Document:

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                                                                   EXHIBIT 10.11

                          WATER AND FUEL OIL AGREEMENT

     This Agreement is made between Otter Tail Power Company, a division of
Otter Tail Corporation, as operating agent ("Agent") for Montana-Dakota
Utilities Co., a division of MDU Resources Group, Inc. and NorthWestern Public
Service, a division of NorthWestern Corporation, and Otter Tail Power Company
(collectively the "Big Stone Plant Co-Owners"), having its principle office at
the offices of Otter Tail Power Company, 215 South Cascade Street, City of
Fergus Falls, State of Minnesota, and Northern Lights Ethanol, LLC, having its
principle office at 1303 East Fourth Avenue, Milbank, South Dakota, ("Northern
Lights").

RECITALS

     The parties recite and declare:

     A. Northern Lights is to be the owner and operator of an ethanol facility
consisting of a plant and supporting elements located near the Big Stone
Generating Plant, Big Stone, South Dakota, which ethanol facilities are herein
referred to as the "project."

     B. The parties believe there are a number of synergies that exist between
the project and the Big Stone Plant, including, but not limited to, water,
wastewater, water for fire protection, and rail access.

     C. The parties desire to enter into an agreement to formally establish the
development, use, and cost of these synergies.

     Now, therefore, in consideration of the mutual covenants and agreements
hereinafter set forth, Agent and Northern Lights agree as follows:

SECTION ONE. WASTEWATER

1.1 Agent will accept without compensation therefore wastewater from the project
so long as the quality of the wastewater is equal to or better than the quality
requirements set forth in Attachment A, and the temperature does not exceed 90
degrees Fahrenheit.

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1.2  Northern Lights will:

     a. Deliver to Agent wastewater of such quality that it is equal to or
better than the quality requirements set forth in Attachment A, and the
temperature does not exceed 90 degrees Fahrenheit.

     b. Construct and maintain at its cost the pipeline, plumbing and any other
facilities necessary to transport wastewater from the project to the Big Stone
Plant Cooling Pond.

     c. Provide sampling of the wastewater to monitor the quality and
temperature of the wastewater in accordance with the procedures set forth in
Attachment A. Data on quality and temperature will be shared with the Big Stone
Plant Manager.

SECTION TWO. DISTILLED WATER

2.1  Agent will:

     a. Provide to the project up to 300 gallons per minute of distilled water
from its brine concentrator and/or makeup pond upon a schedule which will permit
Northern Lights to maintain continuous operation of the project based upon
Northern Lights providing storage capacity at the project site of 40,000 gallons
of distilled water.

     b. Determine the amount of water provided Northern Lights and bill Northern
Lights for water delivered to the project at the rates set forth in Attachment B
attached hereto and made a part of this Agreement.

2.2  Northern Lights will:

     a. Construct, maintain and pay all costs associated with the construction
and maintenance of pipelines to transport water from the Big Stone Plant brine
concentrator and makeup pond to the project.

     b. Install and maintain at its expense a water meter and measure the water
received by Northern Lights from Agent's brine concentrator and makeup pond.

     c. Pay within 30 days of receipt of Agent's invoice for water received from
the brine concentrator or makeup pond at the rates set forth in Attachment B.

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     d. Use water for industrial use as per the Big Stone Plant Water
Appropriation Permit.

     e. Maintain a storage capacity for distilled water of at least 40,000
gallons.

     f. Grant Agent access to inspect water meter and make measurement as
described in 2.1.

2.3  Metering Testing:

     a. Agent shall make special meter tests at any reasonable time at Northern
Lights' request. The costs of the tests shall be borne by Agent; provided,
however, that if any special meter test made at Northern Lights' request shall
disclose that the meter is recording accurately, Northern Lights shall reimburse
Agent for the cost of such test. If the meter registers not more than 2% above
or below normal, then the meter shall be deemed to be accurate. The readings of
the meter which have been disclosed by tests to be inaccurate shall be corrected
for the 90 days previous to such test in accordance with the percentage of
inaccuracy found by such test. If the meter should fail to register for any
period, Agent and Northern Lights shall agree as to the amount of water
furnished during such period and, Northern Lights shall pay said amount.

     b. Agent shall notify Northern Lights in advance of the time of any special
meter reading or test so that Northern Lights' representative may be present at
such meter reading or test.

SECTION THREE. WATER FOR FIRE PROTECTION

3.1  Agent will:

     a. Allow Northern to connect to Big Stone's 10" fire main at a location to
be mutually agreed upon by the parties and access the Big Stone Plant Cooling
Pond and auxiliary water supplies.

     b. Make such water for fire protection available through access to the 10"
water main for an annual fee of $2,000.00 with the first payment due upon
commencement of operations by Northern Lights (the "Operations Date").
Subsequent annual fees shall be due upon the annual anniversary date of the
Operations Date.

     c. Maintain continuous supplies of water for fire protection through its
main and auxiliary systems at water pressure rates mutually agreed upon by the
parties.

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3.2  Northern Lights will:

     a. Construct and maintain the necessary pipeline, fire protection and any
necessary pumping systems from the 10" water main to the project.

     b. Pay $2,000.00 annually as a fee for access to water for fire protection
within 30 days of receipt of Agent's invoice.

     c. Use water for fire protection purposes only.

     d. Cooperate with the Big Stone Plant Manager to develop a notification
system for any activation of Northern Lights' fire protection system.

SECTION FOUR. RAIL ACCESS

4.1  Agent will:

     a. Make available to Northern Lights the use of the Big Stone spur line
which runs from the main line of the Burlington Northern Santa Fe Railroad to
the Big Stone Plant.

     b. Assess Northern Lights on a monthly basis a per car assessment for each
car that is brought across the Big Stone spur line to the project at the rates
set forth in Attachment B.

     c. Permit Northern Lights to tie-in its spur line to the Big Stone spur
line at the location identified in the Access and Rail Agreement dated April 18,
2001, between Northern Lights and the Big Stone Plant Co-Owners (the "Access and
Rail Agreement").

4.2  Northern Lights will:

     a. Construct and maintain the Northern Lights spur line necessary for the
project to receive deliveries from and to ship across the Big Stone spur line.

     b. Pay within 30 days of receipt of Agent's invoice the per car assessment
for each car that is brought across the Big Stone spur line to the project.

