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    sec_letter.htm

August 13, 2009

Joanna Lam

Ken Schuler

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C.  20549-4628

Re:

U.S. Energy Corp.

Supplemental Response to August 5, 2009 Comment Letter

File Number 000-06814:

Form 10-K for the Fiscal Year Ended December 31, 2008 (filed March 13, 2009)

Form 10-K/A for the Fiscal Year ended December 31, 2008 (filed April 2, 2009)

Form 10-Q for the Fiscal Quarter Ended March 31, 2009 (Filed May 8, 2009)

Dear Ms. Lam and Mr. Schuler:

We are in receipt of your above referenced letter relating to the Form 10-K and 10-K/A for the year ended December 31, 2008 and Form 10-Q for the Quarter ended March 31, 2009 for U.S. Energy Corp.  Please find below the text of staff comments and our proposed responses.  Our responses to the financial statement comments
1 through 4 were included in our Form 10-Q for the quarter ended June 30, 2009.  Responses to the engineering comments also are set forth below.

Overview.  If you find the responses to accounting comments satisfactory, we propose to include similar disclosures in periodic reports going forward.  We submit that the changes in disclosure are not so substantial as to require amending the last 10-K
and the first quarter 10-Q.

Regarding the engineering comments, our counsel, Steve Rounds, last week reached agreement with Mr. Schuler that at such time as the staff and U.S. Energy come to agreement on the proposed disclosures, they would be disclosed in the Form 10-K for the year ending December 31, 2009, and no amendment of the filed 10-K would be needed.

Form 10-K for the Fiscal Year Ended December 31, 2008

Financial Statements

Note B – Summary of Significant Accounting Policies, page 72

Mineral Properties, page 74

United States Securities and

Exchange Commission

August 14, 2009

Page 2

1.

Please expand your disclosure either under this heading or in the table above this heading to describe the properties and nature of costs included in your mineral properties balance for each period presented.

Response at Page 12 of Form 10Q for the quarter ended June 30, 2009 under heading Mineral Properties and Item 2, Managements Discussion and Analysis, Critical Accounting Policies at page 26:

Mineral properties at June 30, 2009 and December 31, 2008 reflect capitalized costs associated with the Company’s Mount Emmons molybdenum property near Crested Butte, Colorado.  The Company has entered into an agreement with Thompson Creek Metals Company USA (“TCM”) to develop this property.   TCM
may earn up to a 75% interest in the project for the investment of $400 million.  The Company received the first of six annual payments in the amount of $1.0 million in January 2009.  This payment was applied as a reduction of the Company’s investment in the Mount Emmons property.  No impairment was therefore taken during either period on the Mount Emmons molybdenum property.

We believe the property contains high grade mineralized materials, sufficient for the project to be commercially viable in a volatile price environment.  Activities are ongoing at this advanced exploration stage property, under the supervision of Thompson Creek Metals Company USA as Project Manager.  TCM expended approximately
$2.5 million in exploration efforts in 2008 and has a budget of $5.9 million for 2009 (these amounts include TCM’s scheduled option payments for 2008 and 2009).

Oil and Gas Properties, page 75

2.

We note you disclose that you use the full cost method of accounting for oil and gas properties.  Please expand your disclosure to discuss in more details the limitation on your capitalized costs (i.e. the ceiling test).  Refer to Rule 4-10(c)(4)(i)(B) and (C) of Regulation S-X for guidance.

Response at Page 13 of Form 10-Q for the quarter ended June 30, 2009 under heading Oil and Gas Properties and Item 2, Management’s Discussion and Analysis, Critical Accounting Policies at page 26 and 27 of the Form 10-Q:

The Company uses the full cost method to account for its oil and natural gas operations. Accordingly, the costs to acquire, explore for and develop oil and natural gas properties are capitalized. Capitalized costs of oil and gas properties, net of accumulated Depreciation, Depletion and Amortization (“DD&A”) and related
deferred taxes, are limited to the estimated future net cash flows from proved oil and gas reserves, discounted at 10%, plus the lower of cost or fair value of unproved properties, as adjusted for related income tax effects (the full cost ceiling). If capitalized costs exceed the full cost ceiling, the excess is charged to ceiling test write down of oil and gas properties in the quarter in which the excess occurs.

