**Exhibit 10.22**

** **

**STATE OF NORTH DAKOTA**

**BEFORE THE**

**STATE DEPARTMENT OF HEALTH**

 
| **IN THE MATTER OF:** | ** ** | **)** | ** ** | ** **               | ** ** |
|--------------------------------------|------------|-------|------------|--------------------------|------------|
| ** **                           | ** ** | **)** | ** ** | **ADMINISTRATIVE**       | ** ** |
| **American Crystal Sugar Company**   | ** ** | **)** | ** ** | **CONSENT  AGREEMENT**   | ** ** |
| **101 North Third Street N.**        | ** ** | **)** | ** ** | ** **               | ** ** |
| **Moorhead, MN 56560-1990**          | ** ** | **)** | ** ** | **Case No.  10-001 APC** | ** ** |

 

The North Dakota Department ofHealth (“Department”), together with American Crystal Sugar Company (“Respondent”),agree to settle this administrative action on the following terms:

 

**PRELIMINARY STATEMENT**

 

I.                                                                 Department is the state agency responsible for administeringand enforcing state’s air pollution control laws, N.D.C.C. ch. 23-25 and N.D.Admin. Code art. 33-15, and has the authority to enter into this AdministrativeConsent Agreement under N.D.C.C. chs. 23-25 and 28-32.

 

II.                                                             Under § 110 of the Clean Air Act, 42 U.S.C. § 7410, NorthDakota’s operating permit program was submitted to and approved by theEnvironmental Protection Agency (EPA). See Clean Air Act Full Approvalof Operating Program; State of North Dakota, 64 Fed. Reg. 32433 (June 17,1999).  Under EPA’s approval of NorthDakota’s operating permit program and other EPA delegations of authority,certain air permits issued by North Dakota are federally enforceable.  Such permits are also enforceable by theDepartment under N.D.C.C. §§ 23-25-03(12), 23-25-04.1(2), and 23-25-10.

 

III.                                                         Respondent owns and operates a sugar beet processing factoryor facility (“facility”) located near Hillsboro, North Dakota.

 

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IV.                                                         The parties enter this Agreement to avoid the expense oflitigation and ensure prompt compliance with the state’s air pollution controllaws.  The Agreement is in the publicinterest, will result in air quality improvements in the area where thefacility is located, and has been chosen as the most appropriate means ofresolving this matter that was addressed in Notice of Violation, Case No.10-001 APC, dated February 26, 2010.

 

**BACKGROUND**

 

V.                                                             Respondent is a “person” within the meaning of N.D.C.C. ch.23-25.  N.D.C.C. § 23-25-01(13).

 

VI.                                                         Respondent is subject to the requirements of N.D.C.C. ch.23-25, and its implementing rules, N.D. Admin. Code art. 33-15.

 

VII.                                                     On June 11, 1997, the Department issued Respondent’s AirPollution Control Permit to Construct for a new Promill pulp dryer, with amaximum process weight rate of 107.7 tons/hr consisting of pressed pulp andsold fuel, to replace an existing pulp dryer that had been permitted under AirPollution Control Permit to Operate No. X75001. The particulate matter (PM) emission limit was specified in the permitand was determined by a formula based on the process weight rate at the time oftesting.

 

VIII.                                                 Under N.D.C.C. § 23-25-04.1(1), Respondents must operate thefacility in compliance with the conditions of the permit.

 

IX.                                                        On December 3, 1998, Respondent tested the pulp dryer forcompliance with the PM emission limit of 50.2 lbs/hr while operating at aprocess weight rate of 90.2 tons/hr. Compliance was demonstrated with an emission rate of 28.9 lbs/hr.

 

X.                                                            On May 6, 1999, the Department issued Respondent’s firstTitle V Permit to Operate No. T5-X75001 which incorporated the new pulp 

 

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dryer and the applicableprovisions from the Permit to Construct issued on June 11, 1997.

 

XI.                                                        On November 25, 2003, the Department issued Permit toConstruct No. 03024 which increased the maximum process weight rate of the pulpdryer to 122.3 tons/hr.

 

XII.                                                    On October 8, 2007, Respondent tested the pulp dryer forcompliance with the PM emission limit of 51.8 lbs/hr while operating at aprocess weight rate of 104.4 tons/hr. Compliance was demonstrated with an emission rate of 42.1 lbs/hr.

 

XIII.                                                On December 12, 2008, Respondent tested the pulp dryer forcompliance with the PM emission limit of 52.0 lb/hr while operating at aprocess weight rate of 112.3 tons/hr.

 

XIV.                                                On February 12, 2009, the Department received a copy of theofficial test report directly from the testing firm on behalf of Respondent.The report showed that the pulp dryer failed to demonstrate compliance with thePM emission limit of 52.0 lb/hr when tested on December 12, 2008.  The emission rate during the test was 71.0lb/hr and exceeded the emission limit by 19.0 lb/hr.

