Exhibit
10.17


3033 Campus Drive
North, Suite 175, Minneapolis, Minnesota 
55441

Telephone: 763-551-1001

Facsimile: 763-551-2499


April 26, 2006


Mr. Brian Kletscher

Chairman Highwater Ethanol

30427 County Highway 10

Vesta, MN  56292


Subject:  Environmental Permitting Proposal for the Highwater Ethanol Plant at
Lamberton, MN


Dear Mr. Kletscher:


Thank you for the
opportunity to present the attached proposal for environmental review and
permitting services for the Highwater Ethanol Project near Lamberton, Minnesota.  Earth Tech staff is sensitive to the concerns
of energy producers and agribusiness in Minnesota through our environmental
work with dairy, swine, and poultry operations and commodity handling and
processing facilities.  Most importantly,
our staff has extensive experience preparing environmental review and
permitting documentation for ethanol facilities.


Earth Tech has
extensive experience with agency staff and rules to facilitate effective
permitting and priority service from state regulators.  The project team’s understanding of the
Minnesota regulatory system will provide Highwater Ethanol with a clearer basis
for decision-making and better project results. 
We bring:


·                                          Extensive
Minnesota, Midwestern, and agribusiness and power experience.


·                                          Staff
with up to 30 years of experience in permitting and environmental review with
the Minnesota Pollution Control Agency (MPCA), Environmental Quality Board
(EQB), and federal and local regulatory agencies, with many projects
specifically relating to ethanol and power projects.


·                                          Earth
Tech understands what to expect from regulators.  Earth Tech staff received the highest score
of all competing environmental consultants in a recent competency test on air
permitting regulations prepared by the MPCA.


This proposal
provides an outline of work tasks, approximate timelines, and estimates of the
level of effort required for each task.


In addition,
please find enclosed two signed copies of our Consulting Agreement and Notice
to Proceed.  Please sign and return one
copy to my attention and keep the second for your records.


[Earth Tech Logo]













 


In
closing, we would again like to express our appreciation for the opportunity to
present this proposal for environmental permitting services in support of your
ethanol project.  If you have any
questions, or require further clarification, please feel free to contact me at
(763) 551-2461 or Mike.Valentine@earthtech.com at your convenience.


Very
truly yours,


Earth
Tech, Inc.


	
  /s/ J. Michael Valentine

  
	
  J. Michael
  Valentine

  
	
  Vice President

  



 


Enclosure



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Proposal to Permit
Proposed Highwater Ethanol Facility, Lamberton, MN


1.0          PROJECT UNDERSTANDING


Highwater Ethanol
(Highwater) is proposing to construct a 75 million gallon per year (MGY) dry
mill ethanol plat at a site approximately one mile west of Lamberton, Minnesota
(Figure 1).


The proposed Scope
of Work presented below will allow Highwater to meet environmental review and
permitting requirements related to site development.  We have included the preparation of an
Environmental Assessment Worksheet (EAW), air permitting, and wastewater and
stormwater permitting in the current Scope of Work.  We have also attached a list of other typical
permits, plans, and approvals associated with the development of this type of facility
(Attachment 1).


In addition to the
proposed site development, environmental review documentation and permitting
will need to address changes in infrastructure that will be needed to
accommodate the proposed Facility.  We
assume that a rail spur and a gas pipeline interconnect will be required for
the proposed Facility.  Since we do not
currently know the specific location of the interconnection, we have included
an estimated one mile gas pipeline allowance to address this issue in our cost
proposal.  We understand that water
appropriation and well permitting will be completed by others.  This Scope of Work does not currently include
evaluation of any transmission interconnects.


2.0          PROPOSED SCOPE OF WORK


Task 1 — Project Initiation Meeting/Site
Review


Earth Tech will
hold a project initiation meeting with the Highwater Project Team (Project
Team) to review the scope of services and budget, agree upon overall project
boundary limits, coordinate roles and responsibilities, obtain project
information, establish project schedule and related data needs, and conduct a
site review.