United States Securities and

Exchange Commission

August 14, 2009

Page 3

Full cost pool capitalized costs are amortized over the life of production of proven properties.  Capitalized costs at June 30, 2009 and December 31, 2008 which were not included in the amortized cost pool were $3.2 million and $3.0 million, respectively.  These costs consist of seismic costs that are being analyzed
for potential drilling locations as well as land costs.  It is anticipated that these costs will be added to the full cost amortization pool in the next two years as properties are evaluated, drilled or abandoned.

Impairment of Oil and Gas Properties – Primarily due to the low market price for gas at March 31, 2009, the Company recorded a $1.1 million non-cash ceiling test write down of its oil and gas properties during the first quarter of 2009. At June 30, 2009, the Company computed
the estimated future net cash flows from its proved oil and gas reserves, discounted at 10%, using quarter end prices of $3.70 per Mcf of gas and $69.82 per barrel of oil. Capitalized costs for oil and gas properties at June 30, 2009 do not exceed the ceiling test limit and no further impairment was recorded.

Wells in Progress - Wells in progress represent the costs associated with wells that have not reached total depth or been completed as of period end. They are classified as wells in progress and withheld from the depletion calculation and the ceiling test. The costs for these
wells are then transferred to evaluated property when the wells reach total depth and are cased and the costs become subject to depletion and the ceiling test calculation in future periods.

Further, we did take an impairment to the oil and gas properties in second quarter 2009, as disclosed in the Form 10-Q.  No impairment was necessary for the molybdenum property, as disclosed in MD&A in the Form 10-Q.  We also refer you to Critical Accounting Policies – third paragraph under “Mineral
Properties.”

Long-lived Assets, page 75

3.

We note your disclosure indicating that for both 2008 and 2007, there was no impairment on your long-lived assets including mineral and oil and gas properties.

Please expand your disclosure under this heading and in the critical accounting policies section of your MD&A to discuss the assumptions used in reaching your no impairment conclusion, including your assumptions about the oil and gas and the molybdenum markets and your expectations of their pricing recoveries.

Additionally, explain how you reached no impairment conclusion on your oil and gas properties under the full cost ceiling test given that as of December 31, 2008, your standardized measure of discounted future net cash flows relating to proved oil and gas reserves of $3.3 million as disclosed on page 88 is significantly less than your oil and gas properties capitalized cost balance of $7.9 million
as disclosed on page 86.

United States Securities and

Exchange Commission

August 14, 2009

Page 4

Response at Page 13 of Form 10Q for the quarter ended June 30, 2009 under heading Long Lived Assets and Item 2, Managements Discussion and Analysis, Critical Accounting Policies at page 27:

The Company evaluates its long-lived assets, which consist of commercial real estate, for impairment when events or changes in circumstances indicate that the related carrying amount may not be recoverable. Impairment calculations are based on market appraisals.  If rental rates decrease or costs increase to levels that result
in estimated future cash flows, on an undiscounted basis, that are less than the carrying amount of the related asset, an asset impairment is considered to exist.  Changes in significant assumptions underlying future cash flow estimates may have a material effect on the Company's financial position and results of operations.  At June 30, 2009 and December 31, 2008 and 2007, no impairment existed on the Company’s long lived assets as the appraised value at December 31, 2008 exceeded construction
and carrying value and rental rates remained strong and costs within projected limits.

Please see our response to Comment 1 for discussion relating to mineral property impairment determination and our response to Comment 2 relating to the impairment of Oil & Gas properties.

Supplemental Financial Information on Oil and Natural Gas Exploration, Development and Production Activities

Capitalized Costs, page 86

4.

Please provide the disclosures required under Rule 4-10(c)(7)(ii) of Regulation S-X, including the description and current status of unproved properties for which costs are excluded from amortization, and the anticipated timing of including such costs in your amortization computation.

See the response to Comment 1 above.

Engineering Comments

General

5.

We note that your website and some press releases refer to or use the terms “measured”, “indicated”, and “inferred”, resources.  If you continue to make references on your web site or in press releases to measures other than proven and probable reserves, as defined by the SEC, please accompany such disclosure with the
following cautionary language or provide a legal disclaimer tab or page:

United States Securities and

Exchange Commission

August 14, 2009

Page 5

Cautionary Note to U.S. Investors – The United States Securities and Exchange Commission permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce.  We use certain terms on this website (or press release), such as “measured”, “indicated”, and “inferred”
“resources”, which the SEC guidelines generally prohibit U.S. registered companies from including in their filings with the SEC.  U.S. Investors are urged to consider closely the disclosure in our Form 10-K which may be secured from us, or from our website at http://www.sec.gov/edgar.shtml.

