exv10w24



 





Exhibit 10.24




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 MinnErgy, LLC (“Client”) related to the provision of energy
management services.



PROJECT DESCRIPTION: Client is developing a 50 million gallon per year ethanol
plant (“Plant”) to be located near Eyota, Minnesota area. The Plant will have peak electric usage
of approximately 5 MW and will consume 5000 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 Client upon
request:




A. Energy Infrastructure Advisory Services during the Construction Period





	1.	 	Provide an economic comparison of natural gas transmission and 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 Client to minimize interconnect costs through the purchase of firm
transportation to the Plant.
	 
	 	 	If Client wishes to have U.S. Energy conduct a reuqes6t for proposal for the design and
construction of a gas distribution system on the plant site, a separate fee will be arrange
for this work.
	 
	2.	 	Determine whether firm, interruptible, or a blend of transportation natural gas 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 Client 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 Client, 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
Client.




 









 












	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 Client’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 Client the various supply index
and fixed prices. U.S. Energy will not take title to Client 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 Client’s performance criteria at the lowest
possible cost.
	 
	3.	 	Develop and implement a price risk management plan that is consistent with Client’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 Pricing Letter: Mailed out monthly

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 clients 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. U.S. Energy will utilize customer or utility supplied
telemetering to obtain actual usage data.






	5.	 	Provide a consolidated monthly invoice to Client 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:




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	 	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 Client’s agent while managing Client’s energy matters.
The scope of this agency is set forth in the Agency Authorization between U.S. Energy and Client
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 December 1, 2007 and continue
until twelve (12) months after the Plant’s Completion Date. It will then renew for a one-year
term, year to year thereafter, unless Client or U.S. Energy terminates the contract upon sixty (60)
days prior written notice before the annual renewal date. Client 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 Client, 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 $2,900 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. Upon
written notice by Client for U.S. Energy to delay work on Client’s energy management activities,
U.S. Energy will suspend its activities and suspend invoicing Client until U.S. Energy’s activities
resume.



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, Client 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
Client, prior to termination, as well as fees, charges and pre-approved travel expenses for U.S.
Energy’s services, as defined in Section B (FEES), occurring up until the termination date.



If Client 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 Client for
appropriate energy costs from the previous month and for the U.S. Energy retainer for the current
month. Client shall pay U.S. Energy within ten (10) days of receipt of invoice.




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TAXES: Client 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 the
supplier, or (d) is required by U.S. Energy to be disclosed by court order, or (e) is permitted by
Client. All such information shall be and remain the property of Client 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 Client’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 Client.



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.




	 	 	 
	Client:

	 	MinnErgy, LLC
	 

	 	4455 Theurer Blvd
	 

	 	Winona, MN 55987
	 

	 	Attn: Ron Scherbring
	 
	 	 
	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 Client.



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




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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.




Agreed to and Accepted by:




MinnErgy, LLC




	 	 	 	 	 
	By: 

Name:

	 	/s/ Daniel H. Arnold
 

Daniel H. Arnold
	 	 
	 

	 	 	 	 
	(Print)
	 	 	 	 
	Title:

	 	Chairman	 	 
	 

	 	 	 	 
	Date:

	 	6/4/07	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	U.S. Energy Services, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Bruce L. Hoffarber	 	 
	 

	 	 	 	 
	Name:

	 	Bruce L. Hoffarber	 	 
	 

	 	 	 	 
	(Print)
	 	 	 	 
	Title:

	 	Vice President, Market Development	 	 
	 

	 	 	 	 
	Date:

	 	6/5/07	 	 
	 

	 	 	 	 





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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 MinnErgy, LLC (“Client”)
related to the provision of energy supply management services.



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





	1.	 	APPOINTMENT AND SCOPE — Client hereby appoints U.S. Energy as its agent for managing
Client’s energy supplies and to deal with third parties on behalf of Client, in connection
with energy-related matters, in U.S. Energy’s capacity as Client’s agent, including, without
limitation, the purchase of energy resources in such quantity and at such times as Client 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 Client 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 — Client authorizes U.S. Energy, in making Energy
Procurements, to align credit from energy suppliers or third parties on behalf and as an agent
of Client, as needed.
	 
	3.	 	AUTHORITY OF U.S. ENERGY TO EXTEND CREDIT — Client hereby agrees that when making Energy
Procurements on behalf of a Client, U.S. Energy may use U.S. Energy funds to pay suppliers,
thereby extending credit directly to Client (and acting as a “Creditor,” as that term is used
in this Authorization).
	 
	4.	 	TERM — The initial term of this Agreement shall commence on June 1, 2007 and continue until
twelve (12) months after the Plant’s Completion Date. It will then renew for a one-year term,
year to year thereafter, unless Client or U.S. Energy terminates the contract upon sixty (60)
days prior written notice before the annual renewal date.
	 
	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 Client’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 Assignment, and the individuals signing this
Authorization each represent and warrant that he or she is fully authorized to do so.





Agreed to and Accepted by:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MinnErgy, LLC	 	 	 	U.S. Energy Services, Inc.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Daniel H. Arnold
	 	 	 	By:
	 	/s/ Bruce L. Hoffarber
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 





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	Print Name:

	 	 Daniel H. Arnold
	 	 	 	Print Name:
	 	 Bruce L. Hoffarber	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Title:

	 	Chairman
	 	 	 	Title:
	 	Vice President, Market Development	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	6/4/07
	 	 	 	Date:
	 	6/5/07	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 	 	 






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