A nearly $36 million railway upgrade is planned to improve performance of a critical line in Maine and serve the state’s resurgent pulp and paper industry.

The Federal Railway Administration will cover about half of the $35.5 million being spent to replace aging rails, renovate road crossings, improve safety and fix bridges on a 75-mile stretch of line between North Yarmouth and Waterville owned by Pan Am Railways. The company, based in Billerica, Massachusetts, will match federal funds with its own investment. The Maine Department of Transportation will contribute about $568,000 to the project, which is expected to get underway next year.

“We’ve been talking about this for a long time,” said Nate Moulton, director of freight and business services at the Maine Department of Transportation. “When this opportunity, these funds became available, it was a good fit for the project.”

Republican Sen. Susan Collins of Maine chairs the Transportation Appropriations Subcommittee that awarded the $17.5 million federal grant last month. She and independent Sen. Angus King had sent a letter in September 2018 supporting the transportation department’s application.

“Enhancing the rail connection between manufacturers and the forest products industry and their markets can create a competitive advantage for Maine, helping to create jobs in rural parts of our state,” Collins said in a news release when the funding was announced.

The improvements are equal parts safety and economic development. The pavement on at-grade railroad crossings is in poor shape and signals to warn drivers a train is coming are functional, but out of date.

Most of the funding is directed to improve the line to serve expected freight increases as paper mills ramp up production. Pan Am will install 37 miles of continuously welded line, upgrade mainline switches and track signals, and extend a rail siding in New Gloucester so larger trains can pass one another.

“This is a rail line that is the north-south trunk line, if you have traffic coming down the Eastern Seaboard, it is on this line,” Moulton said. “It is a lot of traffic going really long distances.”

If it doesn’t become more reliable and efficient, companies might choose to ship freight by tractor-trailer instead, increasing congestion and road damage in parts of rural western and central Maine, Pan Am spokeswoman Cyndi Scarano said.

“Absent the improved service reliability and safety enhancements resulting from this project, the concern has always been that customers in Maine will utilize trucks to get their goods to market and receive raw materials,” Scarano said in an email, noting that trucking may be more expensive and environmentally harmful than efficient rail.

“An inefficient rail network would adversely impact customers by depriving them of a competitive option to transport goods,” she said.

Maine’s pulp and paper industry historically supported commercial rail in the state, but as it declined, railroads have had to deal with a light customer density and long distances, the state said in its funding application. They needed a financial boost to retain rail capacity and grow to serve new customers as the state’s paper industry goes through an upswing.

Last year Verso Corp. announced it would upgrade one of its paper machines in Jay to make packaging material and rehire 120 workers. ND Paper bought the Rumford paper mill last year and announced plans to invest $111 million to modernize it. Late last year, ND Paper bought the shuttered Old Town mill and said it would reopen this year.

Right now, some of the jointed rail on the line is up to 60 years old and is susceptible to breaks and gaps, especially during the spring thaw, Moulton said. That forces trains to slow down and adds maintenance delays. With new rails, trains can maintain the maximum speed of 25 mph along the entire line and it will be less sensitive to seasonal conditions. Trains presently run between 17 mph and the top speed.

Pan Am expects its pulp and paper business to increase by 2.4 percent annually, according to the funding application.

Alongside a reviving paper industry, Pan Am also is serving Poland Spring, which transfers bottled water from its plant in Kingfield through the railroad’s yard in Waterville and south to a Massachusetts warehouse. Pan Am expects its business with Poland Spring to grow 9 percent a year.

The water bottling company has been using Pan Am for about 3½ years, said Chris Haynes, Northeast Logistics Director for Poland Spring Co.

“Infrastructure improvements, particularly to safely increase track speeds and decrease time for shipments to reach their destination, will benefit not only Poland Spring but other companies as well,” Haynes said. “Through Pan Am Railways, we currently ship 100 loads per week and we’re approaching 20,000 total loads since 2016. We look forward to continuing this collaboration.”

ND Paper uses both trucking and freight rail in its Maine operations and its business is expected to grow.

“There are a number of capital projects that will increase production capacity in Rumford and we are restarting the Old Town mill this summer,” spokeswoman Amy Lee said.

“We will choose truck or rail based on what the cost is,” she said. “Certainly things like efficiency and reliability would impact that cost and factor into our decision I’m sure.”

The rail project also includes safety improvements such as reconstructing and modernizing 89 public and private crossings, and replacing deck timbers on eight bridges. Some public crossings have battered pavement and 70-year-old signals that will be replaced with LED lights, cameras and modern signal flashers to improve traffic flow.

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