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Another Bump-in-the-Road for High-Speed Rail?

High-speed rail has had more bumps and grinds than a North Beach pole dancer.

Mar 04, 2013

High-speed rail has had more bumps and grinds than a North Beach pole dancer. Never mind that rider estimates are too high, cost estimates too low, that it does nothing to solve traffic problems where they need to be solved...within the greater L.A. and S.F. areas, not the space between them, that there isn't any money, that it isn't what we voted for, that it would not pass if voted on again, that it isn't high-speed, that it has none of the $13 billion in projected private investment, or as the New York Times wrote it's 'like building a state-of -the-art driveway while your house collapses.'

On top of all that, now we find that the California High-Speed Rail Authority apparently never bothered to request permission from the federal Surface Transportation Board to build a high-speed rail system, nor did they file for an exemption from STB's regulatory authority.

We suspect that the California High-Speed Rail Authority will find a way to get around this problem in a way that the common private businessman could not. There doesn't seem to be any obstacle too great for CHSR. Jerry Brown likened it to the Little Engine that Could, a little train engine that pulls a heavy load over a large mountain, despite the difficulty. "We're going to get over that mountain," Brown said. Who can argue with that?

But, back to the STB problem. This is just the latest SNAFU in a long string of SNAFU's. The failure of the California High-Speed Rail Authority to get STB permission could conceivably lead to cease-and-desist injunctions from a federal court, if opponents of the project (or the STB itself) ask for such injunctions. We will hazzard to guess, however, that the CHSRA will railroad us once again and roll right over the latest speed bump.

Troubled California High Speed Rail

Project May Face New Regulatory Delays


The troubled California high speed rail program, which is

scheduled to break ground on initial construction this

summer, may be facing a new round of lawsuits and

construction delays due to a failure by the state rail agency to

ask federal regulatory permission to build a new railroad.

According to letters sent last Friday by House Railroads

Subcommittee chairman Jeff Denham (R-CA), the California

High Speed Rail Authority (CHSRA) apparently never

bothered to request permission from the federal Surface

Transportation Board to build a high-speed rail system, nor

did they file for an exemption from STB’s regulatory


Denham wrote to the chairs of the STB and CHSRA and to the Administrator of the

Federal Railroad Administration requesting clarification on the California project’s

compliance with the Interstate Commerce Act. (The STB is the successor to the

Interstate Commerce Commission.)All three of Denham’s letters contain these common sentences: “As I understand it, the

Authority has not sought such a determination by the Board regarding its proposed

project…While I pass no judgment on whether the Board has jurisdiction over the

construction of the project – indeed, that is a determination properly left to the Board –

I believe it is imperative that the authorities set forth in the Interstate Commerce Act

be followed. If the Board does have jurisdiction, it is my understanding that the

Authority may construct a rail line only if the Board authorizes that activity.”

In the short term, the failure of CHSRA to get STB permission (or a determination from

the STB that no permission is needed) could conceivably lead to cease-and-desist

injunctions from a federal court, if opponents of the project (or the STB itself) ask for

such injunctions, until such time as the jurisdictional question is resolved.

Beyond that, the question becomes: does California need STB permission in order to

build their rail system? The Board decides these questions on a case-by-case basis, but

a STB decision two months ago sheds some light on the question. Last year, a company

called All Aboard Florida, which is proposing to build a new 230-mile rail line between

Miami and Orlando, petitioned the STB for a ruling on whether or not they needed STB

permission (since the railroad itself would not cross any state lines).

On December 21, 2012, in a 2 to 1 ruling, the STB determined that it lacked jurisdiction

over the Florida project, because the project would not be “part of the interstate rail

network.” In particular, the Board noted that the Florida project would not use “the

locomotive power, and train and engine crews” of Amtrak and that the Florida project

would not provide through ticketing with Amtrak or any other rail service provider.

By contrast, the latest business plan of the California High Speed Rail Authority says

that once the very first construction segment (the one that hopes to break ground this

summer) is completed, “the first IOS construction segment will be used by Amtrak San

Joaquin service and potentially other operators. Similarly, when the gap between

Bakersfield and Palmdale is closed, it will be available for immediate use by others.”

The San Joaquin line connects to the rest of Amtrak’s interstate route network. The

business plan also envisions combined ticket sales and marketing between the CHSR

network and Amtrak routes.

(The dissenting STB member in the Florida decision, Frank Mulvey, seems even more

likely to vote that the California project needs STB approval, based on his dissent, in

which he wrote that “if a proposed rail line uses facilities that are in the general system

of rail transportation and is related to the movement of passengers in interstate

commerce, Congress has determined that the Board should regulate its proposed


The STB could decline jurisdiction over the California project, though doing so would

seem to violate its recent case law. But what would be the consequences if the STB

determines that it does have jurisdiction over the California project?

In a word: delays.

