Boxcar blues | Fuel prices are staggering, global warming looms, and cheaper transportation appears to be the wave of the future -- so why aren't more businesses using Maine's freight rail?
The railroad tracks running into Lincoln Paper & Tissue's facility are often empty, and have been for over a decade. Lincoln Paper ships the bulk of its paper and tissue products to the Midwest by truck rather than by boxcar, says Anthony Stewart, transportation and planning manager at the Lincoln mill, and it's unlikely that will change anytime soon without a more efficient and reliable railroad system.
While it takes a truck 48 hours to reach the Midwest, Stewart says it could take up to 14 days by rail. The reason? Peak speeds as low as 10 miles per hour on outdated sections of track, a lack of available boxcars and tardiness on the part of the railroads. "In the past, when using boxcars," Stewart recalls, "[they] could leave the yard and sit within smelling distance for four or five days." Mills like his, says Stewart, are essentially dealing with a monopoly when they deal with the railroad. "If a railroad company owns the tracks, then they get to say we're the only ones that get to go on those tracks, and when you have one guy coming and going you got no competition. When you have no competition it's never good for the customer."
But if a customer can wait for a shipment, rail is the way to go, considering how high diesel prices are, Stewart says. "If you can get it, it's a fiscal responsibility to use rail," he says. "There are companies that are literally going to go out of business because the way energy costs are through the roof."
In the current environment — with high diesel prices, an over-stressed highway system and predictions of increased demand for freight — rail is being seen with fresh eyes by businesses and the state as a viable alternative to an 18-wheeler. But this renewed scrutiny has revealed inefficiencies and reliability issues in the state's rail system that the state is now scrambling to address.
"The key to shippers using rail is reliability," says Greg Nadeau, deputy commissioner of policy, planning and communications at the Maine Department of Transportation. "And reliability is enhanced when trains can go faster, rail crossings are safer and bottlenecks are removed."
Gov. John Baldacci has become a cheerleader for freight rail during his second term in office. Last year, Baldacci along with the Maine Department of Transportation held a series of mini-summits with railroad companies and businesses that use the railroads to discuss freight rail service in the state and what the state can do to improve it. Since the state has no regulatory control over the railroads, which are overseen by the federal Surface Transportation Board, it's limited to a supporting role when it comes to pushing rail. "It's more of a partnership," Nadeau says.
Which begs the question: "To what extent do private sector interests and the public get together to share risk?" Nadeau asks. "That's what it comes down to, because the benefits will be more competitive industries, cleaner air, less congested roads."
Public, private partnership
The debate over how to improve Maine's freight rail service escalated in late February when the Legislature's Utilities and Energy Committee considered petitioning the federal STB to force Pan Am Railways, based in North Billerica, Mass., to sell its Maine rail lines because of complaints about the quality of its service. Pan Am operates 372 miles of track from Mattawamkeag to the New Hampshire border, and serves businesses like Sappi Fine Paper, NewPage Corp. and Lincoln Paper & Tissue. The Maine DOT opposed the idea, which Nadeau says would cost the state hundreds of thousands of dollars and "get us nowhere," and the idea fizzled before it became a bill. But the concerns expressed by lawmakers — that poor railroad service puts Maine companies at a competitive disadvantage — show that lawmakers want to be more active in the railroads.
But at Lincoln Paper & Tissue, Stewart says the problem is larger than Pan Am. The transportation system is a complicated machine with several moving parts. Pan Am may pick up the product in Lincoln, but the freight will pass to other railroads and handlers along its route to the Midwest. And a national surge in demand for freight rail has made boxcars scarce, meaning shippers can't always get all the boxcars they need.
The competition for boxcars will likely only get worse. By 2035, the U.S. Department of Transportation estimates demand for rail freight — measured in tonnage of product shipped annually — will increase 88%, according to the National Rail Freight Infrastructure Capacity and Investment Study released in September 2007. Without a $148 billion investment in the railroads by then, 30% of the nation's rail system will be congested, the study says, bottlenecking freight rail in every part of the country and potentially shifting more freight to the already congested highways and roads.
To prepare for this increase, the Maine DOT estimates it will cost as much as $5 billion over the next 10 years to upgrade all of Maine's transportation infrastructure — highways, roads, rails. A small part of that investment — $60 million — is targeted at rehabbing freight rail lines and port infrastructure, according to the DOT's long-range transportation plan, "Connecting Maine."
Transferring more freight from truck to rail is a necessity in Maine, Nadeau says, because moving freight by rail is cleaner, more efficient and means fewer heavy trucks wearing down public infrastructure. One gallon of diesel fuel in a train can move one ton of goods 423 miles, while one gallon in a truck would move that ton only 125 miles, according to Edward Foley, vice president of marketing and sales for the St. Lawrence & Atlantic Railroad, which operates 85 miles of track in Maine and is owned by Greenwich, Conn.-based Genesee & Wyoming Inc.
Now that market conditions appear favorable to rail, the state is looking at rehabbing sections of state-owned freight rail line between Westbrook and Fryeburg, known as the Mountain Division, and the Lewiston Lower Road rail line between Brunswick and Lewiston. The Mountain Division line is first priority, Nadeau says. Rehabbing that line would cost between $25 million and $31 million depending on how much of the line is upgraded, and would remove as many as 25,000 trucks a year off Route 302, one of the most congested corridors in the state, Nadeau says.
