Document:

EXHIBIT 10.15

 

	
  [FAGEN ENGINEERING LETTERHEAD]

  	
   

  	
   

  
	
   

  	
  March 12, 2007

  	
   

  

 

Mr. Robert Ferguson 

President 

Heron Lake Bio Energy, LLC 

P.O. Box 198 

Heron Lake, Minnesota 56137-0198

 

	
  RE:

  	
  Environmental Compliance Support

  
	
   

  	
  Heron Lake, Minnesota

  

 

Dear Bob:

 

As per our agreement at Friday’s board meeting, Fagen Engineering, LLC
will proceed with the following tasks as outlined in our proposal dated February 19,
2007. Fagen will perform the listed tasks on a time and material basis. Our
estimated cost to complete each task is listed below, but actual costs will be
tracked and can be reported on a monthly or task by task basis. Fagen agrees
not to exceed the budget without prior approval from the Heron Lake Bio Energy.

 

APPROVED TASKS

 

	
  New Source Performance Standard
  (NSPS) Notifications

  	
  $1,000
  to $1,500

  	
   

  

 

Fagen will prepare all required NSPS notifications and submit to the
MPCA on behalf of HLBE. The required reporting timeframe for commencement of
construction of the tanks and piping in light liquid service and the BFB Coal
Combustor expired prior to execution of this agreement, but after-the-fact
notifications have been submitted.

 

	
  Industrial Storm Water
  Pollution Prevention Plan

  	
  $2,500
  to $5,000

  	
   

  

 

Fagen will develop a site specific Industrial Storm Water Pollution Prevention
Plan for HLBE and deliver a final copy prior to facility start-up. Fagen can
also provide the initial training associated with SWPPP implementation, if
requested. SWPPP implementation and performance of the required onsite
inspections and filing of incidence reports are considered outside of this
scope.

 

	
  Risk Management Plan

  	
  $1,500
  to $2,500

  	
   

  

 

Section 112 ( r ) of the Clean Air Act requires that facilities
storing regulated toxic or flammable materials above a certain threshold
quantities prepare and submit a Risk Management Plan (RMP) to the Federal
Government and State and local emergency responders. Fagen will prepare a Risk
Management Plan for the HLBE facility and assist with submittal to the
appropriate agencies prior to plant start-up. Fagen will also work with plant
management to facilitate coordination with local emergency response officials.

 

 

	
  Spill Prevention. Control. and
  Countermeasure Plan

  	
  $6,000
  to $10,000

  	
   

  

 

Fagen will prepare the HLBE Spill Prevention Control and Countermeasure
(SPCC) Plan in accordance with EP A 40 CFR Part 11 0 and evaluate the need
for a Facility Response Plan (FRP). If it is determined that an FRP is
required, Fagen will develop the Plan and incorporate it into the SPCC Plan
accordingly. The SPCC Plan and FRP will be prepared under the direction of a
licensed professional engineer (PE), as per Federal regulations. Fagen will
also provide assistance to HLBE with SPCC/FRP Plan implementation.

 

	
  Alcohol and Tobacco Tax and
  Trade Bureau Permit

  	
  $750
  to $1,000

  	
   

  

 

The Department of the Treasury, Alcohol and Tobacco Tax and Trade
Bureau (TTB), requires that ethanol plants obtain an Alcohol Fuel Producer
permit prior to commencing operations. Fagen will assist HLBE in preparing this
application and submitting to the TTB in order to secure the permit in advance
of anticipated facility start-up.

 

Where appropriate, Fagen is willing to assist with additional
activities or provide any services not specifically included in this scope of
work and will gladly provide an amendment to this proposal and a revised cost
estimate.

 

Please sign below and return an executed copy to my attention. Thank
you again for this opportunity to assist you.

