Illinois River, Pinal Energy slow down their production rates

By Holly Jessen, Susanne Retka Schill | February 14, 2012

In the space of just a few days Ethanol Producer Magazine received reports of two ethanol plants that are cutting back on their production rates. Illinois River Energy LLC, a 110 MMgy plant located in Rochelle, Ill., is reducing its February output by about 7 percent and Pinal Energy LLC, a 50 MMgy ethanol plant in Maricopa, Ariz., has slowed down production to about 90 percent of capacity.

For GTL Resources Ltd., which owns a majority interest in IRE through its wholly owned subsidiary, it’s an economic decision, said CEO Richard Ruebe. The company expects the reduced run rates will remain in place as long as margins are depressed. “Our team has spent a great deal of time studying the impact of corn grind rates and other operating conditions on ethanol yield, distillers grains yield, and energy usage,” he said. “By running reduced rates and optimizing operating conditions at those reduced rates, we have found that we can lower our per gallon variable operating costs significantly. In weak margin environments, those savings in variable costs more than offset the lower revenues from reduced sales.”

For Pinal Energy, the decision came about because the market is currently saturated. “There’s a lot of ethanol out there,” said Keith Kor, general manager of Pinal Energy. Demand is down in the company’s primary market in the Phoenix/Tuscon area. “There are railcars just sitting there in the Phoenix/Tuscon yard, waiting to be unloaded.”

The plant had also shut down for a few days in January for regular maintenance, he said, but this time, they slowed production. “We run at rates to keep our water balance in check and keep our beer column from falling out,” he added, saying that to drop to 75 percent, as an example, would be too inefficient.

With 30 years in the ethanol industry as the long-time manager of Corn Plus LLLP in Winnebago, Minn., and now as general manager of Pinal Energy, Kor added that market imbalances have occurred in the past. “We’ve seen these fluctuations before, but we’ve never seen corn prices this high.”  

Neal Jakel, general manager of IRE, spoke about the company’s relentless focus on yield during a panel presentation at the 2011 International Fuel Ethanol Workshop & Expo held in Indianapolis. “We have found that by running to maximize yields, rather than running for the highest volume, we can actually have a better financial outcome,” Ruebe elaborated, adding that running an ethanol plant is like maneuvering a large ship. “You can’t make quick starts and stops and turns,” he told EPM. “You gradually move from one direction to another.” IRE reviews its operating parameters weekly and works to respond to trends in the marketplace.

Ruebe also pointed out that, historically, the first quarter of the year typically means tighter margins. Demand for gas, and therefore ethanol, goes up in the summer months as motorists do more driving. “But remember, ethanol is a highly valued fuel component for blenders, who are still capturing a significant value from mixing ethanol into E10 gasoline blends,” he said. “With the imminent adoption of E15 blends, many of our customers will have the option of further utilizing ethanol as a high octane, clean burning blend stock. The beauty of E15 adoption is that it should help the demand for ethanol, further reduce blender’s cost, and thus lower the cost of gasoline for the consumer.”