Sale of refinery successfully closes

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November 15, 2008

By JEFF NEAL, News Editor The Commonwealth Journal Sat Nov 15, 2008, 04:48 PM EST

Somerset — In today’s desperate economy, industrial comeback stories are especially encouraging — and more than a little rare.

But on Friday, the embattled Somerset Refinery took another stride toward re-establishing itself as a force within the local economic picture when its sale to New Yorker Michael Grunberg successfully closed.

“For 80 years the Somerset Refinery has been a part of the community, providing jobs and opportunity to many,” Grunberg said in a statement yesterday. “It is our goal to restore this institution to the position it once held.

“As paternalistic as it once was under the steady hands of Cy Waddle and W.T. Walker, we want it to be an economic engine to this community,” Grunberg added. “With more than ample capitalization over the next several years and everyone’s dedication to hard work, this can again be accomplished.”

Grunberg, managing principal member of the New York City-based Grunberg Realty, heaped credit on Kentucky legislators for nursing the sale’s close with their governmental connections.

“This closing could not have been effected without the invaluable involvement of Congressman Hal Rogers, Sen. Mitch McConnell, Sen. Jim Bunning and many others,” Grunberg said. “They dealt with the Environmental Protection Agency and its eventual understanding of the unique nature of the circumstances surrounding the purchase. That understanding allowed this closing to occur.”

The refinery, which has been swirling in a storm of ownership and bankruptcy issues in recent years, sold for $2.2 million to Grunberg in September.

The long-standing 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.”

The purchase includes the refinery itself, several office buildings, a fleet of tanker trucks and 12 retail gas stations in Kentucky. Grunberg plans on wasting little time in cranking things up at the refinery once again.

“It is our intention to have the refinery in full operational mode, as well as three core business units — Somerset Energy Refining, Somerset Transport and Green Hills Environmental — in the first quarter of 2009,” Grunberg said. “Somerset Energy Refining will operate the refinery, while Somerset Transport will transport raw and refined products for this refinery and possibly others. Green Hills Environmental will provide environmental remediation for the refinery and others. We were most fortunate to retain the intellectual capital of key employees who will remain.”

The refinery opened in the 1930s and at one time employed more than 170 workers. It is capable of refining up to 85 million gallons of crude oil each year, producing different octane gasoline, diesel, kerosene and heating oil with potential gross sales of $200 million. The refinery is one of just two in Kentucky and one of only 149 in the United States.

“The inherent challenges of a competitive oil industry will be met head-on and therefore cause us to be more efficient and dedicated to our goals, which will create a stronger and thriving business,” Grunberg said. “Trust is something earned and not given. We plan to earn back the trust and confidence of suppliers of crude and customers of our fuels through this rebuilding process. We look forward to dedicating ourselves to competitive pricing, service and dependability.”

Grunberg said Somerset Energy Refining has “retained some of the best consultants to evaluate the facility and make recommendations on its operations and to commence hiring workers. They have implemented a capital project to improve the efficiency of the refinery.”

Grunberg announced that Jan Acrea of Somerset has been retained as Interim Chief Operations Officer “to guide the refinery through the process of becoming operational.”

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

“I already can see a wealth of assets within the state of Kentucky, from a strong work ethic to a public/private cooperative environment,” Grunberg said. “These benefits will be used to re-establish and grow the refinery.

“We are proud to be a valuable business member of the Somerset and Pulaski County communities,” Grunberg added. “We believe that the commencement of operations will not only benefit the local community through the creation of jobs and tax revenues, but will have a positive impact to the region and the oil and gas industry.”

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