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SECTION FIVE. FUEL STORAGE

5.1  Agent will:

     a. Maintain fuel oil storage capacity of at least 60,000 gallons.

     b. Provide to Northern Lights at a rate not less than 20 gallons per minute
fuel oil from storage tanks located on the Big Stone Plant grounds.

     c. Make available fuel oil from the Big Stone Plant for the average
purchase price for the oil in storage on a first-in, first-out basis, plus an
additional 15% for handling.

5.2  Northern Lights will:

     a. Provide piping from the Big Stone Plant fuel oil storage tanks and
return lines to the project.

     b. Provide metering for fuel oil consumed.

     c. Pay Agent for fuel oil received within 30 days following receipt of
Agent's invoice.

5.3  Metering Testing:

     a. Agent shall make special meter tests at any reasonable time at Northern
Lights' request. The costs of the tests shall be borne by Agent; provided,
however, that if any special meter test made at Northern Lights' request shall
disclose that the meter is recording accurately, Northern Lights shall reimburse
Agent for the cost of such test. If the meter registers not more than 2% above
or below normal, then the meter shall be deemed to be accurate. The readings of
the meter which have been disclosed by tests to be inaccurate shall be corrected
for the 90 days previous to such test in accordance with the percentage of
inaccuracy found by such test. If the meter should fail to register for any
period, Agent and Northern Lights shall agree as to the amount of fuel oil
furnished during such period and Northern Lights shall pay said amount.

     b. Agent shall notify Northern Lights in advance of the time of any special
meter reading or test so that Northern Lights' representative may be present at
such meter reading or test.

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SECTION SIX. MODIFICATIONS TO BIG STONE PLANT

     Nothing in this Agreement shall require modifications or improvements to
the Big Stone Plant, except as such modifications or improvements are
specifically identified herein.

SECTION SEVEN. TERM

     For wastewater, distilled water, water for fire protection and fuel oil
services, this Agreement shall continue in force for the term of ten (10) years
from, and after January 1, 2002, and shall be followed by two (2) additional
five (5) year terms, and thereafter from year to year; provided however that
either party shall have the right to terminate this Agreement on any of the
following dates: (a) date of expiration of the initial term upon 12 months'
advance notice by the terminating party; (b) date of expiration of any
subsequent contractual term upon 12 months' advance notice by the terminating
party; or (c) the date of sale or permanent discontinuance by Northern Lights of
the project at any time after the initial term. The foreclosure of an assignment
of this Agreement by Northern Lights' primary lender for operations and/or
facilities financing (the "Primary Lender"), and the reassignment of this
Agreement pursuant to a foreclosure action initiated by the Primary Lender shall
not be deemed an involuntary assignment, transfer or sale triggering the
termination provisions of the previous sentence. For rail access, this Agreement
shall continue in force for so long as the Access and Rail Agreement remains in
force, except as otherwise provided in Section Ten.

SECTION EIGHT. INTERRUPTIBILITY

     Agent shall not interrupt any of the services provided herein, or any
component thereof, except in the case of casualty damage, or in the case of a
need to make repairs and systems enhancement, and in this later event only upon
notice to Northern Lights adequate to permit Northern Lights to provide back-up
services when required in Northern Lights' sole discretion. All repairs, whether
routine or due to casualty, and all enhancements shall be made as timely as
possible so as to provide as little disruption to Northern Lights' operations as
possible. Notice shall be given to the Northern Lights' Plant Manager for the
ethanol project.

SECTION NINE. GOOD FAITH BILLING DISPUTES

     If Northern Lights disputes in good faith any billings or adjustments to
any billings for services rendered under this Agreement, then Northern Lights
shall pay the undisputed amount to Agent and pay the disputed amount into a
separate interest-bearing account at a

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federally insured financial institution mutually agreed upon by the parties.
This financial institution will be the account agent on behalf of Agent and
Northern Lights. The disputed funds shall be held in this account during the
pendency of the dispute. After resolution of the dispute, both parties will
jointly designate to the account agent the proper distribution of all deposits,
funds and accumulated interest. Any expenses by the account agent shall be borne
equally by Agent and Northern Lights. Agent shall not have the right to suspend
or terminate the services provided herein as a result of any or all good faith
disputes.

SECTION TEN. BREACH OF AGREEMENT

10.1 If any of the following events of default shall occur: (a) if Northern
Lights or the Primary Lender shall fail to pay any amount due hereunder and such
failure shall continue for more than 30 days after written notice thereof from
Agent to Northern Lights and the Primary Lender; or (b) if Northern Lights or
the Primary Lender shall fail to perform or comply with any other term hereof
and such failure shall continue for more than 30 days after written notice
thereof from Agent to Northern Lights and the Primary Lender (or, if such
failure is of such a character as to require more than 30 days to cure and if
Northern Lights and/or the Primary Lender continue to use reasonable diligence
in curing such failure for more than that period of time reasonably necessary to
cure such failure); or (c) if any of the events or circumstances described in
Section Seven (c) above occurs; or (d) if any of the events or circumstances
described in Section Eighteen below occurs and the Primary Lender does not
assume this Agreement, then and in any such event Agent may, at its option,
terminate this Agreement and pursue any other legal rights or remedies at law or
equity to which Agent is entitled.

10.2 If any of the following events of default shall occur: (a) if Agent shall
fail to provide any of the services required hereunder, except as otherwise
permitted under Section Eight, and such failure shall continue for more than
three days after written notice thereof from Northern Lights; or (b) if Agent
shall fail to perform or comply with any other term hereof and such failure
shall continue for more than 30 days after written notice thereof from Northern
Lights (or, if such failure is of such a character as to require more than 30
days to cure and if Agent continues to use reasonable diligence in curing such
failure for more than that period of time reasonably necessary to cure such
failure), then and in any such event, Northern Lights may, at its option,
terminate this Agreement and pursue any other legal rights or remedies at law or
equity to which Northern Lights is entitled.

