Australia's first grains-to-ethanol plant, once under threat of closure, is now hoping to expand its operation in southern Queensland.

The Dalby biorefinery on the state's Western Darling Downs has been running at capacity since the Queensland Government's ethanol mandate came into effect this month.

Under the new laws, ethanol-blended E10 fuel has to make up at least 30 per cent of petrol available for sale in Queensland.

The plant, owned by United Petroleum, buys locally grown sorghum and processes the grain's starch into ethanol.

Chief operating officer David Szymczak said the mandate has secured the future of the facility.

"At this stage the plant is running at 100 per cent and we foresee that going forward," he said.

"We did in previous years have to, from time to time, close the refinery for extended periods because the demand wasn't there.

"But with the uptake of E10 petrol and the boost to the economy, it's a win all round."

Leftover grain to be turned into animal feed

AgForce Grains president and Dalby farmer Wayne Newton sells sorghum to the facility.

He said the plant was a convenient customer for producers.

"We like biofuels because they are actually there buying grain from us for their product, 365 days a year," he said.

Mr Newton said selling sorghum for biofuels was good for all farmers. ( ABC News )

"It's good for all the grain producers in the state because the more grain that's consumed here for one of these sort of products like biofuels, means the other grain producers have more options for their grain and less competition from the local growers who are selling into biofuels."

The biorefinery is expected to process 200,000 tonnes of grain this year.

A large dryer has recently been installed at the biorefinery to convert the leftover grain into a high-protein meal for animal feed.

Mr Szymczak said the company would like to expand its operations further.

"We'd have to build extra tanks on site to actually produce the ethanol," he said.

"It would be a major project to do it but the plant was designed to be increased so that can be done.

"At this stage we haven't really committed to that expansion and we need to see what further signals there are from government about the expansion of renewable fuels."