 

Sincerely, 

FAGEN ENGINEERING, LLC

 

 

	
  /s/ M Rutledge

  	
   

  
	
  Michael Rutledge

  
	
  Department Head

  
	
  Environmental Services

  

 

AUTHORIZATION TO PROCEED:

 

	
  By:

  	
  Robert J. Ferguson

  	
   

  
	
   

  	
  /s/ Robert J. Ferguson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature
  of authorized representative

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  President
  Board of Governors

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3/14/07

  	
   

  

 

2EXHIBIT 10.16

 

COAL LOADING, TRANSPORT, AND DELIVERY
AGREEMENT

 

This “Agreement” between Tersteeg Transport Inc. (“Tersteeg”) located
at 110 1st St. North Olivia, MN 56277 and Heron Lake BioEnergy, LLC
(“HLBE”) located at 91246 390th Avenue, Heron Lake, MN is valid as
of April 1, 2007.  The term of this
Agreement shall be contingent upon the execution of, and coincide with, HLBE’s
other five-year coal Agreements which will terminate no sooner than December 31,
2011 and no later than April 1, 2012, provided that Tersteeg performs in
accordance with this Agreement.

 

HLBE is constructing a coal-fired ethanol facility (“Facility”) in
Heron Lake, MN that is expected to become operational in mid-May 2007 and
that is expected to require approximately 100,000 tons of coal per year at full
output.  HLBE has contracted for coal
deliveries to Southern Minnesota Beet Sugar Cooperative’s (“SMBSC”) facilities
near Renville, MN and shall expect Tersteeg to load, transport, and deliver
HLBE’s coal from such location to HLBE’s Facility at Heron Lake, MN in
accordance with its requirements, which shall be regularly communicated to
Tersteeg.

 

Tersteeg operates a trucking and heavy machinery business in Minnesota
as an independent contractor and regularly has loading equipment and personnel
on-site at SMBSC’s Renville facilities. 
Tersteeg has familiarized itself with SMBSC’s facilities and HLBE’s
Facility, their respective operational requirements, potential haul routes,
weather, truck laws and weight limit regulations in Minnesota, and on the basis
of such information and other information, has agreed to load, transport, and
deliver HLBE’s coal for a base rate of $9.00 per ton at an assumed diesel fuel
price of between $2.406-$2.470 per gallon. 
Such rate shall be subject to (1) one annual 3% increase on the
anniversary date of this Agreement and (2) adjustments for changes in the
price of diesel fuel posted by EIA for each billing period in accordance with
Attachment A, which shall also be subject to an annual 3% increase.

 

By this Agreement, HBLE commits to having Tersteeg load, transport, and
deliver all of HLBE’s coal requirements to its Facility, but is making no
representation or warranty as to its actual annual coal requirements.  HLBE agrees to make required payments to invoices
submitted by Tersteeg in two week intervals on a 15 day net basis. If HLBE
fails to make a payment on scheduled due date, interest on payment shall accrue
at 1% per month billed twice per month.

 

Tersteeg shall load and haul coal in compliance with all applicable
federal, state, and local laws and regulations. Tersteeg is responsible for
having “clean trucks” free from any foreign material. Tersteeg agrees to
maintain an adequate supply of coal at HLBE’s Facility sufficient for HLBE’s
operational requirements.  Tersteeg shall
be responsible for HLBE’s coal in transit and any losses incurred during the
time it is in Tersteeg’s possession, including any clean-up costs. Tersteeg
shall maintain sufficient cargo liability coverage to protect Heron Lake BioEnergy
from losses incurred in transportation of coal to the HLBE facility.  Tersteeg shall maintain a minimum of 50%
supply in the storage tank at all times. The only exception to this requirement
would be adverse weather lasting more than three (3) consecutive days
allowing no travel.

