<PAGE>
EXHIBIT 10.6
[Letterhead of Hansen Consulting]
May 30, 2000
Mr. Freddy Bishop
Citizen's Utility
Helenwood, Tennessee
Fax: 423-569-5303
Dear Mr. Bishop,
The purpose of this letter is to confirm our prior discussions regarding
the processing by Hansen Consulting, hereinafter referred to as "Processor" of
natural gas owned and or operated by Citizen's Utility, hereinafter referred to
as "Producer" in Scott County, Tennessee and allow sufficient time for the
proper evaluation of the project by both parties and the completion of a FORMAL
CONTRACT.
It is recognized by Producer that the current unprocessed high BTU natural
gas will require processing to lower the BTU to meet certain requirements of
Producers market. Producer therefore desires to have such fuel gas processed
prior to delivery to Producer's market. Processor hereby makes the following
natural gas processing proposal to Producer, the terms and conditions of which
are generally set forth as follows:
I. Producer and Processor would enter into a mutually acceptable formal
Gas Processing Agreement substantially in the form of our standard
agreement a copy of which will be mailed under separate cover.
II. Producer would assign and convey to Processor its retained processing
rights in that certain production located in Scott County Tennessee.
III. Producer would agree to maintain delivery of such gas to the
processing facility, to the best of Producer's ability, of
approximately 750 MCFD of gas and Processor agrees to install a
processing plant, or contract through a plant, of sufficient size and
capacity to process such gas stream. Producer shall not bear any of
such costs or expenses related to the plant except those costs as
defined in paragraph IV below.
IV. Producer and Processor would select a mutually agreeable location for
the plant site, and any associated facilities. It is recognized that
the processed residue gas from the plant would be used for various
field equipment. Producer agrees, at Producer's sole cost, liability
and expense, to construct and install the required pipeline system to
distribute the fuel gas to such field equipment. It is contemplated
that low-pressure plastic pipe may be utilized for the fuel gas
distribution system thus minimizing cost.
<PAGE>
V. Processor would receive 100 percent (100%) of the revenues from the
sale of liquids extracted from gas owned by Producer and shall bear
all costs associated with the marketing of the plant liquids until
such time as Processor has recovered 100% of it's costs to design,
transport, and install the plant. Producer shall furnish fuel to
Processor at no cost to Processor. After Processor recovers its out of
pocket costs the revenues generated by the sale of the liquids the
lease payment and operations costs of the plant will be deducted.
After Processor recovers its out of pocket costs, the revenues
generated by the sale of the liquids, the lease payment for the plant
and all operations costs of the plant will be deducted from the gross
revenue, and all remaining proceeds shall be equally divided between
Producer and Processor on a fifty-fifty basis.
VI. Processor agrees to furnish to the Producer within 180 days after
initial deliveries commence, the exact amount of the total investment
to be used in calculating at what point in time that such
participation percentage shall change.
VII. The term of this agreement shall be for the life of the dedicated
leases or until such time in the opinion of Processor as processing
becomes uneconomical. It is further agreed and understood that
Producer will dedicate all current leases held, and any new leases
acquired within Overton County, Tennessee, and an area to include a
100 (one hundred) mile radius from Scott County Tennessee. Producer
shall submit any such gas to Processor to the purpose of processing
any additional gas produced under the terms of this agreement.
Processor shall not be required to accept delivery of or process any
gas that does not meet Processor's quality standards as set forth in
the formal contract referenced Gas Processing Agreement.
The above sets forth in general the terms of our gas-processing proposal.
The specifics of which shall be more particularly set forth in the formal
contract referenced herein and shall be further subject to the following
conditions:
1. Producer agrees to make available to Processor all pertinent data,
engineering reports and other information relating to the
deliverability and the reserves of the dedicated leases necessary to
determine the economic feasibility of fabricating, installing and
operating a plant of the size sufficient to process the Producer's gas
as described herein as contemplated in this proposal on the dedicated
leases. The cost of any feasibility studies, consulting services, or
other costs related to Processor's evaluation of this project would be
borne sole by Processor.
2. Processor shall have the right and this proposal is specifically
subject to Processor gathering gas samples for analysis purposes to
determine the
<PAGE>
composition of the gas stream to be processed and to also be used for
purposes of plant design.
3. This proposal shall be subject to Processor securing a market
satisfactory to Processor for the sale of plant products.
4. Representation to the Producer to the satisfaction of Processor that
there are not any claims of any nature whatsoever that would adversely
effect the economics or operation of the plant or any investment
therein by Processor.
5. Processor shall have a period not to exceed ninety (90) days from the
date of execution of this letter by both parties to conduct its due
diligence and notify Producer of its election to commit to the project
and enter into the formal contract referenced herein or of its
election to not proceed further with the project.
6. Any data, reports, evaluations or other information furnished by
Producer or developed by Processor pursuant to this agreement shall be
maintained in strict confidence and will not be disclosed to any
unauthorized third parties.
7. During the ninety (90) day period set forth above, Producer agrees not
to enter into any Processing Agreements, which would affect the
processing operations contemplated hereunder. The ninety (90) day
exclusive right to enter into a formal contract shall be personal to
Processor.
The above reflects the results of our negotiations and sets forth in
general the terms and conditions of our proposal to process your gas. Please
indicate your acceptance and understanding of this proposal by executing in the
appropriate signatory space provided below and return one copy of this letter to
my attention at the letterhead address for our files. I am looking forward to
working with you on this venture and hope that it will be mutually beneficial
and rewarding to our respective companies.
Accepted this 30th, day of May, 2000
/s/ FREDDY BISHOP /s/ ALAN HANSEN
-------------------------------- ----------------------------------
Freddy Bishop Alan Hansen
Citizen's Utility Hansen Consulting
