Document:

exv10w7

 

Exhibit 10.7

July 19, 2006

Mr. Tony Wasinger

MinnErgy, LLC

4455 Theruer Boulevard

Winona, MN 559847

			
	Re:	 	Request for Professional Engineering Services

Winona/Olmstead County — Conceptual Railway Service Plan

Dear Mr. Van Zenten:

TranSystems Corporation is pleased to submit this proposal to MinnErgy, LLC that addresses your
Request for Services associated with the above referenced project. We understand that MinnErgy is
planning the development of an ethanol production facility to be located in the counties of Winona
or Olmstead. We further understand that this facility, when completed, will produce a minimum 50
million gallons of ethanol annually. Your request for services, that this proposal addresses,
pertains to our development of a conceptual railway service plan that will serve the proposed
ethanol facility. This proposal will adopt the general terms and conditions as set forth in the
Continuous Services Agreement, dated July 18, 2006 and executed on July                     , 2006, in
accordance with the provisions of SECTION 2.1 — REQUEST FOR SERVICES.

This letter details the services TranSystems proposes to perform in connection with this project
and the fee at which TranSystems will perform these services. Furthermore, the services will be
performed with regard to the below outlined assumptions. If this proposal, addressing your request
for services, is acceptable to MinnErgy, LLC please execute this agreement and return to
TranSystems by mail, fax, or e-mail.

All notices or communications pertaining to this Agreement shall be in writing, with reference to
MinnErgy, LLC — Winona/Olmstead and shall be sufficient when mailed or delivered to the address
specified below:

If to OWNER:

MinnErgy

4455 Theurer Boulevard

Winona, MN 55987

Attn: Tony Wasinger

If to TRANSYSTEMS:

TranSystems Corporation

2400 Pershing Road, Suite 400

Kansas City, MO 64108

Attn: Paul Hentschke

1

 

TRANSYSTEMS SCOPE OF SERVICES

In connection with the above-referenced project, TranSystems shall perform the following described
Services:

	 	•	 	Develop conceptual railway service plan that would serve an ethanol production facility
earmarked for an annual production of 50 million gallons.
	 
	 	•	 	Prepare exhibits conveying the horizontal layout of railway service plan with aerial
imagery as a background; the rail service plan will be confined to the rough property
limits shown images previously sent to TranSystems.
	 
	 	•	 	The proposed rail service plan will be developed in accordance with standards and
specifications of the Dakota, Minnesota & Eastern Railroad (DME) and Iowa, Chicago &
Eastern Railroad (ICE).
	 
	 	•	 	We anticipate the railway service plan will consist of a series of services tracks and
loadout tracks that will be connected to the DME/ICE.
	 
	 	•	 	Provide narrative describing the operational movement of rail cars throughout the rail service plan.
	 
	 	•	 	Provide preliminary construction cost estimate based upon conceptual rail service plan.

SERVICES PROVIDED BY OTHERS AND ASSUMPTIONS

These additional services and TranSystems’ agreement to perform the Services is based upon, and
subject to, the following services being provided by others and the listed assumptions:

	 	•	 	We will develop the conceptual plans prior to an overall topographic survey. We assume
that a topographic survey will be completed following the preparation of the conceptual
plans.
	 
	 	•	 	The following services are not included in this Request for Services No.1:

	 	•	 	Land Survey
	 
	 	•	 	Civil/Site Design
	 
	 	•	 	Final Construction Document Preparation

We can provide these services through subsequent Request for Service Notifications.

SCHEDULE

We understand that the conceptual plan is of high importance for MinnErgy, LLC to move forward with
the planning of the proposed ethanol facility. TranSystems will provide our services on a schedule
that is mutually agreeable between MinnErgy, LLC and TranSystems and that is consistent with
project requirements. TranSystems will consider the executed Letter Agreement as our notice to
proceed.

COMPENSATION

As compensation for the performance of the above-described Services, MinnErgy, LLC will reimburse
TranSystems by payment of a lump sum fee of $6,000.00. Invoices will be sent monthly and will be
based on TranSystems’ estimate of the total services completed at the time of billing, plus
expenses. Our fee includes in-house reproduction supplies and long distance phone calls. Other
reimbursable expenses, such as travel, lodging and meals, will be invoiced at our actual cost.

