EXHIBIT 10.28


 


MINNESOTA POLLUTION CONTROL AGENCY/HERON LAKE BIOENERGY, LLC


 


COMPLIANCE AGREEMENT


 


I.                                         PARTIES
AND AUTHORITIES


 


A.                                    Parties. 
The parties to this Compliance Agreement (“Agreement”) are the Minnesota
Pollution Control Agency (“MPCA”) and Heron Lake BioEnergy, LLC, a Minnesota
limited liability company (the “Company”), Heron Lake, Minnesota.


 


B.                                    MPCA Authority. 
The MPCA is the agency of the State of Minnesota with the duty to
administer and enforce the laws and rules relating to the prevention,
control, or abatement of emissions of pollutants to water, air, noise, and
land.  This Agreement is entered into
pursuant to the authority vested in the MPCA by Minn. Stat. Chaps.  115 and 116, and pursuant to delegations from
the United States Environmental Protection Agency under the federal Clean Air
Act.


 


II.                                     BACKGROUND


 


On May 24, 2005, the
MPCA issued Air Emission Permit No. 06300025-01 (the “Permit”) to the
Company, which authorized the Company to construct a coal-fueled ethanol
facility in Heron Lake, Minnesota (the “Facility”), with an annual production
capacity of fifty-five (55) million gallons of denatured ethanol.


 


The Company’s Facility
was permitted by the MPCA as a synthetic-minor emission source, meaning that
the Company agreed to install certain pollution-control equipment and accept
certain operating conditions to limit its potential to emit each of the
criteria pollutants [volatile organic compounds, carbon monoxide, sulfur
dioxide, nitrogen oxides, particulate matter and particulate matter smaller
than ten microns (“PM10”)] to less than 100 tons per year.


 


The Company’s ethanol
plant is expected to be completed and operational in May 2007.


 


The MPCA has informed the
Company that its Facility needs a major source permit due to potential PM10
emissions.  The MPCA has also informed
the Company that, having triggered major source status due to potential PM10
emissions, the Company’s emissions of sulfur dioxide, nitrogen oxides and
volatile organic compounds require “best available control technology” analysis
under 40 CFR 52.21(j)(2).


 


To avoid a dispute with
the MPCA that may delay the construction and operation of its Facility, the
Company has agreed to apply to the MPCA for a major amendment to amend the
Permit so that its ethanol plant may become a major source within the meaning
of the federal Prevention of Significant Deterioration program of the Clean Air
Act.


 


The MPCA has agreed,
pending the issuance of the amendment to the Permit, that the Company may
continue with the construction of its ethanol plant, and operate its ethanol
plant 


 


 

















 


when construction has
been completed in such a manner as to limit the emissions of each of the
criteria pollutants to less than the minor source threshold of 100 tons per
year.


 


The purpose of this Agreement
is to set forth the terms and conditions of the parties’ agreement with respect
to the construction and operation of the Company’s ethanol plant pending the
issuance of the amendment to the Permit, and the Company’s obligations to the
MPCA.


 


III.                                 AGREEMENT


 


NOW, THEREFORE, in consideration of the foregoing premises, and
further in consideration of the mutual promises contained in this Agreement,
the MPCA and the Company hereby agree as follows:


 


A.                                    Major Amendment.  Within one hundred and fifty (150)  days from the effective date of this
Agreement, the Company agrees to submit a complete major amendment application
to the MPCA to amend the Permit to permit its Facility as a major emissions
source within the meaning of the Prevention of Significant Deterioration
program of the federal Clean Air Act (the “Amendment”).


 


B.                                    Amendment Processing.  The MPCA agrees to exercise reasonable diligence in
processing the Company’s Amendment application. 
The MPCA will process and issue the Company’s Amendment according to
applicable permit issuance rules and procedures.


 


C.                                    Company Rights and Obligations. 
Pending the issuance of the Amendment to the Permit, the Company may:


 


i.                                          Continue with and complete the
construction of its Facility.


 


ii.                                       Operate its Facility after the completion
of construction in a manner such that the emissions of each of the criteria
pollutants generated by the ethanol plant, as determined on a twelve (12) month
Rolling Sum, do not exceed ninety-five (95) tons per year and shall in all other
respects comply with Air Emission Permit No. 06300025-01.


 


iii.                                    The Company will keep onsite
records of how monthly emissions are estimated and will keep a record of the
12-month rolling sum for PM10 and nitrogen oxides.