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SECTION ELEVEN. INDEMNIFICATION, WAIVER OF SUBROGATION AND INSURANCE

11.1 Northern Lights shall protect, indemnify and save harmless Agent from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, judgments, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) imposed on or incurred by or assessed against
Agent or Agent's property during the term of this Agreement, for any of the
following: (a) any accidents or injury to or death of persons or loss of or
damage to property of third persons occurring on or about Northern Lights'
project site and/or Agent's facilities due to the negligence or tortuous act on
the part of Northern Lights or any of its agents, contractors sublessees,
licensees or invitees; or (b) any failure on the part of Northern Lights to
perform or comply with any of the terms of this Agreement; or (c) any mechanic's
or supplier's claim or lien in connection with for work done or materials
furnished relating to the Northern Lights' project site and/or Agents's
facilities. In case of any action, suit or proceeding is brought against Agent
by reason of any such occurrence, Northern Lights, on request of Agent, shall at
Northern Lights' expense defend the action, suit or proceeding with counsel
designated by Northern Lights and approved by Agent, which approval shall not be
unreasonably withheld. Northern Lights waives all claims against Agent for
damages to Northern Lights' facilities and property that are now on or will be
placed or constructed on the project site and to the property of Northern Lights
in, on or about the project site, from any cause arising at any time.

11.2 Agent shall protect, indemnify and save harmless Northern Lights from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, judgments, costs and expenses (including without limitation reasonable
attorneys' fees and expenses) imposed on or incurred by or assessed against
Northern Lights or Northern Light's property during the term of this Agreement
for any of the following: (a) any accidents or injury to or death of persons or
loss of or damage to property of third persons occurring on or about Northern
Lights' project site or Agent's facilities due to the negligence or tortious act
on the part of Agent or any of its agents, contractors, sublessees, licensees or
invitees; or (b) any failure on the part of Agent to perform or comply with any
of the terms of this Agreement; or (c) any mechanic's or supplier's claim or
lien in connection with for work done or materials furnished relating to the
Northern Lights' project site and/or Agent's facilities. In case of any action,
suit or proceeding is brought against Northern Lights by reason of any such
occurrence, Agent, on request of Northern Lights, shall at Agent's expense,
defend the action, suit or proceeding with counsel designated by Agent and
approved by Northern Lights, which approval shall not be unreasonably withheld.
Agent waives all claims against Northern Lights for damages to Agent's
facilities and property that are now on or will be placed or constructed on the
project site

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and to the property of Agent in, on or about the project site, from any cause
arising at any time.

11.3 Both parties hereby waive any and all rights of recovery which either of
them may have against the other for any loss of property which is covered by
insurance carried by the other party pursuant to the provisions of this
Agreement, or would have been covered had said party maintained the insurance
required under this Agreement, including without limitation any loss due to the
negligence or intentional acts of a party, or its agents or employees.

11.4 Both parties shall, at their own expense, procure and maintain, or cause to
be procured and maintained, in force throughout the term of this Agreement,
hazard insurance with extended coverage endorsement against loss or damage to
their respective facilities and property located therein, with coverage for
perils as set forth under the Causes of Loss-Special Form in an amount equal to
the full insurable replacement cost of said facilities and property. Said policy
shall require the insurer to give the other party at least 30 days' advance
written notice of any expiration or cancellation of any such policy.

11.5 Both parties shall, at their own expense, keep in effect commercial general
liability insurance, including contractual liability insurance, covering their
respective operations on and about their respective facilities and properties,
with such limits of liability as each shall reasonably determine from time to
time, but not less than combined single limits of $2,000,000.00 per occurrence
for bodily injury, death or property damage. The policies, endorsements,
insurers and/or insurance agents as the case may be, shall name the other party
as additional insureds with respect to their respective facilities, shall be
written on an "occurrence" basis and not on a "claims made" basis, shall be
endorsed to provide that it as primary to and not contributory to any policies
carried by the other, shall contain a severability of interests clause, shall
provide that it shall not be cancelable or allowed to expire without at least 30
days' prior written notice to the other party, and shall be issued in forms
satisfactory to the other party.

SECTION TWELVE. FORCE MAJEURE

     Agent shall not be liable to Northern Lights for its failure to deliver
services hereunder, and Northern Lights shall not be liable to Agent for its
failure to receive said services, when such failure shall be due to accident to
or breakage of pipelines or equipment, failure of generating equipment or lines,
fires, floods, storms, weather conditions, strikes, lockouts, or other
industrial disturbance, riots, legal interference, governmental action or
regulation, acts of God or public enemy, or, without limitation by enumeration,
any other cause beyond Agent's or Northern Lights' reasonable control;

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provided Agent or Northern Lights shall promptly and diligently take such action
as may be necessary and practicable under the then existing circumstances to
remove the cause of failure and resume delivery and use of service, except that
any labor disturbance may be settled at Agent's or Northern Lights' discretion.
The party seeking to invoke this provision shall provide notice within 24 hours
or such other time as is reasonable under the circumstances. The party shall
further notify the other party as to the time when a force majeure condition is
no longer in effect.

SECTION THIRTEEN. GOVERNING LAW

     This Agreement shall be governed by, construed, and enforced in accordance
with the laws of South Dakota.

SECTION FOURTEEN. WAIVERS

     No waiver of any breach of this Agreement shall constitute a waiver of any
other breach of the same or other provisions of this Agreement, and no waiver
shall be effective unless made in writing. In the event that any provision
herein shall be illegal or unenforceable, such provisions shall be severed and
the entire Agreement shall not fail, but the balance of the Agreement shall
continue in full force and effect.

SECTION FIFTEEN. ENTIRE AGREEMENT

     This Agreement shall constitute the entire service agreement between the
parties, and any prior understanding or representation of any kind preceding the
date of this Agreement shall not be binding upon either party, except to the
extent incorporated in this Agreement.

SECTION SIXTEEN. MODIFICATION OF AGREEMENT

     Any modification of this Agreement or additional obligation assumed by
either party in connection with this Agreement shall be binding only if
evidenced in writing, signed by each party or an authorized representative of
each party.

SECTION SEVENTEEN. GOVERNMENTAL JURISDICTION AND AUTHORIZATIONS

     This Agreement shall at all times be subject to the jurisdiction of those
governmental agencies having control over the parties hereto and the subject
matter hereof, and the parties shall be subject to the conditions and
obligations as such governmental agencies may, from time to time, direct in the
exercise of their jurisdiction.