The proposal outlined in this Letter is valid for 60 calendar days.

2

 

We sincerely appreciate the opportunity to provide these services to MinnErgy, LLC. If this
proposal, addressing your request for services, is acceptable to MinnErgy, LLC please execute this
agreement and return to TranSystems by mail, fax, or e-mail. Please let us know if you have any
questions or need any further information.

	 	 	 	 	 
	Very truly yours,

TRANSYSTEMS CORPORATION

 	 	 
	/s/ Timothy P. Rock
 	 	 
	Timothy P. Rock

Vice President 	 	 

ACCEPTANCE

MinnErgy, LLC hereby accepts the proposal outlined above and does hereby engage TranSystems to
perform these services, on the terms and conditions set forth in the Continuous Service Agreement
dated July 18, 2006 and executed on July                     , 2006.

	 	 	 	 	 
	 	 	 
	By:  	                                                /s/ Daniel H. Arnold
 	 	 
	 	Printed Name: 	Daniel H. Arnold 	 	 
	 	Title:  	Chairman
       	 	 
	Date: 	  	 	 
	 

3exv10w8

 

Exhibit 10.8

	 	 	 
	1000 IDS CENTER

	 	TELEPHONE (612) 347-6789
	80 SOUTH EIGHTH STREET

	 	FACSIMILE (612) 347-6780
	MINNEAPOLIS, MN 55402

	 	www.NRGINC.com
	 
	 	 
	July 24, 2006
	 	 
	 
	 	 
	Dan Arnold
	 	 
	MinnErgy, LLC
	 	 
	P.O.Box186
	 	 
	Winona, MN 55987
	 	 

			
	Re:	 	MPCA/DNR Environmental Permitting and Environmental Assessment Services

Proposed Eyota, Minnesota Ethanol Facility

MinnErgy, LLC,

Dear Mr. Arnold:

Natural Resource Group, Inc (NRG) appreciates the opportunity to provide this environmental
services cost estimate for a proposed ethanol plant near Eyota, Minnesota.

Our understanding is this facility will be a Delta-T 50 million gallon (MMGal) per year ethanol
production facility using natural gas as a boiler fuel source with the option of using a fluidized
bed for the future. Based on this, NRG expects the project to be permitted as a synthetic minor
source of air pollution and recommends permitting for a maximum production level of 60 MMGal/yr on
natural gas.

Due to the simultaneous multi-media permit review completed by the Minnesota Pollution Control
Agency (MPCA), NRG has provided estimates for all tasks required for construction in Minnesota. As
such, this proposal has been divided into five tasks: air pollution control permit application,
environmental assessment worksheet, non-contact utility water discharge permitting, water
appropriation permitting, and other permitting services.

			
	 	 	 
	Part 1 — Air Pollution Control Permit Application
	 	$7,800          

Based on NRG’s understanding, the proposed facility will be a new plant located near Eyota, MN. NRG
will complete the MPCA required total facility operating permit application (air permit
application) for the proposed ethanol plant for a cost of $7,800, assuming that the facility is
willing to accept synthetic minor limits, limiting total facility emissions to less than the
Prevention of Significant Deterioration (PSD) and Part 70 major source thresholds (100 tons per
year) with a five ton per year cushion to 95 tons per year as currently required by the MPCA for
ethanol plants.

NRG will calculate air emissions for a projected maximum undenatured ethanol production rating of
60 million-gallons/year using corn as the primary feedstock. The application will be completed
within two weeks of receiving all the necessary facility and process information. NRG

 

 

Eyota Minnesota Ethanol Plant Proposal

Page 2

will supply an information questionnaire concerning site-specific issues within two weeks of
project authorization.

MinnErgy will benefit from NRG’s vast experience and expertise providing air permitting services
for over 60 ethanol plants nationwide. We will provide for maximum air permit operating flexibility
and assure the framework for regulatory compliance is included. The scope of work for preparing the
air permit application is as follows:

Project Location and Description: NRG will require a project location map with a site layout
diagram; preferably an electronic CAD version. The site layout must include a property boundary
(and fenceline, if different), building and structure heights, and stack locations. These elements
will become part of the air permit application.