Federal law (49 U.S.C. 10901) says that no one can “construct an additional railroad

line” or “provide transportation over, or by means of, an extended or additional railroad

line” unless “the Board issues a certificate authorizing such activity.” The STB has two

ways of granting such permission: exemption and full review. According to the STB’s

website, “Most carriers file, as an initial pleading, a Petition for Exemption under 49

U.S.C. 10502 from the formal application procedures of 49 U.S.C. 10901. The STB

reviews the Petition to make a determination of whether, from a transportation

perspective, detailed scrutiny of the proposed increased service is necessary. If the STB

finds that such scrutiny is not necessary, it will typically issue a conditional grant of

authority, subject to the STB's further consideration of the anticipated environmental

impacts of the proposal.”

Whether the STB gives the project the low-scrutiny exemption or the full-scrutiny

treatment, the project then rises or falls on its specifics. The STB website says that

“Historically, the agency has evaluated whether there is a public demand or need for

the proposed service; whether the applicant is financially able to undertake the

construction and provide rail service; and whether the proposal is in the public interest

and will not unduly harm existing services.”

In particular, the law and STB rules require the STB to conduct a rail transportation

analysis of the proposed project and to consider the Environmental Impact Statement

for the project – analyzed pursuant to the STB’s rules in 49 CFR 1105. The EIS process

is already ongoing, but the STB would have to review the EIS’s thousands and

thousands of pages before voting on the application.And it is important to remember that the STB is a quasi-judicial agency. Applications

have to have public comment periods, then public hearings, with waiting periods

between each, before the Board can vote whether or not to grant an application.

Interested parties can file motions against the application. And the process is supposed

to be insulated from politics to some degree.

For an example of how this works in the fastest-case scenario (assuming that the

project is indeed under STB jurisdiction), let’s look at the proposed Las Vegas high

speed rail line to terminate in Victorville, California (DesertXpress). The issue of STB

jurisdiction was a no-brainer because the project crosses state lines. DesertXpress filed

a petition for exemption from the STB on July 28, 2011 and the Board granted the

exemption on October 20, 2011 to become effective on November 25, 2011.

That was a time frame of four months, and the reason that it was done so quickly was

that, according to the STB ruling, “No replies to the petition were received.” But this

followed a three-year period of legal wrangling at the STB from 2006-2009 over whether

or not STB jurisdiction preempted state and local environmental review laws for
DesertXpress. And one can be certain that opponents of the California project would

file motions and comments with the STB, including motions for reconsideration of

potential adverse decisions, that would extend the process for longer than four months.

If a sign-off from the STB is required for the California project to move forward, then

the start of construction could be delayed from anywhere between several months to

more than a year, depending on how fast the STB wants to move the process. (This is

in addition to any delays in the project that might come from the other lawsuits now

pending against it.)

Any delays in the project threaten to jeopardize the $2.4 billion in federal funding from

the 2009 ARRA stimulus law that has been allocated to the California project by the

U.S. Department of Transportation. Under the law, any remaining high-speed rail

stimulus funding vanishes in a puff of smoke at midnight on September 30, 2017, even

if the work associated with that money has already been done and a contractor or

CHSRA is simply waiting for reimbursement.This brings up another bit of news relating to the California project. The Federal

Railroad Administration and CHSRA quietly amended their project agreement on

December 5, 2012 to allow CHSRA to spend about $400 million of federal money before

the state authority has to put up a dime of its matching funds. According to the revised

grant agreement, although the final project cost is supposed to be split 50-50 between

CHSRA and FRA, in the first two fiscal years (California fiscal years, so for the period

from July 1, 2012 through June 30, 2014), the federal government would pay 84 percent

of the cost. The state would then put in significantly more money in 2015 to get the

balance back to approximately 50-50.

The nonpartisan California Legislative Analyst’s Office actually sounded the alarm on

this in a recent review of Governor Brown’s budget request: “The Governor’s budget also

proposes for 2012–13 and 2013–14 to spend a greater share of federal funds at the

beginning of project construction, followed by a proportionally greater share of

Proposition 1A bond funds as the project nears completion. According to the HSRA, this

will reduce the risk of not spending the ARRA funds before the required deadline of

September 2017. The federal government and the HSRA amended their cooperative

funding agreement in December 2012 to allow for this arrangement.”

However, by having Uncle Sam spend $925 million in the first two fiscal years versus

California’s $180 million, the federal government’s “sunken costs” are that much higher,

so if the project then gets canceled (like the New Jersey ARC tunnel in 2011), the

federal government loses much more than would the state.

The front-loading of the federal money appears to be a reversal from USDOT’s position

of two years ago, when Undersecretary of Transportation Roy Kienitz wrote to CHSRA

to reject their suggestion that stimulus funding be used in advance of California

matching funds. The usual practice is to demand that the non-federal match be applied

on a dollar-for-dollar basis every time federal money is spent.

If CHSRA and FRA are already so concerned about meeting the September 2017
deadline for spending all the ARRA money, then the prospect of extra months of delay

(possibly a year or more) to go through an STB approval process must make the lapse of

at least some of the ARRA funding a distinct possibility.

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