Would-be rail baron begins piecing track together

Little by little, a youthful member of a famous American banking family is trying to piece together what could be the country's next major railroad network.

The would-be rail baron: Timothy Mellon, not yet 40, and chairman of a Connecticut firm that manufactures railroad ties. Last spring he formed a holding company, Guilford Transportation Industries Inc. that already owns one railroad, has agreed to purchase another, and is actively pursuing a third.

If he succeeds, the result would be a 4,100-mile system that would span New England and could:

*Streamline rail transportation, lower shipping costs for industries here, and make the region more competitive with other areas of the country.

* Attract new industries here, especially in the heavy manufacturing sector.

* Complicate Conrail's efforts to prove to an impatient federal government that it can operate profitably. Conrail recently announced a plan to compete more effectively with trucking lines by lowering rates for iron and steel shipments. But the reduced rates will not apply to New England, whose principal city, Boston, is in the midst of a building boom.

The first link in the Mellon network is the 900-mile Maine Central, for which he reportedly paid $20 million last May. The second would be the bankrupt 1,400 -mile Boston & Maine (B&M), for which he has offered $24.25 million. Together, these two lines serve parts of all six New England states and interconnect at several points. The third would be the equally troubled Delaware & Hudson (D&H) , whose 1,800 miles of track link Montreal, Washington, Buffalo, and New York City and connect with the B&M near Albany, N.Y.

Purchases of the B&M and D&H are not yet assured, however. While Mr. Mellon and the B&M trustees have signed a letter of intent on the matter, the approval of the Interstate Commerce Commission (ICC) and a bankruptcy court are needed. Another potential buyer has pledged to come forward with a larger offer when the ICC meets. The bankruptcy court could compel the B&M trustees to accept the new offer.

The D&H also is sought by other parties, but the Mellon plan is viewed by influential rail officials as being the most realistic of those proposed. The D&H is considered expendable by its parent company, the Norfolk & Western Railway, because it owes $48 million (including interest) to the US government and stands in the way of a pending merger between the Norfolk & Western and the Southern Railway.

Late last month, however, Congress appeared to clear the way for Mellon to buy the D&H by voting to set a June 1983 deadline for Conrail to show it can consistently operate in the black. If it cannot, and if nobody wants to buy it intact within a year of that date, the Conrail system may be sold in parts. And part of that system is 920 miles of track used by the D&H under "operating rights grants" for which Conrail is paid a fee.

Mellon's press spokesman, John McGinley, says the purchase of the D&H would likely hinge on whether Guilford Transportation is able to acquire the Boston & Maine. But he insists Mellon will hold on to the Maine Central regardless.

If the new rail network can be assembled it would be well-positioned to cash in on the conversion of more and more New England industries from oil to coal. Outgoing trains could carry forest products and other goods manufactured in the region.

Mellon's plans call for single control, but separate management, of the three railroads. Crews would change as a train crossed from one line to another, but equipment would not.

"What it brings is a whole range of new opportunities," says Paul Tortolani, director of economic development for the New England Regional Commission and a specialist in railroad matters. "[The prospective network] can provide unit trains, longer trains, intermodal transportation, more regular service, more dependable service, expedited switching through yards."

Mr. Tortolani thinks the Mellon system also could help attract heavy industry to New England. "Certainly the possibility is there," he says, provided raw materials could be shipped in and finished products shipped out in "two to three days turnaround time."