from the publisheratlanticnortheast.com/onl/iss/i020812_192917.pdf · higher or better offer, then...

Common abbreviations : B&A - Bangor and Aroostook System, BCLR - Bay Colony RR, CFQ - chemins de fer Québec System, CPR - CanadianPacific, CDAC - Canadian American Railroad, CSO - Connecticut Southern RR, EOTC - Mass. Exec. Office of Transportation&Construction, GRS -Guilford Rail System, FHWA - Federal Highway Admin., FRA - Federal Rail Admin., FTA - Federal Transit Admin., HRRC - Housatonic RR, MB -Milford-Bennington RR, MBTA - Mass. Bay Transportation Authority, MDOT - Maine Dept.Transp., MPO - Metropolitan Planning Organization, MTQ- Québec Ministry of Transport, NECR - New England Central RR, NHDOT - NH Dept. of Transp., NHVT - NH & VT RR, NNEPRA - Northern New England Passenger Rail Authority, NSDOT - Nova Scotia Depart. of Transp, PW - Providence & Worcester RR, SLQ - St.Lawrence & Atlantic RR(Québec), SLR - St.Lawrence&Atlantic RR, SRP-Safe Handling Railroad (coastal Maine), VAOT- Vermont Agency of Transportation, VRS-Vt RailSystem (Green Mt. GMRC + Vermont Ry VTR + Clarendon&Pittsford CLP + Washington County Railroad WACR)

Helping to move rail and port traffic through NewEngland, the Maritimes,& eastern Québec.A twice-monthly trade newsletter.

www.atlanticnortheast.com

ATLANTIC NORTHEAST

RAILS & PORTSoperating railroads + ports, intermodal facilities, and government environment

Issue 02#08A 9 August 2002

*Unchanged from e-bulletin.REGIONAL ISSUES

B&A: Fieldcrest Cannon dragged back.* Approvalof breakup fee sought.* APA filed.* Someprovisions of APA. System losing money. Globalsolution for creditors sought. Box onadministrative insolvency.CSXT and NS: Should provide good salt rates.Regional rail: High-speed, CLF, NASTOupdates.

CONNECTICUTTransportation Strategy: Recommendations onrail freight and marine freight.* [Second section.]HRRC: Update on Shepaug reload.

MAINEHighway salt: Vendor contracts continued.Rail task force: Meets today.Calais branch: RTAC 2 votes against liftingrails.* EMRDC prepares presentation.*GRS: Sappi may take over switching.*SRP: Gets six-month contract extension. Updateon Rockland branch.Eastport: Record outbound cargo.* Still needsfifth warehouse.*Portland: Merrill’s had record year in 2001. Statewill not buy Merrill’s, but is funding warehouse.

MASSACHUSETTSHRRC: To close on Pittsfield stub this month.MBTA: Amtrak declines to bid on commuter.Highway salt: Vendors offered an extension.

NEW HAMPSHIRE[NHDOT: Purchased Salem Industrial trackage.Negotiating on Twin State. Commuter: Selecting final design consultant forNashua service. Stories in next issue.]

CCRR: Salt traffic starting, cement continuing.SLR: Fraser ok to own Berlin Mills.

RHODE ISLAND[No report.]

VERMONTHighway salt: More on bid awards and rail.VRS: Lack of oversight by VAOT on ABRB.Rockingham pre-emption case in discovery phase.

MARITIMES/QUÉBEC CBNS: No Cape Breton decision until September.Stora Enso newsprint machine saved.Halifax: RFPs out for Fairview Cove. Still pursuingthird terminal.

Second sectionWith a surfeit of information, I have moved to theSecond Section, which I publish occasionally, thestatement of a working group of the ConnecticutTransportation Strategy Board on rail freight andmarine freight.

I deemed this of less interest to print subscribersthan information in this, the first section.

Many print subscribers have already received thisitem in e-bulletin(u). Anyone wishing the SecondSection (or e-bulletin(u) again), please notify me bye-mail. [All print subscribers may receive the e-bulletin free of charge. Just let me know by e-mail.]

We’ve moved!But only the house number has changed. See below.

FROM THE PUBLISHER

2 ATLANTIC NORTHEAST RAILS & PORTS – twice-monthly trade newsletter 02#08A: 9 August 2002

Price increaseThe newsletter has gone two and a half yearswithout a price increase, while rent, stamps,health insurance (especially health!), etc haveincreased. Effective with your next notice, theprofessional discount for prompt payment isdecreased from $50 to $30, and students (readrail fans) are asked to pay $10 more.

- Chop Hardenbergh Next issue: 30 August

REGIONAL ISSUES

26 July, Portland. FIELDCREST CANNONREMAINS STUCK TO THE BAR and sister companyLogistic Management Services (LMS), despite selling theBAR to Iron Road Railways (IRR) in 1996.

The LMS lienIn a complaint filed this day at US Bankruptcy Court, FieldcrestCannon noted that it borrowed $1.7 million from MaineNational Bank in 1989 using as security the LMS real propertyin Hermon. When IRR bought the BAR and LMS, FieldcrestCannon agreed to guarantee the note.

In 1999-2000, LMS defaulted on loan payments, andFieldcrest Cannon paid the bank then holding the note andmortgage, Fleet, the outstanding amount. Fieldcrest Cannonreacquired the note and mortgage. LMS now owes about $1.4million in principal and $250,000 in interest.

On 11 July 2002, when LMS filed the schedule of itsproperties, it stated the value of its real property as $1.4million, and listed the debt to Fieldcrest Cannon as not onlydisputed, but entirely unsecured.

The BAR lienIn the same complaint, Fieldcrest Cannon noted that BAR hadborrowed from Fleet $1.2 million in 1989 secured by the BARoffice property in Hermon. Upon sale in 1996, FieldcrestCannon guaranteed the note. Thereafter, BAR defaulted on theloan; Fieldcrest Cannon paid Fleet and reacquired the note andmortgage. BAR now owes $550,000 in principal and $70,000 ininterest.

BAR’s schedule shows the property worth about $1million.

