The Shag Harbour Incident is a great place to start. Not truly a USO sighting, it does however possibly suggest the link between UFO and USO sightings.
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Shag Harbour is a small Nova Scotian village which is home to a small lobster fishing industry. October the 4th 1967 was a day that would rock this tiny settlement and produce one of the most well documented, if still unexplained, weird encounters of our time.
Sometime around about 11.00pm that evening Norm Smith and David Kendrick were returning from a date with their girlfriends along Highway 3 when Norm pointed out an object to David. It was hanging in the night sky at a 45 degree angle pointing down towards Shag Harbour. It had four or five amber coloured lights flashing sequentially and Norm thought he saw "windows" reminiscent of an airliner. They kept an eye on it through the tree lines before losing sight of it as it disappeared behind some more trees about 2 miles from them in the direction of the harbour.
Also driving along Highway 3 (this time in the village itself) were Laurie Wickens and four friends. Moments after David and Norm's sighting they spotted the object above and in front of their car. It was again said to have 4 amber coloured lights, and was angled again at 45 degrees towards the harbour. They lost sight of the object for a moment behind a hill and as they rounded it he pulled the car up in a parking lot over looking the "Sound", a large body of water adjacent to the harbour.
About 800 feet off the shore a "dark object" was hovering just above the water, it's previously lights were no longer showing but instead a single orange light appeared at the top.
Wickens and his friends believed it to be an airliner in trouble, and Wickens headed for a pay phone to notify the Royal Canadian Mounted Police. He got through to RCMP Corporal Werbicki and reported an aircraft crash in the Sound off Shag Harbour. Werbicki asked him if he was drunk, and then told him to stay by the phone whilst he did some enquiries. No sooner had Werbicki hung up the phone to call some constables to investigate he received another call, this time from Mary Banks on Maggie Garron's Point who also reported an aircraft crashing into the Sound. Two more calls from different people at different locations also came in reporting exactly the same thing although one man described also hearing a whistle and a bang, one of Wickens friends also reported a whistle and a whoosh.
Werbicki arranged for some of his constables to meet him at the parking lot where Wickens friends were observing events.
Around the same time David dropped Norm off at his home and left. As Norm walked around his house he saw the object again just as it dropped behind a hill. He managed to get his father, Wifred, in time to also observe it and both agreeing it had gone down in the harbour set off to see if they could lend a hand in any rescue efforts.
Werbicki and his constables arrived at the parking lot and also observed the object which they judged to be about sixty feet wide. Concerned that there may be survivors of a crash out there Werbicki was about to begin organising rescue efforts. But just as they were about to set off the object slid into the water and disappeared. With renewed urgency the rescue operation swung into action.
Bradford Shand and Lawrence Smith (Norm's uncle) were local fisherman who were quickly requested to set off in their boats to investigate. Werbicki and one of his constables took a boat each, Norm headed out on Shand's boat and his father in Lawrence's.
About a mile out they ran across their first evidence of the dark object's existence. Across the water stretching for about half a mile and being about eighty foot thick was a 4 inch deep yellow foam which smelt slightly of sulphur.
For the next couple of hours the boats searched, joined by other fishing boats and a Coastguard Cutter, but found no further sign of survivors, debris or the dark object. Word was received that no flights were missing or in any way unaccounted for. The search went on with navy divers but eventually they moved on and the file was case was unexplained. Check out some newspaper articles from the time here
That is where the documented part of the story ends, a rather compelling story in and of itself. But were things even stranger than even this weird event?
As the source material is mainly in print, I'll just quote from Wikipedia (ever reliable!) and you can decide on things yourself.
While the official story of the incident ends here, further evidence attributed to various military and civilian witnesses might imply a highly secretive military search involving a small flotilla of U.S. and Canadian ships about 30 miles to the NE of Shag Harbour near Shelburne (see map above), site of a top secret submarine detection base. According to one military witness, he was allegedly briefed that the object had originally been picked up on radar coming out of Siberia. After crashing in Shag Harbour, it traveled underwater up the coast and came to rest on top of the submarine magnetic detection grid near Shelburne, where it was supposedly joined by a second vehicle. Ships were anchored there for a week, according to the witnesses, in an attempt to recover the object.  A barge was said to have been brought in from the United States to assist in the recovery, as reported by another military witness. Regional newspaper stories did mention a barge with "atomic furnaces" being brought to Shelburne on October 6 for emergency repair, theorized by some as a cover story to explain its presence there. 
One American diver, known only as "Harry" in the book Dark Object by Styles and Ledger, stated that the object wasn't from planet Earth. "Harry" claimed photographs were taken by the divers and some foam-like debris brought up.  Another military witness claimed that there were actually two objects, one perhaps trying to assist the other. The naval search was suddenly called off on October 11. That night, a seemingly identical UFO was reported departing the area by witnesses near the original Shag Harbour crash site.
The most recent History Channel documentary about the incident, which aired on August 10, 2006, also reported that one of the divers involved in the Shag Harbour search did come forward during the mid-1990s, refusing to allow his identity to become known publicly. Once the researchers verified that the man in fact had served as a diver during that search, he recounted his version of what had happened at Shag Harbour.
In this recounting by probably the same diver, by the time they reached Shag Harbour, they already knew that nothing would be found there, because the target had already been located off the coast at Shelburne. He went on to further say that the Canadian military and the United States Navy monitored the "unknown objects" by radar and sonar, and that the objects were underwater. This monitoring continued for at least three days, until a Russian submarine was observed entering allied waters to the north. With that, the navy departed to intercept the submarine, and by the time they had returned, the "unknown objects" had evidently departed.
However, unlike the event at Shag Harbour, no official documentation or confirmation has yet emerged to support witness stories of a second search near Shelburne. There has been nothing to substantiate the diver's claims, with the exception of archived records that indicate a substantial amount of search and monitor activity in the Shelburne area during that 10 day period.
More info on the possible secret searches can be found here.
This all happened during the Cold War and it does not take much of an imagination to consider the high probability that there were further searches for this object, just to be on the safe side so I wouldn't rule anything else.
What was it? You decide. I've got plenty of material on these USOs and so you can count this as another of those part ones in a series of part ones!
Dark Object: The World's Only Government-Documented UFO Crash - Don Ledger and Chris Styles (UK Amazon, US Amazon)
Maritime UFO Files - Don Ledger (UK Amazon, US Amazon)
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