EX 10.9
SERVICES CONTRACT BETWEEN THE WYOMING
BUSINESS COUNCIL, ENERGY SECTION, INVESTMENT
READY COMMUNITIES DIVISION, AND RENTECH, INC.
THIS SERVICES CONTRACT (Contract) made this 30th day of January, 2001,
between the Wyoming Business Council (hereinafter WBC), whose address is Becker
Building, 214 West 15th Street, Cheyenne, Wyoming 82002, and Rentech, Inc., 1331
17th Street, Suite 720, Denver, Colorado 80202 (hereinafter Contractor), in
which the Contractor undertakes to conduct a feasibility study to convert a
portion of the Cheyenne Coastal Chemical plant from the production of MTBE, a
fuel additive to the production of super clean, environmentally friendly liquid
fuels and chemicals.
RECITALS
1. The Energy Section, WBC, has received concurrence from the U.S. Department of
Energy, on the use of eight hundred thousand dollars ($800,000) of Stripper Well
petroleum violation escrow funds.
2. The U.S. Department of Energy has approved the program proposed by the
Contractor to study the feasibility of plant conversion, and super clean liquid
fuel/chemical stock production.
3. Negotiations have occurred between the Contractor and WBC, following the U.S.
Department of Energy's concurrence, wherein the terms of this Contract were
agreed upon.
TERMS AND CONDITIONS BETWEEN THE WYOMING
BUSINESS COUNCIL AND CONTRACTOR
ARTICLE 1. CONTRACTOR'S RESPONSIBILITIES
4. SCOPE OF SERVICES
4.1 The Contractor shall conduct a feasibility study, the scope of which is
listed on slide No. 14 found in Attachment A, at the Cheyenne Coastal Chemical
Plant to determine the opportunities to convert part of the plant to the
production of super clean liquid fuels and chemical feed stock such as super
clean diesel. In conducting the feasibility study, Rentech will attempt to
determine the number of jobs to be lost if the MTBE plant is closed, and how
many employees might be required if the plant is converted, and clean fuels are
produced.
4.2 The Contractor will complete the feasibility study within nine (9) months of
the last signature on this Contract.
4.3 The Contractor will identify any appropriate opportunities to use State of
Wyoming owned natural gas or coal bed methane as partial feed stock for any
future diesel production.
4.4 The Contractor will certify that neither they, nor any of their partners who
will benefit from the feasibility study for any reason, are parties to the
original Stripper Well litigation and were required to pay restitution to the
American public.
4.5 If Contractor determines that it is not feasible to proceed with the
conversion of the plant, Rentech will repay the grant at the rate of one hundred
twenty percent (120%) of the original eight hundred thousand dollars
($800,000.00) for a total of nine hundred sixty thousand dollars ($960,000.00)
over a period of time not to exceed six (6) years. The repayment will be from a
five percent (5%) share of royalties from the conversion of methanol facilities
to Rentech GTL technology worldwide. If Contractor chooses to proceed with the
conversion and/or purchases the Coastal Chemical Methanol/MTBE facility the
grant will be repaid at financial closing at the rate of 100%. In addition to
the repayment of the grant at closing, Rentech would provide a royal of fifteen
cents ($.15)/barrel of Rentech Fisher Tropsch liquid produced (C5+) from the
plant after conversion is complete using the Rentech Fisher Tropsch technology.
The royalty would be paid based on monthly production of the Fisher Tropsch
liquids (C5 + fraction) starting at the date of Commercial Operation as defined
by the engineers/constructors and contract documents for plant commercial
acceptance. The royalty would be paid for the first four years of commercial
operation of the Wyoming facility.
4.6 Failure to meet any of the conditions of the scope of services may result in
the immediate cancellation of the contract and the requirement that all funds
previously paid be returned.
