KiwiRail's relationship with Solid Energy had always been fraught, Mr O'Connor said today.
"This is an inevitable outcome of the crisis facing Solid Energy."
It was sad that two state-owned enterprises had "beaten up" on one another for so long, instead of working collectively and collaboratively, he said.
He hoped that whatever the outcome, the Midland Line stayed open. The line was "absolutely essential" to the Coast's tourism industry, he said.
The TranzAlpine delivered hundreds of thousands of tourists to the Coast, and was the "backbone" of much of the tourism growth that the Coast had appreciated over the years, he said.
Radio New Zealand reported KiwiRail believed the price Solid Energy paid did not fairly reflect KiwiRail's costs to operate the service.
The scuffle has been ongoing for a number of years, but has flared up again after Solid Energy entered voluntary administration.
Transporting Solid Energy's coal is a big part of KiwiRail's revenue. KiwiRail had fixed costs despite the drop in volume of coal being transported, said KiwiRail chief executive Peter Reidy. Its contract with Solid Energy was not commercial in that regard.
"Without Solid it definitely has an impact. We, I think, have been pragmatic, we have an obligation to make sure that we work with Solid, but at the same time we want to make sure we've got a commercial arrangement," Mr Reidy told RNZ.
Solid Energy's voluntary administrators were working with all its creditors and suppliers, including KiwiRail, to try and come up with arrangements.
Any further scaling back in Solid Energy would have severe implications for the coal route, he said.
A lot of money had gone into the coal route line, which he described as "not economic" in the current state of play.
Rail and Maritime Transport Union general secretary Wayne Butson is concerned about employment and the Midland line's future.
"We've got track workers that are based in Westport, they haven't been touched to date and we've got track workers based in Greymouth and Otira as well," he told RNZ.
