Reasons have never been disclosed. However, it's possible to infer he removed it out of his refusal to endorse the LGBT lifestyle. Since he rejected Madonna from taking part in his "In The Closet" music video over similar matters(wanting more of a bi-sexual feel while Michael insisted on keeping it real).
Now don't get me wrong. Michael did not pull the plug over issues of homophobia. He respects folks of the gender queer community as human beings(As made known on The Bashir Documentary Outtakes and a comment by Jessie James during The Trial). But that doesn't mean he approves of their conduct.
If only they didn't try to mash gay rights into the mix, the song would've been perfect for the soundtrack. As Jessee James has said, "You will not use our civil rights to spread immorality" "On The Line" is definitely civil rights material coupled with a dream! Just listen to Martin Luther King's speech on that rainy day in 1964,
"I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood".
Today, you and I are living in that dream! Not just black and white but also for the green, yellow, and red one's.
Lyrics | On The Line lyrics