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Both parties hereto agree to exert their best efforts to comply with all
applicable rules and regulations of all governmental agencies having authority
over either party to this Agreement. The parties shall take all reasonable
action necessary to secure all the required governmental approvals required by
or for this Agreement in its entirety and without charge.

SECTION EIGHTEEN. ASSIGNMENT

     Except as provided in Sections Nineteen and Twenty below, Northern Lights
shall not assign this Agreement either in whole or in part without in each such
case receiving the prior written consent of Agent, which consent shall not be
unreasonably withheld. Any consent given by Agent hereunder shall be with
respect to the particular transaction for which such consent is requested, and
the giving of such consent shall not be deemed consent to a subsequent
transaction. No assignment shall release Northern Lights from, or in any respect
restrict or modify, any of the obligations that Northern Lights has assumed
hereunder.

SECTION NINETEEN. PROHIBITION OF INVOLUNTARY ASSIGNMENT; EFFECT OF BANKRUPTCY OR
INSOLVENCY

19.1 This Agreement shall not be subject to involuntary assignment, transfer or
sale, or to assignment, transfer or sale by operation of law in any manner
whatever, except as is otherwise provided in this Section. Any attempt at
involuntary assignment, transfer or sale except as is otherwise provided in this
section shall be void and of no effect.

19.2 Without limiting the generality of the provisions of the preceding
paragraph of this Section, Northern Lights agrees that in the event any
proceeding is commenced by or against Northern Lights under any bankruptcy act
as amended or replaced, and in the event that the bankruptcy trustee or debtor
in possession fails to assume timely this Agreement under the provisions of the
Bankruptcy Act, any such proceeding shall constitute an involuntary assignment
prohibited by the provisions of the preceding paragraph of this Section and
shall be deemed to constitute a breach of this Agreement by Northern Lights.

19.3 The foreclosure of an assignment granted by Northern Lights to the Primary
Lender on Northern Lights' interest in the Agreement, or the appointment of a
receiver as part of or in conjunction with a foreclosure action initiated by the
Primary Lender, and the subsequent sale by said Primary Lender to a third party
purchaser shall not be deemed an involuntary assignment, transfer or sale
prohibited under the first paragraph of this Section. If a receiver is appointed
in any other proceeding or action to which Northern

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Lights is a party and such receivership is not discharged within a period of 180
days after the creation of the receivership by a court of competent
jurisdiction, or if Northern Lights has not posted a bond or obtained a surety
to indemnify the petitioner for the receivership in an amount satisfactory to
the court, then such receivership proceeding shall constitute an involuntary
assignment prohibited by the provisions of the first paragraph of this Section
and shall be deemed to constitute a breach of this Agreement by Northern Lights.

SECTION TWENTY. ENCUMBRANCE OF NORTHERN LIGHTS' INTEREST IN THIS AGREEMENT

20.1 Northern Lights may encumber and/or assign this Agreement as security for
any indebtedness provided by the Primary Lender. The execution of any security
agreement, assignment or other instrument, or the foreclosure of any security
agreement, assignment or other instrument, or any sale, either by judicial
proceeding or by virtue of any power reserve in said security agreement,
assignment or other instrument, shall not be held as a violation of any of the
terms or conditions of this Agreement, or an assumption by the Primary Lender
personally of the obligations of this Agreement. The foregoing notwithstanding,
the Primary Lender shall be personally liable for the payment and performance of
all amounts due hereunder and other obligations to be paid or performed on the
part of Northern Lights under this Agreement during any period the Primary
Lender succeeds to Northern Lights' interest under this Agreement by virtue of
foreclosure, conveyance in lieu of foreclosure or other transfer of Northern
Lights' interest to the Primary Lender, and should the Primary Lender thereafter
assign or otherwise transfer Northern Lights' interest under this Agreement to a
transferee, the Primary Lender shall be released from all obligations and
liabilities under this Agreement arising from and after the date of such
assignment or transfer provided that the assignee or transferee expressly
assumes in writing, for the benefit of Agent, such liabilities and obligations.
No encumbrances, foreclosure, conveyance or exercise of rights shall relieve
Northern Lights from its liability under this Agreement.

20.2 If Northern Lights shall encumber or otherwise assign to the Primary Lender
Northern Lights' interest in this Agreement, and if Northern Lights or the
Primary Lender shall give written notice to Agent of the existence of the
encumbrance and/or assignment and the address of the Primary Lender, then Agent
shall mail or deliver to the Primary Lender, at such address, a duplicate copy
of all material notices in writing which Agent may from time to time give to or
serve on Northern Lights under and pursuant to the terms and provisions of this
Agreement. The copies shall be mailed or delivered to the Primary Lender at, or
as near as possible to, the same time the notices are given to or served on
Northern Lights. The Primary Lender may, at its option, at any time before the
rights of Northern Lights shall be terminated as provided in this Agreement, pay
any of the amounts due under this Agreement, or do any other act or thing
required of Northern

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Lights by the terms of this Agreement, or do any act or thing that may be
necessary or proper to be done in the observance of the covenants and conditions
of this Agreement or to prevent the termination of this Agreement. All payments
so made and all things so done and performed by the Primary Lender shall be as
effective to prevent a termination of the rights of Northern Lights hereunder as
the same would have been if done and performed by Northern Lights.

SECTION TWENTY ONE. ATTORNEYS' FEES

If any action at law or in equity shall be brought to recover any amounts due
under this Agreement, or for or an account of any breach of, or to enforce or
interpret any of the covenants, terms, or conditions of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs from the other party.

SECTION TWENTY TWO. EASEMENTS

     Each party shall grant to the other easements for ingress and egress to and
from their respective properties for the purpose of installing, maintaining,
inspecting, repairing the lines, meters and equipment to be installed pursuant
to the terms of this Agreement.

     In witness whereof, each party to this Agreement has caused it to be
executed on the dates indicated below.

