MMA To File 241 Mile Abandonment With STB

Funny thing is, the only place I got skunked on something not moving was on the Madawaska-Van Buren run, which is not up for abandonment. The scheduled Friday run, well, didn't run.

Just curious, what do they move between Madawaska and Van Buren? Seems like a fairly short run to be using rail, unless they are interchanging with a Canadian road. I assume it involves the paper mill at Madawaska?

Jon

Traffic from Fraser Paper in Madawaska to the interchange with CN at St. Leonard, NB (across the river from Van Buren).

The question that keeps rattling around in my head is why the Railworld folks originally got involved with MMA. I see it as a tough market to grow with a customer base that appears based on a limited number of large commodity-producing customers, and that doesn't seem to fit the profile that Railworld folks like (EW&S, Estonia, and WC for example). I would be shocked if these guys didn't see the potential risks that the route network was exposed to because of its dependency on commodities and their exposure to economic cycles, and find it hard to believe that they didn't see the possibility of having to retrench like MMA is doing. In a marketplace where other acquisition opportunities have come and gone in the marketplace since Iron Road went under, I'd really like to hear why this group chose the old Iron Road property. Think about it. While Ed Burkhardt owns the San Luis Central, when RailAmerica placed the San Luis and Rio Grande up in play, Railworld didn't acquire it (no clue if the firm bid on it). Definitely looking for insight if any of you have it.

RailWorld was wise not to bid (if they indeed did not) on the SLRG-- it is essentially a long branch with just a few customers, and serious mountain railroading, including a very steep grade that has hosted a pair of runaway derailments in the last decade. Very expensive infrastructure for a little bit of traffic. So, they wisely let someone else take on all those problems and continue to deliver their potato reefers to them at the SLC. Of course, if the SLRG tanks, there goes the SLC, as well. So it is their problem, in a roundabout way.

The company that took on the SLRG, Iowa Pacific, has placed a big focus on passenger excursions, hoping to latch onto the large number of railfan tourists that make summer visits to the Cumbres & Toltec Scenic (even going so far as to schedule one of their trains to meet the CTS train in Antonito to "interline" passengers) and Durango & Silverton. Iowa Pacific is privately held, and does not report financial information. Rumblings of the SLRG not doing well surface from time to time, and it would be hard to argue that they aren't based on the amount of traffic I've seen when out there. It is essentially an oversized tourist railroad with a little bit of freight to supplement the operation. RailAmerica got out of there during a selloff of underperforming properties to work down the massive debt they had accumulated in their acquisition binge in the late 90s and early 2000s. Unless Iowa Pacific has a much lower cost structure and debt load, it will be hard for them not to find themselves in the same boat as RailAmerica with the SLRG. Then, it'll be a matter of whether or not the local economies, especially the large number of potato farms along the SLC, can survive with the loss of freight service. There will be requests for government subsidies/purchase to preserve jobs and communities. Almost sounds a bit familiar, doesn't it?

The question that keeps rattling around in my head is why the Railworld folks originally got involved with MMA.

I'd surmise that they did a lousy job of due diligence in the purchase evaluation process. A few guesses: (1) They looked upon the three paper mills as cash cows and didn't seem to consider that Fraser's traffic was locked in with CN (or they thought they could break the agreement); (2) They didn't research the financial health of the shippers, considering that two mills shut down just after purchase; (3) The acquisition team didn't understand CN's lock on the Maritimes; and (4) Searsport's potential was overestimated.

Cowford, I wouldn't say that your surmisings are out of the bounds of possibility, but it's still conjecture on our part to claim bad due diligence. I guess I'm still hung up on Iron Road Railways' demonstrated failure, and the fact that Railworld had to have learned lessons from IRR....unless Railworld chalked so much of IRR's failure to bad operational management that they thought they could get the returns they needed via discipline and customer service? But this still makes me guilty of my own conjecture...hmph.

Maybe I just take for granted that it was obvious newsprint would stay in a slow, steady decline, at least in the domestic market...what kinds of paper were/are manufactured in Maine?

I know the Verso mill in Bucksport is more of the "specialty" paper business like for magazines, etc. Their other in Jay, I'm not sure about. In a way, this "specializing" and modernizing while under International ownership has kept them away from any long shut-downs other than the two-week one last year.

Agreed that it's all conjecture... that's what makes it fun! One point in the category of opinion (provided by those familiar with the deal): Railworld considerably overpaid for the property. If true (and I'd say the current situation has proved that out), doing so would certainly have stymied subsequent investment capabilities. The old BAR was a marginal (financial) performer long before IRR came on the scene; the CP line fell into an irreversable decline in the mid-80s. IRR and Railworld both probably made their fair share of strategic and tactical mistakes, but the primary causes of the failure(s) are regional economic decline and changing traffic flows (in the case of the CP line). It's telling that the County's population has shrunk nearly 20% just since 1990.

Latest news from Augusta regarding the buyout proposal:

http://www.wcsh6.com/video/default.aspx ... yid=116318

Boston TV is reporting this morning that the Maine Senate killed the bond proposal.

PBM

ferroequinarchaeologist wrote:Boston TV is reporting this morning that the Maine Senate killed the bond proposal.

PBM

That's inaccurate; the Maine House passed the bond; the Maine Senate is a few votes short of the needed 2/3 majority, so they've tabled it until Monday.

Head of the FRA is in Maine to talk about the MMA:

Federal railroad administrator Joe Szabo and other transportation officials will meet today in Bangor with U.S. Sen. Susan Collins, Gov. John Baldacci and other local and state officials and stakeholders regarding the Montreal, Maine & Atlantic Railway.

More info at: http://www.pressherald.com/news/Railroa ... Maine.html

STB releases preliminary report on the impact of MMA's abandonment proposal:

The draft, released by the Surface Trasnportation Board's Section of Environmental Analysis, found that abandoning the line could increase truck trips on Maine's highways by as much as 73,344 a year. That number would consume an additional 3.3 million gallons of fuel a year.

Read more at: http://www.wcsh6.com/news/local/story.a ... 63&catid=2

How does this bill/bond issue work? Is it set up to buy the section proposed to be abandon and then appoint a state contracted operator?

That's pretty much it in a nutshell-- the state would become the owner of the segments up for abandonment, and would be responsible for contracting an operator for the lines. A lot of this will be tied up in how government works-- MMA has said they intend to end service on the affected lines by summer (which is rapidly approaching), and the state could become the owner right about when MMA is ready to split town. That offers little time for the state to go through a formal bidding process to allow other operators to submit proposals to operate the state owned trackage, so it's quite possible that MMA could remain as an interim operator to keep the lines running while the bidding process plays out. MMA may ultimately wind up being the contracted operator at completion of competitive bidding, or a new operator could be in place between Millinocket and Madawaska. If the new operator is not given a trackage rights agreement to get to either CN at St. Leonard, NB or the EMRY/NBSR at Brownsville Jct., all traffic will still be captive interchange for MMA.