The MSE facility located south of town in the Butte Industrial Park is pictured in this file photo. It is set to be auctioned off piece by piece on Nov. 2.

Cash-strapped MSE Technology Applications Inc. has shed half its workforce, and its remaining 25 engineers and technicians are leaving the sprawling facility just south of Butte and moving Uptown.

The decision follows mounting, unpaid bills — including taxes and utilities — and an area bank selling a large portion of debt on the once-thriving industrial and technology complex to a Texas financial firm for what appears to be $1.4 million to $1.6 million.

That would be less than 1 percent of the $168 million spent building the facility in the 1970s, initially as a federally funded venture to test “clean coal technology.” It has been struggling mightily since Congress stopped doling out federal “earmarks” six years ago.

Officials with MSE’s owners — the Montana Economic Revitalization and Development Institute — told The Montana Standard on Thursday that some people in Butte are interested in trying to make a deal with the Texas firm — E Capital Partners LLC based in Fort Worth — and saving the complex and its machinery and equipment.

But the firm can do a number of things if it chooses, including foreclosing on MSE and then selling everything as salvage.


For now, MERDI President Jim Kambich and longtime board member Don Peoples Sr. said MSE is leaving the facility south of Bert Mooney Airport to avoid further holding costs and moving to offices Uptown.

MSE employed about 50 well-paid engineers and technicians about two months ago, but half have been laid off since then, they said. The mounting debts include a “significant” amount of unpaid electricity and gas bills owed to NorthWestern Energy, they said.

The remaining employees began moving into the Thornton Building, 65 E. Broadway St., on Thursday, and they might use a building at Platinum and Excelsior Streets as a lab. MERDI operates from the Thornton Building and has helped land other tenants there.

MSE helps clients research and develop products and industrial processes through engineering, drafting, prototyping, testing, and other means. It also provides laboratory and research-and-development services.

“Now the challenge will be to dig out, stabilize, and try to grow,” Kambich said. “It will be just like starting up a company.”

The few tenants that remained at the complex are moving out too, he and Peoples said, which will leave all of the buildings at the site empty.

Numerous people had been working behind the scenes for months to keep the complex afloat, including having talks with Butte-Silver Bow officials about making loans or purchases through the Port of Montana or the Tax Increment Financing Industrial District.

Peoples said a $5.1-million promissory note on the facility sold in late December for “what seems like an embarrassingly low amount,” given the original cost.

“I’m disappointed we didn’t get more help from city-county government,” he said. “We think there was a way to do it, but there wasn’t the will to get it done.”

Butte-Silver Bow Chief Executive Dave Palmer, who took office this month, had been exploring ways of helping save the facility and its infrastructure, which includes buildings, industrial cranes, electrical equipment, and machinery to pulverize and process coal.

He and many others are worried about Butte losing the machinery and equipment, because if it goes, so goes its potential to draw future firms, manufacturers, and jobs. A message was left with Palmer late Friday morning seeking comment.

Former chief executive Matt Vincent, who lost to Palmer in last November’s election, said in December that county officials had worked tirelessly to keep the complex alive, but some options floated were questionable legally or troublesome financially.

Philipsburg-based Granite Mountain Bank, which has a bank in Butte, gave a $5.6-million loan to MSE in 2010 that was backed by a loan guarantee from the U.S. Department of Agriculture Rural Development. But over the past several years, MSE — even with other financial help — has primarily made interest-only payments.

The bank put a remaining $5.1-million promissory note on the market in late November, and there was a Dec. 21 deadline for submitting bids. The note sold, but the precise purchase price has not been disclosed publicly.

However, officials with USDA Rural Development in Bozeman say their agency paid the bank nearly $3.4 million for its loss. Their guarantee was to cover 90 percent of any loss the bank took on its initial loan to MSE.

Roughly, that means the loss was about $3.7 million, so the note likely sold for between $1.4 million and $1.6 million.

Jerry Sullivan, chief executive officer at Granite Mountain Bank, said Friday he could not comment.

Efforts to contact E Capital Partners were not successful Friday. The company has existed for about three years, does some investment banking, and has purchased liens on at least two Florida properties, records show.

Peoples said he thinks the firm might have bundled the purchase with others and might be looking to “flip it” — meaning sell it for more money and be done with it.

“It looks like they bought a number of distressed loans … and if they do good on one or two, they could take a loss on the others,” Peoples said. “I guess they thought they were hitting a home run here.”

Peoples and others close to the MSE situation have said officials with Granite Mountain Bank had extended deadlines numerous times, had been extremely gracious, and were not to blame for selling the note.

Even though the Texas firm has it now, MSE still owes the $5.1 million, still has an outstanding line of credit with another bank, and is far behind on utility bills.

When asked Thursday if the power had been shut off, Peoples said, “Not as of today” — a clear indication that could come any time.


MSE also is three years delinquent on its property taxes and owes more than $330,000 in payments, penalties, and interest, according to county records. It owes another $79,757 this year and missed its first payment in December.

If it does not pay at least its 2013 taxes by March 1, county officials say, it would then have to pay 2013 and 2016 taxes or face a possible tax deed being issued and the property being put up for tax sale late this year.

Peoples said Uptown Butte at least is gaining about 25, jobs and Kambich is hopeful MSE can survive and grow.

“You’re basically starting from ground zero, but you regroup and build back as an engineering firm and get after it,” he said. “They will be working hard to develop a base again … without a lot of holding costs that are associated with a huge facility.”

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