Private rail may cause businesses in Maine headaches, but it can be a boon for Maine, says Nadeau. While state investment in public infrastructure like highways is completely funded by the government, state investment in private railroads can leverage millions in private investment.
The railroads welcome the public/private partnerships the state has been pushing. "The taxpayers can't afford the infrastructure costs going forward," says Raymond Goss, general manager of the St. Lawrence & Atlantic. "We're a good alternative."
Despite the winds of change, though, Nadeau says 85% of all freight tonnage moved in Maine is currently moved by truck. Rail, on the other hand, was estimated to carry only 5% — or roughly 5 million tons — in 2007, according to Tim Bolton, a policy development specialist with the Maine DOT. The rest of the freight — about 10% — was moved by water, Bolton says.
Even with high diesel prices, Randy Rotermund, vice president of the supply chain at Sappi Fine Paper North America, which has mills in Westbrook and Skowhegan, says the truck industry has been competitive with pricing. From its two mills in Maine, Sappi currently ships about 55% of the paper it produces by rail, compared to 80% from all its mills in the country. "We'd love to have more opportunities to ship by rail, that's for sure," Rotermund says. But investment in rail infrastructure to improve transit time and reliability is necessary before Sappi would look at shifting more product to rail.
Stopped in their tracks
On a recent afternoon, Michael Cella, president of Fore River Distribution, walked through his Auburn warehouse between thick columns of paper rolls produced at NewPage Corp.'s mill in Rumford. The roughly 80,000-square-foot warehouse has loading docks along a spur of the St. Lawrence & Atlantic Railroad on one side and loading docks for trucks on the other. Today, the loading docks on the rail side are quiet. Just a few miles away, nine rail cars loaded with product destined for Cella's warehouse are stuck at Danville Junction, where the St. Lawrence & Atlantic and Pan Am rail lines meet. "My revenue clock doesn't start ticking until the paper gets here," Cella says.
Cella's shipment is delayed because Danville Junction still operates like it did in the 1930s. It's set up so that while one railroad is switching cars over from the other railroad, everything else is held up. Meanwhile, traffic at the junction has been steadily increasing. The amount of freight passing through Danville Junction that was generated in Maine has already increased 52% in 2008 over the same time period last year, says Foley at the St. Lawrence & Atlantic.
Beginning this fall, Danville Junction will undergo a $5 million makeover to modernize the switch and cut the transit time by an estimated 36-48 hours, which means a lot for customers like the paper mills that require timely service. "Two days in shipping times in that business is big money," Nadeau says.
The rehab of Danville Junction is a product of the state's Freight Rail Interchange Program, launched in 2007 to provide improvements to rail yards with interchanges, and is the "poster boy" for how the state can work together with the railroads, says Foley. The majority of the $5 million project is being funded by the federal and state governments, and the two railroads are splitting the rest of the tab.
The state also offers the Industrial Rail Access Program, which since 2000 has raised $12 million in public and private funding to help companies such as Safe Handling Inc. in Auburn, Sprague Energy in South Portland, Sappi Fine Paper North America in Skowhegan and Dragon Cement in Thomaston increase their facilities' capacity to use rail.
Dragon Cement used the program in 2004 to increase its capacity to ship product on the Maine Eastern Railroad, which operates a state-owned line between Brunswick and Rockland, from its plant in Thomaston five miles to Rockland's pier, where it's loaded into barges destined for Boston. That small trip removes the equivalent of 120 trucks a week from the road, according to Matt Lynch, purchasing and transportation manager at Dragon. The company also sends a small amount to Quebec via Pan Am, which switches the cars over to the St. Lawrence & Atlantic at Danville Junction.
Another public investment to help Maine industry access the railroads is the Auburn Intermodal facility, which the city and state built, and which St. Lawrence & Atlantic now operates. From the Auburn Intermodal facility, shippers can reach five deep water ports, including ports in Vancouver, B.C., and New Orleans.
Tipping point
One of the challenges for the freight rail industry is to convince people the railroads have grown up. "It takes time to break down the parochial mindset that railroads are not getting the job done," says Foley at the St. Lawrence & Atlantic.
But high diesel prices seem to already be educating businesses about other shipping options. Nate Moulton, director of the rail program at the MDOT, says more wood and lumber, which traditionally has come by truck, is being moved by rail. "There's no question, whenever fuel prices rise, the railroad becomes much more competitive," Moulton says. "Now all of a sudden we're getting to that tipping point."
Robert Grindrod, president of the Bangor-based Montreal, Maine & Atlantic railroad, which operates 504 miles of track in Maine connecting Montreal, Searsport and Aroostook County, says the railroad has recently received inquiries from potato farmers in northern Maine about moving their spuds south on rail, something that hasn't happened in 30 years. "We are getting a lot of requests for additional service and traffic that hasn't moved in years," Grindrod says.
Indeed, business sources interviewed for this story says there is vast potential to increase the amount of product shipped or received by rail.
The discussion about rail versus truck isn't an all-or-nothing debate — the two are equally important in the supply chain used by Maine companies. "The future is intermodalism and seamless connections," says Nadeau. "Highways to rail and rail to ports and from the ports to the world."
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