Dated: 8-14-01                              NORTHERN LIGHTS ETHANOL, LLC

                                            By: /s/ Delton Strasser
                                               ---------------------------------

                                            Title: President
                                                  ------------------------------

Dated: 8-15-01                              OTTER TAIL POWER COMPANY
                                                As Agent for Co-Owners

                                            By: /s/ Mark Rolfes
                                               ---------------------------------

                                            Title: Plant Manager
                                                  ------------------------------

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                                  ATTACHMENT A

                     WASTE WATER PARAMETERS AND TESTING FOR
                             NORTHERN LIGHTS ETHANOL

<TABLE>
<S>                                     <C>
              COD                       < 36 mg/liter
              TSS                       < 25 mg/liter
              TDS                       < 1,000 mg/liter
              Oil and Grease            < 15 mg/liter
              Temperature               < 90 degrees F
              pH                          6.0 to 9.0
              Total Residual Chlorine   < 1.5 mg/liter
</TABLE>

     The sampling location will be at a sample port in Northern Lights
mechanical building, past the last tee on the discharge line before the line
enters the ground to go to Big Stone Power Plant's Cooling Pond.

     Sampling shall be by grab sample, once every two weeks. An independent lab
agreeable to both parties will be utilized to analyze for COD, TSS, pH, TDS, and
Total Residual Chlorine. Northern Lights Ethanol will pay for the testing.

     The absence of an oil sheen will be sufficient evidence that oil and grease
is not present. If there are any signs of an oil sheen, the sample will be
analyzed for oil and grease.

     The temperature shall be measured and recorded by the sample gatherer.

     Northern Lights certifies that it will only use cooling tower water
treatment chemicals that would be acceptable for use in systems that are blown
down to surface water under NPDES permits for non-contact cooling water.

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                                  ATTACHMENT B

THE REDACTED PORTION OF THIS ATTACHMENT B IS FILED SEPARATELY WITH THE SEC
SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

                                      RATES

WATER

     Water shall be billed initially at $3.00 per 1,000 gallons. This rate is
subject to an annual adjustment as follows:

     The water charge shall be adjusted by ***.

RAIL ACCESS

     Rail access shall be assessed initially at $7.50 per car brought across the
Big Stone spur line to the Northern Lights' spur line. (Across spur line implies
round trip.) Rail access assessment shall be subject to adjustment every five
year period as follows:

     The rail access assessment shall be adjusted upwards by 10% every five
years.<Page>

                                                                   EXHIBIT 10.12

                           ELECTRIC SERVICE AGREEMENT

     This Agreement is made by and between Otter Tail Power Company ("Otter
Tail"), a division of Otter Tail Corporation, duly established and existing
under the laws of the State of Minnesota, having its principal office at 215
South Cascade Street, Fergus Falls, Minnesota, 56537, and Northern Lights
Ethanol, LLC ("Northern"), duly established and existing under the laws of the
State of South Dakota, having its principal place of business at 1303 East
Fourth Avenue, Milbank, South Dakota, 57252.

     A.   Northern is to be the owner and operator of an ethanol manufacturing
facility adjacent to the Big Stone Power Plant, near Big Stone City, South
Dakota, herein referred to as the "facility.

     B.   The Northern owners and developers of the facility desire to contract
for electrical service for its facility at a capacity level of approximately
4500 kW.

     C.   Otter Tail is willing to render such service to Northern in accordance
with the terms and conditions to this Agreement.

     For the reasons recited above and in consideration of the covenants and
agreements hereinafter stated, the parties agree as follows:

SECTION ONE. SERVICE

     Otter Tail shall sell and deliver and Northern shall take and pay for all
electric service required by Northern for its own use under the terms and
conditions specified in this Agreement.

SECTION TWO. RATES

     A.   The electric service provided for in this Agreement shall be sold,
delivered, purchased, received, and paid for under the terms and conditions of
this Agreement, together with Appendix A, Otter Tail's Large General Service
rate; Appendix B, Otter Tail's General

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Rules and Regulations; and Appendix C, Fuel Adjustment Clause; each of which are
attached and are on file with and approved by the South Dakota Public Utilities
Commission and now in force or as may be modified from time to time by the South
Dakota Public Utilities Commission. Any change or modification to this Agreement
must be approved by the South Dakota Public Utilities Commission.

     B.   The minimum demand to be billed shall be in accordance with the
provisions of Appendix A. Billing for the minimum demand shall begin when
Northern determines its project to be commercially operable and requests Otter
Tail to begin service under this Agreement.

SECTION THREE. CHARACTER OF SERVICE

     Otter Tail will deliver firm electric service of approximately 7,500 kVa
capacity, three-phase, 480 volts (secondary voltage), 60 hertz, alternating
current and shall be primary metered at a single point at 13,800 volts. Otter
Tail will furnish the necessary equipment and facilities to serve the electrical
load of the facility.

SECTION FOUR. POINTS OF DELIVERY

     The electric service provided for under this Agreement shall be delivered
by Otter Tail and received by Northern at the point of connection between
Northern's and Otter Tail's equipment, namely, at the electrical transition
cabinets furnished by Northern at the secondary voltage side of the distribution
transformers furnished by Otter Tail. All electrical equipment furnished by
Otter Tail at the point of delivery shall be suitable for the purposes set forth
in this Agreement, and shall be installed and maintained by Otter Tail in
conformity with the requirements of the National Electric Safety Code, the
properly constituted local authorities, and Otter Tail's rules and regulations
as filed with the South Dakota Public Service Commission.

<Page>

SECTION FIVE. METERING

     Otter Tail will install and maintain metering instruments for the facility
as follows:

     A.   Otter Tail shall furnish and install all necessary meters to measure
the electricity furnished by Otter Tail to Northern's facility.

     B.   Otter Tail shall be responsible for all the repair, replacement, and
preventative maintenance of meters it installs or has installed. Northern shall
be responsible for all repair, replacement, and preventative maintenance of
meters it installs, if any.

     C.   Otter Tail, at its expense, shall be responsible for the testing and
calibration of all meters under paragraph A of this Section. Northern shall
provide access to Otter Tail personnel during reasonable hours as necessary and
required to accomplish the inspection, testing, calibration, and operation of
Otter Tail's metering equipment. If requested by Northern, Otter Tail shall
provide a minimum of one week notice to Northern of its planned tests of meters
and shall permit a representative of Northern to be present at all times the
meters are being tested. In addition, Otter Tail will test any or all of such
meters as may reasonably be requested by Northern. Reasonable costs for such
requested test shall be paid by Northern unless any of the meters are found to
be inaccurate in excess of 2%, in which case Otter Tail shall pay for such
tests.

