EXHIBIT 10.10
STEAM SALE AGREEMENT
This Steam Sale Agreement is made between Otter Tail Corporation, (the
"Agent") as Operating Agent for Otter Tail Corporation, f/k/a Otter Tail Power
Company, a Minnesota corporation; Montana-Dakota Utilities Co., a division of
MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities Co., a Delaware
corporation ("Montana-Dakota"); and Northwestern Public Service, a Division of
North Western Corporation, f/k/a Northwestern Public Service Company, a Delaware
corporation ("North Western"), herein referred to the "BSP Co-Owners" having its
principle office at the offices of Otter Tail Corporation, 000 Xxxxx Xxxxxxx
Xxxxxx, Xxxx xx Xxxxxx Xxxxx, Xxxxx of Minnesota, and Northern Lights Ethanol,
LLC, a limited liability company organized and existing under the laws of South
Dakota having its principal office at 0000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxx
Xxxxxx 00000, herein referred to as "Northern."
RECITALS
The parties recite and declare:
A. Northern is to be the owner and operator of an ethanol facility consisting
of a plant and supporting elements located at Big Stone, South Dakota,
which facility is herein collectively referred to as the "ethanol
facility."
B. The parties exchanged a non-binding Letter of Intent that included a
request for steam service for the ethanol facility. The magnitude and
character of the ethanol facility's steam service is such that Agent and
Northern agree the project requires the development of a contractual
arrangement.
C. Northern as owner and developer of the project desires to contract for
steam service for its ethanol facility in an amount not to exceed 140
Million Btu/Hr.
D. Agent 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 to this Agreement mutually agree as
follows:
SECTION ONE
AGREEMENT TO BUY
Agent promises to sell and deliver to Northern, and Northern promises to
purchase from Agent during the term of this Agreement, steam in an amount not to
exceed 120 Million Btu/Hr. for use in its ethanol manufacturing process.
SECTION TWO
TERM
This Agreement shall continue in force for the term of ten (10) years from
and after June 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
by giving the other written notice to that effect at least twelve (12) months
prior to such date: (a) date of expiration of initial term; (b) date of
expiration of any subsequent contractual period; (c) date of sale or permanent
discontinuance of Northern's ethanol facility; and (d) date of sale of
Northern's ethanol facility, except as otherwise provided in Section 24.
SECTION THREE
INTERRUPTIBILITY
Agent may, at its discretion, interrupt the delivery of steam to Northern
due to operating or economic dispatch conditions of the Big Stone Power Plant
("BSP"), or any full or partial
shutdown of BSP. Agent shall have the sole right to determine when such
conditions exist. Agent shall attempt to give Northern four (4) hours notice of
interruption. Agent shall otherwise attempt to give Northern as much notice of
interruption as practicable. Notice shall be given to the Plant Manager at
Northern's ethanol facility.
SECTION FOUR
POINT OF DELIVERY
The Point of Delivery for the steam and condensate lines shall be the point
where the steam supply line and the condensate line cross the Agent's property
line on to the property occupied by Northern's ethanol facility ("Northern's
property"). Ownership of each of these lines will also be defined by the
property line.
SECTION FIVE
METERING
A. METERING INSTRUMENTATION. Steam metering will consist of a differential
pressure measurement across a flow metering element and a pressure and
temperature measurement of the steam in the supply line just prior to the
reboiler in Northern's ethanol facility. Return condensate metering, if
necessary, will consist of a measurement across a flow metering element and
a temperature measurement of the condensate. The measured values will be
used as inputs to the BSP computer. The computer will then calculate the
energy in the steam and condensate using American Society of Mechanical
Engineering standard formulas.
B. ACCESS TO METERING. Meters and charts used in the implementation of this
Agreement that are located on Agent's property shall be accessible at all
reasonable times to reading inspection or examination by Northern.
C. METERING CALIBRATION. If possible, Agent shall calibrate the metering
devices during the annual maintenance shutdown of Northern and the annual
maintenance shutdown of Big Stone Plant. Otherwise, Agent and Northern
shall coordinate and schedule two meter calibrations each year. Agent shall
give Northern advance notice such that Northern may have its representative
present for each such calibration. Calibrations will be performed in a
workmanlike manner according to accepted industry standards. Northern will
be furnished copies of calibration results.
D. METERING ERROR. Errors in metering of more than plus or minus three percent
of full scale shall be corrected and a billing adjustment pursuant to
Section Eleven shall be made.
E. NORTHERN CHECK METERING. Northern may install, maintain, and operate check
metering equipment at Northern's expense, provided that any such equipment
is installed on Northern's side of the Point of Delivery and does not
interfere with the operation of Agent's equipment.
