The question is whether a state investment in the rail service would be more than recouped by maintaining a vital shipping link.
Montreal, Maine & Atlantic Railway last week filed a "notice of intent" with the federal Surface Transportation Board to abandon 233 miles of its track in Aroostook and Penobscot counties. A formal abandonment application is expected later this month, which will trigger a 110-day comment and review process by the board. The possibility of an abandonment originally was announced in August. 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. Toward this end, the state has applied for a $23 million federal grant, as part of the American Recovery and Reinvestment Act. Grant announcements are expected next week. If the grant isn't forthcoming, there is legislation seeking a $20 million bond for the purchase.
The Department of Transportation said that it had hired a consultant and attorney to look for ways to continue the rail service.
"The abandonment would adversely affect some 22 active shippers and other businesses in the region that currently use the rail service for freight movement," the department said in a press release.
No matter who owns the rails, the underlying problem remains-the revenue generated by shipments on the line doesn't cover its costs.
In a letter this summer, the railroad's president, Robert Grindrod, said traffic dropped by about 40 percent over last year. Wood chips, lumber, pulp wood 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.
The state certainly can't sustain such financial loss either.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, decision is whether subsidizing service on the line is worth the cost.