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Friends of Eel River v. North Coast Railroad Authority

Supreme Court of California

July 27, 2017

FRIENDS OF THE EEL RIVER, Plaintiff and Appellant,
NORTH COAST RAILROAD AUTHORITY et al., Defendants and Respondents; NORTHWESTERN PACIFIC RAILROAD COMPANY, Real Party in Interest and Respondent. CALIFORNIANS FOR ALTERNATIVES TO TOXICS, Plaintiff and Appellant,
NORTH COAST RAILROAD AUTHORITY et al., Defendants and Respondents; NORTHWESTERN PACIFIC RAILROAD COMPANY, Real Party in Interest and Respondent.

         Superior Court Marin County Nos. CV1103605, CV1103591, Ct.App. 1/5 A139235, Ct.App. 1/5 A139222 Faye D. Opal and Roy O. Chernus, Judge

          Shute Mihaly & Weinberger, Ellison Folk, Amy J. Bricker, Edward T. Schexnayder and Laura D. Beaton for Plaintiff and Appellant Friends of the Eel River.

          Law Offices of Sharon E. Duggan, Sharon E. Duggan; Klamath Environmental Law Center, William Verick; Environmental Law and Justice Clinic at Golden Gate University School of Law, Helen H. Kang, Ashley Pellouchoud; Environmental Law Clinic and Mills Legal Clinic at Stanford Law School and Deborah A. Sivas for Plaintiff and Appellant Californians for Alternatives to Toxics.

          Law Offices of Stuart M. Flashman and Stuart M. Flashman for Town of Atherton, California Rail Foundation, Transportation Solutions Defense and Education Fund, Community Coalition on High-Speed Rail and Patricia Hogan-Giorni as Amici Curiae on behalf of Plaintiffs and Appellants.

          Kurt R. Wiese, Barbara Baird and Brian C. Bunger for South Coast Air Quality Management District and Bay Area Air Quality Management District as Amici Curiae on behalf of Plaintiffs and Appellants.

          David Pettit, Melissa Lin Perrella and Ramya Sivasubramanian for Sierra Club, Coalition for Clean Air, Natural Resources Defense Council, Planning and Conservation League and Communities for a Better Environment as Amici Curiae on behalf of Plaintiffs and Appellants.

          Clare Lakewood and Kassia R. Siegel for Center for Biological Diversity as Amici Curiae on behalf of Plaintiffs and Appellants.

          Holder Law Group and Jason W. Holder for Madera County Farm Bureau and Merced County Farm Bureau as Amici Curiae on behalf of Plaintiffs and Appellants.

          Frank G. Wells Environmental Law Clinic at UCLA School of Law and Sean B. Hecht for Natural Resources Defense Council, Planning and Conservation League and Sierra Club as Amici Curiae on behalf of Plaintiffs and Appellants.

          Fredric Evenson and Brian Acree for Ecological Rights Foundation as Amicus Curiae on behalf of Plaintiffs and Appellants.

          Neary & O'Brien and Christopher J. Neary for Defendants and Respondents North Coast Railroad Authority and Board of Directors of North Coast Railroad Authority.

          Cox, Castle & Nicholson, R. Chad Hales, Andrew B. Sabey, Linda C. Klein, Stephanie R. Marshall; Law Office of Douglas H. Bosco and Douglas H. Bosco for Real Party in Interest and Respondent.

          Kamala D. Harris and Xavier Becerra, Attorneys General, Robert W. Byrne, Assistant Attorney General, Annadel A. Almendras, Marc N. Melnick, Myung J. Park and Carolyn Nelson Rowan for California Environmental Protection Agency, California Natural Resources Agency and certain of their Departments and Boards as Amici Curiae on behalf of Defendants and Respondents and Real Party Interest and Respondent.

          Kamala D. Harris and Xavier Becerra, Attorneys General, John A. Saurenman, Assistant Attorney General, Deborah M. Smith and Danae J. Aitchison, Deputy Attorney General, for California High-Speed Rail Authority as Amicus Curiae on behalf of Defendants and Respondents and Real Party Interest and Respondent.

          Counsel who argued in Supreme Court (not intended for publication with opinion): Amy J. Bricker, Shute Mihaly & Weinberger, Helen H. Kang Environmental Law and Justice Clinic at Golden Gate University School of Law, Andrew B. Sabey, Cox, Castle & Nicholson

          Cantil-Sakauye, C. J.

