EXHIBIT 10.16


US  U.S. Energy


ENERGY MANAGEMENT AGREEMENT

(Site Development And Operations)


The purpose of this Agreement is to set forth the
understanding and agreement between U.S. Energy Services, Inc. (“U.S. Energy”)
and Tennessee Valley Agri-Energy LLC (“TVAE”) related to the provision of
energy management services.


PROJECT DESCRIPTION: TVAE is
developing a 50 million gallon per year ethanol plant (“Plant”) to be located
near Decatur, Alabama.  The Plant will
have peak electric usage of approximately a 5 MW peak usage in electricity and
will consume approximately 4,000 MMBtu of natural gas per day.


U.S. ENERGY RESPONSIBILITIES:  U.S. Energy will provide consulting and
energy management services for supplies of natural gas and electricity for the
Plant.  These services will be provided
during the construction of the Plant (“Construction Period”), and after the
Construction Period when the Plant has been placed in service (“Completion Date”).  The Completion Date shall be determined when
the Plant begins producing ethanol. 
These services will be provided to TVAE upon request:


A.                                    Energy
Infrastructure Advisory Services During the Construction Period


1.                                       Provide
an economic comparison of distribution service options.  Such options will include service from area
distribution utilities, interstate pipelines and third party contractors.


In the event that a direct connect pipeline option is
selected, U.S. Energy will submit a tap request to the pipeline.  In addition, U.S. Energy will also attempt to
negotiate an option for TVAE to minimize interconnect costs through the
purchase of firm transportation to the Plant.


2.                                       Determine
whether firm, interruptible, or a blend of transportation entitlement will
provide the lowest burnertip cost. 
Factors that will be considered include pipeline credits for the new
interconnect, cost of an alternate fuel system, and availability of specific
receipt point capacity.


3.                                       Provide
advisory services to TVAE regarding electric pricing and service agreements.


a.                                       Analyze
the electric service proposals along with primary, secondary and generation
options and recommend an electric sourcing strategy and plan.  The plan may include a combination of
electric supplier agreement and/or installation of on-site generation.


b.                                      Negotiate
final electric service agreements that meet the pricing and reliability
requirements of TVAE, including options for third party access to electric
metering.













c.                                       Prepare
and implement a regulatory strategy, if required and if an alternative power
supplier is selected.  Any attorney fees
required for the specific purpose of obtaining regulatory approval for an
alternative power supplier, if any, will be over and above U.S. Energy’s
monthly fee herein, and must be pre-approved by TVAE.


4.                                       Evaluate
the proposed electric distribution infrastructure (substation) for reliability,
future growth potential and determination of the division of ownership of
facilities between the utility and the Plant.


5.                                       Investigate
economic development rates, utility grants, equipment rebates and other utility
programs that may be available.


B.                                    On-Going
Energy Management Services Following the Completion Date


U.S. Energy will provide the following services at TVAE’s
request:


1.                                       Provide
natural gas supply information to minimize the cost of natural gas purchased.
This will include acquiring multiple supply quotes and reporting to TVAE the
various supply index and fixed prices. 
U.S. Energy will not take title to TVAE gas supplies, but will
communicate supply prices and potential buying strategies.


2.                                       Negotiate
with pipelines, utilities, other shippers, and suppliers to provide
transportation, balancing, and supply agreements that meet TVAE’s performance
criteria at the lowest possible cost.


3.                                       Develop
and implement a price risk management plan that is consistent with TVAE’s
pricing objectives and risk profile.  An analysis
will be developed to help determine the amount of fuel usage that should be
considered for this price management service. 
U.S. Energy will also provide price risk management information through
the following communications:


Weekly Update:  E-mailed each week


Monthly Conference Call:
Occurs the first Tuesday of each month


Hedge Recommendations: Updated
regularly and published on U.S. Energy’s web site


Annual Energy Conference: Occurs
in May of each year.


Gold+ Web Site Access:  Gold+ is U.S. Energy’s password-protected web
site that allows TVAEs access to their information.  Gold+ access also makes available industry
news, hedging strategies and NYMEX pricing.


4.                                       Provide
daily nominations to the suppliers, pipeline, and other applicable shippers for
natural gas deliveries to the Plant.  This
will include daily electronic confirmations to TVAE of all nominations and
actual daily usage.  U.S. Energy will
utilize customer or utility supplied telemetering to obtain actual usage data.



 2
 









5.                                       Provide
a consolidated monthly invoice to TVAE that reflects all applicable natural gas
and electric energy costs.  U.S. Energy
will be responsible for reviewing, reconciling and paying all shipper, supplier
and utility invoices.


6.                                       Provide
a monthly usage report of electric energy consumption and costs.  Also, where applicable and available from the
utility, obtain monthly interval electric load data and provide monthly load
profile graphs.


