11. CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES
Approximately 99% of the Company's ethanol revenues are received from a single ethanol marketer through sales on the spot market by Tenaska BioFuels, LLC ("Tenaska"). Beginning in the fourth quarter of 2010, the Company pays Tenaska $0.02 per gallon of ethanol sold for its marketing services. As of June 30, 2011, the Company had forward contracted sales of ethanol with Tenaska for 1,450,000 gallons of ethanol at an average fixed price of $2.49 per gallon, for delivery in July 2011. Revenues from ethanol sales to Tenaska were $29,678,000 and $61,078,000 in the three and six month periods ended June 30, 2011, respectively. Accounts receivable from Tenaska as of December 31, 2010 were $1,517,400 and as of June 30, 2011 were $1,253,000.
Gain from Litigation Settlement
A gain of $3,000,000 was recognized on March 19, 2010 in connection with a settlement with the Company's contractor for the facility, previously disclosed. The remaining funds from the settlement are held in restricted cash and are used to satisfy certain amounts due the Lender under the Credit Agreement.
Plant Management Agreement
In July 2007, the Company entered into an agreement with an unrelated party for the operation and management of the Company's plant. The Company pays a fixed monthly payment of approximately $120,434 for such services, which are adjusted annually. The unrelated party also supplies process chemicals, which the Company is currently paying for at a fixed rate per denatured gallon of ethanol produced. The contract allows for potential future payments in an incentive program intended to be based on operational improvements and Company profitability. The agreement will terminate on December 31, 2014 unless terminated by either party giving 180 days prior written notice. The Company incurred approximately $381,000 and $762,000 for these services for the three and six month periods ended June 30, 2011, respectively, and $372,000 and $742,000 for these services for the three and six month periods June 30, 2010, respectively.
The Company entered into a consulting service contract for management of its needs for natural gas in plant operations. The three services of natural gas procurement required to operate the plant are transport, distribution and supply. The physical supply of natural gas to operate the plant is purchased from various companies based on bids established by the Company's Risk Management Committee with the advice of the management services company. The gas is transported by Kinder Morgan pursuant to various contracts with the Company, and delivered to the local gas company, Source Gas, which distributes the gas to the plant.
The Company is party to an agreement with a fuel carrier for the transportation of ethanol from the plant to the load out facility. The Company pays a base fee per gallon unloaded plus a surcharge if above the diesel fuel base. The agreement commenced in July 2007 and automatically renewed for an additional one-year term in July 2011, and will continue to automatically renew for additional one-year terms unless terminated by either party by written notice no less than 180 days prior to the ending date of the renewal term.
Rail Car Leases
The Company has lease agreements for 137 rail cars. There are 29 cars under leases that expire before the end of 2011 and carry an average monthly rental cost of $400. The remaining 108 cars have expiration dates between May 31, 2017 and August 31, 2020, with an average monthly rental cost of $658.
The Company's operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. Accordingly, the Company has adopted policies, practices, and procedures in the areas of pollution control, occupational health, and the production, handling, storage, and use of hazardous materials to prevent material environmental or other damage, and to limit the financial liability which could result from such events. Environmental liabilities are recorded when the liability is probable and the costs can be reasonably estimated.
On March 22, 2011, a fire caused approximately $1,200,000 of damage to a dryer. The Company expects its insurer to pay for the damage, less the $50,000 deductible which was expensed in Cost of Good Sold as a Maintenance and Repair Expense, as of June 30, 2011 at the completion of the dryer repair. As of June 30, 2011, the dryer repair is complete and the dryer was online. As of June 30, 2011, the Company had $750,000 owing from its insurer in receivables and $893,303 owed to vendors as accounts payable in connection with such repairs.