Anticipated
Timeframe:  Immediately
upon project initiation.


Task
2 — Environmental Assessment Worksheet


Task
2.1 Background Data Collection and Review


We have assumed
that suitable base mapping, including site topographic mapping and aerial
photography, are readily available from Highwater or other sources.  The following Geographic Information System
(GIS) mapping and background information will be collected and reviewed in
order to utilize the most current information in the environmental review and
permitting processes.



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·                  Mapping and data
pertaining to natural resources, and habitat and similar information including
the Minnesota Department of Natural Resources (DNR) Natural Heritage Database
information related to natural communities, sensitive species, and public lands


·                  National Wetland
Inventory (NWI) mapping


·                  Natural Resource
Conservation Service (NRCS) soil data and mapping


·                  Floodplain
mapping


·                  Available land
use mapping


·                  County data and
mapping


·                  Minnesota Geologic
Survey data and mapping.


·                  County Well
Index information


·                  Other pertinent
studies and mapping for the area.


·                  Area
meteorological data for the air permit


·                  Hydrologic and
water quality data for downstream waters


·                  Other pertinent
available data


Earth Tech will
also obtain information o the potential location of existing storage tanks and
other potentially contaminated sites at or in the vicinity of the site from the
MPCA.  The DNR online data does not
indicate that rare species are present at the proposed site.  As a result, we have assumed the consultation
with the DNR Natural Heritage Program and the USFWS will provide the necessary
information required to address natural resource, and rare, threatened and endangered
species issues.  As a result, we have not
included field work in our Scope of Work. 
We have assumed that consultation with State Historic Preservation
Office (SHPO) staff will provide the necessary information required to address
cultural resources.  If the SHPO
recommends that a cultural resource survey be conducted we will work with
Highwater to amend the Scope of Work and cost estimate to complete the required
survey using a subcontractor.  We will
use NWI information to address wetland issues. 
Since no NWI- mapped wetlands are shown or the proposed site, we have
assumed that no wetland delineations will be necessary for the proposed
expansion.


We have assumed
that the information from Minnesota Geologic Survey (MGS) publications and the
County Well Index (CWI) will provide the necessary information to address
geologic and hydrogeologic resources.  To
the degree possible within project schedule constraints, we will work with the
party responsible for the water appropriation permit application and well
installation to minimize the duplication of effort.


Anticipated
Timeframe: Approximately one month after project
initiation.


Task
2.1 EAW Preparation


An EAW is a
document prepared in worksheet format that is designed to assess the
environmental effects associated with a proposed project and determine if an
EIS is warranted.  Based on the
information provided, the following mandatory EAW category applies to the
proposed Highwater project:



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·                  Minn. R. Ch.
4410.4300 Subp. 5B — The construction or expansion of a facility for the
production of alcohol fuels that would produce five million or more gallons per
year of alcohol.


·                  The 2004
Legislative Session modified the threshold for a mandatory EIS from 50 MGY to
125 MGY for ethanol plants located outside of the seven County Metropolitan
Area.  Thus the project does not fall
within the mandatory EIS category.


According to the
rules, the MPCA will be the Responsible Governmental Unit (RGU) charged with
the EAW process.  Typically, the project
proposer (Highwater and their consultant) submits responses to the 31 EAW
questions to the MPCA.  The MPCA then
reviews, verifies, assesses the accuracy and completeness of the responses
provided by the project proposer, requests any additional information, and
distributes the draft EAW for a 30-day public review and comment period.  An EAW contains information pertaining to the
following major categories:


·                  Project proposer
and location


·                  Procedural
details including hot to submit comments on the EAW


·                  Project
description including methods of construction, construction schedule, project
characteristics and impacts, project site description, land use, and physical
features of the surrounding area


·                  Resource
projection measures that have been incorporated into the project design


·                  Major issues
sections identifying potential environmental impacts and issues that may
require further investigation


·                  Known
governmental permits, approvals, reviews, or financing required and the status
of any applications


·                  A brief
explanation of the need for the project and identification of those who will
benefit from the project


We have assumed
that Highwater and/or their Engineer will provide facility process, design, and
layout; transportation requirements; construction schedule; staffing levels;
and other information needed to complete the EAW.  We anticipate that agency coordination, a
site reconnaissance, and existing data will provide the information required to
address threatened, endangered, and special concern species; cultural
resources; wetlands; hydrology; and hydrogeology.  We have also assumed that MPCA and all public
notice costs for processing the EAW will be paid directly by Highwater.