5. TERM OF CONTRACT
5.1 For the sake of this grant, this Contract will be in effect from the date of
last signature on this Contract until nine (9) calendar months have passed. It
may be extended for a period of three (3) months with the agreement of both
parties and if funding is still available. Repayment fees will be enforceable
until all funds have been returned as outlined in the repayment schedule in
paragraph 4.5.
6. PAYMENT
6.1 The total cost for providing the scope of services shall not exceed eight
hundred thousand dollars ($800,000.00).
6.2 Payment shall be made in two phases. The first payment, seven hundred fifty
thousand dollars ($750,000.00), will be paid no later than thirty (30) calendar
days after receipt by WBC of a signed copy of this Contract and a request for
payment. The second and last payment of fifty thousand dollars ($50,000.00) will
be paid no later than thirty (30) calendar days after receipt by the WBC of a
copy of the final feasibility report.
7. EMPLOYMENT OF CONTRACTOR
7.1 Contractor is an independent contractor, and neither Contractor nor
Contractor's principals, partners, employees or agents are servants, agents, or
employees of WBC. Contractor shall perform all work by its own means and methods
and WBC shall have no direct control of the work, it being understood that WBC
is interested only in the ultimate results of the completed job. Contractor
shall be solely responsible for its own acts and the acts of its employees while
engaged in the work. As an independent contractor, Contractor shall be
responsible for (i) all applicable state, federal, and other payroll taxes,
including contributions and taxes assessed against any amounts paid to its
employees, and (ii) any and all taxes or charges imposed by governmental
authorities based upon or measured by Contractor's income or receipts, including
without limitation any federal, state or local income of franchise taxes. Except
where expressly authorized in writing by WBC, no employee, agent, subcontractor,
or representative of Contractor shall represent himself to be an agent or
authorized to act in the name or on behalf of WBC, nor at any time enter into
any contract that shall purport to bind WBC in any way.
7.2 The Contractor shall assume sole responsibility for any debts or liabilities
that may be incurred by the Contractor in fulfilling the terms of this Contract.
8. ASSIGNMENT
8.1 Contractor's rights and obligations hereunder are deemed to be personal and
may not be delegated or assigned and any attempt at delegation or assignment
without so complying shall be void.
9. INDEMNITY AND LIABILITY
9.1 Contractor shall indemnify, defend and hold WBC harmless from and against
any and all claims, to the extent caused by or resulting from the negligent acts
or omissions of Contractor or Contractor's willful misconduct, or any entity or
person retained or employed by the Contractor, in connection with the work for
this Contract. "Claims" shall mean suits, actions, legal or administrative
proceedings, claims, causes of action, demands, damages of every kind and type,
liabilities, fines, penalties, losses, costs and expenses, including costs of
defense and attorney's fees.
9.2 Contractor shall indemnify, defend and hold WBC harmless from and against
any and all claims arising from any actual or threatened infringement of any
patent, service, trademark, copyright or other intellectual property right in
connection with any material, article, or process embodied in the work or
performance of the work provided by the Contractor, or anyone performing the
work on behalf of the Contractor.
10. COMPLIANCE WITH LAWS
10.1 Contractor shall comply with all federal, state and local laws,
regulations, requirements, decrees, codes, ordinances, resolutions, and other
acts of any governmental authority which are applicable to this Contract and any
work provided or undertaken by Contractor pursuant to or in furtherance of this
Contract, including, but not limited to, all federal, state and local labor,
safety and environmental laws.
11. OWNERSHIP OF DOCUMENTS
11.1 All reports, publications and other material prepared by the Contractor
specifically for this Contract, which are not general in nature, shall become
the joint property of the WBC and the Contractor. The WBC shall have
unrestricted authority to publish, disclose, distribute and otherwise use in
whole or in part any reports, data or other materials prepared by the Contractor
under this Contract. All data, material and information generated by the
Contractor shall become the joint property of the WBC and the Contractor,
regardless of whether the terms of this Contract are fulfilled.