7.                                       On-going
review and renegotiation of electric service costs, as required.  This may include:


a.                                       Completing
and evaluating annual proposals to identify the most reliable and economic
third party electric energy supply.


b.                                      Identifying
new service tariffs or opportunities to renegotiate the service agreement to
provide lower costs.


c.                                       Identifying
on-site generation opportunities as market conditions change.


d.                                      Provide
a monthly projection of energy (natural gas and electricity) and annual
summaries.


8.                                       Provide
natural gas and electric energy operating budgets for the Plant.


AGENCY:  U.S. Energy will act as TVAE’s agent while
managing TVAE’s energy matters.  The
scope of this agency is set forth in the Agency Authorization between U.S.
Energy and TVAE attached as Exhibit A (the terms of which are made a
part of this Agreement).


TERM:  The initial term of this
Agreement shall commence on Apr 1, 2007 and continue until twenty-four
(24) months after the Plant’s Completion Date. 
It will then renew for a one-year term, year to year thereafter, unless TVAE
or U.S. Energy terminates the contract upon sixty (60) days prior written
notice before the annual renewal date.  TVAE
shall remain responsible for payment and performance associated with any and
all transportation, supply, and storage transactions entered into by U.S.
Energy and authorized by TVAE, prior to termination, as well as fees and
charges for U.S. Energy’s services occurring up until the termination date.


FEES:  U.S. Energy’s fee for services during the
term of this Agreement shall be a monthly retainer fee of $3,500.00 per month
plus pre-approved travel expenses. The monthly retainer fee will increase 4%
per year on the annual anniversary date of the effective date of this
Agreement.


In the event that plant financing is not secured, this
Agreement shall become null and void and both parties will be relieved of
professional and/or financial obligations due the other party.  However, TVAE shall remain responsible for
payment and performance associated with any and all transportation, supply, and
storage transactions entered into by U.S. Energy and authorized by TVAE, prior
to termination, as well as fees, charges 



 3
 









and pre-approved travel expenses for U.S. Energy’s
services occurring up until the termination date.


If TVAE elects to utilize U.S Energy to provide
physical or financial natural gas hedging services, a $.01/MMBTu administrative
fee will be assessed on volumes hedged to cover the costs associated with
compliance to Federal and State commodities rules and regulations and
administrative costs of facilitating this natural gas hedging service.


BILLING AND PAYMENT:  On the first of the month, U.S. Energy shall
invoice TVAE for appropriate energy costs from the previous month and for the
U.S. Energy retainer for the current month. 
TVAE shall pay U.S. Energy within ten (10) days of receipt of invoice.


TAXES:  TVAE will be responsible for payment of all
taxes including, but not limited to, all sales, use, excise, BTU, heating value
and other taxes associated with the purchase and/or transport of natural gas,
electricity or other fuels and the provision of services hereunder.


CONFIDENTIALITY:  U.S. Energy shall not divulge to any other
person or party any information developed by U.S. Energy hereunder or revealed
to U.S. Energy pursuant to this Agreement, unless such information is (a)
already in U.S. Energy’s possession and such information is not known by U.S.
Energy to be subject to another Confidentiality Agreement, or (b) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by U.S. Energy, its officers, employees, directors, agents or its
advisors, or (c) becomes available to U.S. Energy on a non-confidential basis
from a source which is not known to be prohibited from disclosing such
information to U.S. Energy by legal, contractual or fiduciary obligation to TVAE,
or (d) is required by U.S. Energy to be disclosed by court order, or (e) is
permitted by TVAE.  All such information
shall be and remain the property of TVAE unless such information is subject to
another Confidentiality Agreement, and upon the termination of this Agreement,
U.S. Energy shall return all such information upon TVAE’s request.  Notwithstanding anything to the contrary
herein, U.S. Energy shall not disclose any information which is in any way
related to this Agreement or U.S. Energy’s services hereunder without first
discussing such proposed disclosure with TVAE.


NOTICES:  Any formal notice, request or demand which a
party hereto may desire to give to the other respecting this Agreement shall be
in writing and shall be considered as duly delivered as of the postmark date
when mailed by ordinary, registered or certified mail by said party to the
addresses listed below. Either party may, from time-to-time, identify alternate
addresses at which they may receive notice during the term of this Agreement by
providing written notice to the other party of such alternate addresses.



 4
 









 


	
  Tennessee Valley Agri-Energy, LLC:

  	
   

  	
   

  
	
   

  	
  Attn:

  	
    Bartt McCormack

  
	
   

  	
   

  	
    540 Little Dry Creek Rd.

  
	
   

  	
   

  	
    Pulaski, TN 38478

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  U.S.
  Energy:

  	
   

  	
    Bank: US Bank

  
	
  (Payment by wire):

  	
   

  	
   

  	
    Account Name: U.S. Energy Services, Inc.