SECTION SIX
STEAM SUPPLY CONDITIONS
Agent will provide an interruptible supply of steam to the Point of
Delivery at a minimum operating capacity of 0 Million Btu/Hr. up to a maximum of
140 Million Btu/Hr. Agent will not guarantee steam availability in excess of 120
Million Btu/Hr.
SECTION SEVEN
CHARGES FOR STEAM TO BE SOLD
A. PAYMENT FOR STEAM. Northern shall pay Agent for steam delivered under and
pursuant to this Agreement at the rates and charges duly and regularly
established from time to time
as set forth in Appendix A, a copy of which is attached to and made a part
of this Agreement.
B. COST RECOVERY. Northern shall pay up to one-half of the anticipated costs,
$150,000, to install the steam line. If installation of the steam line
exceeds the anticipated cost, the Parties agree to negotiate payment of the
additional costs.
C. ANNUAL STEAM PURCHASE REQUIREMENT. The minimum annual steam purchase
requirement is 67,000 Million Btu, shall be determined on a calendar year
basis and shall be billed in accordance with Appendix A. The minimum annual
steam purchase requirement will be prorated for the first year and the last
year that this Agreement is in force for the period of time during which
the ethanol facility operates. Agent will have steam available a minimum of
40% of the time Agent is producing electricity. Agent will not guarantee
steam availability in excess of 120 Million Btu/Hr.
SECTION EIGHT
CONDENSATE
A. RETURN OF CONDENSATE. Northern will return all of the condensate from the
steam supply to Agent for use at BSP through the return condensate line.
Northern shall own and maintain all necessary condensate collection tanks,
pumps, and insulated pipes required to return condensate to BSP property
line Return condensate pressure and temperature may vary according to
operating conditions and will be measured for billing purposes. If the
condensate cannot be returned to BSP through no fault of Agent, Northern
shall reimburse Agent for the energy and water production costs at a rate
of $15.00 per 1000 gallons.
B. RETURN CONDENSATE QUALITY. The quality of return condensate will be
determined solely by Agent. A conductivity monitoring device installed in
the return condensate line will monitor the quality of the condensate.
Conductivity and silicate levels may be used to determine the quality of
the return condensate, but other factors as determined by Agent may also be
used. Should Agent determine the quality of the returned condensate to be
unacceptable due to contamination caused by anyone other than Agent on
Northern's side of the Point of Delivery, Agent will dump the affected
condensate to waste. Northern will be billed $15.00 per 1000 gallons dumped
to waste, not to exceed 100,000 gallons in any 24-hour period.
C. DISCONTINUANCE DUE TO CONDENSATE CONTAMINATION. Should the quality of the
return condensate as determined by Agent continue to be unacceptable after
Agent has dumped condensate to waste, Agent reserves the right to
discontinue the steam supply to Northern. In such case, Agent will provide
Northern notification two hours prior to discontinuance of delivery of
steam. Steam service will be resumed when Northern has eliminated the cause
of contamination to the satisfaction of Agent.
SECTION NINE
DELIVERY SYSTEM MAINTENANCE
A. STEAM SUPPLY AND CONDENSATE RETURN LINES. Agent shall own and reasonably
maintain all lines and equipment on the steam supply system and return
condensate lines located on BSP property at Agent's expense. Northern shall
own and reasonably maintain the steam supply line and return condensate
line on Northern's property at its expense. If either party shall fail to
fulfill its obligations hereunder, the other party may do so and recover
from the party failing to fulfill its obligations the cost of such repairs.
B. CONTROL WIRING. The control wiring between Northern's ethanol facility's
equipment and Agent's BSP will be maintained, repaired, or replaced at a
cost based on ownership share. Agent and Northern will mutually agree to
repair or replace the control circuit when required, based upon their
ownership share. "Ownership share" shall mean the number of linear feet of
the steam supply line and return condensate line lying on the party's
respective properties divided by the total number of linear feet of the
steam supply line and return condensate line lying between Agent's BSP and
Northern's ethanol facility.
SECTION TEN
BILLING AND PAYMENT
A. FORMAT. Agent shall xxxx Northern monthly for services rendered hereunder
during the preceding calendar month in a format similar to Appendix B.
B. PAYMENT. Payment, except for any amounts disputed in good faith, shall be
made to Agent by Northern within 20 days after receiving such billing. All
such payments shall be sent to BSP.
SECTION ELEVEN
BILLING ADJUSTMENT DUE TO METERING ERROR
Any billing adjustment required as the result of an error in metering shall
be made retroactive to the midpoint of the period between the meter calibration
test which revealed the error in metering and the next most recent meter
calibration test. Should the Parties mutually agree on the time the meter failed
to make an accurate measurement, the adjustment for such case will be made
retroactive to that time.
