue more than an additional 20% of stock to Cornell
        (based on the 19,605,360 shares outstanding on April 14, 2006): 4,021,072
        shares
        (3,921,072 SEDA shares and 100,000 initial warrant shares). This base number
        of
        available SEDA shares will decrease as milestone warrants are issued to
        Cornell.

          -2-

      Shareholder
        approval is not required for the Company to issue fewer than 3,921,072 SEDA
        shares. In addition, shareholder approval is not required for future issuances
        of common stock in transactions outside the SEDA, so long as the 20% rule
        (as
        applied to each such transaction or set of related transactions) would not
        be
        exceeded.

      We
        need
        shareholder approval to issue more than 3,921,072 SEDA shares (20% of the
        shares
        outstanding at April 14, 2006), because only if the stock price exceeds $17.74
        would the company be able to raise $50 million by the SEDA (2,818,072 SEDA
        shares, and ten milestone warrants for a total of 1,000,000 milestone warrant
        shares). Without shareholder approval, if the stock price were $5.85, we
        would
        be able to raise only $20 million by the SEDA (3,418,072 SEDA shares, and
        four
        milestone warrants for a total of 400,000 milestone warrant shares). The
        funding
        available under the SEDA without shareholder approval to exceed the 20% ceiling
        would be proportionately lower if the stock price were below $5.85.

      The
        20% Rule

      Under
        the
        20% rule, companies whose securities are traded on Nasdaq must obtain
        shareholder approval to issue common stock in a private offering (or in a
        series
        of related offerings) at a price less than the greater of the book or market
        value per share of the stock, if the issuance amounts to 20% or more of the
        common stock or 20% or more of the voting power of a company outstanding
        before
        the issuance. The SEDA shares and the initial warrant shares (and any milestone
        warrant shares) will be issued in private offerings, notwithstanding a
        registration statement being on file to cover resale of the shares.

      Because
        the SEDA shares will be issued at a price equal to 98% of (a 2% discount
        to) the
        VWAP, and Cornell will retain 2% of each advance, the SEDA shares will be
        issued
        at a price below market value. The investor shares issued to Cornell and
        the
        Newbridge shares issued to Newbridge Securities Corporation were issued at
        a
        price above the market on April 11, 2006. The exercise price for the initial
        warrants issued to Cornell is above the market on April 11, 2006, but upon
        issuance, the exercise price for the initial warrant shares may be higher
        or
        lower than the market price. Last, the exercise price for the milestone warrants
        may be lower or higher than the market price on the date they are issued;
        in
        either event, their exercise price may be lower than market price when the
        milestone warrant shares are issued.

      Therefore,
        the 20% rule applies only to (i) more than 3,921,072 SEDA shares; (ii) the
        100,000 initial warrant shares; and (iii) and the milestone warrant shares
        (1,000,000 shares if five of these warrants are issued in connection with
        $50
        million of SEDA funding).

      If
        approved, this proposal will satisfy the requirements to issue more shares
        under
        the 20% rule, in connection with the securities to be issued to
        Cornell.

      Impact
        if Shareholder Approval is Not Obtained

        If
          the
          shareholders do not approve this proposal, and we are not successful in
          obtaining joint venture industry partner (or institutional) funding for
          exploration and development of our mineral properties during the current
          favorable commodity price environment, we may have to defer that work until
          alternative financing can be obtained. There is no assurance we would be
          able to
          obtain that financing on terms as favorable as available under the SEDA,
          or, it
          may be available, but not in time to take advantage of the favorable commodities
          price environment. For example, if the shareholders do not approve this
          proposal, then, at a market price of $6.50 per share, the Company would
          be able
          to access approximately $25 million through the SEDA. To raise more capital
          through the SEDA, we would have to seek shareholder permission to exceed
          the 20%
          share ceiling. See “The Right
          You Will Lose If This Proposal Is Approved”
below.

          -3-

      Factors
        Affecting Current Stockholders

      While
        the
        Board of Directors has unanimously approved the issuance of more than 3,921,072
        SEDA Shares, and all the initial warrant shares, and all the shares which
        may
        become issuable on future milestone warrants, and has determined that these
        transactions are in the best interests of all shareholders, you should consider
        the following in deciding whether to vote for, or against, this proposal.

      Effect
        of Issuing Shares Below Market Price. The
        issuance of any of the SEDA Shares (and the initial warrant shares and the
        milestone warrant shares) below market price may have a depressive effect
        on the
        market price by increasing the amount of shares of common stock outstanding.
        Declining market prices could encourage short sales, which could create more
        downward pressure.

      Issuance
        of the SEDA shares and warrant shares would significantly dilute the ownership
        interests and proportionate voting power of current shareholders. For example,
        a
        $30,000,000 SEDA financing at a VWAP