We have included
the submittal of electronic preliminary review copies of the draft EAW to the
Project Team for review and comment. After incorporating Project Team comments,
we will provide three hard copies and an electronic copy of the draft EAW to
the MPCA.  Since it is more conducive to
project schedule to provide the MPCA with all required copies of any color
figures, we have included up to 40 copies of the estimated 5 color figures for
EAW distribution.  We have assumed that
the MPCA will print black and white figures and text pages.



 3
 









Anticipated
Timeline: 
Approximately 2 to 4 months after receipt of project information from
Highwater to prepare proposer EAW responses for submittal to the MPCA and
approximately an additional 3 to 6 months for MPCA EAW preparation, Notice of
Availability, and Notice of Decision.


Task 3 — Air Permitting


For purposes of
this proposal, Earth Tech is assuming that the Highwater Ethanol facility will
include gasification equipment.  Based on
other facilities of similar size and throughput, Highwater Ethanol is assumed
to be a minor source of air pollutants with respect to Federal New Source
Review/Prevention of Significant Deterioration (NSR/PSD), as well as the Part
70 permitting program.  Therefore, this
proposal assumes that this project will not require a full PSD analysis (for
particulate matter, nitrogen oxides, and volatile organic compounds), which consists
of a Best Available Control Technology (BACT) determination, NSR/PSD air
dispersion modeling, an additional impacts analysis, or Part 70
permitting.  If it is determined that
Highwater Ethanol is a major source with respect to NSR/PSD and/or Part 70
permitting, additional analyses will be required.  Determination of applicability for these
permit requirements will depend primarily on estimation of air pollutant
emission rates.  Emission rates will be
evaluated by Earth Tech, in conjunction with the Project Team, when sufficient
process information is available to make acceptably accurate calculations.


The facility will
need to procure a permit that incorporates emissions limits determined by the
permit application process.  Earth Tech,
with input from the Project Team, will prepare a list of information needed to
complete the air permit application for the MPCA.  As much as possible, the information will be
based on the specific equipment that will be installed at the Highwater Ethanol
facility.  Earth Tech will use this
information to develop an emission inventory for the facility.  This will consist of a spreadsheet with
emissions calculations for approximately 70 emission units (both point sources
and fugitive sources).


Once the emissions
inventory has been compiled, Earth Tech will conduct a thorough review of the
Federal and State air permitting regulations to identify those that apply to
the proposed facility.  The draft permit
application will include all necessary MPCA application forms, as well as
explanatory text, to help clarify any issues of particular interest.  We have included the submittal of electronic
preliminary review copies of the draft permit application to the Project Team
for review and comment.  After
incorporating Project Team comments, we will provide three hard copies and an
electronic copy of the draft permit application to the MPCA.


The MPCA operating
permit rules require that the permit application include descriptions of the
monitoring, testing, record keeping, and reporting protocols that the facility
will follow to demonstrate compliance all applicable State and Federal
rules.  Earth Tech will propose a
compliance demonstration plan for consideration that is based on applications
and permits for other similar projects in Minnesota.  Earth Tech will incorporate Project 



 4
 









Team comments into
the final compliance demonstration plan, which will be documented on MPCA Form
CD-01 for inclusion in the permit application.


