A plan to create a new rail link between key East Coast ports and the Canadian interior may fall apart because of a short stretch of tracks between Buffalo and Niagara Falls, N.Y.

The tracks -- known as the Buffalo-Niagara Gateway -- belong to the Consolidated Rail Corp., which has gone to a special court over the dispute with Canadian Pacific Ltd.

The link is vital to Canadian Pacific's plan to use the Delaware & Hudson Railway system to connect the ports of Philadelphia and New York with the Canadian interior. If CP can put all the pieces together, it will be competing directly with Conrail for freight in the Northeast.

"I wouldn't want to be in the position of saying what's motivating Conrail in all of this but certainly a major competitor in their back yard has got to be of concern to them," Canadian Pacific spokesman John Cox said last week.

"There are two issues embedded in one -- whether the trackage rights are available to us and, second, what the cost will be. Right now we're blocked on both fronts," he said.

Canadian Pacific has offered to buy the financially ailing Delaware & Hudson Railway and link it at Niagara Falls to CP Rail tracks into southern Ontario. If it can't get the trackage rights, CP may withdraw its $25 million offer, Cox said.

Cox said the stretch of track was about 15 miles long. Yesterday, Conrail said it was 30 miles. Cox could not be reached to resolve the discrepancy because of the Canadian holiday of Thanksgiving yesterday. The spokesman for D&H was not in his office yesterday.

The D&H, the nation's oldest continually operated railroad, filed in July 1988 for protection from its creditors under U.S. bankruptcy laws. The railroad, which runs from Montreal to Washington and between Albany and Buffalo, owes about $100 million.

CP took over operation of the D&H in August and agreed to absorb any further financial losses, which had been running at about $200,000 a month.

On Oct. 1, Conrail took the track dispute to a special three-judge court, which was created in the 1970s to oversee the railroad bankruptcy proceedings that created Conrail. Court spokesman Richard Eriksen said the panel would hear the case in Washington by the end of the month.

Conrail spokesman David Neurohr said yesterday that Conrail believes CP should pay its fair share to maintain the Buffalo- Niagara tracks, although he declined to give dollar amounts.

This is the second time that Conrail has thrown up a roadblock in CP's effort to buy the D&H. Earlier this year, Conrail refused to negotiate the rights to its tracks between Hagerstown, Md., and Harrisburg, Pa. This led CP to withdraw its initial $35 million bid for the D&H.