Proposals for short line operation were solicited from the Delaware Otsego Corporation, Rail Service Associates (operators of the Bath & Hammondsport Railroad), and TransAction Associates. Rail Service Associates (RSA) formed the Delaware, Lackawaxen & Western Railroad to take over the branch, and began its feasibility study. Early negotiations for subsidy came with the requirement that former union employees be made an offer for work at their current salary and benefit levels. Discussions with Conrail over rate divisions did not end favorably. In March 1976, with less than a month to go before the start up of Conrail, RSA pulled out of their proposal.