         In this case we decide whether federal law, the ICC [Interstate Commerce Commission] Termination Act of 1995 (Pub.L. No. 104-88 (Dec. 29, 1995) 109 Stat. 803) (ICCTA; see 49 U.S.C. § 10101 et seq.), preempts application of the California Environmental Quality Act (CEQA; Pub. Resources Code, § 21000 et seq.), to a railroad project that has been undertaken by a state public entity, defendant North Coast Railroad Authority (NCRA), along with lessee real party in interest, Northwestern Pacific Railroad Company (NWPCo), a private entity.

         The Court of Appeal determined that “CEQA is preempted by federal law when the project to be approved involves railroad operations.” We conclude that the ICCTA is not so broadly preemptive.

         True, the ICCTA contemplates a unified national system of railroad lines subject to federal, and not state, regulation. Indeed, it appears settled that the ICCTA would preempt state regulation in the form of the state's imposition of environmental preclearance requirements on a privately owned railroad that prevented the railroad from operating. But in this case we must explore the application of the ICCTA preemption clause to the state's decisions with respect to its own subsidiary governmental entity in connection with a railroad project owned by the state.

         When the project is owned by the state, the question arises whether an act of self-governance on the part of the state actually constitutes regulation at all within the terms of the ICCTA. Even though the ICCTA applies to state-owned rail lines, in the sense that states as owners cannot violate provisions of the ICCTA or invade the regulatory province of the federal regulatory agency, this is not the end of the question. In our view, the application of state law to govern the functioning of subdivisions of the state does not necessarily constitute regulation. To determine the reach of the federal law preempting state regulation of a state-owned railroad we must consider a presumption that, in the absence of unmistakably clear language, Congress does not intend to deprive the state of sovereignty over its own subdivisions to the point of upsetting the usual constitutional balance of state and federal powers.

         There is another aspect of the state's status as the owner of the railroad that is significant. The ICCTA, although it contemplates a rail system that is unified on a nationwide basis, also contemplates a rail industry that is subject to relatively limited regulation on the part of the federal government. Where the federal law has deregulated, the states are not free to fill regulatory voids. But the ICCTA's deregulatory feature also frees railroad owners to make market-based decisions and not suffer an undue level of regulation of any kind. In the area of activity in which a private owner is free from regulation, the private owner nonetheless ordinarily would have internal corporate rules and bylaws to guide those market-based decisions. In other words, a private conglomerate that owns a subsidiary railroad company is not required to decide whether to go forward with a railroad project, for example, by tossing a coin. Rather, it can make the decision based on its own corporate guidelines, and require its rail company to do the same.

         When we consider that the ICCTA has a deregulatory purpose that leaves railroad owners with a considerable sphere of action free from regulation, we see that the state, as owner, must have the same sphere of freedom of action as a private owner. But unlike other owners, to act in that deregulated sphere, the state ordinarily acts through its laws. In the circumstances here, those state laws are not regulation in the marketplace within the meaning of the ICCTA, but instead are the expression of the state's choice as owner within the deregulated sphere. This is how the deregulatory purpose of the ICCTA necessarily functions when state-owned, as opposed to privately owned, railroad lines are involved.

         We acknowledge that, like the private owner, the state as owner cannot adopt measures of self-governance that conflict with the ICCTA or invade the regulatory province of the federal regulatory agency. But there is a sphere of regulatory freedom enjoyed by owners, and there are at least two specific areas of regulatory freedom that are present in this case. Specifically, environmental decisions concerning track repair on an existing line and the level of freight service within certain boundaries to be offered on an existing line appear to be within the regulatory sphere left open to owners. We conclude that this freedom belongs to the state as owner, as well, and under these circumstance, the ICCTA does not preempt the application of CEQA to this project.

         I. Factual and Procedural Background

         An intrastate railroad line runs from Lombard, in Napa County, north to Arcata, in Humboldt County. The northern, or so-called Eel River division of the line, is quite decayed and runs through the environmentally sensitive Eel River Canyon. The southern, or so-called Russian River division of the line, also formerly in poor condition, runs between a southern terminus in Lombard north to Willits, in Mendocino County. There is a connection to an interstate rail line at Lombard. The project under review involves resumption of freight service in the Russian River division.