ARTICLE II WBC RESPONSIBILITIES
12. COMPLIANCE WITH FEDERAL FINANCING REGULATIONS
12.1 WBC will provide technical assistance on the use of PVE Funds and will
submit any required federal reports.
13. PAYMENT
13.1 WBC shall pay Contractor per the payment schedule under Article I, 6.2.
ARTICLE III GENERAL PROVISIONS
14. USE OF WYOMING FIRMS, AGENCIES AND RESIDENTS
14.1 It is the intention of the Contractor to use Wyoming firms, State agencies
and Wyoming residents as much as possible fulfilling the terms of this Contract.
15. CHOICE OF LAW PROVISION
15.1 The laws of the State of Wyoming and rules and regulations issued pursuant
thereto shall be applied in the interpretation, execution and enforcement of
this Contract.
16. CONFLICT OF INTEREST
16.1 The signatories swear that, to their knowledge, no WBC employee has any
personal or beneficial interest whatsoever in the services described herein. No
staff member of the Contractor, compensated either partially or wholly with
funds from the Contract, shall engage in any contract or activity which would
constitute a conflict of interest, as related to this Contract.
17. TERMINATION
17.1 WBC may terminate this Contract for any reason upon fifteen (15) calendar
days written notice. Upon such termination, WBC shall pay Contractor, in full
satisfaction of all obligations owed to Contractor payments due for work
actually performed in accordance with the requirements of this Contract.
17.2 In the event of a breach or default of this Contract, either party, in
addition to the right of termination, shall have all other remedies available at
law or in equity. All such remedies shall be cumulative, and the waiver of one
right or remedy hereunder shall not constitute the waiver of any other right or
remedy hereunder.
18. CHANGES/MODIFICATIONS TO CONTRACT
18.1 WBC and the Contractor may from time to time request changes in the scope
of services to be performed hereunder. Such changes which are mutually agreed
upon by and between both parties shall be incorporated by written amendment to
this Contract, signed by an authorized employee of WBC and an authorized agent
of the Contractor.
18.2 The failure of WBC to insist upon or enforce strict performance of any of
the terms of this Contract or to exercise any rights herein shall not be
construed as a waiver of rights on any future occasion. No waiver or
modification of any of the terms or conditions of this Contract shall be
effective unless said waiver shall be in writing and signed by the CEO of the
WBC. If any action at law or in equity is necessary to enforce or interpret the
terms of this Contract, the prevailing party shall be entitled to its reasonable
attorneys' fees, costs and necessary disbursements, in addition to any other
relief to which that party may be entitled.
18.3 This Contract, consisting of seven (7) pages, Attachment A, consisting of
two (2) pages, and Attachment B, consisting of ten (10) pages, represents the
entire and integrated Contract between the parties and supersedes all prior
negotiations, representations, and agreements, whether written or oral.
19. SOVEREIGN IMMUNITY
19.1 The State of Wyoming and the WBC do not waive sovereign immunity by
entering into this Contract, and specifically retain immunity and all defenses
available to them as sovereigns pursuant to WYO. STAT. Section 1-39-104(a) and
all other state law.
ARTICLE IV. SIGNATURES
By signing this Contract, the parties certify that they have read and
understood it, that they agree to be bound by the terms of the Contract, that
they have the authority to sign it.
This Contract is not binding on either party until approved by the
Governor of the State of Wyoming or his designee, if required by WYO. STAT.
Section 8-2-1016(b)(iv).
WYOMING BUSINESS COUNCIL
01/30/01
_______________________________ ____________________________
Tucker Fagan, CEO Date
RENTECH INC.
