Advocates for the continued restoration of the Mountain Division Rail Line will look again for state funding, now that the project has been denied federal grant money.

Inclusion in a statewide transportation bond package that would likely go to referendum in June is the project’s next best bet for financing, said state Sen. Bill Diamond, D-Windham.

In the spring, Diamond proposed to borrow $21 million to repair the Mountain Division Rail Line to Fryeburg, but the bill was carried over to the coming session, which starts next week.

In the fall, the Maine Department of Transportation applied for $8.3 million in federal funding to restore 22 miles of rail line from Windham to West Baldwin, the site of a proposed plant for manufacturing wood pellets.

The $10.4 million project, meant to boost an economically depressed area by bringing back freight service west of Portland, was not among the 46 applicants chosen this month by the U.S. Department of Transportation to receive $511 million through its popular grant program called Transportation Investment Generating Economic Recovery.

In total, 848 applicants to the program requested $14.3 billion, according to the U.S. Department of Transportation.

Maine submitted three applications, for a total of $24.7 million, and received $10.8 million, to restore the Kennebec Bridge between Richmond and Dresden. The third application was for a downtown revitalization project in Searsport.

Nathan Moulton, director of the Maine Department of Transportation’s rail program, said the state plans to “beef up” its application for the restoration of the Mountain Division line and apply for the round of federal funding in 2012.

“In the meantime, we’ll look at other options,” he said.

Diamond said public hearings on bond proposals usually happen in February or March. He expects his $21 million proposal to be pared down to about $10 million, which would restore the rail line to West Baldwin.

“The bond package is going to be pretty minimal this time. I think we have to be realistic,” Diamond said.

West Baldwin became a landmark when the F.E. Wood & Sons wood-products company came forward with a plan to build a plant there for manufacturing wood pellets, which it would ship from Portland to Europe.

Anthony Wood, the company’s vice president, has said that construction of the plant isn’t contingent on freight service, but the company could reduce costs and carbon emissions by using rail instead of trucks to transport the pellets to Portland.

“If it happens in the beginning, if it happens a couple years down the line, it will be an improvement,” said Wood. He said the company has to “make sure we have a successful development one way or the other.”

Wood has said the plant would open in 2013.

The only section of the Mountain Division line in operation is a six-mile stretch between Portland and Westbrook, which is used by the Sappi paper mill. The restoration of five miles from Westbrook to South Windham is expected to be complete in the spring.

Staff Writer Leslie Bridgers can be contacted at 791-6364 or at:

lbridgers@pressherald.com