There’s a “white hat” coming to town, as described by the man underneath it — Michael Grunberg, whose real estate company snatched up the ailing Somerset Refinery on Friday.

The refinery, which has been swirling in a storm of ownership and bankruptcy issues in recent years, sold for $2.2 million to Grunberg Realty, a New York City-based company of with Grunberg is the managing principal member.

The longstanding petroleum refinery had been turning crude oil into gasoline for generations before it ran into financial trouble and shut down in late 2006. William Spears acquired the refinery from Frank Lynch and Roy Shirley last year, only to immediately commence layoffs and file for bankruptcy protection.

When the facility went up for sale in bankruptcy court earlier this year, Spears’ high bid was allowed by the courts. However, the transaction never worked out.

So Somerset Refinery once again went up for sell at a Lexington auction by Tranzon Asset Advisors. A strong effort of advertising the sale caught the eye of Grunberg.

“People who are not normally in the (fuel) market like myself were notified by the auctioneer,” said Grunberg. “It was on my radar to diversify.”

Grunberg came down to take a look around Somerset before going through with the purchase. He was “pleasantly surprised” by what he found in the town, its people and their work ethic.

“I thought it was a very nice place,” Grunberg said. “I actually make a lot of decisions based on character and personality, and I think we’ll be able to work well here.”

Grunberg graduated from Vassar College and has been involved with a number of business start-ups, everything from an art gallery to an ice cream shop, all before he turned 22. Eventually he returned to the fold of his family business, which has been dealing in real estate for over 40 years, and made a strong name for himself in the New York business community.

Grunberg would like to have Somerset Refinery operational four to five months after the sale is closed, likely to occur in the next 30 to 60 days. He knows rebuilding the once-proud business won’t be easy and will require patience.

“We won’t be looking to make a lot of money — my initial interest is to invest in the business and get it operational and working towards profitability in a prescribed time,” said Grunberg. “... I’ m not a flipper. I don’t have partners, I don’t have shareholders, I don’t have investors. It’s Grunberg money and it’s all cash. We’re not financing anything, at least initially, so don’t have the pressure that others have into this with and have had problems with in the past.

“It will be very expensive and I’ll be looking for help from state and local governments, to help me any way they can,” he added.

Grunberg said that the individuals who have claimed ownership in the past have been well-intentioned but undercapitalized.

“It’s an unfortunate reality in today’s world that people have tried to bite off more than they can chew,” he said. “The banks were not as forthcoming with loans as they thought, so the business suffered for it. I hope not to make the same mistakes.”

While he plans on starting out slow, Grunberg envisions eventually looking to expand into areas, such as biodiesel fuel. Updating the refinery is also a must. Community involvement is key.

“I’d like (Somerset Refinery) to be an employment engine for the area,” said Grunberg, noting that he would eventually like to employ around 100 individuals there (though he’s currently working with a skeleton crew of about 20). He mentioned the intermodal park operated by Southeast Kentucky Economic Development (SKED) as a key part of area infrastructure that could boost the refinery’s capabilities.

“These are infrastructure investments that both the public and private should be involved in, and will benefit not only myself but also future buyers,” said Grunberg. “The thing about these types of refineries is they need to expand and become profitable by increasing barrels per day of production. To do so, one needs good degree of capital, manpower and expertise, which I believe is available and willing in the Somerset marketplace.”

Among the assets purchased by Grunberg were 38 gas trucks, approximately 50 other types of vehicles, 12 gas stations, the 105 acres on which the refinery sits, two office lots and pipeline easement across six counties

This is Grunberg Realty’s first foray into both the oil business and intothe state of Kentucky, though it owns properties as far away as Arizona.

The Somerset refinery opened in the early 1930s and was one of only two in the state. Since it closed, oil producers in southern Kentucky have faced higher costs to take their product elsewhere, said John Gabbard, executive director of the Kentucky Oil and Gas Association, which represents producers.

Grunberg wants Somerset Refinery to be something both the community and oil industry can be proud of once again.

“We need to bring credibility back to the Somerset name and to encourage suppliers and buyers of the product that we’ll manufacture for to do business with us,” he said. “The biggest challenge is to make sure they realize it isn’t business as usual. What we’ll say we do, we do, and the proof is in the pudding.”



The Associated Press contributed