 

 

HLBE agrees to compensate Tersteeg for detention time in the event that
mechanical defects at HLBE’s Facility won’t allow Tersteeg to unload coal
within forty-five (45) minutes at arrival at such Facility.  Detention time for such occurrences shall be
charged at a “Detention Rate” of $25.00 per hour for the time documented by
Tersteeg for each truck at HLBE’s Facility waiting to dump coal.  Such Detention Rate shall be subject to an
annual 3% increase at the anniversary date of this Agreement.  In the event that Tersteeg is directed by
HLBE to return loads to SMBSC’s facilities due to mechanical defects at HLBE’s
Facility, there shall be no extra charge to return. The total cost of this trip
will stay @ the regular delivery charges.

 

In the event that Tersteeg is directed by HLBE to deliver loads of coal
to alternate sites, the rates for such deliveries will be mutually agreed upon
between the parties prior to making those deliveries.

 

Tersteeg agrees to defend, indemnify, and
hold harmless HLBE and its employees and officials from any claims, demands,
actions or causes of action, including reasonable attorney’s fees and expenses
rising out of any act or omission on the part of Tersteeg, or its
subcontractors, partners or independent contractors or any of their agents or
employees in the performance of or with relation to any of the work or services
to be performed or furnished by Tersteeg or subcontractors, partners, or
independent contractors or any of their agents or employees under the
agreement.

 

As evidence of required coverage, Tersteeg
shall furnish an original Certificate of Insurance to HLBE before work
commences.  The Certificate should include a minimum 90-day written notice
of intent to cancel, suspend or reduce coverage.  The Certificate should
identify HLBE as an Additional Insured for relevant coverages, except Workers
Compensation.  Insurance should be placed with a current A.M. Best
rating of no less than A: Class Size VII. 
Tersteeg Transport Inc. shall maintain a minimum of $1,000,000 of
commercial general liability and automobile coverage for the duration of this
contract.

 

In the event that HLBE is dissatisfied with service provided by
Tersteeg, it shall have the right to terminate this Agreement with five (5) days
notice, provided that Tersteeg has been notified of HLBE’s concerns and has had
sufficient reasonable time to implement measures to correct such deficiencies
to HLBE’s satisfaction.

 

 

	
  /s/ Alan M. Tersteeg

  	
   

  	
  /s/ Robert J. Ferguson

  
	
   

  	
   

  	
   

  
	
  Tersteeg Transport, Inc.

  	
   

  	
  Heron Lake BioEnergy, LLC

  
	
   

  	
   

  	
   

  
	
  Alan M. Tersteeg, President

  	
   

  	
  Robert J. Ferguson, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Board of Governors

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  4/3/07

  	
   

  	
  Date:

  	
  4/6/07

  
	
   

  	
   

  	
   

  
	
  Witnessed by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Peggy Tersteeg

  	
   

  	
  /s/ Jean M. Ferguson

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  4/3/07

  	
   

  	
  Date:

  	
  4/6/07

  
							

 

 

Attachment A: 
Rate Schedule for Changes in Diesel Fuel Prices

 

	
   

  	
   

  	
  RATE CHARGED TO HLBE ($ /TON)

  	
   

  
	
  EIA AVG COST

  PER GALLON

  	
   

  	
  YEAR 1

  	
   

  	
  YEAR 2

  	
   

  	
  YEAR 3

  	
   

  	
  YEAR 4

  	
   

  	
  YEAR 5

  	
   

  
	
  1.431 -1.495

  	
   

  	
  $

  	
  8.10

  	
   

  	
  $

  	
  8.34

  	
   

  	
  $

  	
  8.59

  	
   

  	
  $

  	
  8.85

  	
   

  	
  $

  	
  9.12

  	
   

  
	
  1.496 - 1.560

  	
   

  	
  $

  	
  8.16

  	
   

  	
  $

  	
  8.40

  	
   

  	
  $

  	
  8.66

  	
   

  	
  $

  	
  8.92

  	
   

  	
  $

  	
  9.18

  	
   

  
	
  1.561- 1.625

  	
   

