John Skelley rocked back and forth in his wooden rocking chair at Pinal Energy LLC's administrative office in Maricopa, Ariz., amid the whirring sounds outside of the company's newly-opened $74 million corn-to-ethanol production plant.
“Overall it's been a pretty good startup,” said Skelley, Pinal Energy general manager. “I'm relieved we're in the production mode rather than construction mode. In construction, you don't have much cash flow.”
The Pinal Energy facility, the first ethanol production plant in Arizona, is located about 40 miles south of Phoenix. The plant operated at 85 percent to 90 percent of capacity in early August — gaining steam towards full-scale production of 55 million gallons of ethanol annually.
“We're using 50,000 bushels a day — that's 50 truckloads of corn to produce 120,000 gallons of ethanol daily,” Skelley said. “That amounts to 18 million bushels of corn annually.”
Engineers designed the plant to brew ethanol from corn or grain sorghum (milo). For now, the plant is utilizing corn railed in from the Midwest.
Skelley's vision is clear — he wants Arizona farmers to grow grain for the plant. Speaking to farmers at the Arizona Farm Bureau annual meeting in fall 2006, he expressed his goal of Arizona farmers growing more feed grains than cotton within the next five years.
“Ideally, I'd like all grain for the ethanol plant produced in Arizona. Realistically, producing half of the grain needs, nine million bushels, would be a lofty goal, but perhaps not unrealistic. A lot will be determined by price.”
Growers are signing one-year contracts to grow grain for the plant.
“The plant is a market to grow for. We're seeing signs that (Arizona) farmers want to grow for this plant. There are a lot more milo acres this year. We'll aggressively buy corn out of the Willcox (Ariz.) area.”
“With cotton facing an uncertain future with subsidies, milo and corn will be more in the forefront of what farmers will consider growing,” Skelley said. “The dynamics of price will determine what's grown.”
Skelley believes higher-priced feed grains are a good alternative if cotton prices remain low.
“Corn is the largest cost for the ethanol plant. In a perfect world, corn prices would be cheap, ethanol prices would be high, and we would sell distiller's grain at a high price. That would make for a profitable bottom line.”
Corn futures on the Chicago Board of Trade have retreated from early summer record prices of $4 plus per bushel. The move lower was tied to higher than expected U.S. corn plantings and reports of an overall good quality crop nationwide.”
The ethanol price has also headed south due to the increasing number of ethanol plants in the U.S., he said.
According to the Renewable Fuels Association, 115 ethanol biorefineries are in production nationwide, with 79 plants under construction.
For now Skelley is shipping most of his plant's 200 proof, denatured ethanol output to the West Coast but hopes to sell it all in Arizona by October 2007.
Pinal Energy engineered the plant to potentially expand capacity to 110 million gallons down the road.
A coproduct of Pinal Energy's ethanol output is about 1,000 tons of distiller's grain daily, sold wet or dry to livestock operations including dairies within a 30-mile radius.
Ground was broken for the Maricopa plant in January 2006 with an anticipated 14-month build-out. During the permit process, Maricopa annexed the property from Pinal County, which delayed the plant's progress.
“We were annexed, didn't ask to be, and never saw it coming. We were handed off from the county to the city and started anew (with the permits). It blindsided us,” Skelley said.
Skelley stepped down as Arizona Grain Inc.'s president of 22 years to take the ethanol company's helm. Arizona Grain owns Pinal Energy.