 

XV.                                                    On February 23, 2009, according to Respondent, the dryer wasshut down for inspections.  During thistimeframe significant maintenance work was completed and included replacingscrubber nozzles prior to conducting another test.

 

XVI.                                                On February 26, 2009, Respondent informed the Department byletter stating that after several attempts to retest the dryer, the decisionwas made to abort the compliance test. The decision was based on difficulties in maintaining the desired pulpdryer throughput due to variations in coal supply and unsteady slice rates inaddition  to adverse weather conditionsof ice and snow.  The weather also poseda safety concern for the testing firm employees accessing the stack with a 30 

 

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below wind-chill factor.  Respondent requested approval from theDepartment to delay retesting of the pulp dryer until the fall of 2009.  Respondent agreed to operate the dryer at aprocess weight rate of less than or equal to 110.1 tons/hr until compliancecould be demonstrated at a higher process weight rate.  The 110.1 tons/hr rate was based on theresults of a satisfactory compliance test conducted in October 2007.

 

 XVII.                                         On March 3, 2009, the Department sent a letter to theRespondent giving approval to delay retesting of the pulp dryer for PMemissions and stating that the test must be conducted no later than November15, 2009.  The letter also included aprocess weight rate limit of 110.1 tons/hr that was not be exceeded pendingretesting at a higher process weight rate.

 

XVIII.                                        Respondent has indicated that the Hillsboro factory operatedthe pulp dryer within the process weight rate limit of 110.1 tons/hr, andRespondent believes that operating at the lower rate likely resulted in loweremissions.

 

 XIX.                                            On October 20, 2009, Respondent tested the pulp dryer forcompliance with the PM emission limit of 51.5 lbs/hr while operating at aprocess weight rate 102.7 tons/hr.

 

XX.                                                   On January 6, 2010, Respondent sent a letter to Departmentenclosing a copy of the test report for the October 20, 2009 test and indicatedif there were any questions to contact Respondent.  The letter did not mention that the pulpdryer failed to demonstrate compliance with the PM emission limit, and theletter did not indicate any actions that Respondent would take to demonstratecompliance.

 

XXI.                                               On January 8, 2010, the Department sent an email toRespondent indicating that the test on October 20, 2009 showed that the pulpdryer failed to demonstrate compliance. The PM emission limit of 51.5 lb/hr was exceeded by 14.5 lb/hr with anemission rate of 66.0 lb/hr.  The 

 

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email also indicated that aNotice of Violation would be recommended for issuance by the Department toRespondent.

 

XXII.                                           On February 19, 2010, Respondent sent an email to theDepartment, followed by a letter dated February 22, 2010 outlining plans toshut down the pulp dryer on March 3, 2010, to inspect furnace, cyclones and thescrubber internals, and to replace all of the scrubber nozzles.  An engineering test would be conducted duringthe week of March 8, 2010 to determine internally what adjustments should bemade to the operating plan to achieve compliance.  Plans were made with a testing firm toconduct compliance testing during the week of March 29, 2010.

 

XXIII.                                       On March 3, 2010, according to Respondent, extensive work onthe pulp dryer was completed; the corrective action plan was implemented priorto scheduled engineering tests and future compliance testing.

 

XXIV.                                       On March 30, 2010, Respondent tested the pulp dryer forcompliance with the PM emission limit of 51.3 lbs/hr while operating at aprocess weight of 100.37 tons/hr. Compliance was demonstrated with an emission rate of 22.15 lb/hr.

 

**VIOLATIONS**

 

XXV.                                           Respondent’s failure to comply with the pulp dryer PM emissionlimit of 52.0 lbs/hr specified in Condition 3 of Title V Permit to Operate No.T5-X75001 during a failed compliance test on December 12, 2008, violatedN.D.C.C. § 23-25-04.1(1).

 

 XXVI.                                    Respondent’s failure to comply with the pulp dryer PMemission limit of 51.5 lbs/hr specified in Condition 3 of Title V Permit toOperate No. T5-X75001 during a failed compliance test on October 20, 2009,violated N.D.C.C. § 23-25-04.1(1).

 

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**SETTLEMENT TERMS**

 

NOW, THEREFORE, in consideration ofthe foregoing and the mutual covenants and conditions in this Agreement, anddesiring to be legally bound, the Parties agree as follows:

 

XXVII.                                   Respondent agrees to pay an administrative penalty of OneHundred Three Thousand, One Hundred Eighty-One Dollars ($103,181) to theDepartment not later than September 30, 2010. Payment shall be in a check made payable to the State of North Dakota,Department of Health, shall reference Case No. 10-001 APC, and shall bedirected to the attention of L. David Glatt, Environmental Health SectionChief, 918 E. Divide Ave., Bismarck, ND 58501-1947.

