EXHIBIT 10.59

                           CONVERTIBLE PROMISSORY NOTE
                                       AND
                                     PLEDGE


U.S. $400,000.00                                                   May 15, 1997

        FOR VALUE RECEIVED,  Yellow Stone Fuels,  Corp. an Ontario  corporation,
(Borrower or YFC) promises to pay U.S. ENERGY CORP., a Wyoming corporation,  and
CRESTED  CORP.,  a Colorado  corporation,  or order (Note Holder or USECC),  the
principal sum of U.S.  $400,000.00 with interest on the unpaid principal balance
from the date of this  Note  until  December  31,  1998,  at the rate of 10% per
annum.  Principal and interest shall be payable at 877 North 8th West, Riverton,
Wyoming 82501, or such other place as Note Holder may designate.

        Borrower  currently  is indebted to USECC in the amount of  $249,779.29.
USECC agrees to advance an  additional  $150,220.71  or a total of  $400,000.00.
These  advances  are  subject  to the terms of this  Promissory  Note.  Payments
received  for  application  to this Note shall be  applied  to accrued  interest
first, and the balance applied in reduction to the principal amount hereof.

        Borrower may prepay in cash, the principal  amount and accrued  interest
outstanding  under this Note, in whole or in part, at any time without  penalty.
Any partial prepayment shall be applied against the principal amount outstanding
and shall not postpone the due date of any subsequent payments.

        In lieu of paying the Note in cash on or before its maturity  date,  the
Borrower shall have the following election:

               (i) to convert,  at any time,  all or any  outstanding  principal
amount of the Note, and interest  accrued  thereon to date of  conversion,  into
shares of the Borrower's common stock at the rate of one share for each $1.00 of
such principal and accrued interest;

               (ii)  PROVIDED  HOWEVER,  that the  Borrower  cannot  elect  such
conversion  in paragraph (i) above unless and until it has acquired an amount at
least  equal to such  aggregate  conversion  amount  either  through the sale of
equity or as a result of income from operations; and

               (iii) PROVIDED  FURTHER,  that if such Note and accrued  interest
has not been paid in full  through  either (i) and/or (ii) above by December 31,
1998,  such unpaid balance will be  automatically  converted into that number of
shares of the  Borrower's  common  stock  when  added to the number of shares of
Borrower's  common  stock  theretofore  owned  by  Holders  shall  equal  51% of
Borrower's then outstanding common stock.



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                                                                   EXHIBIT 10.59

        Borrower  and all other  makers,  sureties,  guarantors,  and  endorsers
hereby waive presentment,  notice of dishonor or protest,  and they hereby agree
to any extensions of time of payment or partial  payments  before,  at, or after
maturity.  This Note shall be the joint and several  obligation  of Borrower and
all other makers,  sureties,  guarantors and endorsers, and their successors and
assigns.

        Any notice to Borrower provided for in this Note shall be in writing and
shall be given and be  effective  upon (1)  delivery  to Borrower or (2) mailing
such notice by  first-class  U.S.  Mail,  addressed  to  Borrower at  Borrower's
address  stated  below,  or to such other  address as Borrower may  designate by
notice to the Note  Holder.  Any notice to Note  Holder  shall be in writing and
shall be given and be given and be effective upon (1) delivery to Note Holder or
(2) by mailing  such  notice by  first-class  U.S.  Mail,  to Note Holder at the
address stated in the first  paragraph of this Note, or to such other address as
Note Holder may designate by notice to Borrower.

        The  indebtedness  evidenced  by this  Note is  secured  by a pledge  of
Borrower's   ownership   interest  in  Yellow  Stone  Fuels,   Inc.,  a  Wyoming
corporation.

                                                 YELLOW STONE FUELS, CORP.
                                                 an Ontario corporation

                                                 By:     /S/ MARK J. LARSEN
                                                    ---------------------------
                                                 Its   President


Borrower's Address
877 North 8th West
Riverton, WY  82501



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