RequestFieldcrest Cannon asked the court to affirm the validity of itsliens on the LMS and BAR properties. {text of FieldcrestCannon filing from court website}

24 July, Portland. HOWARD ASKED FOR APPROVAL OF

THE BREAK-UP FEE written into the asset purchase agreement(APA) under which Rail World anticipates acquiring most of theassets of the B&A System. In his petition, Jim Howard as trusteefor the various entities of the B&A system, stated that on 24 Julyhe had signed the APA [see box for terms of agreement and see 28June issue for some terms of the earlier version of the APA].

The rationale for the break-up feeThe petition states: ‘An integral part of selling the Debtors’ assetsas a going concern is securing a stalking horse bidder at a highfloor price. A stalking horse bidder may stimulate other offerswhile at the same time locking in a floor price at which the assetsmay be sold. However, it is unlikely that anyone will agree toinvest the time, effort, and expense necessary to formulate astalking horse bid without assurance of a breakup fee in the eventhe was not the successful bidder.’

Howard stated that Purchasers continue to incur substantialprofessional and other expenses in connection with the APA.

Legal precedentOther bankruptcy courts have approved the payment of breakupfees to generate stalking horse bids. Howard cited precedents,including one from Maine approving a fee of 3.4% of the purchaseprice (In Re Pepsi-Cola Bottling Company of Aroostook , 2001).{text of petition from court website}

[Note: The petition does not ask for approval of the APA. TheAPA requires that motion by 31 August. Editor]

THE ASSET PURCHASE AGREEMENTSome significant terms in the version dated 24 July and filed withthe Bankruptcy Court on 24 July:

Buyer and seller. The buyers are listed as Montréal, Maine andAtlantic (MMA) and Montréal, Maine and Atlantic Canada (MMAC),collectively the ‘Purchasers’. The ‘Sellers’ are BAR, LMS, CDAC,NVR, N&R, VBB, and QCR.

Price. $50 million, plus $5 million if the CN trackage rightsagreement is annulled, and plus any post-closing ‘earn-outpayments.’

Payments. Purchasers have paid a deposit of $500,000 and willpay an additional $500,000 by 23 August, and another $500,000by 23 September. {section 1.4} If the transaction does not closedue to Sellers’ breach, Sellers’ termination, or Purchasers’termination under 6.2, Purchasers get the full deposit back. If thetransaction does not close for any other reason, Sellers get thefull deposit. {section 1.4}

Dates. Sellers shall immediately file a motion for approval of thebreakup fee upon signing of the APA. {section 3.8} If the Courtdoes not approve the fee by 12 August, Purchasers mayterminate the agreement.

ATLANTIC NORTHEAST RAILS & PORTS – twice-monthly trade newsletter 02#08A: 9 August 2002 3

The trustee will file a motion to approve the sale of assetsunder section 363 of the bankruptcy laws on or before 31August.

The trustee will seek the entry of an order governingcompeting bids requiring the competing bids to exceed theAPA price by at least $2 million.

CDAC and VBB will obtain approval of the Scheme ofArrangement for their assets in Canada by the Federal Courtof Canada, as required by the Canada Transportation Act.{section 3.1}

Closing will occur 60 days after court approval of the APA. Itmust also occur ‘on or prior to December 30, 2002’ and assoon as possible after Purchasers are approved and able toclose on sufficient financing. {section 1.6}

Breakup fee. If the Purchasers waive any financingcontingency in the APA, and if the Court approves a higher orbetter offer, and a sale is consummated pursuant to thehigher or better offer, then the bankruptcy estate will payPurchasers one million dollars, plus a receivable from CDACfor locomotive leasing (about $380,000 at the end of June),and costs of notice about the sale.

The APA defines higher and better offer as oneexceeding the APA price by $2 million.

Financing. If Sellers have not received Purchasers’ writtenwaiver of their rights under Section 4.1(m) on or before theday that is one day prior to the Qualifying Bid Deadline, thenSellers’ obligation to pay the breakup fee ceases. {section6.3} [The Qualifying Bid Deadline is the date on which anyother bids for the property are due.]

Section 4.1(m) says Purchasers must have received $55million in debt or equity financing before they must enter intothe closing.

Property. Sellers shall provide schedules of all property toPurchasers by 1 August. The two sides have 30 days toadjust the schedules, and then they become final.

Excluded property. B&A office building in Hermon. (MMA is leasing the office fortwo years for a price of fair market value or at least theamount needed to pay the mortgage. Sellers get to maintaintwo offices.) {section 3.17}Mack Point tank farm. (MDOT is negotiating the purchase.)Fort Fairfield branch.Income streams from crossing licenses and easements.Passenger cars.Leasehold interests in personal property.Scrap iron at the Borque yard in Sherbrooke.

Lease on line from Wells River to White River Junction.Two piggy packers in Montréal (conditionally sold).

Excluded obligations. Virtually every debt arising before the sale,including the mortgage owing on the LMS property. Section4.1(n) notes that ‘the bulk of the assets are subject to acomplicated set of arrangements.’ The Sellers must provide thePurchasers the assets ‘free and clear of such arrangements.’

Earn-out payments. MMA will pay to the Sellers, beginning on 31March 2004 and continuing to 31 March 2008, 10% of thedifference between actual earnings and a specified amount ofearnings for the preceding calendar year. {section 1.9}

29 July, Bangor. THE B&A SYSTEM IS LOSING AT LEAST$500,000 NET EACH MONTH as customers leave for othermeans of transportation. “Anybody who’s had a choice, with oneexception, has taken it,” System President Fred Yocum said. Theexception: Flakeboard, a St.Stephen New Brunswick company who,despite the possibility of using either CN or GRS, has used CDACto reach CP. {Deborah Turcotte Seavey in Bangor Daily News30.July.02; ANR&P discussion 7.Aug.02}

6 August. THE SALE PROCEEDS WILL NOT COMPLETELYPAY OFF THE SECURED CREDITORS, explained Yocum. Twosecured creditors, Bank Austria and Progress Rail, are owed morethan $67 million. [Bank Austria $25 million–see 31 August 2001issue. Worst case total liabilities $123 million, of which $47.7 issecured–see 6 December 2001 issue. The track assets lease isworth $57 million–see 4 March issue.]

