EXHIBIT 10.1

                                                Debtor: CRESTED CORP.
                                                Document defined as the "Note"

                                 PROMISSORY NOTE

$6,023,407.35                                      Issued as of the 31st day of
-------------                                    May, 1997 at Riverton, Wyoming

FOR VALUE  RECEIVED,  CRESTED CORP., a Colorado  corporation in good standing in
Wyoming  (Debtor),  hereby  promises to pay to the order of U.S. ENERGY CORP., a
Wyoming  Corporation  ("Creditor")  (in  lawful  money of the  United  States of
America,  or with equal value as otherwise  expressly  permitted  herein) at the
office of Creditor located at 877 North 8th West, Riverton,  Wyoming, 82501., or
at such other place as  Creditor or a future  holder  hereof  (Creditor  or such
other holder being sometimes  referenced  herein as ("HOLDER")) may from time to
time  designate  in writing,  the  principal  sum of SIX  MILLION,  TWENTY THREE
THOUSAND,  FOUR HUNDRED SEVEN dollars and THIRTY FIVE cents ($6,023,407.35),  as
specified below.

This Promissory Note ("Note") has been issued pursuant to the Resolution adopted
by the Boards of Directors of U.S.  Energy Corp.  and Crested Corp. on April 17,
1997, to transfer  amounts owed by Crested Corp. to U.S. Energy Corp. which have
been recorded as accounts receivable to long-term note receivables.

                      1. PAYMENTS OF PRINCIPAL AND INTEREST

1.1 INTEREST RATE AND MATURITY DATE During the term hereof, the principal amount
hereof,  from time to time  outstanding,  shall bear interest at the rate of six
(6%)  percent  per annum on the unpaid  balance  and shall be paid in full on or
before October 1, 1999 (the "Maturity Date").

Payment by Debtor to Creditor on the  Maturity  Date shall be in an amount equal
to the unpaid balance on this Note.

1.2  PREPAYMENT  The indebtedness  hereunder  may be prepaid in whole or in part
any time, at the election of Debtor.


1.3 PAYMENT IN COMMON STOCK OF DEBTOR. The Debtor reserves the right to pay this
Note either in cash or by issuance of its common shares to Creditor based on the
closing  price of Debtor's  common  stock on the  Bulletin  Board  market or the
average between the bid and asked price on the date payment is made.

                           2. MISCELLANEOUS PROVISIONS

2.1 ATTORNEYS' FEES Should suit be brought to enforce,  interpret or collect any
part of this Note,  the  prevailing  party shall be  entitled to recover,  as an
element of the costs of suit and not as damages,  reasonable attorneys' fees and
other costs of enforcement and collection.

2.2  CHOICE OF LAW AND FORUM  THIS  NOTE  SHALL BE  CONSTRUED  AND  ENFORCED  IN
ACCORDANCE  WITH THE INTERNAL LAWS OF THE STATE OF WYOMING,  U.S.A.,  INCLUDING,
WITHOUT  LIMITATION,  ANY WYOMING LAWS GOVERNING  USURY OR PERMISSIBLE  RATES OF
INTEREST.  EXCEPT AS SET FORTH  BELOW,  DEBTOR  HEREBY  AGREES  THAT ANY SUIT TO
ENFORCE  ANY  PROVISION  OF, OR TO  COLLECT  THIS NOTE  SHALL BE  BROUGHT IN THE
DISTRICT  COURT FOR THE  COUNTY OF  FREMONT-NINTH  JUDICIAL  DISTRICT,  WYOMING,
U.S.A. EACH PARTY HEREBY AGREES THAT SUCH COURT SHALL HAVE EXCLUSIVE IN PERSONAM
JURISDICTION AND VENUE WITH RESPECT TO SUCH PARTY, AND EACH PARTY HEREBY SUBMITS
TO THE EXCLUSIVE IN PERSONAM  JURISDICTION  AND VENUE OF SUCH COURT. IN ADDITION
TO THE  FOREGOING,  CREDITOR OR A HOLDER,  AT ITS SOLE OPTION,  MAY COMMENCE ANY
SUCH SUIT IN ANY  JURISDICTION  IN WHICH  DEBTOR  HAS ITS  OFFICES  OR WHERE ANY
COLLATERAL SECURING THIS NOTE IS LOCATED.


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                                                                   EXHIBIT 10.1

2.3 DEBTOR'S WAIVERS Except as expressly provided to the contrary herein, Debtor
(and all  guarantors,  endorsers  and other  parties now or  hereafter  becoming
liable for the  payment  of this  Note)  hereby  waive  diligence,  presentment,
protest,  demand of payment,  notice of protest,  dishonor and  nonpayment,  and
waive the legal  effect of Holder's  failure to give all  notices not  expressly
provided for herein.  Debtor expressly agrees that, without in any way affecting
the  liability of Debtor  hereunder,  the Holder may extend the Maturity Date or
the time for payment of any amount due hereunder.  Debtor further waives, to the
full  extent  permitted  by law,  the  right to plead  any and all  statutes  of
limitation  as a defense to any demand on this Note,  or on any agreement now or
hereafter securing this Note.

ATTEST:                                     DEBTOR:  CRESTED CORP.



    /s/ Daniel P. Svilar                    BY:       /s/ Max T. Evans
----------------------------------               ------------------------------
Secretary                                          MAX T. EVANS, President



                                 ACKNOWLEDGEMENT


STATE OF WYOMING      )
                      )ss.
COUNTY OF FREMONT     )

        On this 5TH day of June,  1997,  personally  appeared  before  me MAX T.
EVANS who being by me duly  sworn did say that he is the  PRESIDENT  of  Crested
Corp. and duly  acknowledged  that said  instrument was signed on behalf of said
company by authority of its bylaws or a resolution of its board of directors and
said MAX T. EVANS duly acknowledged to me that said company executed the same.



My Commission Expires:  May 10, 2001                   /s/ Bryon G. Mowry
                                                   -----------------------------
                                                   Notary Public
(NOTARY SEAL)


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