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Rail dispute may threaten Twin Rivers operation

Splintered rail ties littered a section of track of of the Montreal, Maine and Atlantic railway near a depot for the Maine Potato Growers in Presque Isle Thursday, March 18, 2010. Safety concerns and poor maintenance along sections of the MM&A railway in northern Maine limit the speed of their freight trains where 10 to 15 mph is common. State officials are seeking a $25 million bond to repair rail in Aroostook, Penobscot and Androscoggin counties. Without such aid railways like MM&A might have to abandon their 241 miles of track which remain crucial to Maine industries. BANGOR DAILY NEWS PHOTO BY JOHN CLARKE RUSS
By Matt Wickenheiser and Nick Sambides Jr., Special to the BDN

BANGOR, Maine — The head of the Twin Rivers Paper Co. in Madawaska said Thursday that his company’s future is jeopardized by shipping costs that have escalated as two rail lines dispute track rights.

“Freight’s a huge issue for us; the jobs are clearly at risk if we don’t secure the freight situation very, very quickly,” said Jeffrey Dutton, president and CEO, in a meeting with the Bangor Daily News.

Twin Rivers, formerly known as Fraser Papers, employs about 650 people in Madawaska.

Dutton estimated that under increased transportation fees for incoming raw materials and outgoing product, it will pay roughly an additional $3 million annually.

Twin Rivers is intervening in a lawsuit between Canadian National Railway Co. and the Montreal, Maine & Atlantic Railway. Dutton said the mill has been unhappy with the service from MM&A, which has been handling switching at Twin Rivers and also has been hauling some paper down through Maine.

That dissatisfaction with service, along with MM&A’s past plans to abandon the line through Maine, led Twin Rivers to look to work solely with CN, which hauls the mill’s paper across Canada, said Dutton. He said the mill sought to deal solely with CN, believing the rail line had an agreement to travel over a rail spur owned by MM&A that leads to Twin Rivers. CN sued MM&A, seeking to assert its right to use those tracks.

MM&A CEO Robert Grindrod said Thursday that Twin Rivers officials were essentially trying to tell his company to get out of the way while another rail line uses its property.

“I do not want to get into a big discussion about this in the paper when what really needs to be done here is for the parties to sit down and negotiate and come to a solution,” he said. “That is what the governor wants us to do.”

Grindrod said Gov. John Baldacci met with MM&A officials Tuesday for about an hour and urged them to meet with the paper company and settle their differences. Maine Department of Transportation Commissioner David Cole tried to arrange a meeting at which the two sides could address their issues.

Dutton said Twin Rivers officials were unavailable to meet with the governor’s office because they had a board meeting at the same time.

“We are absolutely interested in talking to the MM&A and the governor and still remain open to do that,” said Dutton.

Grindrod said he would be happy to meet with Twin Rivers officials. Losing the company’s business likely would cost the railroad about $3 million in revenue annually, he said. About 10 percent of MM&A’s traffic comes from Twin Rivers, its largest single customer.

A central point in the legal argument between the rail lines and the mill is whether a 2001 agreement contained a mutual mistake.

MM&A argues that the $5 million agreement made in 2001 allowed CN to access tracks to a point 1,780 feet from the Madawaska mill — not right up to the doorstep. CN attorneys argue that was a mistake made by both CN and the Bangor and Aroostook — MM&A’s predecessor. Those railways believed access right up to the mill had been granted, CN attorneys argue.

MM&A attorneys have argued in court that their business would suffer financially if CN is allowed direct access to the mill, relegating the smaller rail line to a “lowly subcontractor” status.

An agreement between CN and MM&A that set rates for switching expired recently. New, temporary agreements have been put in place, but Dutton said it appears the new rates set by the MM&A are significantly higher than they had been. MM&A continues to switch trains at the mill, but Dutton said the mill remains unhappy with the rail line’s service.

“Although we’re doing well as a new company, cash is still a challenge for a company that has just emerged from bankruptcy protection,” Dutton said. “If we have to inventory paper, whether it’s in the warehouse or because of the transit times, that ties up cash; that ties up financing.”

The company is profitable at this point, Dutton said, and is dealing with shipping through a combination of trucking and rail.

Grindrod questioned Twin Rivers’ claims that continuing the present arrangement would threaten the company’s profitability.

“Why is that changing? If they are profitable now, under the status quo, what makes them less profitable if the status quo continues?” he said.

He also said he was surprised that Twin Rivers took its case to the news media and he defended his railroad’s service to the papermaker as “consistent.”

“They don’t need to try this in the press,” Grindrod said Thursday. “They ought to call us, and we would happily sit down and work out all these details. But there is this tendency on their part to say, ‘Well, let’s make a big media splash.’ How many times did they [say] that their mill was going to close?”

Grindrod was referring to Twin Rivers’ press statements during the company’s time last year in bankruptcy protection, when company officials called on the mill’s union workers to accept a new contract carrying a pay cut or the Madawaska mill likely would fold.

Relations between the mill and MM&A have deteriorated over the past several years. Mill executives claimed that MM&A failed to maintain the company’s railroad tracks and missed delivery and pickup deadlines — often forcing the coated and uncoated papermaker to hire trucks on the fly to make shipments — because of miscommunication or insufficient numbers of railroad runs.

MM&A officials countered that they were trying to meet demand, but that the mill’s use of trucks and downturn in production made running more trains uneconomical and helped create the conditions that led to the company’s seeking to abandon about 233 miles of track earlier this year.

MM&A officials also said the mill’s decision to split traffic between them and CN helped cause the railroad’s financial woes. The state of Maine is in the process of buying the tracks for $20.1 million and plans to rehabilitate and lease them to a third-party operator.

The spur to the Twin Rivers mill is not part of that deal.

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