RIVERTON RANGER

July 9, 1996

Panel affirms award to U.S. Energy subsidiary

A three-member arbitration panel has reaffirmed the award of some 512.2 million to U.S. Energy Corp. and its subsidiary Crested Corp., settling a long-standing dispute over uranium contracts.

The award is against Nukem, Inc. of Stamford, Conn., and its wholly owned subsidiary, Cycle Resource Investment Company.

The disputed property is Sheep Mountain Partners, formed in December 1988 between USE/CC and Nukem/CRIC to develop, mine and mill uranium concentrates.

The April 18 award from the arbitration panel gave USE/CC a net of $7.4 million in damages against Nukem. An amount of $4.8 million was awarded to USE/CC from funds held in SMP bank accounts,for a total of $12.2 million.

USE/CC petitioned the U.S. District Court in Colorado for confirmation of the award. Nukem filed two motions to set aside portions of the award, alleging errors.

Nukem sought to set aside potentially $16 million which the panel had awarded to USE/CC.

The panel entered a new order on July 3, affirming its earlier award.

"There was wrong doing on the part of Nukem when it used what were clearly partnership contracts to obtain financial benefits for itself alone. Our award is premised on the wrong doing on the part of Nukem and a judgment by us that Nukem ought not to be permitted to profit from that wrongful conduct," the court ordered.

The panel affirmed the order awarding SMP the rights to purchase Commonwealth of Independent States uranium, the uranium acquired pursuant to those rights and the profits therefrom which are impressed with a constructive trust in favor of SMP.

The panel further stated that there is no inconsistency and no double recovery, and no subtraction ought to be made from profits already realized.

The panel did correct a portion of the award to reimburse $137,700 to CRIC for uranium oxide it purchased out of a bank account in Riverton.

The panel also confirmed a correction to have the $136,500 previously awarded to USE/CC paid out of First Interstate Bank of Riverton account rather than the Norwest account in Denver.

Another $265,313 which USE/CC calls a mathematical error made by Nukem remains in dispute before the district court.

In addition to the petition for confirmation of the award, USE/CC also filed a petition for appointment of a receiver for SMP and motions to dissolve the partnership and for an order directing distribution of the escrowed proceeds in the SMP account.

"After five years since Nukem/CRIC first filed its action for arbitration, we now have the final award of the arbitration panel," said John L. Larsen, president of U.S. Energy Corp.

Larsen said he plans to use part of the money awarded to bring the Shootaring Canyon uranium mill in Utah on line in late 1996 or early 1997 and perhaps to buy back some of the U.S. Energy stock.

Larsen said in light of the rise of uranium oxide prices from $12 to $16.60 a pound over the past six months, he believes U.S. Energy shares are undervalued.