Negotiations about how much of the proceeds will flow to thetwo creditors are going on. Yocum explained that the judge is notlikely to permit the estate to become ‘administratively insolvent’[see box]. Thus, the two creditors are not going to take the entireproceeds of the asset sale (which would not satisfy them in anyevent).

Roger Clement, attorney for the trustee, noted that bankruptcylaw permits the trustee to surcharge the collateral of the securedcreditors to recover the costs of protecting the collateral. In theinstant case, the trustee has expended funds to keep the railsystem in operation, which, Clement argues, has redounded to thebenefit of all creditors. This legal lever permits the trustee toensure that the estate does not become administratively insolvent.

Negotiations with the secured creditorsFor several months, Clement said, the trustee has negotiated withthe secured creditors and the unsecured creditors to come up witha plan which will “point in the direction of resolution of many,many, many issues in this case....The trustee thinks it better toresolve a host of issues in advance of, or simultaneously with, thesale approval.” At that point, the trustee and the estate “havemaximum leverage.” The issues include:

Payments to the secured creditors . What sort of reduction the


secured creditors will take. Whether the trustee has takenappropriate steps to protect the collateral.

Payments to the unsecured creditors. According to Clement,the unsecured creditors will get some payment.

Equitable subordination issue. Some unsecured creditors haveargued that the secured creditors should lose their prioritybecause they were, in effect, operating the railroad [see 31August 2001 issue].

The plan resolving the various claims will become part of the“torrent” of pleadings the trustee hopes to file by the end ofthis month.

According to Yocum, the work to reach this “globalsolution” has held up the filing of the APA, as has theCanadian court situation and the need to assemble three setsof property schedules. {ANR&P discussion with Yocum7.Aug.02, with Clement 8.Aug.02}

Estate losing money every monthIn the court documents filed on 26 July, Howard said the valueof B&A System’s assets is diminishing because of continuedoperating losses. Relationships with suppliers and customersare strained,, “and a timely sale will aid in controlling theadministrative expenses in the case....Finally, a sale of theassets …… will serve the public interest by preservingessential rail services.”

Larry Parsons, a member of the Rail World consortium,said the financing would consist of both debt and equity.“That’s academic to the people receiving the cash where itcomes from....It’s not highly leveraged, but it’s reasonablyleveraged.” {Deborah Turcotte Seavey in Bangor Daily News30.July.02}

ADMINISTRATIVE INSOLVENCY

The Bankruptcy Code gives first priority on the assets of theestate to secured claims (a hierarchy of secured claims exists).Second come unsecured claims, and among thoseadministrative expenses are nearly always given the highestpriority. Among the administrative expenses:

Costs of preserving the estate. These include compensationfor services rendered post-petition, and taxes incurred by theestate. For the B&A, Yocum said, this covers anyone whoprovided goods or services after 4 December 2001, the date ofthe entry of the order of bankruptcy, who is not yet paid 100cents on the dollar. He listed as examples workers and leasingcompanies.

Compensation of trustee and others . These include paymentof the debtors’ attorneys and other professional persons.{Michael Herbert, Understanding Bankruptcy}

An estate becomes administratively insolvent when it does nothave enough to pay the administrative expenses.

CLASS I RATES FOR SALT7 August. COMPETITION BETWEEN IMPORTED SALT ANDDOMESTIC SALT occurs in New England. As Ken Ellen,transportation manager for Cargill Salt noted, his companysupplies much of Vermont because that region lies farthest fromthe coast [see Vermont]. The cost of trucking the salt from NewEngland ports makes imported salt much less competitive at thatdistance.

The American Rock Salt viewDon Holman, vice-president marketing for this company, is“working with the two Class I carriers to break the stranglehold” ofimported salt on the region. Ninety percent of New England usedrail-supplied salt until the Retsof mine collapsed in 1995 [see 7March 1996 issue]; buyers switched to imported salt.

Holman believes that “if we can get the same logistics factorsas they [the importers] have to the East coast,” domestic salt canwin back the market. “The railroads will have to reduce their rates.”CSXT and NS have offered some rates, but not enough for all ofNew England.

The two railroads need to “look at the long-term situation,” heargued, because the market potential “is huge.” Instead of runningthe cost to individual points, they should “run the cost matrixsystem-wide.”

American Rock Salt has a good position to win back the saltcontracts long-term. “We have the largest mine in the UnitedStates, and, we believe, the most cost-effective because of hownew it is [came on line in 2000, see 6 December 2001 issue]. US-produced salt and US railroads can do it.” {ANR&P discussions6&7.Aug.02}

BOSTON-MONTRÉAL8 August. THE HIGH SPEED RAIL STUDY TEAM is settingdates for a second round of public hearings [see 15 March issue]in September, including one in Montréal. The team will presentresults thus far. {ANR&P discussion with VAOT’s KarenSonghurst 8.Aug.2002}

CLF NORTHERN NEW ENGLAND8 August, Concord NH. A DRAFT BUSINESS PLAN FORNORTHERN NEW ENGLAND RAIL should emerge by mid-September, according to Nancy Girard of the Conservation LawFoundation. CLF is coordinating the Northern New England RailRevitalization Project, using some EPA funds.

Wilbur Smith Associates [see 15 February 2002 issue] washired to do a ‘business plan’ described thus by WSA:

‘The Conservation Law Foundation (CLF) seeks to develop astrategic plan for investment in freight and passenger rail


infrastructure and services in the three states of northern NewEngland - Maine, New Hampshire. and Vermont. The purposeof the study is to build on work already done in those statesand craft a business plan that prioritizes rail investments andlays out a funding strategy to implement priority railinvestments over time. The focus of this study is to developviable freight and passenger rail service options to serve bothtraditional and new markets in the region. The intent of thestudy is to develop an actionable plan leading to theimplementation of a northern New England Rail RevitalizationInitiative. The key words are action and implementation. Theend purpose of this effort is to provide the CLF. its partners,and the region with a blueprint for project initiation andimplementation.’

