For several years, ethanol was an infrequent topic of conversation amongst the Hornbeck brothers. While interested in bringing the fuel to eastern Arkansas, the drawbacks were plentiful and seemed insurmountable: not enough corn grown in the area, a landlocked town, and prohibitive costs for hauling corn to their base in DeWitt, Ark.
“We’d shake our heads, say ‘It’s too bad but ethanol isn’t do-able around here’ and we’d get on to something else,” says Jon Hornbeck.
Then, early in 2005, the Hornbecks – well-known through Hornbeck Seeds, started by their father – were outside Buenos Aires, Argentina, checking in with a research company they do business with. Just by chance, an Argentine business associate mentioned one of the company’s subsidiaries, a bio-diesel engineering firm.
“The owner started talking about a model soy-diesel plant they’d built. They were producing B-100 (100 percent soy-diesel) and burning it. And it made sense. The area they’re in is remote and transporting fuel is very expensive. So they built the plant to not only make money but to fuel their own fleet of vehicles.”
While discouraged about ethanol, the brothers found soy-diesel intriguing. They began talking more with their Argentine contacts, picking up ideas and information about the fuel.
“Eventually, we got in touch with the executive director of the engineering company responsible for the plant. He said, ‘Let’s just pretend you’ll build a facility and see what we can do.’ The more he looked and we talked, the more serious we became. The next thing you know, within the last year, we had a building study done.”
The feasibility study – looking at hardcore numbers – began last May. There wasn’t anything that stuck out as a major hindrance for a bio-fuel facility in the DeWitt area.
And when talking to local farmers, “who we wanted input from at the get-go since we’ll be buying their crops, I was told repeatedly, ‘Jon, if you make the fuel, we’ll buy it. Don’t worry about that. There’s nothing we’d rather do then buy a product that supports our industry.’”
In fact, it became obvious farmers would have already been using soy-diesel if a local supply had been available and the price was competitive with regular diesel.
“The more we looked, the more we realized the cost of bio-diesel here shouldn’t cost more than regular fuel. In many cases, transporting the B-100 is what adds a dime to the cost. And the distributors aren’t gouging, they just have to charge for hauling those miles.”
The Hornbecks insist they can overcome that cost increase by manufacturing, blending and selling the fuel in town.
“Our main focus for this plant is helping local farmers and, hopefully, to allow the local economy pick up. I want everyone to benefit from this fuel but before helping folks in north Arkansas or the Bootheel, we’ll help our neighbors first. If the business spreads out and helps folks outside this area, fantastic. But that’s not a concern right now.
“Around here, agriculture is still king. All our businesses revolve around agriculture and when the farmers aren’t doing well, neither is DeWitt. That’s been obvious around here the last few years.”
Just south of DeWitt, clouds of grit and dust swirl as a construction crew prepares a 20-acre site for the Arkansas Soy Energy Group facility. Stakes have already been driven and concrete poured.
The first phase of building will allow the production of raw oil, not fuel. The operation will consist of a scale system, an in-bound grain complex, an extrusion building where the beans will be crushed and oil collected and refined, meal storage and oil storage. The initial phase of construction should be completed by fall of 2007.
In the second phase of construction, expected to begin in early 2008, a refinement/reaction plant will be built to allow crop oils to be transformed into diesel. By-product storage for methanol and glycerol is also on the agenda.
As for grain storage, the facility will have about 350,000 bushel capacity.
“We looked at putting in more capacity but, currently, the cost would be astronomical. The cost of putting up grain storage nowadays, due to steel prices, has jumped a lot. So the plan is to add more storage as we go. The plant has been designed so that won’t be an issue. There’s plenty of area to expand.”
Once the main line is up and running, the extrusion plant will produce about 3 million gallons of oil annually. With expansion, the plant will be able to more than double that gallon count to around 6.5 million to 7 million gallons.
“We could have put in the whole facility at the same time but we’re taking it a bit slower than others have. We want to make sure the initial phase of the operation is put in properly and is up and running well. We have to make sure we’re putting out a product that’s been refined perfectly before getting into the reaction plant.”
According to engineers, “a common miscalculation is not having a pure enough product prior to producing fuel. If you want a good quality B-100, you’ve got to make sure a strong foundation is laid from the start. We absolutely don’t want to rush the plant, rush production and then find the product isn’t what it should be.”
The Hornbecks want to make one thing clear: They’re not interested in running a gas station.
“We don’t want vehicles pulling up for a fill-up. There are folks who do that for a living and are experts at it. We’re better suited to concentrate on just producing the raw oil and, later, fuel. There are hundreds of fuel distributors around the state who can handle fuel better than us.”
There are ways to keep costs down, though. The brothers have spoken with distributors about how best to blend the fuel.
“Maybe they can bring their big trucks in, we can put the oil in and off they go for deliveries. There’s no sense in us hauling B-100 two hours and then they blend it and haul it back to DeWitt. That would drive the price up.”
Jon Hornbeck says he takes calls from farmers on the project daily.
“This morning, a farmer came by wanting to know about the diesel plant and when fuel would be available. Local farmers seem excited by it. I think some are excited because they know this is a product they’ll use. Others are excited because they believe it may drive the soybean price up. Others may do no business with Hornbeck at all but are excited because it will help our local economy.”
Businesses and bankers are happy something is happening that could help more dollars flow into the town.
Also of interest are oil-producing crops not often grown in the Mid-South – particularly canola.
“That crop has extremely high oil content and is one we can produce here profitably. It can be grown here as a winter crop just like wheat. According to information we’ve gathered, farmers here should be able to grow top-notch canola. We’re going to check that out starting this year.
“Right now, my brother is planting some canola (on the family farm). We’re also doing some research on canola varieties to see if we can better them through crosses. That could allow canola to be updated a bit to tweak maturities and other issues to better suit them to the Mid-South environment.”
The name and the future
Why no Hornbeck in the bio-fuel company’s name?
“There are two reasons we did that. First, we wanted this to be separate from the seed company. We didn’t want them tied together. People that don’t do business with Hornbeck Seed, for whatever reason, we don’t want them to assume because they don’t buy seed from us they can’t do business with the fuel operation. That’s absolutely not the case.
“Second, as a new company, we want to leave open the possibility of bringing in other investors into the business. We’ve never intended for this company to be solely owned by the Hornbeck family. We’ve always envisioned bringing in others in agriculture. We want their input and ideas because we don’t know everything about the bio-diesel business and don’t claim to.”
In speaking with farmers about the new facility, Hornbeck says some common themes emerge.
“They want our separate companies to provide a joint type of opportunity. They say, ‘We’d like to be able to buy seed for you, grow seed for you, bring grain back to you for soy energy, buy the fuel from you and wrap it up in one big plan.’
“Farmers would like to plan for fuel expenses from year to year. That may be something we could help with – provide a price range for their fuel. I’m sure the bankers would be very happy if that was the case.”