         A. History of public ownership

         Public ownership of the line is relatively new. Historically, private railroad companies owned the tracks and operated service on both the northern and southern divisions of the line. These companies eventually failed economically. The state Legislature was concerned that service on the line would be permanently abandoned. To avoid this outcome, particularly the loss of freight service - a result that was considered damaging to the economy of the counties through which the line ran - the Legislature decided that the investment of public monies would be necessary. (Gov. Code, §§ 93001, 93003; see also Historical and Statutory Notes, 37A, pt. 3 West's Ann. Gov. Code (2005 ed.) foll. former §§ 93030-93034, p. 296.)

         In late 1989, the Legislature created NCRA (Gov. Code, § 93010), giving the agency the power to acquire necessary property and to operate a railroad on the line, and also to select a public or private entity to actually operate transportation services on the line.

         With state funds, NCRA acquired ownership or, on some sections, easement rights over the railroad line, including the Russian River and Eel River divisions, between 1990 and 1996.[1]

         B. Public funding for repairs and NCRA's repeated written commitments regarding CEQA compliance

         In 2000 the Legislature appropriated funds to the state Department of Transportation for allocation as directed by the California Transportation Commission, including $60 million to NCRA to “repair and upgrade track to meet Class II (freight) standards.” (Gov. Code, § 14556.40, subd. (a)(32).) Of this, approximately $4 million was allocated to environmental remediation.

         From 2001 to 2006 in various agreements and plans, NCRA committed to CEQA compliance. In 2001 the state Department of Transportation entered into a funding master agreement with NCRA to run through 2010, naming a number of state funding sources, and binding NCRA as recipient to a number of terms, including, for example, compliance with state auditing rules; California Transportation Commission resolutions imposing environmental obligations; public contracting requirements; and nondiscrimination and disabled access requirements.

         Significantly, as a condition of funding, one term of the master agreement stated that “[c]ompletion of the environmental process (‘clearance') for project by recipient (and/or state if it affects a state facility within the meaning of the applicable statutes) is required prior to requesting project funds for right-of-way purchase or construction. No state agency shall request funds nor shall any state agency, board or commission authorize expenditures of funds for any project effort, except for feasibility or planning studies, which may have a significant effect on the environment unless such a request is accompanied by an environmental impact report [as] mandated by [CEQA].” (Some capitalization omitted.) Funding was also conditioned on completion of strategic and capital assessment plans. These also acknowledged that NCRA was required to comply with CEQA before approving or carrying out the project.

         In its 2006 application to the state Department of Transportation for $31 million to bring the line up to certain standards, NCRA asserted that “appropriate CEQA and NEPA documentation will be prepared” and various state, federal, and local agencies approached for permits. Environmental obligations under CEQA and the National Environmental Policy Act (NEPA; 42 U.S.C. § 4321; et seq.) were repeatedly acknowledged and fulfillment of those obligations was noted in funding requests.[2]

         A 2006 supplement to the master agreement between the state Department of Transportation and NCRA described the scope of the work to be financed to include various obligations under CEQA, including preliminary project and scoping activities, draft environmental impact reports (EIRs), and a final EIR.

         The NCRA administration and contracting policy manual also called for CEQA compliance: “As a public agency, [NCRA] is required to comply with the California Environmental Quality Act.... The Act requires public agencies to adopt a policy that serves to implement the CEQA for activities within the jurisdiction of the agency.” Moreover, the manual represented, “[NCRA] adopts the Guidelines for the Implementation of the California Environmental Quality Act; California Code of Regulations, Title 14, Division 6, Chapter 3, Sections 15000-15387 and Appendices A-K (‘CEQA Guidelines') in its entirety....”

         C. Agreement with private operator

         NCRA contracted with private corporations that were to actually operate freight service on the entire line, ending up in 2006 with an arrangement with NWPCo, the real party in interest in this litigation. The text of this 2006 “agreement for the resurrection of operations upon the Northwestern Pacific railroad line and lease” (some capitalization omitted) designated NCRA as the owner of the line, which was under a statutory duty to provide freight rail service on the line. NWPCo was designated a franchisee, selected to operate freight service on the line.

