Exhibit 10.16


 


	
  

  	
   

  	
  Panhandle Eastern Pipe Line

  	
   

  	
  5444
  Westheimer Road

  Houston, TX 77056-5306

  
	
   

  	
  Trunkline Gas

  	
   

  	
  P.O.
  Box 4967

  
	
   

  	
  Trunkline LNG

  	
   

  	
  Houston,
  TX 77210-4967

  
	
   

  	
  Sea Robin Pipeline

  	
   

  	
  713.989.7000

  



 


	
  Chris Forkenbrock

  	
   

  	
  April 18, 2006

  
	
  U.S. Energy Services

  	
   

  	
   

  
	
  1000
  Superior Blvd.

  	
   

  	
   

  
	
  Wayzata, MN 55391-1873

  	
   

  	
   

  



 


Service Proposal to U.S. Energy
Services for Ethanol Grain Processors’ proposed Facility, Obion, Tennessee—Financed Interconnect Option—Revised Contract Date


 


Chris,


 


Trunkline Gas Company, LLC (“Trunkline”)
submits the following frm transportation service proposal for Ethanol Grain
Processors’ (“EGP”) execution to serve the proposed ethanol plant to be sited
near Obion. As requested in your December 13, 2005 RFP, this proposal
incorporates the cost of the gas service interconnect within the service rates
indicated, and applies to either “Proposal #1” or “Proposal #2”, referenced
within your RFP:


 


•                  9,400 Dth/d of EFT transportation MDCQ from
Trunkine ELA to EGP’s proposed new delivery meter in Zone 1B, near Obion,
Tennessee 


•                  Discounted, 100% Load Factor Rate: $.20/Dth


•                  10 year term, stating November 1, 2007,
terminating October 31, 2017


 


All rates and charges
indicated above are exclusive of the then applicable fuel, penalties, gathering
charges, and overrun charges as represented in Trunkline’s gas tariff.


 


Forward haul fuel rate from
Trunkline ELA to Zone lB is currently 2.34%, but will reduce to 1.95% on April
1, 2006. Effective rates can change from time to time according to the tariff.


 


If the creditworthiness of
EGP is deemed insuffcient to meet the required credit level, EGP would provide
three months of collateral in the form of a deposit or a Guaranty or a Letter
of Credit from an entity whose creditworthiness is confrmed by Trunkline as
specified in Trunkline’s tariff. This collateral ($169,200) shall be submitted
to Trunkline by EGP prior to issuance of the definitive contracts to EGP for
their review and execution, but no later than May 31, 2006. 


 


1

















 


In return for and in
consideration of the executed defnitive agreements referred to below between
Trunkline and EGP for the services reflected above, Trunkline would agree to
pay for the capital cost (roughly estimated at $950,000, +-25%) of the new gas
measurement facility (does not include gas heating, or odorization equipment
which will be the sole responsibility of EGP) to the outskirts of the currently
proposed location of the ethanol plant site. The facility would be sized to
provide up to 9,400 Dth/d of delivery capacity.


 


Trunkline would agree to
have the faciity available for service by November 1, 2007 provided: 1) EGP,
and its agents, agree to not detrimentally impact the projected November 1,
2007 project in-service date through willful attempts to modify the scope of
work or project schedule, 2) EGP, and its agents, agree to actively but
reasonably support the implementation of this project in the face of any
federal, state, local or any other agency interventions, protests, or data
requests that Trunkline may incur in the midst of filing for, designing,
surveying, constructing, and/or placing into service, the referenced
facilities, 3) EGP, and its agents, agree to reimburse Trunkline for its actual
reasonable costs for all work performed in association with the proposed
interconnect if the project is delayed, cancelled or stopped for any reason by
EGP, or its agents, or by act of a legislative, judicial or regulatory body
having jurisdiction (as such, no further credit shall be required for the
capital-related work that is being contemplated); 4) any required FERC or other
regulatory approvals are issued in time to permit the facility to be
constructed and placed in service by such date; or 5) Trunkline is not able to
obtain the necessary right of way for the facility except by condemnation, and
such condemnation proceeding is not concluded in time to permit the facility to
be constructed and placed in service by such date. Upon receipt of Trunkline’s
invoice for such costs as provided in subparagraph (3) above, EGP agrees to
make full payment of such costs to Trunkline no later than 90 days from the
date of such invoice. Notwithstanding the foregoing, in no event shall
Trunkline be obligated to incur any costs unless on or before August 31, 2006 EGP has executed the Form of
Service Agreements, Discount Letter Agreements,
and a Facilities Interconnect
Agreement referred to below for the services reflected above, and has provided
suffcient credit in accordance with Trunkline’s tariff.


 


Trunkline would own,
operate, and maintain all measurement facilities encompassed in the Facilities
Interconnect Agreement referred to below. Location of the meter facilities,
operation, design/construction, and delineation of facility ownership will be
specifcally addressed in the Facilities Interconnect Agreement referred to
below.


 


This proposal is subject to
senior management approval of Trunkline and will remain open until the end of
business, April 21, 2006. If the
proposal is accepted by EGP and all required approvals from Trunkline’s senior
management are obtained, the parties will proceed to negotiate in good faith
and, if successful, execute (a) Form of Service Agreements, (b) Discount Letter
Agreements, and (c) a Facilities Interconnect Agreement providing for the
construction of the facilities. If such defnitive agreements have not been
executed by August 31, 2006, then either party
may terminate this agreement upon written notice to the other party and
thereafer neither party shall have any further obligation to the other.


 


2

















 


If the foregoing proposal is
acceptable to EGP, please so indicate by signing and dating both copies of this
letter in the spaces provided below and returning both fully executed copies to
me. Following receipt of your signed copies, Trunkline will seek approval from
its senior management and, upon receipt of such approval, Trunkline wil execute
and return a fully executed copy to EGP along with the above-referenced three
definitive agreements for EGP’s approval and execution.


 


We look forward to a
mutually beneficial business relationship with Ethanol Grain Processors. Please
don’t hesitate to call me if you have any questions.


 


	
  Sincerely,

  	
   

  
	
   

  	
   

  
	
  /s/ Greg A. Myers

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Greg A. Myers

  	
   

  
	
  Director, Business
  Development

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Ethanol Grain Processors,
  LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James K. Patterson

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  April 19, 2006

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  TRUNKLINE
  GAS COMPANY, LLC

  
	
   

  
	
  By:

  	
  /s/ Robert O. Bond

  	
   

  
	
   

  	
  Robert O. Bond

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
  President and COO, Panhandle Energy

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  4/25/06

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  c:

  	
  Gregg
  Russell

  	
   

  
								



 


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