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California Supreme Court Determines that CEQA Applies to Railroad Projects Undertaken by State Agencies

In a decision that could have lasting impacts on future litigation over California High Speed Rail, the California Supreme Court held last week that the California Environmental Quality Act (CEQA) is not preempted by the Interstate Commerce Commission Termination Act of 1995 (ICCTA).

The case, Friends of the Eel River v. North Coast Railroad Authority (July 27, 2017, S222472), involved state agency North Coast Railroad Authority’s (NCRA) project to resume freight services on a rail line from Lombard in Napa County to Willits in Mendocino County.  The project included resuming freight service and associated railway rehabilitation activities.  The NCRA had committed to CEQA compliance over the years, completing two draft environmental impact reports (EIR) for the project in 2009 and certifying a final EIR in 2011.  However, when two petitioners, Friends of the Eel River and Californians for Alternatives to Toxics, filed CEQA lawsuits against NCRA’s approval of the project, the NCRA argued that any application of CEQA to the project was preempted by the ICCTA.  The NCRA subsequently rescinded its certification of the EIR and approval of the project in 2013 to bolster its claims that the activities were not a project subject to CEQA.

The Court held that while the ICCTA preempts state regulation of rail transportation when the owner of the railroad is a private entity, it does not preempt regulation by the state on itself as a railroad owner.  This is because, in the CEQA context, the state is not acting as a regulator, but is self‑governing.  In adopting CEQA, the California Legislature imposed rules on how state and local agencies may exercise their governmental direction related to land use issues through requiring these agencies to undertake extensive environmental reviews, consider mitigation and alternatives, and support determinations on environmental impacts with substantial evidence.

The Court held that when CEQA conditions the issuance of a permit for private development, it is clearly regulatory, because it restricts the ability of a private citizen or entity to develop their property.  However, when the state agency owns the property and intends to develop that property itself, CEQA acts as a form of self-government.  The state’s ability to govern itself and its departments is entirely different from the usual regulation of private entities, and therefore was not intended to be preempted by Congress in enacting the ICCTA.  The ICCTA preempts only the more traditional regulation of the railroad industry, not the self-regulation of a state government or subdivision.  Therefore, the ICCTA would preempt CEQA when the developer is a private entity, but not when the developer is a state entity.

This decision could have serious impacts on the highly contentious high speed rail project currently under construction.  Under the Court’s holding in this case, the California High Speed Rail Authority, a California state agency, will not be able to easily argue that the ICCTA preempts CEQA such that it does not have to entirely comply with CEQA requirements when planning, constructing, and operating the high speed rail project.

For more information on this case, please contact Brenda Bass at bbass@somachlaw.com.

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