Earth Tech, in
conjunction with the Project Team, will review and comment on the draft permit
issued by the MPCA or accuracy, appropriateness, and to identify if additional
negotiations are required.  Once Earth
Tech and the Project Team has reviewed and commented on the draft permit from
the MPCA, a final permit application incorporating comments will be submitted
to MPCA.


This estimate also
includes a State level Air Emissions Risk Assessment (AERA).  This analysis is required for projects that
need an EAW.  This MPCA has developed
some tools to ease the AERA process for ethanol plants.  However, these tools are based on very
conservative assumptions, which result in erroneously high results.  In order to avoid these issues, Earth Tech,
Inc. will conduct a site-specific air dispersion modeling analysis for use in
the AERA process.  Earth Tech and the
Project Team will work together to produce model input parameters that
realistically characterize the facility and demonstrate compliance in the most
cost-effective manner.  Earth Tech will
prepare a draft modeling protocol document that will be submitted
electronically to the Project Team for review and comment.  After incorporating Project Team comments, we
will provide the draft modeling protocol to the MPCA for their approval prior
to completing the analysis.


Anticipated
Timeline: 
Approximately 2 to 3 months to prepare the air permit application.  Approximately 4 months from application
submittal for the MPCA to prepare the draft permit.  This will take place concurrently with the
EAW and wastewater permitting processes. 
The EAW process must be completed prior to the issuance of the final air
permit by the MPCA.


Task 4 — Wastewater and Storm Water Permit
Applications


Permit
applications will be prepared for the process wastewater and storm water
discharges from the facility.  General
assumptions for this task are that a regular wastewater permit would be
required by MPCA (less than 1 MGD discharge), that a Section 404 permit would
not be needed and that this task does not involve the design of wastewater
facilities by Earth Tech.


Application forms
will be completed for the National Pollution Discharge Elimination System/State
Disposal System (NPDES/SDS) Process Water Permit including the NPDES/SDS permit
application, the permit application Appendix A, the Water Quality Transmittal
Form, and the Combined Project Application Form needed for the 401C
certification.  It is assumed that Earth
Tech will be provided basic information on the types and quantities of raw
materials to be consumed (average and maximum amounts), quantities of products
produced (average and maximum amounts), results of water quality testing
completed to date, chemical additives that are anticipated to be used,
anticipated non-contact cooling water discharges, anticipated wastewater
pretreatment system including expected discharge rate (average and maximum) and
flow chart, anticipated 



 5
 









pollutant
concentrations in wastewater discharges, anticipated sludge handling and
disposal methods, and Material Safety Data Sheets (MSDS) and product labels for
chemicals to be used in the operation. 
Earth Tech will obtain the information needed to complete the wastewater
permit application forms at the project initiation meeting and complete draft
application forms.  It is also
anticipated that Earth Tech will use general wastewater data and information
available in the public domain for the ethanol industry.  Earth Tech will then review the draft forms
with Highwater personnel at a project meeting. 
After receipt of comments from Highwater the permit forms will be finalized
and provided to Highwater for signatures and submittal to MPCA and appropriate
other agencies.  It is assumed Highwater
will provide the permit application fees.


Earth Tech will
provide support to Highwater during the permit review process.  Earth Tech will review the draft permit
developed by MPCA and provide recommendations to Highwater regarding permit
requirements.  It is assumed for this
project that Earth Tech will provide one written response to the draft permit
to be submitted to MPCA and will attend one public meeting during the review
process for the wastewater permit.


Earth Tech will
prepare an Industrial Storm Water Permit Application and associated Industrial
Storm Water Pollution Prevention Plan (SWPPP). 
The SWPPP will be based on the site plan and operation description
provided by Highwater.  A draft
application and Industrial SWPPP will be prepared for review and comment by
Highwater.  After receipt of comments by
Highwater, Earth Tech will finalize the application and Industrial SWPPP and
provide them to Highwater for signatures and submittal to MPCA.  It is assumed Highwater will provide the
permit application fee.


