Railroad Crossroads

Although a private company has found it uneconomical to maintain rail lines through Aroostook County, Maine, it would be uneconomical for mills and other major employers in the region to be left without rail service. This is the dilemma facing state officials who are currently grappling with a budget shortfall of nearly $440 million, according to an editorial in the Bangor Daily News.

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.