Complicated answer with no specific or easy answer.
First off, what you have been told is NOT correct. A common carrier rail line presently generating traffic can indeed be abandoned. However, the carrier (railroad company) has a burden of proof to show the line cannot be economically operated and that the abandonment is in the public interest. More on this later.
Second, no carrier is in the business of subsidizing unprofitable rail lines. If business falls off, even a big railroad like UP will abandon unprofitable lines unless there is some other major reasons why it should remain, such as preserving service to another common carrier, if the customer served has other plants elsewhere on other lines who's business might be negatively impacted should one line close, and/or if there are some other competitive reasons why a line should remain in place.
That being said, the essence of the answer to your question "What is going to happen" depends on a whole lot of factors. Was the line leased by the present carrier or owned? If leased, the lessee carrier could always terminate the lease and walk away, or the lessor can cancel the lease, at which point the common carrier obligations would return to the lessor, though the Surface Transportation Board must approve the transfer of the common carrier status. The carrier could also enter bankruptcy protection, which would enable the carrier to continue operations until the property is either liquidated or reorganized or the assets otherwise conveyed to a new party. I'm not 100% sure how a bankruptcy liquidation interfaces with disposition of common carrier service, but the actions of the bankruptcy court might trump the Surface Transportation Board requirements and regulations.
If the situation is hopeless, the carrier with the common carrier responsibility can seek regulatory approval to abandon the line and terminate common carrier operations. The process is much simpler is the line has not generated any traffic in the previous two years, and gets a little bit more complicated if the line has generated carloads in that time period. In the latter cases, the carrier has to detail in its application the overall economic situation of the line, identify existing shippers and their shipping levels, and specify other available shipping options to any customers who will lose service as a result of the abandonment. There are a myriad of other studies and consultations that must be done during the abandonment process, such as identifying any benchmarks or survey markers or the like that might be affected, if there are threatened or endangered species in the area, any other affected environmental concerns, projected increases in truck traffic because of the loss of rail service, and a survey for and subsequent plan to protect any cultural or historic resources present on the line. The STB's Office of Environmental Analysis generally handles the documents and consultations carrying out these tasks. There are also required public notices the carrier must file with affected shippers and publish in local newspapers, among other places.
There are safeguards in place to protect shippers, local governments, or others potentially affected by an abandonment. Affected parties can challenge a STB decision authorizing an abandonment, and if they can make a strong enough case it is possible to get an abandonment petition denied, though the bar for so doing is set pretty high. Once abandonment has been authorized, there are some secondary processes under which an affected party, or a financially responsible outside party, can use parts of the abandonment regulations to either subsidize continued operations of the existing carrier or, if necessary, force the carrier to sell the line in question to the third party at either a privately arranged price or a price set by the STB, with the caviot the buyer has to operate the line for at least two years. If those processes fail and the abandonment becomes a reality, then others get a chance to negotiate for converting the right-of-way to a recreational trail, subject to future restoration to a rail line should that again become viable.
These are just the highlights of the process, there are a lot of other intricacies and details I left out. It's no secret SLRG's parent Iowa Pacific is going through some very rough times at the moment. All this being said, SLRG, like a lot of other operations, is doing a lot of commercial railcar storage at the moment, which can be very financially rewarding for a railroad, though it may not otherwise be reflected in freight traffic or other business levels.
I hope this helps.
Jeff Moore
Elko, NV