Air Emission Source Descriptions & Emission Rates: NRG will assume that the emission source
descriptions will be provided by the process design firm or other member of the project team,
presumed to be Delta T. All applicable emission unit specifications will be verified with the
project team. If design information is not available, NRG will use best available general design
information from previous Delta T project experience, which includes recent permits for MGP-Riga
and Otter Tail Ag Enterprises, both believed to be very similar facilities to the proposed MinnErgy
facility.

PSD Avoidance and Applicability Review: NRG will keep the facility a minor source with respect to
PSD and Part 70. This proposal assumes we will avoid PSD and stay less than 95 tons per year for
each of the criteria pollutant emissions and less than 10 tons and 25 tons for individual hazardous
air pollutants (HAPs) and combined HAPs, respectively, through the control equipment specified for
the plant.

Non-PSD Air Permit Application: The permit application will review all the regulatory requirements
applicable to the facility, including, NSPS Subparts Dc/Db for boilers, Kb for tanks and VV for
leak detection in the fermentation and distillation area of the ethanol plant. NRG will complete
preparation of the application with all required forms. Compliance plan elements for emission units
with monitoring, record-keeping and reporting requirements will be included.

Review of Draft Permit and negotiation of permit terms: There will likely be some follow-up
required to respond to technical questions regarding the air permit application. We have not
included any follow-up costs in this proposal beyond submittal of an administratively complete air
permit application.

			
	 	 	 
	Part 2 — Environmental Assessment Worksheet
	 	$19,300          

Because the proposed project entails construction of a new ethanol plant with production capacity
greater than 5 million gallons per year, the MPCA will generate an environmental assessment
worksheet (EAW) for the proposed project. NRG will prepare a draft EAW for the proposed
ethanol plant that the MPCA will use to generate a final document on behalf of
MinnErgy. The EAW will describe the proposed project in detail and evaluate its impact on air,
water (ground and surface), soil, wildlife, and other resources. Specifically, the EAW will

 

 

Eyota Minnesota Ethanol Plant Proposal

Page 3

address the following:

Summarize the process used for the production of the fuel grade ethanol,

Describe the purpose and need for the construction of the ethanol production facility,
Describe the affected environment, which will include the project construction schedule, maps and
diagrams of the site and the other pertinent information regarding the site,

Cover types and amounts of wetlands will be estimated using National Wetland Inventory maps. Based
upon preliminary wetland evaluations, field wetland delineation may need to be completed. If
necessary, NRG will provide an additional scope and cost of services for completing this work.

NRG will provide consultation letters on behalf of MinnErgy to the State Historical Preservation
Officer (SHPO), Minnesota Department of Natural Resources (DNR) Natural Heritage and Non-Game
Research Program, and the United States Fish and Wildlife Service (USFWS) to solicit an opinion
whether the proposed project would affect any structures that are of historic, archaeological, or
architectural significance, or state or federally protected species. Additional field surveys may
be required based upon the results of these consultations, and NRG will provide a scope and cost of
services for completing these additional tasks, if necessary.

Describe the state and federal approvals and permits that will be required for the construction and
operation of the facility.

Provide a discussion of other related analyses required by Minnesota rule, including an odor best
management practices plan for the facility operations.

Perform Air Emission Risk Analysis (AERA). Based on recent experience and proximity to Eyota, an
AERA is likely required to be completed as part of the EAW. Air toxics may include, but are not
limited to, acetaldehyde, formaldehyde, acrolein, hexane, and methanol. The AERA would assess
public health risk posed by the facility using estimated emissions. NRG will estimate speciated
emissions based on our dataset of compliance data from similar existing facilities and perform
necessary dispersion modeling to assess human health risk. A Risk Assessment Screening Spreadsheet
(RASS) is used to determine if MPCA-designated health risk thresholds would be exceeded at any
receptors.

Based on experience from AERAs prepared for similar facilities, further refinement to the
conservative screening-level dispersion estimates Calculated in the RASS will be necessary to
demonstrate that the facility poses ‘no unreasonable risk to the public’ as defined by the MPCA.
Based on NRG experience with similar facilities it will be possible to demonstrate this using a
fully refined AERMOD model and a technique developed by our staff. The NRG modeling technique and
representation has been previously approved by the MPCA on several projects, including the recently
permitted Heartland Corn Products project. A detailed information request for modeling will be
provided to MinnErgy within two weeks of authorization.

