September 12, 2001
Xxxxx Xxxxxx
Western Plains Energy, LLC
000 Xxxx, X.X. Box 567
Hoxie, Kansas 67740
Dear Xx. Xxxxxx:
The purpose of this letter is to set forth the understanding and agreement
between U.S. Energy Services, Inc. (U.S. Energy) and Western Plains Energy, LLC
(CUSTOMER) regarding the provision of energy management and engineering
services.
TERM - The initial term of this Agreement shall be from September 1, 2001
through August 31, 2002, and thereafter for successive one year terms unless and
until terminated by either party with thirty (30) days notice.
U.S. ENERGY SHALL:
1. Provide a detailed economic comparison of receiving natural gas
transportation service from a Local Distribution Company (LDC), or
directly connecting with Alternative Pipeline (Pipeline) sources for
facility sites under consideration. U.S. Energy will provide CUSTOMER
with engineering cost estimates, route drawings, and a project timeline
related to constructing pipeline facilities directly connecting
CUSTOMER with PIPELINE.
In the event that a direct connect pipeline option is selected, U.S.
Energy will submit a tap request to PIPELINE. Engineering and
construction management services related to constructing facilities
that will interconnect with PIPELINE can be provided by U.S. Energy
Services on a fee basis.
2. Determine whether firm, interruptible, or a blend of transportation
entitlement with PIPELINE will provide the lowest burnertip cost for
CUSTOMER. Factors that will be considered include PIPELINE credits for
the new interconnect, cost of an alternate fuel the system, and
availability of specific receipt point capacity. Analysis of the costs
and benefits will require U.S. Energy to negotiate as CUSTOMER'S agent
with PIPELINE and other potential third party shippers.
3. Provide natural gas supply information to minimize the cost of natural
gas purchased by CUSTOMER. This will include acquiring multiple supply
quotes and reporting to CUSTOMER the various supply index and fixed
prices. U.S. Energy will not take title to CUSTOMER gas supplies, but
will communicate supply prices and potential buying strategies.
4. Negotiate directly with PIPELINE, other shippers, and suppliers to
provide transportation, balancing, and supply agreements that meet
CUSTOMER'S performance criteria at the lowest possible cost.
5. Provide daily nominations to PIPELINE and other applicable parties for
CUSTOMER. This will include daily written confirmations to CUSTOMER of
all nominations and actual daily usage. U.S. Energy will utilize
telemetering to obtain actual usage on a real time basis.
6. Provide advisory services to CUSTOMER regarding electric pricing and
service agreements. Such services will include, but are not limited to,
the following:
a. Evaluation of regulatory and legislative precedent regarding
electric supplier choice options.
b. Identification of qualified electric suppliers.
c. Evaluation of self-generation options.
d. Development and implementation of an electric sourcing
strategic plan. Such plan may include a competitive bid
process and/or installation of on- site generation.
e. Negotiation of electric service agreements that meet the
pricing and reliability requirements of CUSTOMER.
7. Prepare detailed cost estimates for substation, transformation and
distribution equipment required for service options proposed by service
providers.
8. Prepare, implement and modify, as required, an electric and natural gas
price risk management plan. The objective of the plan is to achieve
stable forward prices that are consistent with CUSTOMER's risk profile
and pricing objectives.
9. U.S. Energy will also evaluate on an ongoing basis other options that
may reduce energy costs.
10. Provide a monthly projection of energy cost (natural gas and
electricity) and annual summaries.
11. Provide a consolidated monthly invoice that reflects all applicable
costs. U.S. Energy will be responsible for reconciling and paying all
shipper and supplier invoices.
FEES: U.S. Energy's fee for services described in items 1-11 during the initial
term of this agreement shall be $2,800 per month, plus pre-approved travel
expenses not to exceed $2,500 during the initial term of this agreement. $500 of
the monthly fee will be payable upon billing. The remaining $2,300 of the
monthly fee will be deferred and collected only when and if investor funds are
released from Escrow. In the event funds are not released from Escrow, this
Agreement shall
become null and void and both parties will be relieved of professional and/or
financial obligations due the other party, including the accrued monthly
charges.
TERMINATION: CUSTOMER shall have the unilateral right to terminate this
Agreement, with or without cause, at any time during the initial term and any
subsequent term of the Agreement with thirty (30) days written notification if
not satisfied with U.S. Energy's service.
BILLING AND PAYMENT: On the first of the month, U.S. Energy shall invoice
CUSTOMER. CUSTOMER shall pay U.S. Energy within ten (10) days of receipt of
invoice.
INDEPENDENT CONTRACTOR: U.S. Energy shall be and remain an independent
contractor-consultant during the term of this Agreement, and U.S. Energy, its
directors, officers and employees, shall not act for, or bind CUSTOMER in any
manner, unless specifically directed by CUSTOMER.
CONFIDENTIALITY: U.S. Energy shall not divulge to any other person or party any
information developed by U.S. Energy hereunder or revealed to U.S. Energy
pursuant to this Agreement, unless such information is (a) already in U.S.
Energy's possession if such information is not known by U.S. Energy to be
subject to another Confidentiality Agreement, or (b) is or becomes generally
available to the public other than as a result of an unauthorized disclosure by
U.S. Energy, its officers, employees, directors, agents or its advisors, or (c)
becomes available to U.S. Energy on a non-confidential basis from a source which
is not known to be prohibited from disclosing such information to U.S. Energy by
legal. contractual or fiduciary obligation to the supplier, or (d) is required
by U.S. Energy to be disclosed by court order, or (e) is permitted by CUSTOMER.
All such information shall be and remain the property of CUSTOMER unless such
information is subject to another Confidentiality Agreement, and upon the
termination of this Agreement, U.S. Energy shall return all such information
upon CUSTOMER's request.
CONFLICT OF INTEREST: U.S. Energy will not, directly or indirectly, engage in
any activities which would result in any conflict of interest with CUSTOMER, or
enable U.S. Energy to benefit from its relationship with CUSTOMER, except as
provided in this Agreement or approved by CUSTOMER.
NOTICES: Any formal notice, request or demand which a party hereto may desire to
give to the other respecting this Agreement shall be in writing and shall be
considered as duly delivered as of the postmark date when mailed by ordinary,
registered or certified mail by said party to the following addresses:
CUSTOMER: Western Plains Energy, LLC
000 Xxxx, X.X. Box 567
Hoxie, Kansas 67740
U.S. Energy:
(Payment) U.S. Energy Services, Inc.
c/o US Bank SDS 12-1449
Account #: 173100561153
P.O. Box 86
Minneapolis, MN 55486
(Notices): U.S. Energy Services, Inc.
0000 Xxxxxxxx Xxxx. Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
ASSIGNMENT OR AMENDMENT: The Agreement may not be assigned or amended without
the written consent of U.S. Energy and CUSTOMER.
APPLICABLE LAW: The Agreement shall be construed in accordance with the laws of
the State of Minnesota.
ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
Agreements and understanding pertaining hereto.
If the above correctly sets forth CUSTOMER'S understanding of the Agreement,
please so indicate in the spaces below and return one copy to U.S. Energy,
Attention: Xxxxx Xxxxxx.
U.S. ENERGY SERVICES, INC.
By: /s/ Xxxxx Xxxxxx
Title: Vice President
ACCEPTED AND DATED THIS 12th
DAY OF September, 2001.
CUSTOMER
By: /s/ Xxxx Xxxxxxxxx
Title: Chairman of Managers