         The agreement memorialized NWPCo's duty (under a certificate of convenience and necessity granted to it by the federal Surface Transportation Board) to provide safe, adequate, and efficient facilities and service. The agreement provided that NWPCo is the operator responsible for complying with federal and state safety regulations. Under the agreement, NWPCo leased portions of the Russian River division owned by NCRA and gained an assignment of portions of the line that NCRA held under an easement, with an option involving the northern sections of the line. The agreement was subject to a number of conditions, including “NCRA having complied with the California Environmental Quality Act... as it may apply to this transaction.” (Italics added.) The agreement had a term of five years with options to renew.

         NCRA was responsible for restoring all portions of the line to a certain level of “utility.” NCRA committed that all available public funds designated for restoration and improvement would be invested and that “[i]t shall be solely NCRA's responsibility to use its best efforts to seek public funding to reopen, rehabilitate, restore, and continue the level of utility of the [line].” NWPCo had no obligation to provide service before this was accomplished. “If, however, [NWPCo] elects to operate... over any portion of the [line] at a lesser Utility Level, ” then NWPCo was responsible for maintenance. NWPCo was to be the sole provider of freight service on the line, would manage and control train operations after service resumed, and generally would be responsible for maintenance after service commenced. NWPCo had authority to seek the relevant federal agency's permission to suspend or discontinue service if service were to become “not economical in consideration of traffic volumes” for it to perform its maintenance obligation, although NWPCo agreed not to seek authority to suspend or discontinue service without NCRA approval. “In the event that NCRA unsuccessfully opposes such suspension or discontinuance of service it may terminate this Agreement as to any section or any portion of a section of the... line necessary in its sole discretion to restore service to [that] portion of the... line....”

         D. Regulation of the rail line

          1. Federal regulatory action and involvement of various state agencies

         As defendants and real party in interest stress, the project falls within the regulatory authority of the federal agency charged with administration of the ICCTA. Accordingly, in 1996, NCRA filed a notice of exemption with the newly established Surface Transportation Board (STB) - the successor to the prior federal regulatory agency, the ICC. The 1996 notice of exemption produced an exemption from ordinary regulatory certification proceedings and permitted NCRA's acquisition of and operation on the line. (See 49 C.F.R. § 1150.41 (2016) [acquisition or operation by class III rail carrier].)

         In 2001, the first private operator selected by NCRA filed its own notice of exemption with the STB, thereby permitting a change of operators from NCRA to the private company without further procedures. (See 49 C.F.R. § 1150.31(a)(3) (2016) [exemption from certification procedure for change in operators].)[3]

         This prior operator was succeeded by real party in interest, NWPCo. In 2007 NWPCo filed its notice of exemption with the STB, permitting the change in operator along the Russian River division of the line without a certification procedure. (See 49 C.F.R. § 1150.31(a)(3) (2016).) In 2007, plaintiff Friends of the Eel River and others petitioned the STB to revoke the exemption. The challengers complained that increased train traffic on the line would, under STB regulations, necessitate federal environmental review of the planned operation. In rejecting the petition, the STB explained that the level of frequency of freight service being planned was below the STB's regulatory threshold triggering the need for federal environmental review. It also noted that the ICCTA favors exemption from regulation whenever appropriate unless the STB has identified an abuse of market power.

         Several other state and federal agencies have taken actions respecting the line. Of note is safety regulation by the Federal Railroad Administration (FRA), an agency of the United States Department of Transportation charged with ensuring railroad safety. In 1990, prior to state ownership, the FRA closed portions of the line because of safety concerns arising from inadequate maintenance. Safety problems continued as the line suffered from deferred maintenance and inadequate capital investment. The Federal Emergency Management Agency (FEMA) also became involved after flooding damage caused additional problems. The FRA worked with the state Public Utilities Commission, but both agencies, along with FEMA, found that defective track conditions had not been corrected, and in 1998 the FRA shut down service all along the line. Repairs and operational improvements were made, and in May 2011, the FRA granted partial relief from its emergency order, permitting resumption of traffic on the southern portion of the line at issue in this litigation, but not on the northern section.

         In addition, various state entities, including the Department of Fish and Wildlife and Department of Toxic Substances Control, along with the North Coast Regional Water Quality Control Board, investigated poor environmental conditions on the line, documenting that in undertaking repairs, NCRA failed to comply with state environmental statutes and regulations. They ultimately filed a complaint against NCRA for violation of the state Fish and Game Code, Health and Safety Code, and Water Code. In 1999 the parties entered into an elaborate consent decree binding NCRA to cease certain environmentally destructive practices and to undertake remediation.

