Fagen Inc. in Granite Falls, Minnesota, set the foundation for ethanol industry's growth
Fagen Inc. built more than one-half of the ethanol capacity in the U.S. Its founder said he was inspired by three cousins who began turning the corn they raised on their farms into ethanol in a small-scale operation in the early 1980s.
GRANITE FALLS — Ron Fagen can look around the town that is his company’s headquarters and point out the businesses and farms that owe much of their economic viability to how the country’s ethanol industry has improved farm income.
“What ethanol did for the farming industry is just as important, had the same effect, as the invention of the combine,” said Fagen.
The ethanol industry represents 40% of the nation’s market for corn. A University of Minnesota Extension Service study measured ethanol’s economic impact in Minnesota at $6.1 billion in 2021.
Ron and Diane Fagen, and their sons Aaron and Evan, led Fagen Inc ., of Granite Falls, Minnesota, as it built more than 100 ethanol plants across the country, representing more than one-half of the industry’s total capacity.
Ron Fagen credits much of it to three cousins, Richard, Mike and Larry Fagen, and Richard’s son, Greg, for making it happen.
“They inspired me. They got me excited about ethanol,” said Fagen.
The three cousins erected a distillation tower near Granite Falls, and began cooking and fermenting and turning the corn they were raising into ethanol in the early 1980s. That’s long before there was a 10% renewable fuel standard or networks of gas stations selling the fuel.
Looking to create a market for their corn
“We didn’t have a place to market our corn. That is what kind of started it,” said Richard Fagen as he and his son and cousins reminisced about their early venture into ethanol.
The U.S. Department of Agriculture loan rate on corn was $1.78 a bushel at the time, recalled Mike Fagen. Most of the corn produced in Minnesota was shipped down the Mississippi River, with very little value-added processing occurring within the state.
The cousins produced their value-added ethanol and a variety of byproducts for around 10 years. On their own, they produced and marketed ethanol as a fuel, as a charcoal lighter, and as a Sterno-like gel which they sold as a survival fuel.
They also developed products from the byproducts of producing ethanol. They worked with the Agricultural Utilization Resource Institute in Marshall to produce a high-protein, low-fat cookie for human consumption from the corn mash.
They converted the vast majority of the corn mash into a high-protein livestock feed, not unlike the distillers dried grains that is today one of the ethanol industry’s major products. They recalled how a neighboring farmer’s sheep would come running every time their noisy truck arrived with a new load of the feed.
They piped the carbon dioxide from the ethanol fermentation process into a greenhouse where they grew hydroponic tomatoes on stems that were more than 30 feet long. They tapped the excess heat from the distillation process to help heat the greenhouse, which also became home for tilapia they raised in water warmed by the plant.
Their best money-making product — until it wasn’t — was the ethanol bottled as charcoal lighter. It was based on a formula from its inventors in Mississippi.
It was also some of their undoing. Consumers who seemingly ignored the warning on the labels not to squirt the fuel on open flames filed lawsuits against the cousins, their distributors and the grocery stores that sold the lighter fluid when they got burned by their actions. Eventually, the cousins said an attorney persuaded them the lawsuits were costing more than they were making.
To get this all started in the early 1980s, the three cousins pooled their resources and bought a Conklin-built distillation tower in Mora, Minnesota. They hauled it to Richard Fagen’s property north of Granite Falls alongside Minnesota Highway 23, and erected it and the buildings to support their operations.
They produced about 100,000 gallons of ethanol a year, or roughly 333 gallons per day, said Mike Fagen. He was the go-to guy for operations. He turned the knowledge he gained in the start of this industry into a career with Fagen Inc. after the cousins ended their operation. He traveled around the country — and overseas — to help start up the newly built Fagen plants.
Producing ethanol, byproducts proved demanding
The three cousins were farming when they started, and got into production with the idea it would be like farm chores. Check on things in the morning, and come back again at the end of the day.
“It was about like milking cows. You had to be there,” said Mike. All agreed the operation demanded far more of their time than they had anticipated.
Their tower produced 190-proof alcohol, while 200-proof was needed to fuel cars. Richard ran his tractor on the fuel they produced, and the cousins modified the carburetors on their cars to run on it as well. If he ran out of fuel on the road, Mike said he could fill up with gasoline and adjust the carburetor to keep going.
Eventually, the cousins were able to find a company in Mankato, Minnesota, that had the equipment to refine their 190-proof alcohol into 200-proof. They began selling their fuel to Holiday stations in the state.
Early into the venture, they had to temporarily suspend operations. They were producing too much alcohol based on their permit, which at that time was based on federal law governing distilled spirits.
Larry still remembers the day that their cousin Ron stopped to see the plant. Ron was into his construction business at the time, erecting a variety of buildings.
“He was curious. He asked a lot of questions,” said Larry.
Ron Fagen's introduction to ethanol
Ron Fagen said he knew virtually nothing about ethanol until learning about it from the cousins. “I never heard of it until I showed up at their house one day,” he said.
He realized its potential when he landed the job to build an ethanol production facility for the Minnesota Corn Processors (now Archer Daniel Midland) at their wet-milling plant in Marshall. It was the first ethanol plant he built, and was soon followed by another project in Nebraska.
Fagen Inc.’s role in ethanol’s development involved much more than constructing the plants. The company helped farmers and investors raise the money and work with banks.
One of the most important aspects of it all, said Fagen, was helping farmers and investors identify the locations where plants were most likely to succeed economically. He pointed out with some pride that every Fagen-built plant remains in operation today.
The three cousins sold their operation in the early 1990s to a group of investors, who in turn sold the plant to another party. The second owner closed it down as larger and more efficient plants were being erected and the ethanol industry took off. The site is now Heartland Preserve, a pheasant and trap shooting venue operated by Richard Fagen near Granite Falls.
Ron Fagen said it is hard to overstate the importance of the ethanol industry for the rural economy, as well as the nation’s fuel independence. He applauded the recent decision to allow sale of 15%-blend ethanol during the summer.
Much of the credit for launching this industry should be given to the cousins looking to survive as farmers, he said. “These guys deserve the credit,” he said, calling them “true pioneers.”
A variety of factors led them to sell their operation and focus on their farming and careers, the cousins said. The demands of the enterprise were a big part of it, as were the lawsuits over the charcoal lighter. They were also able to expand their sugar beet acreage and focused more of their energies into their farming, they explained.
Yes, they do sometimes wonder what might have happened had they stuck with it, but still believe that they got out of their business when they needed to do so. “We were just 20 years ahead of our time,” said Larry.