Parameters such as stack heights and position of fenceline could be dictated by the modeling

 

 

Eyota Minnesota Ethanol Plant Proposal

Page 4

results. NRG will determine the minimum dispersion requirements leading to the most defensible
conclusion of no unreasonable risk to the public at any offsite receptor and which in our judgment
best serve the interests of the facility.

			
	 	 	 
	Part 3 — NPDES Permitting
	 	9,900          

Non-Contact Utility Water Discharge Permitting

The project will require a National Pollution Discharge Elimination System (NPDES) permit for some
utility water streams from the facility. NRG understands these water streams to consist largely of
non-process cooling water, such as cooling tower blow-down, boiler blow-down, and possibly reverse
osmosis reject or iron filter backwash, etc. These water streams often are of sufficient quality to
be discharged to a surface water stream or river. NRG has secured these permits for facilities just
like the planned Eyota facility. The estimated cost assumes all information will be provided to us
upon initial request. If the water discharge is over 200,000 gals/day, a non-degradation review
will be required. The scope of the non-degradation review will be decided by the MPCA and
subsequent costs will be provided to you by NRG. Meetings with Watershed and Sub-watershed staff to
discuss the discharge and surface water quality have not been included.

			
	 	 	 
	MPCA Construction Notice of Intent and SWPPP
	 	$4,200          

If the disturbed site is greater than 1 acre, the proposed project will require a NPDES
Construction Stormwater Discharge Permit. Obtaining coverage under this general permit program
requires the submittal of a notice of intent (N0I), and development of a Stormwater Pollution
Prevention Plan (SW3P). NAG will complete the NOI and SW3P for construction for a cost not to
exceed $4,200. This cost assumes that a grading plan including initial and proposed final
elevations and best management practices for erosion control is provided to NRG in electronic
format. This cost does not include permit filing fees.

			
	 	 	 
	Part 4 — Water Appropriation Permitting
	 	$65,000 (Does not include drilling costs)

Area Hydrologic Evaluation

NRG will complete a hydro geologic evaluation of the area to determine available water resources.

Water Appropriation Permit Application

NRG will prepare a Minnesota Department of Natural Resources (DNR) application to appropriate
waters of the state. This task includes time associated with discussing the project with local and
regional DNR staff.

Well Interference Evaluation

NRG will identify wells located within a 1.5-mile radius of the site. Well depth, pump depth,

 

 

Eyota Minnesota Ethanol Plant Proposal

Page 5

well diameter and static water level information will need to be obtained from all wells prior
to initiation of the pumping test. Door to door interviews may need to be completed and potentially
the well pumps will need to be pulled to access the well construction information. Costs have not
been included for subcontractor well service contractor work that may be associated with pulling
pumps to access wells. Please note, the process of pulling pumps to access wells can damage the
pumps and clog well screens making the well unusable. Costs associated with repairing or replacing
the pump or well are the responsibility of MinnErgy. The potential exists for the DNR to request a
larger well survey area, based upon local hydrogeologic conditions. A larger well survey area would
increase the costs associated with this task. NRG has budgeted one 12-hour field day for completing
a door to door well survey in an effort to evaluate local well construction or obtain permission to
access wells.

Pumping Test Setup/Data Logging, 7 Day Pumping Test

As outlined on the attached “Example” pumping test requirements letter from the DNR, pre-pumping,
pumping and post pumping (recovery) water level measurements are required in the test well and yet
to be determined observation wells. NAG has provided costs associated with mobilizing to the site
to install pressure transducers/dataloggers in the test and observation wells, download the data
prior to the pumping test, assist with the startup of the pumping test, and ground water level
monitoring during the pump test. Costs have also been included to download transducer data in the
middle of the pumping test and at the end of the pumping test and at the end of the recovery
period.

