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Board to rule on Abandonment
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Surface Transportation Board to rule on abandonment

Trackage vs. haulage rights on rail that connects with 233-mile section of Montreal, Maine & Atlantic track to be abandoned are at issue in proposed state purchase

By Kathryn Buxton
 
The fate of a 233-mile section of northern Maine rail line hangs in the balance, as Aroostook County employers, rail advocates and the state wait for the Surface Transportation Board (STB) to rule on Montreal Maine & Atlantic’s (MMA) proposed abandonment on the line.
 
The board held a hearing in Aroostook County on July 7th where they heard from the public, MMA and the state about the line, its operation and its importance to area businesses. On July 13th in Philadelphia, the board mediated negotiations between MaineDOT and MMA about a possible purchase of the line. Those talks have stalled as the two parties continue to disagree on two issues. The first is whether or not the state’s future rail operator will receive trackage rights over key sections of MMA track. The second is the rate MMA will charge the state and its operator for those trackage rights.
 
Trackage rights would enable any operator that contracts with the state to operate the line to carry freight uninterrupted over sections of track still owned by MMA and connect with other rail lines in Van Buren, Brownville Junction and Northern Maine Junction. MMA prefers to grant only haulage rights over the section of rail it plans to retain. That would mean that the operator hired by the state would have to hand off freight to MMA at the terminal points on the 233-mile section of rail.
 
“We left the mediation with that issue still out on the table,” said Nathan Moulton, director of MaineDOT’s rail program, speaking about the July 13 talks in Philadelphia. Moulton and Commissioner David Cole have been the state’s representatives in the rail negotiations with MMA, and he said he expects the STB to hand down a decision on the abandonment soon. MaineDOT has held fast to its position that it must have trackage rights at reasonable market rates and that without those, the future viability of the line as a state-owned venture would be at risk.
 
“We only have one chance to do this right,” said Moulton who added that trackage rights would enhance the viability of the line for the state and its operator and protect the state if MMA or any future owner of the connecting rail lines goes bankrupt.
 
“This is the only way, and we will walk if we can’t come to an agreement.”
 
Moulton said he and Commissioner Cole have conferred with members of the task force, appointed by Governor John Baldacci to oversee the state’s negotiation and purchase of the line, and they have unanimously backed MaineDOT’s position.
 
What’s at stake
 
Denis Berube, director of planning and transportation services at the Northern Maine Development Commission (NMDC), has been followiing the STB public hearings and related events closely and talking with shippers that would be affected by the abandonment. He said he has canvassed the shippers and determined that the long-term viability of approximately 760 jobs in the region’s forest products and agriculture industries are at risk. Berube said NMDC’s economic model indicates another 966 indirect jobs could be lost in the long term if the line were abandoned.
 
There are approximately two dozen shippers that rely on the line, including Irving Woodlands LLC, Portage Wood Products, McCain Foods, Louisiana Pacific, Maine Potato Growers, Fraser Paper and Huber Engineered Woods. Those businesses would be forced to find other means to transport their products. In most cases, the alternative would be to ship by truck. For some cargo, that is a more costly method than rail, primarily because of higher fuel and operating costs.
 
“One of the local shippers, who employs over 100 people, estimates that it would add $1 million to $1.5 million in extra transportation costs to their overhead annually if they were to lose rail service,” said Berube. “That’s a lot of money for anybody in these times. In a tough economy like today’s, corporate headquarters naturally look at the most expensive elements of their operations when it comes time to make cuts and shut down plants that cost more to operate. Having that extra transportation overhead makes one that much more vulnerable.”
 
Conversely, Berube said that the state’s efforts to obtain trackage rights, if successful, possibly would have significant positive benefits for area shippers. Mostly they would be able to streamline shipments and possibly shorten transit times.
 
Unsustainable?
 
Many of the affected shippers attended the STB’s public hearing on July 7th in Presque Isle. They were part of an overflow crowd, many of whom implored the STB to not allow MMA to abandon the line. For its part, MMA has maintained that even with so many shippers using the line, it is losing between $4 million to $5 million annually and that those losses are not sustainable.
 
MMA has suggested options for companies that use the rails if the lines are abandoned, such as shipping by truck or through transloading – using several types of transportation to get the product to its destination.
 
MaineDOT Commissioner David Cole testified on behalf of the state at that hearing and reiterated his department’s commitment to purchasing the tracks and leasing them to a rail operator that would keep northern Maine’s freight moving. Cole told the board, if the 21 businesses currently shipping by rail were forced to ship by truck, the increase in operating costs would make them less competitive in regional and national markets. He also spoke about concerns MaineDOT has regarding increased truck traffic on roads. According to an environmental analysis performed by the state, Cole said more than 70,000 trucks would be added to Maine roads if companies were forced to abandon rail cars. Cole said the state will still attempt to acquire the lines and and believes the lines can be operated profitably.
 
During the hearing MMA officials said to continue service or make the necessary repairs to keep the tracks viable, would cost between $18 million and $19 million most of which would be used to upgrade the tracks. They said that insufficient maintenance over the years by MMA’s predecessor has contributed to the company’s financial difficulties.
 
Two offers on table
 
The state has made two offers to MMA for the purchase of the line. One is a pro forma $18 million offer made on July 19 that includes purchase of the line with trackage rights over the track MMA intends to retain. Called an offer of financial assistance (OFA), the timing was originally intended to come after the STB ruled on the abandonment, but that ruling has been delayed due to the extended negotiations between MaineDOT and MMA.
 
The second offer, that is part of the negotiations, includes trackage rights and could be accepted by MMA before the STB delivers its ruling. MMA has stated publicly that the value of the land and tracks is closer to $27 million. For now, though, it looks like there is an impasse with both the state and MMA holding their ground.
 
Funding for the purchase and track upgrades would come from a variety of sources. The transportation bond passed by voters in June included $7 million. The state currently is working with NMDC and consultant HNTB Corp. to develop a grant application for a second round of TIGER grant funding (Transportation Investments Generating Economic Recovery) from the federal government for capital improvements to the rail lines. Senator Susan Collins (R-Maine) also has put in a $3 million appropriations request for track upgrades.  
 
Berube says that the failure of the negotiations would have long-lasting ramifications for the state. “We’re at a critical place. If we lose these tracks, a huge portion of Northern Maine’s current and potential economic strength will fade away,” said Berube.
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