     D.   Adjustments shall be made in meter readings and billings for errors in
a meter reading within six (6) months of the discovery of an error.

SECTION SIX. REGULATORY AUTHORITIES

     This Agreement shall be filed with the South Dakota Public Utilities
Commission for its approval and is made subject to all applicable rules,
regulations, and orders of the South Dakota Public Utilities Commission.

<Page>

SECTION SEVEN. EFFECTIVE DATE AND TERM

     This Agreement shall become effective as of the day established in Section
Two B, and shall continue in force from year to year until cancelled by twelve
months written notice by either party hereto.

SECTION EIGHT. NO RESALE

     Northern agrees not to resell any electric capacity and energy furnished
under this Agreement.

SECTION NINE. BILLING AND PAYMENT

     Meters serving the project shall be read by Otter Tail monthly. Based on
these readings, Otter Tail shall bill Northern for the electric capacity and
energy used in the billing period ending with the meter reading. The bills will
be computed by application of Appendix A. The billing shall be sent to Northern
at the address set forth in the beginning of this Agreement or other address
designated by Northern. Northern shall pay Otter Tail the amount due in
accordance with the provisions of Appendix A and shall make payment as provided
under the provisions of the General Rules and Regulations, Appendix B.

SECTION TEN. NORTHERN'S LINES, MACHINERY AND APPARATUS

     Northern shall, at its own risk and expense, furnish, install, and keep in
good and safe condition all electric lines, machinery and apparatus which may be
required for receiving electric capacity and energy from Otter Tail at the point
of delivery as described in Section Four, and for distributing and utilizing
such capacity and energy.

SECTION ELEVEN. INTERRUPTION OF POWER SUPPLY

     Otter Tail may temporarily interrupt or reduce deliveries of power and
energy if Otter Tail determines that such interruption or reduction is necessary
or desirable in case of system

<Page>

emergencies, or in order to install equipment in, make replacements within, make
investigations and inspections of, or perform other maintenance work on
Northern's facilities or the transfer system. Except in case of emergency, in
order that Northern's operations will not be unreasonably interfered with, Otter
Tail shall give 48 hours advance notice to Northern of any such interruption or
reduction, the reason for such interruption or reduction, and the probable
duration of such interruption or reduction to the extent of Otter Tail's
knowledge of the situation. To the extent possible, Otter Tail will coordinate
any outage with Northern. Otter Tail shall make available the use of temporary
facilities or equipment to minimize the effect of any such interruption or
reduction to the extent reasonable and appropriate.

SECTION TWELVE. FORCE MAJEURE AND FORCED OUTAGE

     A.   In the event Otter Tail shall be wholly or partially prevented
delivering the electric capacity and energy contracted for herein, or in case
the service of such capacity and energy shall be interrupted, or in case
Northern shall be prevented from receiving, using, and applying the same by
reason of or through strikes, stoppages of labor, riots, fire, flood, invasion,
terrorism, insurrection, accident, the order of any court judge, or civil
authority, changes in federal, state, or other governmental laws, agency orders,
decrees, restraints or regulations, act of God, or any cause reasonably beyond
its control and attributable to its neglect, then and in such event Otter Tail
shall not be obligated to deliver such electric capacity, energy and service
under and pursuant to this Agreement during such period, and shall not be liable
for any damage or loss resulting from such interruption or suspension, and
Northern shall not be obligated or liable to pay for such capacity, energy or
service not delivered, furnished, or supplied during such period.

     B.   In any and all such events the party suffering such interruption or
suspension shall be prompt and diligent in removing the cause of such
interruption or suspension. Either party

<Page>

whose plant shall suspend operation by reason of accident to its machinery,
plant or system, shall proceed at once to repair the same within a reasonable
time, and, failing to do so, the limit or exemption from liability as fixed in
this section shall not apply, and the party so failing shall be liable to the
other as though no such limit or exemption had been fixed.

SECTION THIRTEEN. INDEMNIFICATION AND HOLD HARMLESS

     A.   Northern shall indemnify, defend, and save harmless Otter Tail from
any liability, loss, or expense arising from or growing out of injury to
persons, including death, or property damages incurred by persons other than the
parties, which may occur on the electric system of Northern and on its side of
the point of delivery unless such loss is due to the negligence of Otter Tail.

     B.   Otter Tail shall indemnify, defend and save harmless Northern from any
liability, loss, or expense arising from or growing out of injury to persons,
including death, or property damages for persons other than the parties, which
may occur on the electric system of Otter Tail and on its side of the point of
delivery unless such loss is due to the negligence of Northern.

     C.   If such loss or injury is not due to the negligence of either party or
is due to the equal negligence of both parties, any damages recovered therefore
shall be borne by the parties equally. If either party is required to satisfy
any claim or judgment recovered for such damages, such party shall have the
right of contribution against the other party.

SECTION FOURTEEN. ASSIGNMENT

     Neither Otter Tail nor Northern shall voluntarily assign its rights nor
delegate its duties under this Agreement, or any part of such rights or duties,
without the written consent of the other party. Such consent shall not
unreasonably be withheld. This Agreement shall inure to and bind the parties'
successors and assigns.

<Page>

SECTION FIFTEEN. SEVERAL OBLIGATIONS

     Otter Tail and Northern shall each be individually and severally liable for
its own obligations under this Agreement.

SECTION SIXTEEN. WAIVER

     Any waiver at any time by either party of its rights with respect to a
default under this Agreement, or with respect to any other matters arising in
connection with this Agreement, shall be in writing and shall not be deemed a
waiver with respect to any subsequent default or other matter.

SECTION SEVENTEEN. NOTICE

     Any notice provided for or concerning this Agreement shall be in writing
and shall be deemed sufficiently given when sent by certified or registered mail
if sent to the respective address of each party as set forth in the beginning of
this Agreement.