‘Freight Railroad Involvement - the region's freight railroadsmust be engaged at the start of the study process, as thisinitiative would have direct operational and financial impactson them. Issues specific to each of the potential host railroadsmust be identified and addressed openly and honestly.’

‘WSA will complete this effort [a 10-12-page paper] within the$50,000 budget and seven-month time frame.’ {text of WSAproposal}

NASTO FREIGHT STUDY8 August. THE NORTH ATLANTIC FREIGHTTRANSPORTATION STUDY will become public at the NewEngland Governors/Canadian Premiers meeting in Québec 25-27 August. The product of work by MDOT and NYDOT [see15 February issue], as well as consultant CambridgeSystematics, it provides the region with a “common agenda forreauthorization of TEA-21" in Congress next year, accordingto Rob Elder, who heads Maine’s Office of FreightTransportation.

NASTO (North Atlantic State Transportation Officials)covers the region from Labrador to Maryland. Elder said theUS part of NASTO stood third in the world, behind the entireUnited States and Germany, in gross economic product, a factwhich should give the region “more leverage” in Congress.

The study contains a list of subregional issues, based oninterviews with all DOTs and Canadian ministries, and some“far-ranging focus areas.”

Mid-Atlantic Rail StudyStates in the southern part of the NASTO region recentlycompleted this work [see 15 February issue, Connecticut] alsousing Cambridge Systematics, and its results are subsumed bythe NASTO study.

Maine freight plan updateMaine’s recommendations were based in part on its ownfreight plan, updated for 2001 [see 12 April 2002 issue].{ANR&P discussion 8.Aug.02}

CONNECTICUT

HOUSATONICJuly, Hawleyville. THE SHEPAUG DISTRIBUTION SERVICESFACILITY HANDLES MORE THAN 100 CARLOADSMONTHLY. Typically as much as 12 million board feet of lumberis stored there, per Rian Nemeroff, HRRC vice-president formarketing and sales.

The switch to lumber reloadsUp to the 1960s, hundreds of lumber yards had private sidingsreceiving a few cars a month. Examples still remain: HancockLumber on the SLR in Yarmouth, Maine. [The lumber yards wereoften among the last remaining industries to oppose theabandonment of uneconomic branch lines. Editor]

Railroads still handle most long-haul lumber, but it now arrivesat reload centers such as Shepaug. A shipper will consigncenterbeam flat cars of dimensional lumber to itself at Hawleyville,CT. According to Facility General Manager Ed Bryan, Shepaughandles unloading of the cars, control of inventory, receiving oforders from shipper’s sales force, contacting the customer andloading the truck for delivery.

Operation by the railroad - a rare situationA third-party operator runs most reloads. For example, Cohennooperates a reload at Stoughton, Massachusetts on CSXT, andQuaboag Transfer operates a reload at Palmer, Massachusetts onNECR. Shepaug is operated by the railroad itself, giving HRRCcomplete control of the customer relationship.

ServiceHawleyville lies 135 rail miles from CSXT’s Selkirk yard. Bycooperative arrangement, cars arriving at Selkirk yard in theafternoon reach Hawleyville by the second morning. For example,a car in Selkirk Monday afternoon will be available at the ShepaugReload Wednesday morning.

Service territoryAccording to Bryan, a lumber reload can economically servecustomers within a radius of 100 miles, but typically 80% of thebusiness lies within 50 miles. Shepaug lies nearer than any otherreload to the fast-growing northern New York suburbs in Putnam,Dutchess, Orange and Ulster counties, and Fairfield County inConnecticut. Competitors exist in Albany, New Haven [Anastasio,see 29 March issue], and Port Newark, NJ. The last isdisadvantaged by congested highways through New York City.

Trucks need only travel 1/4 mile off I-84 to reach the Shepaugfacility.

Bulk transfer at Shepaug.The facility [see 15 February issue] is actively soliciting customers.It is now included in CSX TransFlo’s list of independent


terminals [see 15 December 2000 issue]. {Interviewswith ANR&P correspondent Malcolm Laughlin}

MAINE

MAINE RAIL TASK FORCEThe first meeting of the Task Force on Rail Transportationoccurs Friday, August 9, 2002 at 9:00 a.m. in room 126 of theState House. [See 26 July issue.]

AgendaOverview of the status of Bangor & Aroostook Railroad. (FredYocum)Update on rail service in Maine. (Tracy Perez, DOT, Office ofPassenger Transportation; Robert Elder, DOT, Office of FreightTransportation)Task force goals discussion.Proposed schedule/plan to achieve goals. {e-mail to ANR&P fromtask force staff}

HIGHWAY SALT CONTRACTS 2002

salt provider pile/delivery

source Districts served

MAINE DEPARTMENT OF TRANSPORTATION (contracts renewed from 2001)

Harcros Chemical truck from mine Pugwash (Morton) 1: northern Maine

Searsport/ship 4: central, 5: midcoast

Cargill truck from mine Sussex mine 2N: eastern, 3N: n.central

2S: eastern, 3S:n.central

International Salt Portland/ship Chile mine 7: mountains

Morton South Portland/ship Pugwash mine 6: southern

MAINE TURNPIKE AUTHORITY (apparent low bidders)

International Salt Portland/ship orPortsmouth/ship

Chile mine Mile 44, 61, 74, 90, 99

Morton South Portland/ship Pugwash mine York and Mile 24

GREATER PORTLAND COUNCIL OF GOVERNMENTS (award 2 August)

International Salt Portland/ship orPortsmouth/ship

Chile mine various municipalities

NotesMDOT contracts. According to Denise Baron, MDOTprocurement and contracting specialist, the departmentrenewed the contracts at the existing prices except for Cargill,which offered a lower price. {ANR&P discussion 5.Aug.02}Maine Turnpike Authority. The Maine Turnpike Authorityreceived bids on 2 August. Low bidders: International Salt fordelivery to five locations, and to Morton for two locations. Pricesrange from $29.21 (York) to $34.62 (West Gardiner) [compareto $32.21 to $36.46 in 2001–see 19 November 2001 issue].The contracts will be awarded at the meeting of the Turnpikeboard on 13 September.

