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Tuesday, March 09, 2010

Editorial: Maine Rail Solutions

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Allowing the rail link between Aroostook County and the rest of the state to disappear would be economically devastating to the region. But, with limited resources, the state isn't in a good position to operate a financially troubled rail line, according to an editorial in the Bangor Daily News.

State and federal officials, along with shippers and the Montreal, Maine & Atlantic Railway, are looking for ways to keep the more than 200 miles of rail line operational. They must focus on ways to secure more shipments - which translates into more revenue - to make the line financially viable for the long term.

Montreal, Maine & Atlantic Railway last month filed a "notice of intent" with the federal Surface Transportation Board to abandon 233 miles of its track in Aroostook and Penobscot counties. The notice covers the railroad's line from Millinocket to Madawaska with spurs to Presque Isle, Easton, Limestone and Houlton.

One scenario under consideration is for the state to buy the rails and then lease them to MMA or another company to operate the system. Lawmakers are considering bonds of up to $25 million for such a purchase.

Transportation Commissioner David Cole last week said that several rail companies have expressed interest in running the lines. A consultant hired by the department said that there was room for growth on the line, especially when the housing and construction markets recover.

Also last week, Sen. Susan Collins asked U.S. Transportation Secretary Ray LaHood about the railroad during a Senate hearing. He said the department's rail administrator would soon visit Maine and "we'll figure out some kind of funding opportunity to make sure this rail line is not closed down."

Sen. Collins and Rep. Mike Michaud also asked the Surface Transportation Board to hold a hearing in Maine to hear firsthand from companies that would be affected by the proposed abandonment.

No matter who owns the rails, the underlying problem remains - the revenue generated by shipments on the line doesn't cover its costs. MMA says it has been losing between $4 million and $5 million a year on the route.

In a letter this summer, the railroad's President Robert Grindrod said traffic dropped by about 40 percent over last year. Wood chips, lumber, pulpwood and cooking oil for McCain Foods are the primary freight on the lines.

Grindrod suggested that a state takeover of the rail lines is the "best possible solution." However, another sentence in his letter should give state officials pause. "MMA, as a private company, cannot continue to sustain the level of financial loss which is currently ongoing, with little or no prospect of improvement," he wrote.

An industry standard says that a railroad should earn between $50,000 and $60,000 per mile annually. MMA is earning about $20,000 on these lines. The only way to earn more is to get more companies shipping more freight on these lines. If the state is to intervene, it must have commitments from local mills and businesses that more volume will be shipped on the line.

A first step is to maintain the rail corridor. A second, more difficult, one is to develop a plan to make the route financially sustainable.