SECTION EIGHTEEN. EASEMENT AND ACCESS

     Northern shall grant to Otter Tail, during the period of this Agreement,
easements of rights-of-way for the construction, extension, maintenance, and
repair or removal of electric lines, either overhead or underground, which are
or may become necessary to provide the electric service described herein,
including the necessary fixtures and apparatus in connection therewith. Further
right-of-way, when necessary, shall be granted Otter Tail to place position, and
locate the butts of its main poles, pole structures, or underground wires, over,
across, or under Northern's property in such manner and location as the parties
may mutually agree. Otter Tail shall be given the right-of-way, ingress and
egress, at all reasonable times for the purpose of the right-of-way granted and
shall have the right to cut down and trim all trees as reasonably necessary to
keep the

<Page>

wires of its electric lines clear, so as to be maintained in accordance with
Otter Tail's standards of construction and maintenance.

SECTION NINETEEN. OWNERSHIP OF OTTER TAIL LINES AND EQUIPMENT

     The title and ownership of electric lines, related equipment, and metering
equipment owned and installed by Otter Tail on Northern property shall be and
remain the personal property of Otter Tail and shall not become part of the
estate of Northern.

SECTION TWENTY. REMOVAL OF OTTER TAIL LINES AND EQUIPMENT

     Otter Tail shall have the right, exercisable within a reasonable time after
the expiration or termination of this Agreement, to remove its electric lines,
related equipment, metering equipment, and other appliances and fixtures from
the Northern property.

SECTION TWENTY-ONE. ENTIRE AGREEMENT

     All previous communications between the parties hereto, either verbal or
written, with reference to the subject matter of this Agreement are hereby
abrogated, and this Agreement, as duly accepted and approved, constitutes the
sole agreement related to the sale and delivery of electric capacity and energy
by Otter Tail to Northern. No modifications of this Agreement shall be binding
upon the parties or either of them unless such modifications shall be in
writing, duly accepted in writing by Northern and executed by an officer of
Otter Tail, except for the provisions for rate change as provided under Section
Six hereof and Appendix A.

SECTION TWENTY-TWO. CHOICE OF LAW

     This agreement shall be construed and interpreted in accordance with the
laws of the State of South Dakota, excluding any choice of law or rules, which
may direct the application of laws of another jurisdiction.

<Page>

SECTION TWENTY-THREE. GOVERNANCE OF AGREEMENT OVER REGULATIONS

     Where there are differences between the Agreement and the appended General
Rules and Regulations, the Agreement shall govern.

SECTION TWENTY-FOUR. REMEDIES FOR DEFAULT

     In the event Northern shall fail to comply with or shall violate the
provisions of this Agreement, or if Northern shall fail to pay for electric
service provided by Otter Tail pursuant to the terms of its General Rules and
Regulations, and such failure or violation is not remedied or prompt and full
performance is not accomplished by Northern within thirty (30) days after
written notice of such failure or violation is given by Otter Tail, Otter Tail
may pursue any remedies at law and those under its General Rules and
Regulations, including the right to disconnect service to Northern's premises.

SECTION TWENTY-FIVE. INVALID PROVISIONS

     The invalidity of any portion of this Agreement will not and shall not be
deemed to affect the validity of any other provision. In the event that any
provision of this Agreement is held to be invalid, the parties agree that the
remaining provisions shall be deemed to be in full force and effect as if they
had been executed by both parties subsequent to the expungement of the invalid
provision.

SECTION TWENTY-SIX. PARAGRAPH HEADINGS

     The titles to the paragraphs of this Agreement are solely for the
convenience of the parties and shall not be used to explain, modify, simplify,
or aid in the interpretation of the provisions of this Agreement.

<Page>

SECTION TWENTY-SEVEN. EQUIPMENT INSTALLED BY NORTHERN

     All electrical equipment on the premises of Northern or connecting
Northern's premises with Otter Tail service, furnished by Northern, shall be
suitable for the purpose set forth in this Agreement, and shall be installed and
maintained by Northern at all times in conformity with the requirements of the
National Electric Safety Code, the properly constituted local authorities, and
Otter Tail's rules and regulations as filed with the South Dakota Public
Utilities Commission.

     In Witness whereof, the parties have caused this Agreement to be executed
this 26th day of September, 2001.

NORTHERN LIGHTS ETHANOL, LLC            OTTER TAIL POWER COMPANY

By: /s/ Delton Strasser                 By: /s/ Doug Kjellerup
   --------------------------------        --------------------------------

Its: Chairman                           Its: V.P. Otter Tail Corporation
    -------------------------------         -------------------------------

<Page>

                                   APPENDIX A

                       Large General Service, tariff C-02S

<Page>

OTTER TAIL POWER COMPANY                    Section No. 3, Volume I
Fergus Falls, Minnesota                     5th Revised Sheet No. 30
ELECTRIC RATE SCHEDULE                      Cancelling 4th Rev. Sheet No. 35.1
                                            Rate Designation C-02S, Page 1 of 2
================================================================================

                              LARGE GENERAL SERVICE

                                Rate Zones 1 & 9

         Primary Service                                42-602
         Secondary Service                              42-603

APPLICATION OF SCHEDULE: This schedule is applicable upon request for single and
three-phase electric service supplied through one meter. This rate is not
applicable for energy for resale, nor for municipal streetlightlng. Emergency,
supplementary or standby service will be supplied only in accordance with the
terms applying to such service.

All equipment to be served must be of such voltage and electrical
characteristics that it can be served from the circuit provided for the main
part of the load and the electricity used properly measured by the meter
ordinarily installed on such a circuit. If the equipment to be served is such
that this is impossible, the, customer must provide any necessary transformers,
auto transformers or other devices suitable for connection to the circuit
provided by the Company.

Intermittent and highly fluctuating loads requiring a separate service line or
separate transformer may be served through a separate meter, on this rate, with
a separate billing.

RATE:   Customer Charge $25.50 plus

<Table>
<Caption>
Demand:                                              Primary              Secondary
                                                     Service               Service
                                               -------------------   -------------------
<S>                                              <C>                   <C>
First 100   kw of billing demand                     $6.75/kw               $7.05/kw
Excess      kw of billing demand                     $4.85/kw               $5.15/kw

                                    PLUS:

Energy:     kwh Charge                           3.362 cents/kwh       3.415 cents/kwh
            All Over 360 kwh per
            kw of billing demand                 2.449 cents/kwh       2.498 cents/kwh
</Table>

MONTHLY MINIMUM CHARGE: The demand charge, computed in accordance with the terms
of this rate.