W.H.Shurtleff and Harcros Chemical also bid on the

contracts, with Shurtleff about two dollars a ton above thewinning bid, and Harcros $20/ton above. {ANR&P discussionwith Mary Ellen Tetreau 5.Aug.02}

Harcros’ Frank Lemanski explained he put in the bids inorder to get the bid results, and on the off-chance that the otherbids get thrown out, as happened about 15 years ago. Becausehe was landing the salt in Searsport, he did not expect tocompete with companies with piles in southern Maine. {ANR&Pdiscussion 5.Aug.02}Greater Portland Regional Council of Governments. On 2August, GPCOG awarded its bid, as large as that of onehighway division, to International Salt at a price of $28.40delivered or $28.00 picked up [compare to $31.81/ton and$29.50–see 19 November 2001 issue]. {ANR&P discussion


with Carol MacKenzie, GPCOG director of joint services,5.Aug.02}Searsport. Cargill used Searsport in 2001, but will not due tocost this year. Harcros will continue to use Searsport, as willInternational.International Salt unloads at Merrill’s, stores at Merrill’s and at

Shurtleff in South Portland. International will use primarilyPortland, but can also use Portsmouth and Searsport to supplyMaine. {ANR&P discussion with Arthur Bush 8.Aug.02}Morton in 2001 unloaded three ships at Merrill’s MarineTerminal because the ships lacked the appropriate dischargeequipment. Through August 2002, Morton ships had thedischargers to reach the Sprague hopper. {ANR&P discussionwith P.D.Merrill 7.Aug.02}

ContactsDenise Baron at MDOT: 207-624-7337Carol MacKenzie at GPCOG: 207-774-9891Mary Ellen Tetreau at the Turnpike: 207-871-7771 x 122

CALAIS BRANCH5 June, Cherryfield. RTAC 2 VOTED 16-2 AGAINST ABICYCLE TRAIL for part of the rail line. While most inattendance at the Regional Transportation Advisory Committee(RTAC) for the region approved of three of the four points of theMelrose plan for the Calais branch [see 3 May and 17 Mayissues], they did not like lifting the rail between Machias andAyers Junction.

Skip Rogers, who sits on the RTAC and also heads theEastern Maine Railroad Development Commission (EMRDC),secured the opposition of the officials of several towns topresent to the RTAC. Rogers related that the officials believedany money spent on the path would be better spent on roads,and that the officials looked on the path as a “sorry substitute”for rail in terms of economic development.

EMRDC actionRogers also related that the Commission planned to make surethat the rail task force meeting in August [see above] “does notoverlook our situation” and that it realizes other rail issues existbesides the B&A and Greenville. {ANR&P discussion5.Aug.02}

GRS1 August, DC. THE STB PUBLISHED THE NOTICE OFEXEMPTION ABOUT SAPPI TRACKAGE RIGHTS. Thenotice permitted Sappi to operate over 1.25 miles of GRS track inSkowhegan [see 12 July issue].

The board said it would address, ‘in a subsequent decision’Sappi’s motion to dismiss the proceeding because the STBlacked jurisdiction. {STB Finance Docket No. 34133, decided 25July, publication 1.Aug.02}

SAFE HANDLING RAIL8 August, Auburn. SAFE HANDLING HAS AGREED TOEXTEND ITS RAIL OPERATION another six months beyond31 December, the end of the current contract to operate on theRockland branch and the Lower Road (Brunswick-Augusta).Ford Reiche, one of the two principals, said MDOT had askedSafe Handling Rail (SRP) to add six months (with no changes interms) so that the handover to a new operator would occur in thesummer.

SRP assumed the operation in December of 2000 [see 15December 2000 issue] from the previous operator, Maine Coast,but MDOT does not want to do another handover in winter.

For the railroad, Reiche said, it provides a chance “to bringsome closure to some larger deals we are working on which wewould like to see in place” should SRP become the longer-termoperator. {ANR&P discussion 8.Aug.02}

MDOT’s Rob Elder [see above] pronounced the departmentvery satisfied with the job SRP is doing. {ANR&P discussion6.Aug.2002}

Track upgradeRussell Spinney, head of MDOT's Multi-Modal division, said inJuly that by the time Atlas Construction has completedupgrading the rail between Brunswick and Rockland–sometimein November [see 12 April issue]–the state will have investedabout $30 million.

The state then plans to solicit bids from private companiesthat might be interested in providing freight, passenger or bothservices [see 17 May issue].

For passengers, the rail line will form one part of a way to getaround the state without a car. "If we want to protect Maine sothat the quality of life we enjoy now is the same in 20 years fromnow, then we have to start thinking ahead," Ron Roy, head ofMDOT’s Office of Passenger Transportation, said. "We're almoststepping back in time because in the past, this is how peoplecame to Maine (by train or boat). It could open up entirely newmarkets for us." {Dennis Hoey in Portland Press Herald29.July.02}

EASTPORT24 July, Eastport. A RECORD SHIPMENT LEFT ESTESHEAD. Sixty workers (including 37 stevedores, 7 office workers,ten truck drivers) in two shifts loaded more than 19,000 metrictons of pulp aboard the cargo ship Star Ikebana. Produced byDomtar’s mill in Baileyville, the pulp went to ports in China,Japan and Korea.

A record yearTo date, the port has shipped more than 160,000 metric tons, andthat number is expected to go higher. “They are projectingbetween 250,000 and 260,000 tons for this year of wood pulp, thegreatest amount of tons shipped through the port ever,”” PortDirector John Sullivan said. George “Bud” Finch, Eastport citymanager and vice-chairman of the port authority, praised Domtar


for the larger shipments. “They are reaching farther into theglobal markets in the area of pulp and paper. And I think a lot ofit has to do with Domtar’s goal of making the mill moreproductive and profitable.”

WarehouseAlthough they did not address specifics, both Sullivan andFinch said the port is talking with other shippers and they arelooking at everything as potential cargo, from granite to gravelto rolled paper. The port is limited by warehouse space; lack ofit in early 2002 meant some pulp went out over Saint John, butnone has done so since.

Skip Rogers, head of the Federal Marine operation, said theport has three warehouses at the new pier on Estes Head, andone at the old pier downtown. To load the 19,000 tonnes, all werefull. If he had a second ship loading right after the Star Ikebana,he could not supply it.

