No roads link Churchill, Man., with places to the south. For decades, the town 1,000 kilometres north of Winnipeg has relied on the railway to bring food, fuel and jobs over the tundra to the shores of Hudson Bay.

But springtime flooding that wiped out railroad bridges and tracks have gone unrepaired amid an escalating dispute between the Hudson Bay Railway owner and governments, leaving Churchill, population 900, dependent on airplanes. Prices for fuel and food have soared, and about 100 railway jobs are gone, adding to mounting hardships in a region hit by port and mine closings and dwindling rail freight.

Denver-based OmniTrax, owner of Hudson Bay Railway, says it has no intention of repairing the tracks and restoring train service on the town's only land link, despite the threat of a lawsuit from the federal government.

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The company says it has not rebuilt the bridges and track sections damaged in a May flood because the 820-kilometre route loses about $5-million a year, and it will not spend at least $43-million to repair a rail line it has been trying to sell to a coalition of First Nations.

The federal government says OmniTrax faces a Sunday deadline to reopen the railway or it is in violation of an agreement reached in 2008 that OmniTrax would keep the trains moving and the tracks repaired until 2029.

"OmniTrax has until Nov. 12, failing which Transport Canada will instruct Justice Canada to file a lawsuit for breach of contract," said Delphine Denis, a spokeswoman for Marc Garneau, the Transport Minister.

Peter Touesnard, OmniTrax's chief commercial officer, said a lawsuit will delay the transfer of the railway to new owners. "By suing us, they tie up this matter in the courts. If the Canadian government [and] the people of Canada are sincere about restoring rail service into Churchill, this isn't the way to go about it," he said.

Dennis Fenske, the mayor of Thompson, Man., said Ottawa's legal ultimatum issued last month appears to have hastened OmniTrax's retreat from the region. "We saw a reduction in train services. We saw a reduction in employees," Mr. Fenske said. Via Rail, which uses HBR's tracks, has cut service to Thompson to twice a week from three times, and freight train service has been reduced, forcing fuel companies to depend on trucks.

Meanwhile, Churchill, more than 400 km to the north, remains a fly-in community.

At Churchill's Tamarack Foods, a two-litre jug of milk costs $4.50; a banana goes for 65 cents. Erwin Borau, the store's manager, said he hears complaints from customers about rising prices, but provincial and federal air-freight subsidies have kept prices from rising too steeply.

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"It helps with the shipping costs. It certainly doesn't eliminate it because air freight is extremely expensive, but it does help," he said by phone.

In 1997, OmniTrax bought the Hudson Bay Railroad from recently privatized Canadian National Railway Co., and the port of Churchill from the federal government.

The port has Canada's only deep-water berths in the north and, despite being iced-in for most of the year, was a key grain terminal.

But rail volumes plunged after the 2012 dismantling of the Canadian Wheat Board, which was a major customer. The grain-buying group was privatized and purchased by a U.S.-Saudi partnership that has been shipping through its own network of crop terminals in Vancouver and the St. Lawrence Seaway.

OmniTrax's Mr. Touesnard said the railway needs about 60,000 railcars a year to be viable. At its peak, it carried about 17,000, he said. "This is not a commercially viable operation and … our intention is not to invest more money in a losing operation," he said.

Privately owned OmniTrax owns 21 short-line rail companies, including Carlton Trail Railway Co. in Prince Albert, Sask.

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In a deal reached with Ottawa and Manitoba in 2008, OmniTrax agreed to operate and maintain the rail line until 2029 in exchange for about $40-million.

After announcing it had a buyer for the port and railway in 2015, OmniTrax closed the port and reduced rail service in 2016. In June of 2017, the company said the railway was severely damaged by spring flooding and would shut "indefinitely." The flood, OmniTrax said, was an unforeseeable event that meant, legally, it did not have to fulfill its contract.

The railway used to employ 100 train engineers and conductors, in addition to maintenance workers and clerical staff. "Everybody has been laid off except for eight people in The Pas," said Roland Hackl, vice-president of Teamsters Canada Rail Conference, the union that represents train crews. About 100 people lost their jobs when the port closed.

"It's been pretty devastating," Mr. Hackl said.

The federal government's chief negotiator, lawyer and former clerk of the privy council Wayne Wouters declined to be interviewed, citing continuing talks.

The loss of the railway and port jobs comes as Brazilian miner Vale SA closes a mine, smelter and refinery in Thompson, eliminating about 700 jobs.

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"It just adds to the uncertainty of the north," said Mr. Fenske, who arrived in Thompson as a toddler and has been mayor for four years.