01/26/01
_______________________________ ____________________________
Richard Sheppard, Date
Director, GTL Marketing
ATTORNEY GENERAL'S OFFICE APPROVAL AS TO FORM
01/23/01
_______________________________ ____________________________
Michael L. Hubbard, Date
Deputy Attorney General
ATTACHMENT A
RENTECH
GAS TO LIQUIDS
FEASIBILITY ASSESSMENT PROPOSAL
FOR THE
COASTAL CHEMICAL FACILITY
CHEYENNE, WYOMING
o Fischer-Tropsch (F-T) is a proven technology which converts natural gas
to premium liquids (GTL).
o The liquids include low emissions diesel fuels and other chemical
feedstocks.
o The F-T diesel exceeds all the new EPA proposed diesel standards.
o Rentech owns proprietary F-T catalyst technology.
o Rentech and Coastal Chemical desire to complete a feasibility analysis
for conversion of the Coastal MTBE Facility in Cheyenne to produce F-T diesel.
o MTBE, a gasoline additive, is being banned because it pollutes ground
water.
o Forty (40) existing technical jobs are at risk should Coastal close its
MTBE operations.
o In working with the Wyoming Business Council (WBC), Rentech has
developed a feasibility assessment plan for the conversion of the Coastal
Facility; cost of the assessment is estimated at $800,000.
o The assessment would include:
o MTBE plan conversion costs and schedule
o Market evaluation for clean diesel and other products $ Gas
supply methodologies
o Options for using Wyoming's in-kind gas royalties
o Determine financial feasibility and implementation plan
o Rentech requests that the WBC loan $800,000 from the petroleum
overcharge restitution fund to conduct the feasibility assessment.
o Rentech shall repay the loan from proceeds from the construction
financing of the conversion at Coastal, or from royalties received by Rentech
from other methanol or MTBE conversions worldwide.
BENEFITS TO WYOMING
o Establish Wyoming as a world leader in clean fuel technologies.
o Retain skilled, well paying jobs for Wyoming workers.
o Enhance the competitiveness of Coastal's ammonia operation.
o Create high value added products from Wyoming's commodity natural gas
resources.
o Induce substantial capital investment in Wyoming;
o Approximately $35 million for the Coastal conversion;
o Additional $200 million to expand the GTL capacity
o Provide super-clean diesel fuel for Wyoming's state vehicles and other
crucial vehicles, such as locomotives, from in-kind gas royalties.
o Create incremental demand for other Wyoming suppliers of gas
compressors, engineering and construction services, contract operations
and natural gas.
o Establish the precedent for coal gasification and subsequent GTL
conversion using Texaco coal gasification process.
ATTACHMENT B
AWARD DOCUMENTS
WYOMING BUSINESS COUNCIL LETTERHEAD
To: Steve Achter
Bob Ugland
Tucker Fagan
Governor Geringer
Subject: Request for $800,000 of Petroleum Violation Escrow (PVE) funds to be
used by Rentech, Inc. in order to determine the feasibility of converting part
of the Coastal Chemical plant located in Cheyenne Wyoming from the manufacture
of MTBE, an additive originally thought to make automotive fuel burn with less
environmental problems, to the manufacture of super clean diesel fuel, using
Wyoming natural gas.
Background:
The Environmental Protection Agency has mandated the use of MTBE as a fuel
additive in automotive gas in order to produce a less environmentally
destructive automotive fuel. This fuel must be used in non-attainment areas. As
a result of this mandate, a number of plants across the nation spent hundreds of
millions of dollars converting portions, or all, of their plants in order to be
able to produce this additive. The Coastal Chemical plant in Wyoming is one of
these. However, since the introduction of MTBE as a fuel additive, it has been
discovered that MTBE, as a result of the combustion process, has begun to
accumulate in ground water aquifers, causing taste and odor problems and long
term health concerns. It has been banned in California and it is expected that
the Environmental Protection Agency will son ban its use nationwide. As result
of this expected ban, Coastal is in the unenviable position of having a
substantial portion of their plant which is unusable and with no reasonable way
to recover their capital costs. However, an opportunity has been presented to
them by Rentech, Inc., which will help to offset their potential losses and more
importantly to Cheyenne and Wyoming, the loss of jobs that will otherwise occur.
