U.S. Energy Corp. has invested $4.3 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 $17.3 million (25% USE), which now includes approximately 95,500 acres of BLM, state and fee leases in eight prospect areas in three states.

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.