  	
  $

  	
  8.22

  	
   

  	
  $

  	
  8.47

  	
   

  	
  $

  	
  8.72

  	
   

  	
  $

  	
  8.98

  	
   

  	
  $

  	
  9.25

  	
   

  
	
  1.626 - 1.690

  	
   

  	
  $

  	
  8.28

  	
   

  	
  $

  	
  8.53

  	
   

  	
  $

  	
  8.78

  	
   

  	
  $

  	
  9.05

  	
   

  	
  $

  	
  9.32

  	
   

  
	
  1.691 - 1.755

  	
   

  	
  $

  	
  8.34

  	
   

  	
  $

  	
  8.59

  	
   

  	
  $

  	
  8.85

  	
   

  	
  $

  	
  9.11

  	
   

  	
  $

  	
  9.39

  	
   

  
	
  1.76 - 1.820

  	
   

  	
  $

  	
  8.40

  	
   

  	
  $

  	
  8.65

  	
   

  	
  $

  	
  8.91

  	
   

  	
  $

  	
  9.18

  	
   

  	
  $

  	
  9.45

  	
   

  
	
  1.821 - 1.885

  	
   

  	
  $

  	
  8.46

  	
   

  	
  $

  	
  8.71

  	
   

  	
  $

  	
  8.98

  	
   

  	
  $

  	
  9.24

  	
   

  	
  $

  	
  9.52

  	
   

  
	
  1.886 - 1.950

  	
   

  	
  $

  	
  8.52

  	
   

  	
  $

  	
  8.78

  	
   

  	
  $

  	
  9.04

  	
   

  	
  $

  	
  9.31

  	
   

  	
  $

  	
  9.59

  	
   

  
	
  1.951 - 2.015

  	
   

  	
  $

  	
  8.58

  	
   

  	
  $

  	
  8.84

  	
   

  	
  $

  	
  9.10

  	
   

  	
  $

  	
  9.38

  	
   

  	
  $

  	
  9.66

  	
   

  
	
  2.016 - 2.080

  	
   

  	
  $

  	
  8.64

  	
   

  	
  $

  	
  8.90

  	
   

  	
  $

  	
  9.17

  	
   

  	
  $

  	
  9.44

  	
   

  	
  $

  	
  9.72

  	
   

  
	
  2.081 - 2.145

  	
   

  	
  $

  	
  8.70

  	
   

  	
  $

  	
  8.96

  	
   

  	
  $

  	
  9.23

  	
   

  	
  $

  	
  9.51

  	
   

  	
  $

  	
  9.79

  	
   

  
	
  2.146 - 2.210

  	
   

  	
  $

  	
  8.76

  	
   

  	
  $

  	
  9.02

  	
   

  	
  $

  	
  9.29

  	
   

  	
  $

  	
  9.57

  	
   

  	
  $

  	
  9.86

  	
   

  
	
  2.211 - 2.275

  	
   

  	
  $

  	
  8.82

  	
   

  	
  $

  	
  9.08

  	
   

  	
  $

  	
  9.36

  	
   

  	
  $

  	
  9.64

  	
   

  	
  $

  	
  9.93

  	
   

  
	
  2.276 - 2.340

  	
   

  	
  $

  	
  8.88

  	
   

  	
  $

  	
  9.15

  	
   

  	
  $

  	
  9.42

  	
   

  	
  $

  	
  9.70

  	
   

  	
  $

  	
  9.99

  	
   

  
	
  2.341 - 2.405

  	
   

  	
  $

  	
  8.94

  	
   

  	
  $

  	
  9.21

  	
   

  	
  $

  	
  9.48

  	
   

  	
  $

  	
  9.77

  	
   

  	
  $

  	
  10.06

  	
   

  
	
  2.406 - 2.470

  	
   

  	
  $

  	
  9.00

  	
   

  	
  $

  	
  9.27

  	
   

  	
  $

  	
  9.55

  	
   

