July 14, 2013

For rail company, rebirth may yield to ruin

The rising demand for crude oil transit gave hope to the Montreal, Maine & Atlantic Railway, but may also be prove to be its undoing.

By Eric Russell erussell@pressherald.com
Staff Writer

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click image to enlarge

In this Feb. 19, 2010 file photo, rail cars sit idled on the Montreal, Maine & Atlantic Railway junction in Oakfield, Maine.


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So, beginning in late 2011, MM&A began shipping crude oil east to Irving's refinery. The company that owns most of the southern Maine rail lines, Pan Am Railways, started shipping oil as well.

In less than three years, the oil-by-rail industry has grown significantly, from 25,000 barrels shipped in 2011 to 5.2 million barrels in 2012. In the first five months of 2013, 3.4 million barrels moved through Maine.

"It's a matter of economics," said Jamie Py of the Maine Energy Marketers Association. "We have a lot of oil now in the Western part of the country and it's less expensive than what we've been purchasing off the international market."

MM&A's financial outlook improved once the oil started flowing, although since it's a private company, its budget numbers are not publicly available.

According to the company's website, it owns about two dozen locomotives (the actual rail cars that haul freight are leased) and employs 170 people.

Burkhardt, who addressed reporters when he arrived in Lac-Megantic on Wednesday, said his company is "acknowledging liability."

"We're not standing around saying we don't have responsibility," he said. "We have a lot of insurance, and I'm not going to advise at this point what our limits are. I think our limits are going to be tested."

Even if the insurance is adequate, though, MM&A's line is temporarily shut down because of the investigation. That means Irving is not getting as much oil at its refinery. It may not be long before Irving tries to build up its capacity by relying on another line, such as the one owned by Pan Am that runs north from Portland.

Whether MM&A will continue to ship oil on its tracks in the wake of the accident is not clear. A representative for Irving Oil could not be reached for comment about whether the company will discontinue using MM&A.

MM&A does have other customers. Many commodities move along those tracks, said Dearden, the Indiana consultant, including lumber, particle board and wind turbine parts.

Without oil, though, MM&A would be tying its fortunes to a dying industry in Maine: the lumber and paper industry.

Dearden said Burkhardt is a good manager and "very safety-conscious."

"My heart goes out to him," she said. "I know he's agonizing over this."

Dearden also said railroads are still the safest way to move goods, despite the July 6 tragedy.

In 2011, Montreal, Maine & Atlantic had a train accident rate of 10 accidents per million train miles throughout the company's network. Pan Am had a rate of 3.7, and the national average was 2.8.

In 2012, MM&A's rate was 34.7 per million miles, compared to the national average of 2.3.

The company has said that its rate is higher because it carries freight fewer miles than other carriers. The 2012 rate reflects two reportable accidents.

Burkhardt founded Rail World Inc, in 1999 after he left Wisconsin Central, one of the first private regional railroads formed after the industry was deregulated.

Most of Rail World's holdings are outside the U.S.: Poland, Estonia, New Zealand, Australia and the United Kingdom.

Burkhardt does own the San Luis Central Railroad Company, a 13-mile stretch of tracks in Colorado over which grains, potatoes and fertilizer are hauled, and serves on the board of directors for the Wheeling & Lake Erie Railway, a regional carrier serving Ohio, Pennsylvania and West Virginia.

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