Rentech has proposed to lease or purchase the portion of the plant that will
soon be unusable by Coastal. With the installation of some additional equipment,
and with the modification of some existing equipment, Rentech will be able to
use Wyoming natural gas, or coal bed methane gas, to produce an extremely clean
and environmentally friendly diesel fuel. Rentech needs to perform a feasibility
study in order to determine the reasonableness of this course of action.
Description:
There has long existed a process that is used to convert gas to liquids. This
process is called the "Fisher-Tropsch" process. Over some period of time,
different companies and individuals have experimented with and refined the
process in order to improve the conversion efficiency. Rentech is one such
company. The result of this research has left Rentech with their own proprietary
Fisher-Tropsch process which they feel is at least 50% more efficient than
anything currently being used by their competitors. Using their process, Rentech
is able to convert natural gas and coal bed methane gas into premium liquid
hydrocarbons such as clean diesel fuel, naptha, waxes, and other valuable
products. Environmental Testing Corporation of Aurora Colorado has tested
Rentech Diesel against standard commercial diesel available at any pump in the
area, and found the following:
Rentech "Diesel" has a cetane (power) rating of 67, compared to commercial
diesel which has a rating of 46, has 35% less particulate emissions, 53% less
hydrocarbon emissions, and 41% reduction in carbon monoxide. Rentech "Diesel" is
less than .001% sulphur by weight as compared to approximately .35% sulfur by
weight.
Rentech proposes to conduct a feasibility study to determine if it would be
appropriate to convert part of the Cheyenne Coastal Chemical plant so that clean
diesel can be produced. If the feasibility study points to a positive conclusion
that such a project should be undertaken, Rentech proposes to convert the plant
in two phases. Phase I will result in the production of 1600-2000 bbl/day of
product using coal bed methane. The capital cost for this phase will be $35
million. Successful market penetration will result in Phase II, which will see
the production of over 5000 bbl/day of product at a capital cost of$200 million.
Rentech will have several partners in order to proceed with Phase I and Phase II
developments. These partners will include Coastal Chemical, and Jacobs Engineers
and Constructors. Rentech has nineteen year experience in gas to liquid
technologies and has designed, built, and operated five (5) Fisher-Tropsch pilot
plants. Jacobs, an international engineering company has 23,000 employees
worldwide, some at the Cheyenne refinery, and is well versed in gas synthesis
technology. Coastal Chemical has several plants throughout the west, and, in
addition to MTBE and other chemicals, produces fertilizer.
Need:
Rentech needs $800,000 in order to conduct the feasibility study needed to
determine if the Coastal facilities should be converted or not. Rentech has
requested that they be given a loan or grant from currently available Petroleum
Violation Escrow funds in order to meet this financial requirement. They key
goals to be derived from the feasibility study include:
1. Estimated Phase I conversion costs
2. Define project schedule
3. Evaluate products market
4. Develop gas supply methodology
Rentech has offered to repay the loans in either of two ways. If Phase I does
not proceed, Rentech will repay the loan from royalties gained from converting
other plants worldwide. The payment would be 5% of Rentech's royalties until
Wyoming receives 120% of the feasibility study loan. If Phase I proceeds,
Rentech will repay the loan at time of financial closing at the rate of 120% of
the amount borrowed.
Discussion:
Rentech has met with Wyoming Business Council employees on a number of different
occasions in order to discuss this request specifically, and the project in
general. In view of the benefits to Wyoming, and the opportunity to use, and yet
recover, the requested PVE funds, the discussions have always been favorable to
all parties involved.
Benefits to Wyoming:
Funds in the PVE account will actually grow over a period of time if
reimbursed at the rate proposed by Rentech.
The technology and the production of the super clean diesel will show
that Wyoming is environmentally sensitive and willing to put forth effort and
money in order to help our own environment as well as that of our sister states
which may end up the recipient of our fuels. We would be seen as a leader in
clean fuels.