          2. Proceedings under CEQA

         Over a period of years, NCRA, acting as lead agency, undertook the following procedures under CEQA.

         In July 2007, NCRA submitted a notice of preparation of an EIR for the freight rail project that is the subject of this litigation. The notice described the project as involving the resumption of freight rail service on the Russian River division of the line, saying more specifically that (1) NCRA proposed a project to resume freight rail service on the Russian River division, and (2) that NWPCo, “NCRA's selected rail operator, proposes to resume the operations of freight service” on the line.

         The initial study for the “Russian River Division Freight Rail Project” also described the project as NCRA's proposal to resume freight rail service and again it pointed to NWPCo's involvement as the actual operator that would resume freight service. The initial study also recounted NCRA's proposed “rehabilitation of its track, signals, embankments, and bridges, ” saying that some of these activities may cause a significant impact on the environment and would be analyzed in the EIR.

         After public and agency consultation and scoping meetings, in March 2009 NCRA issued a draft EIR, again describing the project as NCRA's resumption of freight rail service on the Russian River division, with NWPCo designated as “NCRA's contract operator.” The draft EIR noted that certain rehabilitation along the line had already been covered under a June 2007 notice of exemption, and that NCRA and NWPCo had been bound by an earlier consent decree as to that project.[4] The draft EIR also noted that NCRA and NWPCo were bound by the 1999 consent decree brought by the various state agencies (see ante, at p. 10), requiring them to prepare and implement waste clean-up plans, “conduct all rail operations in accordance with applicable environmental laws, ” and properly dispose of hazardous materials.

         The draft EIR stated that NWPCo proposed to resume freight operations, and that resumption of rail service would serve statewide air quality goals and reduce diesel truck traffic, among other things. It acknowledged that “NCRA, acting as the CEQA lead agency, has a duty pursuant to CEQA guidelines to neither approve nor carry out a project as proposed unless the significant environmental effects have been mitigated to an acceptable level, where possible.” (Italics added.) The draft EIR provided a lengthy analysis of potential environmental impacts of resuming freight service, including consideration of rehabilitation of the line, cumulative impacts, and potential mitigation measures.

         After further hearings, a second draft EIR was filed in November 2009. Comments were received in 2010 and the final EIR was released in March 2011. The final EIR again summarized the project as being to resume freight service on the Russian River division of the line, noting that “[r]epairs to the line to bring the rail line into conformance with FRA... [s]tandards have been completed for most of the line, and it is now ready to resume service to Windsor.” The project also was said to include four specific, rather limited repair and construction projects.

         The final EIR rebutted comments claiming that the project actually included the northern or Eel River portion of the line - then consisting of unusable tracks. It also declared that rehabilitation activities covered by the 2007 notice of exemption were considered a separate project. Also appearing were rebuttal to concerns about the economic viability of the project, mitigation measures, and disposal of hazardous materials and waste.

         An addendum to the EIR responding to additional comments was attached in May 2011. Joint regulatory authority was noted: “The NCRA plans and procedures as they relate to NWPCo. include, but are not limited to, rules and regulations of the Federal Railroad Administration, the Surface Transportation Board, federal, state and local laws, rules and regulations where applicable, the 2006 Lease by and between NCRA and NWPCo., the Operating Agreement with SMART, and Easement rights granted to and by NCRA. NWPCo. maintains certain obligations under each of these entities, and will continue to maintain such obligations while operating on the line. If plans and procedures change over time, the revisions will be subject to the appropriate regulatory and environmental review. The agreement/contract between NCRA and NWPCo will reflect the revisions, as appropriate.”

         In June 2011, NCRA's board of directors (Board) adopted a resolution certifying the final EIR and approving the project, again defined as the resumption of limited freight rail service on the so-called Russian River division of the line, along with the four specified rehabilitation, construction, and repair activities.

         According to the resolution, the final EIR disclosed that the project posed significant or potentially significant adverse environmental impacts that may be mitigated; that with certain exceptions the significant adverse environmental impacts had been eliminated or reduced to insignificance; and as to certain impacts, that additional mitigation was infeasible. Having balanced the risks and benefits, the Board determined that the benefits outweighed the unavoidable adverse environmental effects.