The port authority might at least install a concrete base forthe warehouse this summer. But all parties are looking for aprivate entity to build the warehouse. “Without that, I have ahard time going after new customers,” Rogers said. {ANR&Pdiscussion 5.Aug.02; Diana Graettinger in Bangor Daily News30.July.02}

PORTLAND23 January 2002. MERRILL’S MARINE TERMINAL HAD ARECORD YEAR, announced owner P.D.Merrill. “We marked the20th year of operating this facility in Portland,” over the span ofwhich the terminal moved 7,433,010 tonnes in 1,053 vessels. For2001, Merrill listed 578,000 tonnes (399,000 bulk tonnes, and180,000 breakbulk tonnes), or 630,000 short tons, from 85vessels.

For the year, the terminal had 2,997 rail car movements.

Growth of break-bulkThe terminal started off handling only bulk. Over the past fewyears, Merrill explained, break-bulk traffic has grown, and theterminal has added an “entirely different kind of operation.” Thelead role is taken by the newsprint from Corner Brook [see box].

In part because of the break-bulk, Merrill now accounts fornearly half of the dry cargo passing through Maine, and ranksas the largest operation between Saint John and New London.

Northeast Paper Services buys domestic businessIn September 2001, parent company Merrill Marine TerminalServices (operator of Merrill’s Marine Terminal) sold MerrillDomestic Distribution, a division which had operated out of a150,000SF leased warehouse in Scarborough. The divisionreceived and shipped by rail and truck for various manufacturers.

Northeast Paper Services, another tenant in the warehouse,bought the division and now operates it as a separate company,Merrill Domestic Distribution Inc. Northeast Paper rewinds,rewraps, and resizes paper rolls as a service for customers. If therailcars in and out of the Scarborough facility were counted after

September, the 2,997 count would have been higher. {ANR&Pdiscussions with Merrill 8, 23, 30.Jan.02; 8.Aug.2002 }

Still a warehouse in South PortlandUntil recently, Merrill leased 150,000SF of a warehouse at RigbyYard in South Portland with two rail sidings. After remodellingat the Portland facility, the company reduced occupancy to100,000SF, and will reduce that to 50,000SF with the completionof the Maine Port Authority warehouse [see below].

Temporary warehouse spaceMerrill Marine Terminal Services leases space on a temporarybasis to handle customer needs, Merrill said. For example, thisyear it leased 26,000SF of industrial space at the former DouglasBrothers' fabrication facility on Riverside Street, Portland. Theleases last only 90 to 120 days. {ANR&P discussion 7.Aug.02}

MERRILL CUSTOMERS

Kruger/Corner Brook Pulp and Paper, Limited. This plant locatedin Newfoundland is owned by Kruger Incorporated, a familycompany which also owns Scott Paper Limited, the leading tissuemanufacturer in Canada. [Scott Paper’s owner, Kimberly-Clark,licenses Kruger to produce the Scott brands in Canada.{Kimberly-Clark website}]. On 17 January Kruger announced 4-day shutdown in Newfoundland, to hook up equipment requiredfor the fall start-up of its cogeneration project. The installation ofthe cogeneration equipment, a $29 million-investment, along withdowntime related to other capital and improvement projects,resulted in a 12,000 metric tonne reduction in newsprint outputover the last few months for the Corner Brook Paper Mill.{Kruger press release}

The Canadian company accounts for one-quarter of Merrill'sship traffic. The regular arrival of vessels twice a month allowshim to employ a highly-skilled work force, available for other,more irregular cargoes, such as export of Maine pulp.

Occasionally, said Merrill, to compensate for Corner Brookproduction problems, Kruger rails the paper to Merrill’swarehouses from its Trois Rivieres PQ plant via SLR and GRS toPortland.

Some of the Kruger newsprint moves by rail from Portlandto the Boston Herald and Boston Globe printing plants inBoston. Merrill sent out 300 carloads last year, and received 40cars inbound. {ANR&P discussions 8, 23, 30.Jan.02; 7.Aug.02}

Mead and SAPPI. The Mead mill in Rumford and the SAPPIplants in Westbrook and Hinckley use Merrill’s terminals forstorage and for export.

National Starch. The terminal unloads tapioca root flour fromThailand that is converted to a variety of food products in IslandFalls.


European lumber. Wood importers can utilize the pulp ships tobring in European lumber for distribution in New England, Merrillsaid. Because of the small quantity (“a couple of thousandtons”) of the shipments, the product would not move overPortland without the pulp business. {Kelley Bouchard inPortland Press Herald 31.Mar.02; ANR&P discussion7.Aug.02}

7 August. THE STATE IS FUNDING A WAREHOUSE FORMERRILL’S TO LEASE , as part of an effort to keep the costsof break-bulk handling down.

Need for government assistanceP.D.Merrill, the principal of the company, has long argued thathis private facility competes with operations which usegovernment-capitalized facilities [see 14 August 2001 issue]. Hiscompetitors in Saint John and Connecticut use governmentfacilities.

Eastport, though government-funded, does not compete forbreak-bulk business because it lacks rail. Maine mills will look toSaint John to compete for export.

Inbound, customers will look at Connecticut ports: NewLondon was once a big newsprint port, though now it is pluggedwith lumber.

“We have long prided ourselves on being a privately ownedoperation....[but] we want to do everything we can to keep up thehigh-intensity use of this property and maintain its service toMaine industry.”

Earlier plan for state to purchase entire facilityLast winter, Merrill and the state worked out a plan under whichthe state would acquire a three-year option to buy the 28-acreproperty for $6 million. After the state bought the property, itwould lease it back to Merrill for a ten-year period.

However, said Merrill this day, “the economics did not workout.” In May, the state could not figure out where it would find$6 million for the land and existing buildings, which are assessedat $10 million. Morever, the state was promising the city that itwould help it make up lost property taxes (Merrill pays $200,000a year).

But the warehouse deal did take a step in the direction ofgovernment ownership of facilities.