  
	
   

  	
   

  	
   

  	
    Account #: 173100561153

  
	
   

  	
   

  	
   

  	
    ABA: 091 0000 22

  
	
   

  	
   

  	
   

  	
   

  
	
  (Notices):

  	
   

  	
   

  	
    U.S. Energy Services, Inc.

  
	
   

  	
   

  	
   

  	
    1000 Superior Blvd., Suite 201

  
	
   

  	
   

  	
    Wayzata, MN 55391

  
	
   

  	
   

  	
    Attn: Contract Administration

  



 


ASSIGNMENT OR AMENDMENT:  The Agreement may not be assigned or amended
without the written consent of U.S. Energy and TVAE.


APPLICABLE LAW:  The Agreement shall be construed in
accordance with the laws of the State of Minnesota.


ENTIRE AGREEMENT:  This Agreement constitutes the entire
Agreement among the parties pertaining to the subject matter hereof and
supersedes all prior Agreements and understanding pertaining hereto.



 5
 









Agreed
to and Accepted by:


Tennessee Valley Agri-Energy, LLC


	
  By

  	
   

  	
  /S/ Bartt R. McCormack

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Bartt R. McCormack

  	
   

  
	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Chairman

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  4/13/2007

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  U.S. Energy Services, Inc.

  
	
   

  
	
  By:

  	
   

  	
  /S/ Gail McMinn

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Gail McMinn

  	
   

  
	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  EVP – Commercial Services

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  4/24/07

  	
   

  



 



 6
 









EXHIBIT A


AGENCY AUTHORIZATION


The purpose of this Agency Authorization (this “Authorization”)
is to set forth the authorization and agreement between U.S. Energy Services,
Inc. (“U.S. Energy”) and Tennessee Valley Agri-Energy, LLC (“TVAE”) related to
the provision of energy supply management services.


TVAE and U.S. Energy agree on the following terms and
conditions:


1.                                       APPOINTMENT AND SCOPE – TVAE hereby appoints U.S. Energy as
its agent for managing TVAE’s energy supplies and to deal with third parties on
behalf of TVAE, in connection with energy-related matters, in U.S. Energy’s
capacity as TVAE’s agent, including, without limitation, the purchase of energy resources in such quantity and at such times as TVAE
may authorize in writing, by electronic communications (e.g., by email),
verbally or otherwise (“Energy Procurements”).  U.S. Energy is authorized to contract on
behalf of TVAE for the acquisition of energy supply, transportation and
distribution.  U.S. Energy hereby accepts
such appointment and agrees to use commercially reasonable efforts to perform
the services required by this Authorization.


2.                                       AUTHORITY OF U.S. ENERGY TO ALIGN CREDIT – TVAE authorizes
U.S. Energy, in making Energy Procurements, to align credit from energy
suppliers or third parties on behalf and as an agent of TVAE, as needed.


3.                                       AUTHORITY OF U.S. ENERGY TO EXTEND CREDIT  – TVAE hereby agrees that when making Energy Procurements on
behalf of a TVAE, U.S. Energy may use U.S. Energy funds to pay suppliers,
thereby extending credit directly to TVAE (and acting as a “Creditor,” as that
term is used in this Authorization).


4.                                       TERM  – The term of
this Authorization shall commence as of the date hereof and shall continue
indefinitely until such time as the parties hereto shall agree in writing to
terminate the Authorization.


5.                                       INDEPENDENT CONTRACTOR  –
It is not the intent of the parties hereto
to form any partnership or joint venture relationship.  Each
party shall, in relation to its obligations hereunder, act as an independent
contractor.


6.                                       RELEASE OF ENERGY CONSUMPTION RECORDS AND BILLS  - This Agreement serves as authorization for the release of TVAE’s
energy consumption records and bills from pipelines and suppliers to U.S.
Energy.


7.                                       AUTHORITY –  Each party
represents and warrants to the other that it is fully empowered and authorized
to execute and deliver this Authorization, and the individuals signing this Authorization
each represent and warrant that he or she is fully authorized to do so.



 7
 









Agreed to and Accepted by:


	
  Tennessee Valley Agri-Energy, LLC

  	
   

  	
   

  	
  U.S. Energy Services, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /S/ Bartt R. McCormack

  	
   

  	
   

  	
  By: 

  	
  /S/ Gail McMinn

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name: 

  	
  Bartt R. McCormack

  	
   

  	
   

  	
  Print Name: 

  	
  Gail McMinn

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
  Chairman

  	
   

  	
   

  	
  Title: 

  	
  EVP Commercial Sves

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   4/13/2007

  	
   

  	
   

  	
  Date: 

  	
  4/24/07

  	
   

  
														



 



 8