The correct answer is $\boxed{\text{E}}$. None of the conclusions follow.
The first statement is “All pencils are birds.” This means that every pencil is a bird. The second statement is “All birds are skies.” This means that every bird is a sky. The third statement is “All skies are hills.” This means that every sky is a hill.
The first conclusion is “All pencils are hills.” This conclusion does not follow from the premises. The premises only say that every pencil is a bird and that every bird is a sky. They do not say anything about pencils and hills. Therefore, we cannot conclude that all pencils are hills.
The second conclusion is “All hills are birds.” This conclusion also does not follow from the premises. The premises only say that every pencil is a bird and that every bird is a sky. They do not say anything about hills and birds. Therefore, we cannot conclude that all hills are birds.
The third conclusion is “All skies are pencils.” This conclusion does not follow from the premises. The premises only say that every pencil is a bird and that every bird is a sky. They do not say anything about skies and pencils. Therefore, we cannot conclude that all skies are pencils.
The fourth conclusion is “All birds are hills.” This conclusion does not follow from the premises. The premises only say that every pencil is a bird and that every bird is a sky. They do not say anything about birds and hills. Therefore, we cannot conclude that all birds are hills.