TRANSPORTATION IN MAINE

Rail companies’ struggle for solvency hangs on manufacturing

Located in Hermon, the Northern Maine Junction is where the Pan Am and Montreal, Maine & Atlantic rail lines meet.
Located in Hermon, the Northern Maine Junction is where the Pan Am and Montreal, Maine & Atlantic rail lines meet.
Posted March 20, 2011, at 12:35 p.m.
Last modified March 20, 2011, at 8:38 p.m.

BANGOR, Maine — The railroad industry’s ability to move huge volumes of goods over long distances is also its biggest enemy in Maine, where a dwindling manufacturing base means customers who need rail transport are becoming too few and too far between.

That reality nearly changed northern Maine forever when the Montreal, Maine & Atlantic Railway announced two years ago that it would abandon 233 miles of tracks in northern Maine that serve some of Aroostook County’s largest employers.

“If we go without rail, we might as well close the mills,” said Pat Vaillancourt, sales manager for Fraser Timbers, a division of Fraser Papers in the Madawaska area. “Thank God for the state of Maine and the taxpayers.”

Taxpayers presumably saved the rail line in June 2010 by approving $7 million in borrowing to purchase the tracks. The Maine Department of Transportation is now in the process of selecting a railroad company to keep trains rolling.

“This is not about saving any particular railroad,” said Nate Moulton, the MDOT’s rail program director. “This is about keeping that transportation corridor open for those businesses it serves.”

Moulton said approximately 20 railroad companies have been tracking the process, which he hopes will conclude with the selection of one of them by mid-June when Montreal, Maine & Atlantic Rail’s commitment to operating the rails ends.

Joe McGonigle, MM&A vice president of marketing, said his company, attracted by the prospect of continuing service in northern Maine without the considerable expense of owning and maintaining the ailing tracks, might be one of the bidders. Whoever takes over, he said, will face the same problem that the MM&A grappled with: too little volume from too few customers who are too far apart. It’s not an easy problem to fix, and McGonigle has concerns about rail’s long-term fate.

“To assume that the railroads are going to be in Maine forever is probably the wrong assumption,” he said. “We’re not the only railroad operating in the state of Maine that has problems.”

In 2005, MM&A moved approximately 50,000 rail cars in and out of Maine. By 2010, that number had dropped to about 30,000 rail cars. McGonigle said the closure of paper mills and sawmills over the years was compounded by the economic downturn of 2008. Another culprit, he said, is a quickening trend of businesses keeping less inventory on hand. Lower stock levels generally translate to smaller shipments that have to arrive more quickly — which are two things for which rail is not best suited.

“Many of our customers are starting to order a truckload of inventory instead of a rail car,” said McGonigle. “People look at the railroad to be consistent, not fast. Volume and distance, that’s what we do best.”

Bill Cohen, a spokesman for Verso Maine, which operates paper mills in Bucksport and Jay and is served by Pan Am Railways, said his company slowly has shifted away from rail over the years. While rail once dominated the equation, about 55 percent of Verso’s incoming materials and outgoing products now are moved on trucks. A major contributor to that shift was the factor identified by McGonigle: Companies keeping lower volumes of stock.

“The days of having 100 days’ worth of paper sitting in a warehouse are long gone,” said Cohen. “The biggest piece of our business with anybody is to be on time and reliable. When we have the right kind of lead time, trains are more efficient, but we’re always looking for the most cost-effective way to get tons of material both in and out. We have to run our business just as the railroads have to run theirs.”

Cohen said the railroads’ performance over the year also has been a problem. Verso officials would like to return to using more rail, said Cohen, but “we need to see dependability and reliability to get there.”

Vaillancourt of Fraser Timbers agreed. He said everything from a shortage of box cars to harsh winter weather have delayed shipments. This winter alone, said Vaillancourt, there have been three train derailments in Maine which had Fraser products aboard.

“That’s my product sitting there,” he said. “Other times cars are not coming back because they’re caught in snowstorms. The biggest challenges with rail for us are logistical.”

With the price of fuel rising, Vaillancourt said he expects to pay more to move product, whether it’s on rails or roads.

“Rates are going up and we don’t have much choice,” he said. “We have to do with what they offer us.”

Cynthia Scarano, vice president of Pan Am Railways, which operates more than 300 miles of tracks in Maine, said her company is aware of customers’ needs for reliability and efficiency. In the winter months, one of the biggest challenges is weather, which in the past several months has caused at least two of three derailments of Pan Am trains. The cause of the most serious incident, when more than a dozen cars slipped off the tracks in Readfield on Feb. 6, has not yet been determined.

“It’s the same everyday fight that all businesses have with snow and winter,” said Scarano. “The cold is difficult on our machinery. Nothing runs quite right, which can contribute to the reliability factor.”

Scarano says she sees brighter days on the horizon for her company. In the past several months business has rebounded so much — particularly from paper companies, she said — that the company is trying to reverse a downsizing it underwent early last year. Business had fallen by about 32 percent, but started to improve in May 2010, which caught Pan Am with a shortage of engineers and conductors. Since then the company has trained 40 new personnel.

Scarano said Pan Am also is making improvements to its infrastructure with an eye toward increasing reliability. For example, the company is in the midst of a collaboration with Norfolk Southern railroad to spend $90 million on improvements to the lines, switching stations, loading machinery and bridges between Ayer, Mass., and Mechanicville, N.Y. Though the project is hundreds of miles away from many of Pan Am’s Maine customers, Scarano said the project’s impact will be felt here.

“If you have bridges that allow more weight, tracks that allow more speed and an automatic distribution center, you cut your times down on the whole system,” she said. “It also broadens the market, which improves service to Maine.”

McGonigle agreed and said Montreal, Maine & Atlantic also is analyzing its operations to find ways to improve service. He said he anticipates the focus in terms of growth will be the forest products industry.

“Other railroads, such as the Bangor and Aroostook and Iron Roads, went into bankruptcy,” he said. “We’re doing everything we possibly can to stay out of that situation, and we have a good business plan going forward.”

The state is doing its part with the development of a long-awaited State Rail Plan, a draft of which will be released in the coming months, according to Moulton. Though he wouldn’t say what the plan will contain, he said it will serve as a blueprint for the steps necessary to sustain rail service for the Maine businesses and communities that depend on it.

“All the pressure is in manufacturing,” said Moulton. “The railroads need to do a better job with their marketing and the state needs to look at how we develop new businesses. Do we work with them to locate on a rail? I don’t know the answer to that, but I know we need to be making sure we’re in the conversation. The key is having all parties work together.”

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