Employers say loss of rail would carry consequences

Posted Feb. 18, 2010, at 7:30 p.m.

AUGUSTA, Maine — Representatives from several of northern Maine’s largest employers warned Thursday that the loss of Aroostook County’s only railroad would cause ripple effects throughout the state’s manufacturing and industrial sector.

The comments came during a legislative hearing on a proposal for $20 million in bonds that would allow the state to purchase roughly 240 miles of privately owned railroad tracks between Millinocket and Madawaska.

Within the week, Montreal, Maine and Atlantic Railroad is expected to file an application seeking federal approval to abandon the tracks in the face of mounting debts. Unless the state or a private entity steps in to purchase the tracks, MMA’s decision could eliminate freight rail service to roughly 20 companies that include some of the largest employers in the region.

“This really is a statewide economic development enterprise that has enormous implications for our manufacturing economy and the economy of the state as a whole,” said Jim Mitchell, an attorney representing Irving Woodlands, Maine’s largest timberland owner.

“Our survival is dependent on getting our products to our customers in the most efficient and cost-effective manner,” said Tracy Caron, corporate transportation manager for Fraser Papers, which employs more than 900 people at several mills in northern Maine. “Increased freight costs would significantly decrease operating mar-gins, threatening the continued operations of our mills.”

Earlier this week, state transportation officials had one of their hopes dashed when the federal government denied a request for millions more in stimulus dollars to purchase MMA’s rail lines into northern Maine. The company plans to continue operating a still-profitable leg of tracks running from Brownville through Jackman to Montreal.

Maine Department of Transportation officials have been meeting with representatives from MMA and its shipping customers to come up with alternatives to avoid a service shutdown.

One solution discussed at Thursday’s Transportation Committee meeting was a public-private partnership in which the state would acquire the tracks and then lease them back to a third party — whether MMA or another operator — that would actually run the railroad.

DOT Commissioner David Cole said the state is getting involved only as a last resort to avoid losing a transportation network critical to the state’s manufacturing sector.

“It is inconceivable to me that the largest county east of the Mississippi, and whose economy is largely dependent on the movement of natural resources, would be cut off from rail service,” Cole said.

Freight traffic on MMA’s northern lines has decreased substantially in recent years. In 2005, there were 15,000 carloads. This year, company officials estimate slightly more than 9,000.

MMA President Robert Grindrod has said that while he believes the line will become profitable once the housing market and other markets recover, the company is bleeding several million dollars a year and cannot wait that long.

“I want to see rail service preserved in The County, but it has come to the point where I, as the leader of a private company, cannot do it anymore,” Grindrod told lawmakers. Asked why the state should even consider buying an unprofitable rail line, Grindrod said any deal would not include the debts MMA carries, thereby making the line more financially sustainable.

A report presented to the committee Thursday estimated the net liquidation value of the tracks at between $18 million and $21 million. The bill sponsored by Rep. Charles Kenneth Theriault, D-Madawaska, proposes $20 million in voter-approved bonds to purchase the tracks if no other funds become available.

Caron with Fraser Papers said the company’s Madawaska mill ships about 2,600 rail cars a year, roughly half of those on MMA lines. Removal of the northern Maine lines would make the company less competitive at a time when it is trying to emerge from bankruptcy, she said.

McCain Foods could see annual operating costs at its Easton plant increase by as much as $1 million if rail service were lost, attorney Avery Day told the committee. As an example, Day said it costs as much to ship french fries from Easton to New York City by truck as it does to ship fries from McCain’s Western plants to New York by rail.

“A cost of production increase of this magnitude would make Easton less competitive with other McCain plants and would risk losing jobs and volume in the area,” Day said.

Travis Turner, plant manager at Louisiana Pacific’s mill in Houlton, said his company expects to ship about 150 rail car loads of lumber this year. But that figure could be as high as 1,500 rail car loads once the market recovers.

Louisiana Pacific invested $150 million in Maine in 2006 based, in part, on an assumption of economical rail service. The absence of a rail network would drive up costs for both incoming materials and outgoing products, he said.

For that reason, Turner said state investment in railroads should not be regarded solely as an expense.

“Really, it should be viewed as an investment in the livelihood of Maine families,” he said.

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