Hermon railroad announces deal to sell tracks that service Madawaska mill

By Nick Sambides Jr., BDN Staff
Posted Dec. 06, 2011, at 5:56 p.m.

HERMON, Maine — Montreal, Maine & Atlantic Railway announced a tentative deal Tuesday to sell 25 miles of railroad tracks and effectively end a long-running dispute by allowing another shipper access to a Madawaska paper mill.

If the Federal Rail Administration and Maine Department of Transportation approve, J.D. Irving subsidiary Eastern Maine Railway will purchase the Madawaska-Van Buren-St. Leonard railroad line for an undisclosed amount. The governmental agencies have liens on the property. The sale could be completed next month, said Robert C. Grindrod, MM&A’s president and CEO.

“We have an isolated piece of railroad there that doesn’t seem to be generating a lot of traffic,” Grindrod said Tuesday of his reasons for the sale, “and there seemed to be little or no prospect of regaining traffic from Twin Rivers.”

Twin Rivers Paper Co. executives claimed a year ago that the Madawaska mill’s future was threatened by MM&A’s failure to maintain its railroad tracks and by its 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 an insufficient number of railroad runs.

MM&A officials countered that they were trying to meet demand but that the use of trucks and declines in production by Twin Rivers and its predecessor, Fraser Paper, made running more trains uneconomical and helped create the conditions that led to the company’s loss of $4 million to $5 million annually. The company sought to abandon about 233 miles of track in early 2010.

MM&A officials also said that Fraser’s decision to split traffic between them and another shipper, Canadian National Railway Co., helped cause the railroad’s financial woes.

Twin Rivers began trucking paper into Canada for transshipment by rail late last year.

In April, U.S. District Judge John A. Woodcock Jr. rejected Canadian National’s motion for a preliminary injunction that would allow it to carry products to and from the mill. He reaffirmed Montreal, Maine & Atlantic’s right to control traffic on property it owns, saying that “reasons of history, economics, and personality seem caught in powerful centrifugal forces” pulling apart MM&A and Twin Rivers.

Eastern Maine Railway and Twin Rivers officials did not return telephone calls seeking comment on Tuesday.

The sale of the 25-mile stretch of tracks, Grindrod said, would cause his company to lose about 5 percent of its customer base, which provides the company about $30 million in receipts annually, but won’t seriously harm MM&A’s emergence into profitability.

In October 2010, the state bought for $20.1 million the tracks MM&A had sought to abandon. That sale — plus the implementation of new automated shipping procedures, the layoffs of about 170 workers since 2008 and other belt-tightening measures — should make the company profitable in 2012, Grindrod said.

Another factor helping the company’s turnaround, Grindrod said, is the resurrection of the new Great Northern Paper Co. mill in East Millinocket, which restarted in October and ships about five rail cars of paper a day.

“We have trimmed down the expenses of the company substantially and as traffic grows and the economy recovers — and more particularly, Great Northern gets their feet under them — all that will lead to extra revenue, which makes the company stronger,” Grindrod said.

“The service runs much more smoothly, but we have to operate recognizing the volume of traffic we have. We can’t run seven days a week to some places and bring only one car every day,” he added.

http://bangordailynews.com/2011/12/06/business/hermon-railroad-announces-deal-to-sell-tracks-to-madawaska-mill/ printed on July 30, 2014