Construction of warehouseMerrill is building, using state-supplied federal funds of about$1.7 million, a 53,000SF climate-controlled warehouse in thevicinity of West Commercial and Danforth Streets, where a pileof coal was located until recently. The Maine Port Authority willown the structure, built on Merrill land using an easement fromMerrill. After the planned completion in November, Merrill willoperate the building under license from the state.

The new structure will permit Merrill to reduce “by about50%” the space in the warehouse in South Portland [see above]at a yearly cost of $500,000. The terminal will also reduce truck

traffic to and from South Portland.

Savings to the customerIn autumn 2001, Corner Brook, Merrill’s largest customer, said itwould take its cargo elsewhere if Merrill failed to cut costs.Without his biggest customer, Merrill would have to curtail hisoperation to about 20 ships per year carrying scrap, coal androad salt. A deal with the state became imperative.

P.D.Merrill said with the cut in warehousing costs, plus aconcession on his own pricing, Corner Brook agreed to stay. Hedeclined to state the nature of his agreement with Corner Brook.

A longer-term solution?While the deal does not solve the problem, Merrill said it didprovide some “breathing room for a more permanent solution.”Given the state deficit, however, he could not outline such asolution at this point. {ANR&P discussion 7.Aug.02; KelleyBouchard in Portland Press Herald 31.Mar.02}

MASSACHUSETTS

CSX TRANSPORTATION8 August, Dedham. THE LONG OUT-OF-SERVICE DEDHAMINDUSTRIAL TRACK MAY BECOME A TRAIL. Once part ofa New Haven Railroad line from a Readville yard (the ‘Five Yard’)in Boston leading two miles west to a junction with the formerline from West Roxbury to Islington, the line was later cut backto only 1.2 miles, roughly at Walnut Street.

In 1973, the MBTA assumed ownership of the line from thePennCentral. In recent years, Amtrak has used the Five Yard andthe Dedham Industrial Track for storage of maintenance of wayequipment. CSXT has trackage rights for freight.

In 2001, following discovery of contaminants, the T fencedoff some of the Dedham track. {EOTC notice to citizens 2002; LeoKing in Destination Freedom, newsletter of the NationalCorridors Initiative 5.Nov.01}

TrailState Representative Marianne Lewis included $550,000 in a stateenvironmental bond bill to transform the industrial track into atrail. {press release from Lewis 26.June.02}

The town may have acquired the line from the T, but thetown is now backing away pending resolution of theenvironmental issues. {ANR&P discussion with Bill Keagan,Dedham town administrator 7.Aug.2002}

HRRC31 July, DC. THE STB AUTHORIZED COLTSVILLE TOACQUIRE THE CSXT STUB in Pittsfield. ‘By letter filed on July19, 2002, Housatonic advised the Board that the parties have


reached an agreement on the terms and conditions for thepurchase of the line. It also indicated that Coltsville TerminalCompany, Inc. (Coltsville) will be substituted as purchaser of theline.’ [See 26 July issue. The filing on 19 July never did show upon the STB website. Editor] {STB Docket No. AB-565 (Sub-No.3X) decided 31.July.02}

StartupFollowing the closing, HRRC will perform the necessary remedialwork in September, and anticipates starting operation on 1October. {ANR&P discussion with Executive Vice-president EdRodriguez 8.Aug.2002}

MBTA COMMUTER RAIL30 July. AMTRAK DECIDED NOT TO BID ON THECOMMUTER RAIL OPERATION. David Gunn, president,wrote to Michael Mulhern, head of the T: ‘The provisions

contained in the RFP would radically alter the contractualrelationship that exists under your current operating agreement

with us, and make it impossible to develop a reasonable pricing

strategy to control risk. As you know, Amtrak is prohibited bylaw from subsidizing commuter services, and we could be in real

danger of violating that prohibition under the terms of your RFP.’[Amtrak’s detailed description of the RFP problems is available

upon request to Chop Hardenbergh.] Amtrak did request to continue operating, dispatching, and

maintaining the line from Boston to Providence at its own

expense, including operating the T trains. {text from Amtrak}

Remaining bidders

- Boston & Maine Corporation.

- Massachusetts Bay Transit Services (a joint venture ofStagecoach and Herzog) [Herzog was the prime company behind

the 2000 winning bid of Bay State Transit to do just themaintenance, but lost when MBTA was faced with a funding

cutoff–see 2 and 16 May 2000 issue].

- Massachusetts Bay Commuter Rail ( a joint venture of AlternateConcepts run by former T General Manager Jim O’Leary, Connex,

and Bombardier).

T spokesperson Brian Pedro said his agency would notagree to letting Amtrak operate and maintain the Boston-

Providence line, but would consider letting Amtrak dispatch it.

{ANR&P discussion 8.Aug.2002}

HIGHWAY SALT6 August, Boston. THE COMMONWEALTH WILL ASK FOR

EXTENSIONS of the current highway salt contracts. Ron

Whitaker, contract manager for vehicles and related services in

the operational services division (OSD), said the salt contractssigned in 2001 [see table in 15 February issue] permitted four

annual extensions beyond the 31 August end date of the first

year. To extend, each vendor must sign, date, and return theextension agreement. He intends to send out the request for

extensions by mid-August. If a vendor does not choose to extend, the Commonwealth

may go to parties who bid on the original contract.

Price decreaseThe contract permits vendors to ask for price increases, but they

must notify OSD 60 days prior to the end of the contract year;

Whitaker said none did so. The department wants to ask vendorsif they will give the Commonwealth a 10% price decrease, and

Whitaker will send a letter to that effect. However, he does not expect any vendor to do so, given the

low revenue they received during the very mild 2001-2002 winter,

and the fact that most users have 60-70% of the salt they needand will not need to purchase much more, or any if the prediction

of another mild winter comes to pass. {ANR&P discussion

7.Aug.02}

NEW HAMPSHIRE

CLAREMONT CONCORD8 August, Claremont. RAILROAD TRAFFIC IS BOOMING,

compared with 1998's 140 or so [see Atlantic Northeast Rail and

Marine Transport Review 1999]. General Manager Lorie Barnessaid the railroad’s salt shed will house salt from American Rock

Salt, which won one of the Vermont districts [see Vermont]. Thefirst 30 of an expected 250 cars arrived this week; Beaudry

Enterprises will dray the salt to Vermont.