 

XXVIII.                               Respondent agrees to test the pulp dryer not later thanNovember 30, 2010, for compliance with the PM emission limit specified inCondition 3 of Permit to Operate No. T5-X75001.

 

**ADDITIONAL TERMS**

 

XXIX.                                      Respondent agrees that it was properly notified of theviolations listed herein.

 

XXX.                                          Respondent acknowledges that, with regard to violationslisted herein, it is knowingly and voluntarily waiving the rights andprocedures that would otherwise protect it and that it would have in any formaladministrative adjudicatory proceeding or any civil action in a court of law,including the right to the filing of a notice of intent, to present evidence andwitnesses on their behalf, to cross-examine Department’s witness, to a jurytrial, and to administrative and judicial review.

 

XXXI.                                      Respondent agrees that an administrative order may beentered incorporating the Agreement’s terms, and agrees that such an order maybe enforced by a court of competent jurisdiction.  Respondent agrees that it will not contestDepartment’s jurisdiction to compel compliance with such an order in anysubsequent enforcement 

 

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proceedings.  Nothing herein shall be construed as limitingDepartment’s right to seek penalties for violations of such an order.

 

XXXII.                                  Any judicial action brought by either party to enforce oradjudicate any of the Agreement’s terms, or an order incorporating theAgreement’s terms, shall be brought in the Burleigh County Court in the Stateof North Dakota (South Central Judicial District).

 

XXXIII.                              If any term of this Agreement is declared by a court havingjurisdiction to be illegal or enforceable, the validity of the remaining termswill not be affected and, if possible, the rights and obligations of theparties are to be construed and enforced as if the Agreement did not containthat term.

 

XXXIV.                              The Agreement shall constitute full settlement of the violationslisted herein, but does not limit Department from taking enforcement actionconcerning other violations.

 

XXXV.                                  No failure by Department to enforce any of the Agreement’sterms after any breach or default will be deemed as a waiver of its rights withregard to that breach or default, nor will such failures be construed as awaiver of the right to enforce all of the Agreement’s terms on any furtherbreach or default.

 

XXXVI                                 This Agreement constitutes the entire agreement between theparties.  Except as otherwise provided inthe Agreement, no amendment, alteration, or addition to the Agreement shall bebinding unless reduced to writing and signed by both parties.

 

XXXVII.                          The Agreement shall apply to, and be binding on, theparties, their officers, agents, servants, employees, successors, and assigns.

 

XXXVIII.                      No change in ownership of any property covered by theAgreement shall in any way alter, diminish, or otherwise affect Respondent’sobligations and responsibilities under the Agreement.

 

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XXXIX.                             Each party shall bear its own costs incurred in this action,including attorney fees.

 

XXXX.                                 Respondent enters into the Agreement freely and voluntarily.

 

XXXXI.                             The Agreement becomes effective when signed by both parties.

 
| DEPARTMENT OF HEALTH          |                 |              |
|-------------------------------|----------------------|-------------------|
|                          |                 |              |
| /s/ L. David Glatt  P.E. |                 | September 7, 2010 |   |
| By:                           | L. David Glatt, P.E. |              | Date |   |
|                          | Environmental Chief  |              |   |
|                          |                 |              |
| STATE OF NORTH DAKOTA         | )                    |              |
|                          |                 |              |
|                          | ) ss.                |              |
|                          |                 |              |
| COUNTY OF                     | )                    |              |

 

The foregoing instrument wasacknowledged before me this on this           day of                            ,2010, by L. David Glatt.

 
|                           |             |              | (Seal) |
|--------------------------------|------------------|-------------------|--------|
| Notary Public                  |             |              |   |
|                           |             |              |   |
| My Commission Expires:         |             |              |   |
|                           |             |              |   |
|                           |             |              |   |
| AMERICAN CRYSTAL SUGAR COMPANY |             |              |   |
|                           |             |              |   |
| /s/ Joseph J. Talley           |             | September 1, 2010 |   |
| By:                            | Joseph J. Talley |              | Date   |   |
|                           | COO              |              |   |   |
|                                |                  |                   |        |  |  |  |  |

 

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| STATE OF MINNESOTA | )     |   |
|--------------------|-------|--------|
|               | ) ss. |   |
| COUNTY OF CASS     | )     |   |

 

The foregoing instrument wasacknowledged before me on this              dayof                           ,2010, by                                     ,                                    ofAmerican Crystal Sugar Company, a Minnesota cooperative association, on behalf ofthe cooperative association.

 

 
|                     |   |
|--------------------------|--------|
| Notary Public            |   |
| My commission expires on |   |

 

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