Earth Tech will
also prepare an Application for General Storm Water Permit for Construction
Activity based on the site plan and construction sequencing description
provided by Highwater.  An erosion
control SWPPP will be developed based on the anticipated needs of the
site.  A draft application and Erosion
Control SWPPP will be prepared for review and comment by Highwater.  After receipt of comments by Highwater, Earth
Tech will finalize the application and Erosion Control SWPPP and provide them
to Highwater for signatures and submittal to MPCA.  It is assumed Highwater will provide the permit
application fees.  Completion of a Notice
of Termination is not included in this Scope of Work.


Anticipated
Timeline: 
Approximately two months from the receipt of project information from
Highwater to prepare permit applications. 
The MPCA may require four to six months to process, public notice, and
issue the wastewater permit.  Work on
this task will take place concurrently with the EAW and air permitting
tasks.  The EAW process must be completed
prior to issuance of permits for the project.


Task
5 — Other Permits and Modifications (if required)


A list of typical
permits and approvals for this type of project are included in Attachment
1.  We assume that the contractor will
provide all building permit applications required.  We have assumed that no conditional use
permits of zoning changes will be required.



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Based on our
experience and knowledge of ethanol facilities, we believe no other
environmental permits related to project construction would be required.  The absence or presence of jurisdictional
wetlands/farmed wetlands and any additional requirements will be determined
based on further agency coordination and the site review.  If jurisdictional/farmed wetlands are present
at the facility wetland delineations will need to be undertaken based on the
1987 USACE Wetland Delineation Manual. 
Earth Tech will work with Highwater on an amended scope and budget to
address wetland delineations of required. 
The need for additional permits or plan revisions may be more clearly
identified based on the initial site reconnaissance, but are not included in
the current Scope of Work.  These permits
are dependent upon the presence or absence of jurisdictional wetlands,
sensitive resources, floodplain, etc.


3.0          COST
ESTIMATE


Our estimated cost
for the work identified is presented in the table below.


	
  COST ESTIMATE

  	
   

  
	
  Highwater Ethanol Plant

  	
   

  
	
  Task

  	
   

  	
  Cost

  	
   

  
	
  1 — Project
  Initiation Meet/Site Review

  	
   

  	
  $

  	
  5,140.00

  	
   

  
	
  2 —
  Environmental Assessment Worksheet

  	
   

  	
  $

  	
  34,722.00

  	
   

  
	
  3 — Air Permit

  	
   

  	
  $

  	
  27,855.50

  	
   

  
	
  4 —
  Water/Wastewater Permits

  	
   

  	
  $

  	
  20,908.00

  	
   

  
	
  5 — Other
  Permits and Approvals

  	
   

  	
  AS REQUIRED

  	
   

  
	
  Total

  	
   

  	
  $

  	
  88,625.50

  	
   

  



 



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FIGURES AND ATTACHMENTS



 8
 









Attachment 1


LIST
OF OTHER TYPICAL PERMITS, PLANS AND APPROVALS FOR SIMILAR FACILITIES


·                  Spill
Prevention, Control, and Countermeasure (SPCC) Plan


·                  Oil Pollution
Prevention Act 90 Response Plan


·                  112(r) Risk
Management Plan


·                  Above ground
storage tank registration for tanks over 110 gallons


·                  Above ground
storage tank rule requirements (Chap. 7151)


·                  Hazardous Waste
Contingency Plan


·                  Minnesota Spill
Response Plan


·                  Toxic Pollution
Prevention Plan


·                  SARA Title III
chemical notification, planning and reporting


·                  Water
Appropriation Permit may also be required for dewatering if more than 10,000
gpd or one million gpy


·                  Small or Very
Small Quantity Hazardous Generator License


·                  Grading Permit


·                  Building Permit


·                  Tax Increment
Financing, Stormwater Utility, State Infrastructure, and other State funding
may be applied to some utility and access improvements


·                  Utility Permits


·                  Zoning
Conditional Use Permits or zoning changes


·                  Water treatment
plan and specification review


 



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[Aerial photo of
Lamberton, Minnesota]