SECTION TWELVE
LATE PAYMENT CHARGE
Any failure by Northern to pay its monthly xxxx in full in accordance with
the 20-day payment deadline, except for any amounts disputed in good faith,
shall result in the imposition of a monthly late payment charge on the unpaid
balance. A late payment charge of 1.5 percent per month shall be added to the
past due amount if the xxxx is not paid by the due date. This right to a late
payment charge is not in lieu of other rights existing at law or equity for
failure to make timely payments.
SECTION THIRTEEN
GOOD FAITH BILLING DISPUTES
If Northern disputes in good faith any monthly xxxxxxxx or adjustments to
any billing, then Northern shall pay the undisputed amount to Agent and pay the
disputed amount into a separate interest-bearing account at a federally insured
financial institution mutually agreed upon by the Parties. This financial
institution will be the Account Agent on behalf of Agent and Northern. 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 accounts, funds, and accumulated
interest. Any expenses by the Account Agent shall be borne equally by Agent and
Northern. Agent shall not have the right to suspend or terminate deliveries of
steam as a result of any or all good faith disputes. Agent reserves the right to
suspend or terminate deliveries of steam for causes other than a good faith
dispute.
SECTION FOURTEEN
BREACH OF AGREEMENT
Should either party fail to perform or cause unnecessary delay in
performance of, or perform in bad faith, any of its obligations under this
Agreement; or violate any of the conditions of this Agreement, then the
aggrieved party may serve written notice upon the other party, and a Mortgagee
as provided in Section Twenty-Four, of its intention to terminate this Agreement
with respect only to the non-aggrieved party's obligations hereunder, unless
within five working days after the service of such notice a satisfactory
arrangement is made to remedy the default, then the aggrieved party at its
election may terminate the Agreement with respect to any of its further
obligations to the other party. Nothing herein shall be construed to limit or
restrict any other legal rights or remedies at law or equity of the aggrieved
party.
SECTION FIFTEEN
INDEMNIFICATION AND HOLD HARMLESS PROTECTION
Northern shall indemnify, defend, and save harmless Agent and BSP Co-Owners
from any liability, loss, damage, claims, 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 steam system of Northern and on
its side of the Point of Delivery unless such loss is solely due to the
negligence of the Agent. Where such claim or loss is caused by the concurrent
negligence of Northern, its agents or employees, and Agent and its employees,
Northern hereby agrees to indemnify, defend, and save Agent and BSP Co-Owners
harmless from all such claims or losses to the extent that such claim or loss
was caused by the negligence of Northern, its agents or employees. Agent shall
indemnify, defend, and save harmless Northern from any
liability, loss, damage, claims, or expense arising from or growing out of
injury to persons including death or property damage for persons other than the
parties, which may occur on the steam system of Agent and on the BSP side of the
Point of Delivery unless such loss is solely due to the negligence of Northern.
Except as hereinabove provided, neither party hereto shall be liable to the
other for damages caused to the other by reason of the operation, faulty
operation, or non-operation of the other's facilities. This indemnification
provision shall survive a Section Fourteen termination.
SECTION SIXTEEN
FORCE MAJEURE
Agent shall not be liable to Northern for its failure to deliver steam, and
Northern shall not be liable to Agent for its failure to receive steam, 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,
shutdowns for repairs and maintenance, or, without limitation by enumeration,
any other cause beyond Agent's or Northern's reasonable control provided Agent
or Northern 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 steam, except that any labor disturbance
may be settled at Agent's or Northern's 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 no longer was in effect.
SECTION SEVENTEEN
GOVERNING LAW
This Agreement shall be governed by, construed, and enforced in accordance
with the laws of South Dakota.
SECTION EIGHTEEN
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 NINETEEN
ENTIRE AGREEMENT
This Agreement shall constitute the entire steam 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 TWENTY
MODIFICATION OF AGREEMENT
Except as provided in Appendix A of this 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 TWENTY-ONE
GOVERNMENTAL JURISDICTION AND AUTHORIZATIONS
This Agreement shall at all times be subject to the jurisdiction of those
South Dakota 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 South Dakota agencies may, from time to time, direct in the
exercise of their jurisdiction. 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 TWENTY-TWO
ASSIGNMENT
Northern agrees that BSP steam shall only be used for the production of
ethanol and auxiliary uses, and in the event of selling, leasing, assigning, or
otherwise disposing of the ethanol facility or the business located on the
Northern Property, and except as otherwise provided in Section Twenty-Four,
Northern may, only with the Agent's written consent, assign this Agreement if
such subsequent assignee will in writing assume and covenant to perform this
Agreement. No assignment shall release Agent or Northern from, or in any respect
restrict or modify, any of the obligations that Agent or Northern has assumed
hereunder.