Fen Interference Evaluation

Two protected calcareous fens, Dover 7 and Dover 13, are located approximately 2 and 2.5 miles east
of the site. Calcareous fens may not be drained or filled or otherwise altered or degraded except
as provided for in a management plan approved by the commissioner. The Minnesota Department of
Natural Resources has notified NRG that if water will be appropriated from the Jordan Aquifer,
which supplies water to the fens, an evaluation would need to be completed to document that the
fens will not be degraded. The DNR speculated that monitoring the fen’s water quality and flow may
be required as part of the evaluation process. NRG recommends that a meeting be setup with the DNR
staff to further understand their evaluation requirements and schedule. The results of the meeting
with the DNR should provide further insight regarding the need to explore the availability of lower
aquifers.

Pump Test Project Management/Data Reduction and Report Preparation

This task includes costs associated with project management, data reduction and report preparation,
as required by the DNR.

			
	 	 	 
	Part 5 — Aboveground Storage Tank (AST) Permit Application
	 	$3,500          

The project will require an Aboveground Storage Tank (AST) permit. Facilities that have more
than one million gallons of storage capacity must obtain an AST permit from the MPCA in accordance
with MN Rules 7001.4205-4250. NRG has secured these permits for facilities

 

 

Eyota Minnesota Ethanol Plant Proposal

Page 6

similar to the planned MinnErgy facility. NRG will prepare the application forms and submit
the draft application to MinnErgy for review by the date indicated. Cost assumes information
regarding the AST and secondary containment details will be provided upon initial request.

Table 1 Proposed Eyota Facility Environmental Permitting Work

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Task Description	 	Cost	 	Completion Date	 	Authorization
	Permits Needed for Construction
	 	 	 	 	 	 	 	 	 	 	 	 
	Air Permit Application
	 	$	7,800	 	 	3 weeks	 	 	 	 
	Environmental Assessment (EAW)
	 	$	19,300	 	 	6 weeks	 	 	 	 
	NPDES Construction Permit Application
	 	$	4,200	 	 	3 weeks	 	 	 	 
	Water Appropriation Permitting/
Environm Review Determination
	 	$	65,000	*	 	10 weeks**	 	 	 	 
	NPDES Wastewater Permit Application
	 	$	5,700	 	 	3 weeks	 	 	 	 
	AST Permit Application
	 	$	3,500	 	 	3 weeks	 	 	 	 
	Construction Subtotal
	 	$	105,500	 	 	 	—	 	 	 	—	 

 

			
	*	 	Task completion dates are from project authorization and receipt of requested information.
	 
	**	 	The fen impact evaluation requirements, as yet to be determined by the DNR, may change cost and schedule for this task.

Please note that this proposal does not include follow-up correspondence beyond minor clarification
with the MPCA after submission of each application/document. Significant technical follow-up and
meetings with the MPCA and public after application submittal are not included in these costs. NRG
will complete each application as thoroughly as possible with the available information in order to
minimize agency follow-up. A pre-application meeting is included in the project scope of work to
notify the MPCA of the pending application and to get informal concurrence on project permit
compliance assumptions. To perform follow-up work for the approved tasks, NRG will notify MinnErgy
and use existing budget from the initial tasks, if available. If additional budget is necessary to
complete follow-up work with an agency, NRG will submit a change order request for approval of the
additional expense. NRG will not exceed the budgeted costs or initiate any of the proposed tasks
without prior authorization from MinnErgy. All work will be completed on a time and materials basis
using the applicable NRG fee schedule.

If authorized to complete the work, NRG could start the project with little or no delay. NRG will
complete each task by the completion dates shown in Table 1, pending the availability of the
requested project information. Project progress will be communicated to you on a weekly basis until
all tasks are completed. We consider the information contained in this proposal confidential and
respectfully request your concurrence. We look forward to working with you on this project. Please
indicate your acceptance of this proposal by signing the authorization below. Please forward a copy
of the signed proposal to our office. Thank you for the opportunity to be on the MinnErgy project
team.

Sincerely,

	 	 	 	 	 
	Natural Resource Group, Inc.

	 	Authorized By:
	 	/s/ Daniel H. Arnold 

	 
	 	 	 	MinnErgy Authorized Representative
	/s/ Todd A. Potas 
	 	Date: 8/10/06
	Todd A. Potas, P.E.	 	 	 	 
	Principal

(612) 339-4815

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]