 


D.                                    No Admissions. 
The parties acknowledge and agree that nothing in this Agreement should
be interpreted or construed as any type of admission by the Company that its
Facility, as currently permitted under the Permit, would be unable to qualify
as a synthetic-minor source with respect to any of the criteria pollutants,
including PM10.


 


 


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E.                                      Failure to Comply. 
If the MPCA determines that the Company has failed to comply with any
provision of this Agreement, the MPCA shall provide written notice to the
Company of such failure.


 


F.                                      Remedies of the Parties. 
The terms of this Agreement shall be legally enforceable in a court of
appropriate jurisdiction and the Parties retain the right to assert any legal,
equitable, or administrative right of action or defense that may be available
by law or in equity in order to implement or enforce the terms of this
Agreement.


 


G.                                    Full Agreement and Amendments. 
This Agreement sets forth the full and final understanding of the terms
of the parties’ agreement and may only be modified or amended by a written
instrument executed by both parties.


 


H.                                    Transfer of Agreement. 
This Agreement is not transferable nor assignable to any person without
express written approval of the MPCA; such approval shall not be unreasonably
withheld.


 


I.                                         Successors and Performance of
Agreement.  This Agreement shall be binding upon the
Company, its successors and assigns and upon the MPCA, its successors and
assigns.


 


J.                                      Extension of Time. 
MPCA staff may grant extensions of time schedules stated herein in the
event that the Company demonstrates good cause for granting such extensions and
provided that any such extension shall not have any adverse effect upon human
health or the environment.  The Company
shall submit any request for an extension of time in writing.


 


K.                                    Effective Date and Termination. 
This Agreement shall be effective upon the date it is signed by the MPCA
Commissioner or his designee and shall remain in effect until the Amendment
becomes effective pursuant to 40 CFR 124.15(b) and, if applicable,
completion of any and all appeals pursuant to 40 CFR 124.19 or otherwise.


 


L.                                     Counterparts and Facsimiles.  This Agreement may be executed in more than one
counterpart, each of which shall be deemed to be an original but all of which
taken together shall be deemed a single instrument.  Facsimiles of signature pages are
acceptable as long as an original is provided within thirty (30) days.


 


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Left Blank]


 


 


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MINNESOTA
POLLUTION CONTROL AGENCY


 


 




	
  By:

  	
  /s/ James L. Warner

  	
   

  	
   

  
	
   

  	
  James L. Warner

  	
   

  	
   

  
	
  Its:

  	
  Industrial Division
  Director

  	
   

  	
   

  






 


 




	
  STATE OF MINNESOTA

  	
   

  	
  )

  
	
   

  	
   

  	
  ) ss.

  
	
  COUNTY OF WASHINGTON

  	
   

  	
  )

  






 


                                                On this 23rd day of January,
2007, before me personally appeared James L. Warner, who, being first dully
sworn, stated that he an Industrial Division Director of the Minnesota
Pollution Control Agency, an administrative agency of the State of Minnesota;
that he had the authority to execute the foregoing instrument on behalf of said
agency; and that he executed the foregoing instrument voluntarily and as the
free act and deed of said agency.


 




	
    /s/ Miriam J. Bergmark

  	
   

  	
   

  
	
  Miriam J. Bergmark

  Notary Public-Minnesota

  Commission expires January 31,
  2010

  	
   

  	
   

  






 


 


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HERON
LAKE BIOENERGY, LLC, 

a Minnesota limited liability company


 


 




	
  By:

  	
  /s/ Robert J. Ferguson

  	
   

  	
   

  
	
   

  	
  Robert J. Ferguson

  	
   

  	
   

  
	
  Its: 

  	
  President

  	
   

  	
   

  






 


 




	
  STATE OF MINNESOTA

  	
   

  	
  )

  
	
   

  	
   

  	
  ) ss.

  
	
  COUNTY OF RAMSEY

  	
   

  	
  )

  






 


                                                On this 23rd day of January,
2007, before me personally appeared Robert J. Ferguson, who, being first dully
sworn, stated that he is the President of Heron Lake BioEnergy, LLC, a
Minnesota limited liability company; that he had the authority to execute the
foregoing instrument on behalf of said limited liability company; and that he
executed the foregoing instrument voluntarily and as the free act and deed of
said limited liability company.


 




	
    /s/ Jean Marie Ferguson

  	
   

  	
   

  
	
  Jean Marie Ferguson

  Notary Public-Minnesota

  Commission expires January 31,
  2009

  	
   

  	
   

  






 


 


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