  	
  $

  	
  9.83

  	
   

  	
  $

  	
  10.13

  	
   

  
	
  2.471 - 2.535

  	
   

  	
  $

  	
  9.06

  	
   

  	
  $

  	
  9.33

  	
   

  	
  $

  	
  9.61

  	
   

  	
  $

  	
  9.90

  	
   

  	
  $

  	
  10.20

  	
   

  
	
  2.536 - 2.600

  	
   

  	
  $

  	
  9.12

  	
   

  	
  $

  	
  9.39

  	
   

  	
  $

  	
  9.68

  	
   

  	
  $

  	
  9.97

  	
   

  	
  $

  	
  10.26

  	
   

  
	
  2.601 - 2.665

  	
   

  	
  $

  	
  9.18

  	
   

  	
  $

  	
  9.46

  	
   

  	
  $

  	
  9.74

  	
   

  	
  $

  	
  10.03

  	
   

  	
  $

  	
  10.33

  	
   

  
	
  2.666 - 2.730

  	
   

  	
  $

  	
  9.24

  	
   

  	
  $

  	
  9.52

  	
   

  	
  $

  	
  9.80

  	
   

  	
  $

  	
  10.10

  	
   

  	
  $

  	
  10.40

  	
   

  
	
  2.731 - 2.795

  	
   

  	
  $

  	
  9.30

  	
   

  	
  $

  	
  9.58

  	
   

  	
  $

  	
  9.87

  	
   

  	
  $

  	
  10.16

  	
   

  	
  $

  	
  10.47

  	
   

  
	
  2.796 - 2.860

  	
   

  	
  $

  	
  9.36

  	
   

  	
  $

  	
  9.64

  	
   

  	
  $

  	
  9.93

  	
   

  	
  $

  	
  10.23

  	
   

  	
  $

  	
  10.53

  	
   

  
	
  2.861 - 2.925

  	
   

  	
  $

  	
  9.42

  	
   

  	
  $

  	
  9.70

  	
   

  	
  $

  	
  9.99

  	
   

  	
  $

  	
  10.29

  	
   

  	
  $

  	
  10.60

  	
   

  
	
  2.926 - 2.990

  	
   

  	
  $

  	
  9.48

  	
   

  	
  $

  	
  9.76

  	
   

  	
  $

  	
  10.06

  	
   

  	
  $

  	
  10.36

  	
   

  	
  $

  	
  10.67

  	
   

  
	
  2.991 - 3.055

  	
   

  	
  $

  	
  9.54

  	
   

  	
  $

  	
  9.83

  	
   

  	
  $

  	
  10.12

  	
   

  	
  $

  	
  10.42

  	
   

  	
  $

  	
  10.74

  	
   

  
	
  3.056 - 3.120

  	
   

  	
  $

  	
  9.60

  	
   

  	
  $

  	
  9.89

  	
   

  	
  $

  	
  10.18

  	
   

  	
  $

  	
  10.49

  	
   

  	
  $

  	
  10.80

  	
   

  
	
  3.121 - 3.185

  	
   

  	
  $

  	
  9.66

  	
   

  	
  $

  	
  9.95

  	
   

  	
  $

  	
  10.25

  	
   

  	
  $

  	
  10.56

  	
   

  	
  $

  	
  10.87

  	
   

  
	
  3.186 - 3.250

  	
   

  	
  $

  	
  9.72

  	
   

  	
  $

  	
  10.01

  	
   

  	
  $

  	
  10.31

  	
   

  	
  $

  	
  10.62

  	
   

  	
  $

  	
  10.94

  	
   

  
	
  3.251 - 3.315

  	
   

  	
  $

  	
  9.78

  	
   

  	
  $

  	
  10.07

  	
   

  	
  $

  	
  10.38

  	
   

  	
  $

  	
  10.69

  	
   

  	
  $

  	
  11.01

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