DETERMINATION OF BILLING DEMAND: The billing demand shall be the maximum kw as
measured by a suitable demand meter for any period of 15 consecutive minutes
during the months for which the bill is rendered adjusted for excess reactive
demand, but not less than the greater of:

================================================================================
SOUTH DAKOTA PUBLIC                        EFFECTIVE for service rendered on and
UTILITIES COMMISSION                       after November 1, 1987 in SD.
Approved:  October 30, 1987
Docket No. F-3691
                       Jay D. Myster, Corporate Secretary

<Page>

OTTER TAIL POWER COMPANY                    Section No. 3, Volume I
Fergus Falls, Minnesota                     5th Revised Sheet No. 30
ELECTRIC RATE SCHEDULE                      Cancelling 4th Rev. Sheet No. 35.1
                                            Rate Designation C-02S, Page 2 of 2
================================================================================

LARGE GENERAL SERVICE (continued)

DETERMINATION OF BILLING DEMAND: (Continued)

      80 kw or
          25% of the first 500 kw
          50% of the next 500 kw
          75% of the excess kw of billing demand established during the
            preceding 11 months

ADJUSTMENT FOR EXCESS REACTIVE DEMAND: The billing demand shall be increased by
one kw for each whole 10 kvar of reactive demand in excess of 50% of the
measured demand in kw.

METERING: If it is impractical or impossible to measure the demand and the
energy used with one meter or metering equipment, Otter Tail may, at its option,
install separate meters and combine the readings of such meters before applying
the rate. If this is done, no allowance shall be made for diversity but all
demands and consumptions shall be added together to determine the totals on
which billing will be made.

EMERGENCY, SUPPLEMENTARY OR STANDBY SERVICE: Emergency, supplementary or standby
service will be provided only subject to individual negotiation, in each
instance.

PAYMENT: Bills will be due ten days after the billing date: net payment will be
accepted through the 21st day. On the 22nd day after billing an account with an
unpaid balance of $5.00 or more (after allowance for any EMP credit) will be
considered late and a late payment charge will apply. The late payment charge
shall be 1.5% of the unpaid balance plus a collection charge of $2.00, except
that a customer with at least 12 successive payments of regular bills prior to
the 22nd day after the billing date shall not be billed a late payment charge.
Where a customer is disconnected for nonpayment of a bill, a reconnection charge
will be made; the charge will the Customer Connection Charge as provided for in
Rate M-61S, or any amendments or superseding provisions applicable thereto, plus
direct labor costs for reconnection outside of regular business hours.

     A $10.00 charge will be made subsequent to a customer's check being
returned from the bank because of nonsufficient funds.

CONTRACT PERIOD: Otter Tail reserves the right to require a contract with the
customer in cases of unusual service requirements.

FUEL ADJUSTMENT CLAUSE: The energy charges under this schedule are subject to a
Fuel Adjustment Clause as provided for in Rate M-60S, or any amendments or
superseding provisions applicable thereto.

REGULATIONS: General Rules and Regulations govern use under this schedule.

ADJUSTMENT FOR MUNICIPAL PAYMENTS: Bills under this rate schedule may be subject
to adjustment for certain payments to municipalities as provided in the General
Rules and Regulations.

================================================================================
SOUTH DAKOTA PUBLIC                        EFFECTIVE for service rendered on and
UTILITIES COMMISSION                       after November 1, 1987 in SD.
Approved:  October 30, 1987
Docket No. F-3691
                       Jay D. Myster, Corporate Secretary

<Page>

                                   APPENDIX B

                          General Rules and Regulations

                                [not reproduced]

<Page>

                                   APPENDIX C

                      Fuel Adjustment Clause, tariff M-60S

<Page>

OTTER TAIL POWER COMPANY                    Section No. 3, Volume I
Fergus Falls, Minnesota                     5th Rev. Sheet No. 98-Super. 52
ELECTRIC RATE SCHEDULE                      Cancelling 4th Revised Sheet No. 52
                                            Rate Designation M-60S, Page 1 of 1
================================================================================

                             FUEL ADJUSTMENT CLAUSE

There shall be added to or deducted from the monthly bill the amount per
kilowatthour (rounded to the nearest 0.001 cents) that the average cost of fuel
is above or below 1.5460 cents per kilowatthour. The average cost of fuel per
kilowatthour for the current period shall be calculated from data covering
actual costs from the most recent three-month period as follows:

Energy costs from actual months 1, 2 and 3 plus unrecovered (or less over
recovered) prior cumulative energy costs plus (or minus) the carrying charge,
divided by the associated energy (reduced for average system losses) associated
with retail sales for actual months 1, 2 and 3 equals the cost of energy amount.

The applicable adjustment will be applied month to month on a uniform billing
cycle to each customer's bill at the earliest practical date following the
three-month period. The cost of fuel shall be determined as follows:

     1.   The expense of fossil fuel, as recorded in Account 151 of the FERC's
          Uniform System of Accounts for Public Utilities and Licensees, used in
          the Company's generating plants.

     2.   The utility's share of the expense of fossil fuel, as recorded in
          Account 151, used in jointly-owned or leased plants.

     3.   The net energy cost of energy purchases when such energy is purchased
          on an economic dispatch basis, exclusive of capacity or demand
          charges.

     4.   The actual identifiable fossil and nuclear fuel expense associated
          with energy purchased for reasons other than identified in 3 above.

     5.   Less the fossil fuel-related costs recovered through intersystem
          sales, including the fuel costs related to economy energy sales and
          other energy sold on an economic dispatch basis.

Where, for any reason, billed system sales cannot be coordinated with fuel
costs, sales may be equated to the total of:

     1.   Net generation
     2.   Purchases and net interchange in, less
     3.   Intersystem sales, less
     4.   Losses on system retail sales

A carrying charge or credit will be included to determine the monthly fuel
adjustment factor. The carrying charge or credit will be determined by applying
one-twelfth (1/12) of the overall rate of return granted by the Commission in
the most recent rate decision to the recorded deferred fuel cost balance of the
latest fuel adjustment calculation.

SOUTH DAKOTA PUBLIC                        EFFECTIVE for service rendered on and
UTILITIES COMMISSION                       after November 1, 1987 in SD.
Approved:  October 30, 1987
Docket No. F-3691

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