And in West Lebanon, the railroad is spotting four to fivecement cars a day for Lafarge Cement [see 3 May issue].

{ANR&P discussion 8.Aug.02}

SLR - MAINE26 July, DC. THE STB ACCEPTED FRASER’S NOTICE OF

EXEMPTION to acquire the assets of Berlin Mills Railway. The

notice was filed on 3 July [see 12 July issue]; the SLR began

operating over the line on 14 July.The STB noted: ‘The effective date of the exemption was

July 10, 2002 (7 days after the exemption was filed).’ {STB

Finance Docket No. 34222, decided 16.July.02, served 26.July.02}


VERMONT

VERMONT ROAD SALT VENDORS 2002

District,headquarters

rock saltprovider

pile/delivery source Drayage

1 Bennington Cargill Shaftsbury/rail New York orCleveland

William DaleyConstructionoperates and drays

2 N.Brattleboro Cargill Rockingham/rail Barrett

3 Rutland Cargill Rutland/rail Barrett

4 White River J. Am.Rock.Salt Claremont NH/rail HamptonCorners NY

Beaudry Enterprises

5 Essex Junction Cargill Burlington/rail New York or Cleveland

Barrett

6 Barre Cargill Middlesex/rail Dubois Construction

7 St.Johnsbury Cargill Middlesex/rail* Dubois Construction

8 St.Albans Morton Montréal/truck Windsor, Ontarioor Fairport, Ohio

n/a

9 Newport Morton n/a

*Ken Ellen, transportation manager for Cargill Salt, said thecompany would possibly use one of the Vermont piles, withStarks NH as a backup pile, to serve this district. “We have acomputer model which shows us least cost for every order thatcomes in.” {ANR&P discussion 8.Aug.02}

NotesBids opened. On 16 July. The other bidding companies: SiftoCanada [won districts 8 and 9 in 2001–see 24 October 2001issue], Granite State Minerals, Eastern Salt, and InternationalSalt.Rail bonus. A state statute requires the deduction from theprice bid the amount the state receives if the salt is railed overstate-owned lines [see 24 October 2001 issue]. This did notcome into play for 2002, according to Judy Jamieson of thepurchasing department. {ANR&P discussion 19.July.02}Prices. These ranged from $34.83/ton in District One to $42.48in District Nine.Why Cargill won. Ken Ellen, Cargill Salt’s transportationmanager [see Regional], said the company “does not want tocut corners on environmental laws.” Vermont statutes have thepractical effect of requiring covered storage on piles within thestate, and Cargill “is proud that all of its piles are covered.” No

other salt company has piles within the state.

ContactsJudy Jamieson, purchasing department, 802-828-2211.

VERMONT RAIL SYSTEM5 August. VAOT COULD HAVE OVERSEEN VTR WORK

BETTER, concluded an audit by KMPG on the work VTR did to

prepare its line in southern Vermont and New York for Amtrakservice [see 4 March issue]. In this case, no state employee was

on site to see what materials were used, or even if the work was

completed. Agency officials say that practice will now change.The audit contained no accusation of wrongdoing. {Mark

Bosma in WCAX-TV News}The Federal Highway Agency wrote to VAOT on 3 July: 'As

stated in the report, it is likely that the internal control

weaknesses cited would be applicable to all other VTR contractswith VTrans. Therefore, effective with this letter, FHWA will not

reimburse any expenses related to VTR's work on any non-

competitively bid federal-aid project until we receive an auditfrom VTrans certifying that VTR has an acceptable accounting


system capable of accumulating, segregating, and allocating

costs, that its internal controls are adequate, and that its indirectcost and fringe benefit rates are acceptable.'

Congress authorized $9.168 million in Section 1601 of TEA-

21, to be allocated over six federal fiscal years, from 1998-2003 forthe Albany-Bennington-Rutland-Burlington project. {e-mail to

ANR&P from AAG John Dunleavy 7.Aug.02}

8 August. WHETHER ACT 250 GOVERNS THE RIVERSIDE

INDUSTRIAL PARK remains to be decided by the US District

Court [see 24 May issue]. Jeanne Elias, an assistant attorneygeneral handling the case, estimated that the discovery phase of

the lawsuit would end in December. While the state could proceed with an enforcement action

under Act 250 because GMRC has withdrawn its Act 250

application [see chronology in 29 March issue], Elias said no

enforcement action has yet been filed. {ANR& P discussion8.Aug.2002}

QUÉBEC /MARITIMES

CAPE BRETON AND CENTRAL NS6 August, Port Hawkesbury. MAJOR CUSTOMER STORA

ENSO WILL CONTINUE TO OPERATE A NEWSPRINTMACHINE [see 12 April issue]. Union workers accepted a

contract which called for early retirement and less overtime.

{CBC news webposted}

ATLANTIC NORTHEAST RAILS & PORTS162 Main Street (new number!) Yarmouth, Maine 04096Vox (207) 846-3549 Fax (603) 215-4482Chalmers (Chop) Hardenbergh, publisher and editor

[email protected] www.atlanticnortheast.com

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7 August, Halifax. THE UTILITIES AND REVIEW BOARD

WILL PROBABLY NOT DECIDE UNTIL SEPTEMBER on

the fate of the Cape Breton line. According to staffer Nancy

McNeil, the two board members who took testimony [see 26 Julyissue] have received all filings and rebuttals. The two will make

the decision about when CBNS may abandon the line. {ANR&P

discussion}

HALIFAX7 August. PROPOSALS TO OPERATE THE FAIRVIEW

COVE TERMINAL are due on 6 September, according to

spokesperson Dawn Dalley. She said all those who hadexpressed interest [see 26 July issue] were sent the request for

proposals. {ANR&P discussion 7.Aug.02}

8 August. THE PORT AUTHORITY IS PLANNING FOR THE

THIRD TERMINAL. The operations manager heads the group.

{ANR&P discussion 7.Aug.02} [See 7 November 2001 issue.

More in a future issue.]

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