Commercialization efforts and the implementation of Phases I and II
will result in the retention of jobs that will be lost due to the closing of the
MTBE plant as well as the addition of jobs and revenues that will result due t
the construction phases and any additional permanent jobs that will arise due to
more manpower requirements for the Phase I and II operations.
A guaranteed return of the PVE funds regardless of the outcome of the
feasibility study.
The opportunity to increase the value of State owned natural gas.
If Phase I implemented, super clean diesel will be available for State
and other Wyoming fleets.
Potential Downfalls:
Possibility of Rentech going out of business and not repaying the PVE
funds.
Time for repayment of loan based on royalties from sales worldwide
cannot be determined and may be considerable.
If Rentech is given a loan, as opposed to a grant, and for any reason defaults
on this loan, the State, i.e. The Governor's office would have to make up any
principal not recovered from Rentech.
Recommendations:
The Energy Conservation Staff, Investment Ready Communities, recommends the
funding of this proposal. It is our feeling that the opportunity for
technological growth in the state along with the benefits to be accrued by
Rentech far outweigh the consequences of the PVE funds not being returned. We
further recommend that we make this award a grant rather than a loan, and that
we make arrangements for some sort of payment from Rentech back to the PVE
account a condition of the grant. An outright loan is not out of the question,
but we must feel extremely comfortable with this position since the Federal
Courts have stated that a State cannot lose PVE funds in bad loans and must make
up any unrecoverable amounts. By making a grant and then coming to some
understanding on a suitable arrangement for returning our funds at some later
date, the issue of loans and loan losses is eliminated. Furthermore, we would
recommend that instead of accepting a 20% return on our funds, that we take a
small equity position in the over all royalties for the life of the plant. For
instance, using Rentech's figures of 1600BBL/day for a period of ten years, if
we received $.50/bbl, we would stand to recover a minimum of $2,420,000 on our
investment of $800,000. If the plant grows as Rentech projects, the bbl/day
output should actually approach 5,000 bbl/day. In Rentech's initial proposal to
the energy office, in which they requested twice the amount they are seeking
now, Rentech had offered a payback derived from 5% of royalties until the State
had received a 300% return on the funding. The suggested $.50/bbl would insure
at least a similar return. While this would most likely result in a much longer
payback of the funds into the appropriate PVE account, it should result in a
much higher rate of return over the course of the lifetime of the plant.
Frankly, we would like to see a greater return than 20% given that we don't know
how long it will take Rentech to repay a loan, if that is the instrument used,
or return funds based on a grant, based off of royalties collected from
worldwide sales at other plants, and given Rentech's initial offer of a 300%
return. The terms of any grant or loan require the services of the Attorney
General's Office.
The Energy Conservation Staff specifically recommends that Rentech be given a
grant and that Rentech later repay the grant to the appropriate PVE account at a
rate equivalent to at least a 300% return. We will, however, accept whatever
instrument and rate of return the reviewers so choose prior to the final
recommendation to the Governor. If the Governor wishes, he could okay the use of
the funding, and leave the terms up to the Business Council to be negotiated at
a later date.
Once concurrence on the use of the funds is received from the Governor, the U.S.
Department of Energy will have to be approached for their concurrence on the use
of the funds. This is a requirement set by the Federal Courts in order for any
State to use its petroleum violation funds.
Stripper Well Funding:
Current Balance: $5,704,600.00
Open Obligated Projects: Remaining SEP funds $ 79,350.00
Wheatland Energy Park $ 229,000.00
Rocky Mountain Oilfield $ 100,000.00
Testing Center
Current Available Funds: $5,296,250.00
Other Potential Projects: SEP Program Match $ 650,000.00
Rough Rider Dual Fuel Demo $ 156,000.00
TMA Wind Demonstration $ 950,000.00
Derek Resources
Crude Recovery $ 800,000.00
Governor's Action:
JG August 30, 2000
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Approve Disapprove