SECTION TWENTY-THREE
CONFIDENTIALITY
Northern agrees that this Agreement between Agent and Northern will not be
disclosed to, nor will access thereto be allowed to, any persons except such
Northern employees and agents
as are directly involved with this Agreement, and except for disclosure to
Mortgagee as provided in Section Twenty-Four, and even then only to the extent
necessary and essential to complete the work involved. Such employees, agents
and Mortgagee will preserve the confidential nature of this Agreement. Agent
shall also preserve the confidentiality of the terms of this Agreement, to the
extent they are able, in any regulatory or legal proceeding where it may be
necessary to disclose them.
SECTION TWENTY-FOUR
ENCUMBRANCE OF NORTHERN'S INTEREST
Northern may encumber by mortgage or other proper instrument, this
Agreement and its leasehold interest and estate in the Northern property as
security for any indebtedness of Northern. The execution of any mortgage, or
other instrument, or the foreclosure of any mortgage or other instrument, or any
sale, either by judicial proceeding or by virtue of any power reserved in any
mortgage, or conveyance by Northern to the holder of the indebtedness or the
exercising of any right, power or privilege reserved in any mortgage
(hereinafter the "Mortgagee"), shall not be held as a violation of any of the
terms or conditions of this Agreement, or as an assumption by the Mortgagee
personally of the obligations of this Agreement. The foregoing notwithstanding,
the Mortgagee shall be personally liable for the payment and performance of all
amounts and other obligations to be paid or performed on the part of Northern
under this Agreement during any period the Mortgagee succeeds to Northern's
interest under this Agreement by virtue of foreclosure, conveyance in lieu of
foreclosure or other transfer of Northern's interest to the Mortgagee, and
should the Mortgagee thereafter assign or otherwise transfer Northern's interest
under this Agreement to a transferee, the Mortgagee 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 encumbrance, foreclosure, conveyance, or exercise of right shall
relieve Northern from its liability under this Agreement.
If Northern shall encumber or otherwise assign its interest in this
Agreement, and if the Mortgagee shall give notice to Agent of the existence of
the encumbrance of and/or assignment and the address of the Mortgagee, then
Agent shall mail or deliver to the Mortgagee 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 under and pursuant to the terms and provisions of this
Agreement. The copies shall be mailed or delivered to the Mortgagee at, or as
near as possible to, the same time the notices are given to or served on
Northern. The Mortgagee may, at its option, at any time before the rights of
Northern 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 by the terms of this Agreement, or do any other act or thing required
of Northern by the terms of this Agreement, or do any act or thing that may be
necessary and 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 Mortgagee shall
be as effective to prevent a termination of the rights of Northern thereunder as
the same would have been if done and performed by Northern.
In witness whereof, each party to this Agreement has caused it to be
executed at Milbank, SD on the date indicated below.
Dated: 4-18-01 NORTHERN LIGHTS ETHANOL LLC
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Title: President
---------------------------------
OTTER TAIL CORPORATION
AS AGENT FOR THE BSP CO-OWNERS
By: /s/ Xxxx Xxxxxx
------------------------------------
Title: Plant Manager
---------------------------------
APPENDIX A
THE REDACTED PORTIONS OF THIS APPENDIX A ARE FILED SEPARATELY WITH THE SEC
SUBJECT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
A.1 MONTHLY CHARGES FOR STEAM DELIVERED TO NORTHERN
Steam Charge per Million Btu * * *
A.2 Determination of Total Monthly Xxxx starting in 2002 and beyond:
Monthly Energy (Steam) Charge
A.3 Method of Indexing Steam Charges
- The steam charge shall be indexed to * * * *
A.4 Governmental/Regulatory/Environmental Adjustment
As of the effective date of the Steam Service Agreement, Agent retains the
right to modify the charges in Section A.1 for any increase in charges caused by
new severance taxes, consumer taxes, fees, laws, or changes in existing laws,
rules, or regulations that may affect steam costs such as, but not limited to,
fuel and emissions.
A.5 Payment
Bills will be due 20 days after the receipt of xxxx 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 will be considered late and a late payment
charge will apply. The late payment charge shall be 1.5% of the unpaid balance.
All payments shall be made by wire transfer to agent.
A.6 Minimum annual steam usage.
Agent will xxxx Northern Lights in January for all steam not taken under the
annual minimum requirement in the previous year.
APPENDIX B
Steam used __________________
Net Million Btu's used
Days of steam availability
Service charge at Northern per day
Energy charges:
Total amount due for ____________ steam
Due date
Late payment charge 1.5 percent
Remit to:
