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COMMITMENTS
 12 Months Ended
Jan. 31, 2012
Commitments Disclosure [Text Block]

 

 

14.

COMMITMENTS

 

 

 

One Earth and NuGen have combined forward purchase contracts for approximately 10.3 million bushels of corn, the principal raw material for their ethanol plants. They expect to take delivery of the corn by July 2012.

 

 

 

One Earth and NuGen have combined sales commitments for approximately 40.4 million gallons of ethanol and 59,300 tons of distillers grains. They expect to deliver the ethanol and the distillers grains by April 2012.

 

 

 

Forward grain purchase, ethanol and distillers grains sale contracts are accounted for under the “normal purchases and normal sales” scope exemption of the accounting standards because these arrangements are for purchases of grain and sales of ethanol and distillers grains that will be delivered in quantities expected to be used by One Earth and NuGen over a reasonable period of time in the normal course of business.

 

 

 

One Earth has entered into an agreement with an unrelated party for the use of a portion of the party’s natural gas pipeline. The term of the agreement is 10 years, and the amount is $4,380,000, which is spread over 120 equal payments of $36,500. Payments began in February 2009. One Earth paid approximately $438,000, $438,000 and $402,000 pursuant to the lease in fiscal years 2011, 2010 and 2009, respectively.

 

 

 

One Earth has entered into an agreement with an unrelated party for the lease of railcars that will be used to ship ethanol. The lease expires on May 31, 2012, with an automatic 36-month extension, unless either party notifies the other in writing 60 days prior to the initial expiration date. One Earth pays a monthly lease amount per railcar. One Earth paid approximately $744,000, $660,000 and $344,000 pursuant to the lease in fiscal years 2011, 2010 and 2009, respectively.

 

 

 

One Earth has entered into an agreement with an unrelated party for the lease of railcars that will be used to ship ethanol. The lease expires on June 30, 2012, and shall continue under lease for successive one month terms, unless notified in writing 30 days prior to the initial expiration date or any successive term. One Earth pays a monthly lease amount per railcar. One Earth paid approximately $449,000, $662,000 and $69,000 pursuant to the lease in fiscal years 2011, 2010 and 2009, respectively.

 

 

 

One Earth has a contract with an unrelated party (“Distillers Grains Marketer”) for distillers grains marketing services. Under the terms of the contract, the Distillers Grains Marketer will purchase all of One Earth’s distillers grains production during the term of the contract. The contract called for One Earth to pay a fee per ton of distillers grains for the Distillers Grains Marketer’s services. The contract was amended on December 6, 2010, to reduce the fee for DDGS, and the termination date was extended to July 1, 2014. One Earth paid approximately $627,000 and $905,000 in fiscal years 2011 and 2010, respectively, for these marketing services.

 

 

 

One Earth has a grain origination agreement with Alliance Grain, under which it purchased 100% of its grain during fiscal years 2011, 2010 and 2009. One Earth pays to Alliance Grain a certain amount per bushel for procurement fees. The term of the agreement expires Oct. 31, 2014, and shall renew automatically for additional one year terms, unless either party sends notice to the other party of its intent to terminate the agreement at least 180 days prior to the expiration of the then current term of the agreement.

 

 

 

NuGen entered into an agreement with unrelated parties for the lease of railcars that will be used to ship ethanol and distillers grains. These leases expire during fiscal year 2012. NuGen paid approximately $482,000 in fiscal year 2011 for the rail car leases.