Please indicate the location of this disclaimer in your response

Response:  Concerning the Mount Emmons Project on the Company’s website, the reference to “resources” has been removed and replaced with the following language concerning mineralized material:

Historical records filed by predecessor owners of the Mount Emmons Project with the Bureau of Land Management in the 1990’s for the application of patented mineral claims, referenced identification of mineralized material of approximately 220 million tons of 0.366% molybdic disulfide (MoS2), with a high grade section of mineralized
material containing approximately 23 million tons at a grade of 0.689% MoS2.

As requested, any future news releases concerning the Mount Emmons Project will either use the term mineralized materials or if the term resources is used, the requested disclaimer will be included in the news release.

Properties, page 21

6.

We note your disclosure regarding your mineral claims and other real property for your Mt. Emmons project.  Please disclose the total area and quantity of your patented, unpatented, and mill site claims.  If you have other real properties or surface rights in the project area, please also include these properties in your property area tabulation.

Response:  As requested, please find the following property area tabulation for the Mount Emmons Project:

Acres

# of Claims

Patented / Fee

365

n/a

Unpatented Claims

5,844

662

Mill Site Claims

1,218

244

Fee Property(1)

160

n/a

7,587

906

United States Securities and

Exchange Commission

August 14, 2009

Page 6

(1)

This property (fee ownership) is in the vicinity of the mining claims but presently is not considered by TCM and the Company to be part of the Mount Emmons Project.

7.

Please disclose the information required under paragraph (b) of Industry Guide 7 for all your material properties listed under this heading.  For any properties identified that are not material, please include a statement to that effect, clarifying your intentions.  For each material property, include the following information:

·

The location and means of access to your property, including the modes of transportation utilized to and from the property.

Response:  The Mount Emmons Project is located in Gunnison County, Colorado.  The property is accessed by vehicle traffic via Gunnison County Road 12.

·

Any conditions that must be met in order to obtain or retain title to the property, whether you have surface and/or mineral rights.

Response:  The Company owns both surface and mineral rights at the Mount Emmons Project in fee pursuant to mineral patents issued by the United States of America.  All fee property requires the payment of property taxes to Gunnison County.  Unpatented mining and mill site claims require the payment of an
annual maintenance fee of $125 per claim to the Bureau of Land Management, totaling payment for the 906 claims of $113,250 in 2008.

·

A brief description of the rock formations and mineralization of existing or potential economic significance on the property.

Response:  The exploration work conducted in the late 1970’s by Amax, Inc. as discussed in the Patent Claim Application to the Bureau of Land Management dated December 23, 1992, defined the initial mineralized material at the Mount Emmons Project as follows.

Molybdenite is present in randomly distributed veinlets (i.e. stockwork veining) and in some larger veins that are up to two feet wide.  This mineralized zone is found in metamorphosed sedimentary rocks and in Tertiary igneous complex which acted as the source of the mineralization.

United States Securities and

Exchange Commission

August 14, 2009

Page 7

The sedimentary sequence in the Mount Emmons area spans from late Cretaceous to early Tertiary time.  The oldest formation is the Mancos, a 4,000 foot sequence of shales with some interbedding limestone and siltstones.  The Mancos Formation is not exposed on Mount Emmons, but may be seen in valley bottoms a few miles
to the north, south, and east.  All of the Mancos Formation encountered in the vicinity of the Mount Emmons mineralization has been strongly metamorphosed and attempts to correlate internal divisions of the unit have not been made.  The overlying Mesaverde Formation, also of the late Cretaceous age, consists of a massive repetitive sequence of alternating sandstones, siltstones, shales and minor coals.  Coal seams were not observed in any of the diamond drill holes, or in any of
the underground drifts.

On Mount Emmons the Mesaverde Formation varies from 1100 to 1700 feet thick.  The variability in thickness of the Mesaverde Formation is mainly due to post-depositional erosion.  The Ohio Creek Formation, dominantly a coarse sandstone with local chert pebble conglomerate and well-defined shale to siltstone beds, overlies
the Mesaverde Formation.  The Ohio Creek Formation is of early Tertiary (Paleocene) age and remains fairly consistent at 400 feet thick on Mount Emmons.  Capping Mount Emmons is the Wasatch Formation, also of early Tertiary (Paleocene to Eocene) age.  On a more regional scale, within the Ruby Range the Wasatch Formation may reach 1700 feet in thickness.  However, on Mount Emmons specifically, all but the basal 600 to 700 feet has been erod