— BY KEVIN MILLER

Bangor Daily News

AUGUSTA — Representatives of several of northern Maine’s largest employers warned Thursday that the loss of Aroostook County’s only railroad would be felt throughout the state’s manufacturing and industrial sector.

The comments came during a legislative hearing on a proposal for $20 million in bonds that would enable the state to purchase roughly 240 miles of privately owned railroad tracks between Millinocket and Madawaska.

Within the week, Montreal, Maine and Atlantic Railroad is expected to file an application seeking federal approval to abandon the tracks in the face of mounting debts. Unless the state or a private entity steps in to purchase the tracks, the railroad’s decision could eliminate freight rail service to roughly 20 companies, including some of the largest employers in the region.

”This really is a statewide economic development enterprise that has enormous implications for our manufacturing economy and the economy of the state as a whole,” said Jim Mitchell, an attorney representing Irving Woodlands, Maine’s largest timberland owner.

”Our survival is dependent on getting our products to our customers in the most efficient and cost-effective manner,” said Tracy Caron, corporate transportation manager for Fraser Papers, which employs more than 900 people at several mills in northern Maine. ”Increased freight costs would significantly decrease operating margins, threatening the continued operations of our mills.”

Earlier this week, state transportation officials had one hope dashed when the federal government denied a request for millions more in stimulus money to purchase the railroad’s lines in northern Maine.

One solution discussed at Thursday’s Transportation Committee meeting was a public-private partnership in which the state would acquire the tracks and then lease them back to a third party — either Montreal, Maine and Atlantic or another operator — that would actually run the railroad.

State Transportation Commissioner David Cole said the state is getting involved only as a last resort to avoid losing a transportation network critical to the state’s manufacturing sector.

”It is inconceivable to me that the largest county east of the Mississippi, and whose economy is largely dependent on the movement of natural resources, would be cut off from rail service,” Cole said.

Freight traffic on Montreal, Maine and Atlantic’s northern lines has decreased substantially in recent years. In 2005, there were 15,000 carloads. This year, company officials estimate slightly more than 9,000.

Railroad President Robert Grindrod has said that while he believes the line will become profitable once housing and other markets recover, the company is bleeding several million dollars a year and cannot wait that long.

”I want to see rail service preserved in The County, but it has come to the point where I, as the leader of a private company, cannot do it anymore,” Grindrod told lawmakers. Asked why the state should even consider buying an unprofitable rail line, Grindrod said any deal would not include the railroad’s debts, thereby making the line more financially sustainable.

A report presented to the committee Thursday estimated the net liquidation value of the tracks at between $18 million and $21 million. The bill sponsored by Rep. Charles Kenneth Theriault, D-Madawaska, proposes $20 million in voter-approved bonds to purchase the tracks if no other funds become available.