         The Board made a finding that environmental impacts of development on the Eel River division of the line properly had been omitted from consideration because the Board had no intention of resuming service in that division. It stated: “Given that there are no financial resources available to resume services in the [Eel River division], the Board does not intend to operate [there].”

         It appears that limited freight service has resumed on the southern or Russian River division of the line.

         E. Litigation

         In July 2011, plaintiffs Friends of the Eel River and Californians for Alternatives to Toxics filed separate petitions for writ of mandate, naming NCRA as defendant and NWPCo as real party in interest. Friends of the Eel River sought alternative and peremptorywrits of mandate directing NCRA to set aside its findings and certification of the EIR and approval of the project and directing its compliance with CEQA, as well as a stay and preliminary and permanent injunctions preventing NCRA and its agents from “taking any action to implement, or further approve, or construct the Project, pending full compliance with the requirements of CEQA and the CEQA Guidelines, ” and restraining real party in interest from “taking any action to implement or construct the Project, pending full compliance with the requirements of CEQA and the CEQA Guidelines.” Friends of the Eel River alleged two causes of action, both for violations of CEQA. These challenged the adequacy of the EIR and of the mitigation measures and alternatives that had been considered and adopted, and the adoption of findings assertedly not supported by substantial evidence. The challenge was based in part on assertedly inadequate consideration of hazardous materials and impacts on water quality and threatened species, and in part on the absence of consideration of the northern or Eel River portion of the railroad.

         Californians for Alternatives to Toxics petitioned for a writ of mandate ordering NCRA to set aside certain findings, the certification of the final EIR, and approval of the project and instead “to follow California regulations and statutes, including [CEQA], in any review of and new decision for the Russian River Division Freight Rail Project.” It sought to enjoin NCRA and NWPCo “from engaging in any activity pursuant to the Russian River Division Freight Rail Project until the Project complies with all applicable California regulations and statutes, including requirements of [CEQA].”

         In all, Californians for Alternatives to Toxics alleged 10 causes of action for violations of CEQA. It alleged various inadequacies in the information provided in the projects descriptions and EIRs; inadequate response to public comment; failure to evaluate the environmental impact of various levels of freight service and of track repair and rehabilitation on water, soil, air, and other resources; inadequate consideration of mitigation measures and alternatives; and improper findings of “overriding considerations” not supported by substantial evidence. The petition also asserted that efforts to reopen the rail line in the Eel River division threatened serious environmental harm, especially harm to water in rivers and coastal areas. An 11th cause of action incorporated the prior allegations and alleged that irreparable injury to natural resources constituted a basis for injunctive relief. The petition sought an order that NCRA set aside its certification of the final EIR and its findings and approvals, that it follow CEQA, and that NCRA and NWPCo be enjoined from “engaging in any activity pursuant to the Russian River... Project until the Project complies with... [CEQA].”

         At this point NCRA concluded that further challenges should be met with the argument that any application of CEQA to the project, i.e., the resumption of freight service and the specified rehabilitation work, was preempted by the ICCTA.

         The NCRA removed the matters to federal court, arguing the claims were preempted. The federal court found the dispute was not subject to so-called complete preemption, that is, plaintiffs were not attempting to litigate a federal cause of action in the guise of a state cause of action.[5] In addition, it determined that a case is not subject to removal solely on the basis of a federal defense, including the defense of preemption. Accordingly the federal court remanded the matters to state court.

         In April 2013, the NCRA Board issued a resolution rescinding its resolution of June 2011, “to clarify that the NCRA did not have before it a ‘project' as that term is used in [CEQA] and did not approve a project when it certified the EIR that was the subject of the Resolution. More specifically, NCRA rescinds any word, phrase or section of the Resolution to the extent that it purported to approve a project for the resumption of railroad operations....” The Board acknowledged that the EIR process had been a valuable source of information for it and for the public, but that the EIR was not legally required as a condition of operation of the line. Rather, “[t]he ICCTA preempts CEQA's application over railroad operations on the line” and once the Board entered the lease with NWPCo in 2006, “no further discretionary actions or approvals were necessary by NCRA as a condition to NWPCo's right to operate the line”; that after the STB approved NWPCo's application for an exemption to operate the line in August 2007, “no further action or approval was required by the STB as a condition to NWPCo's right to operate the line”; that after the FRA partially lifted its emergency order in May 2011, “no further action or approval was required by the [FRA], or any other state or federal agency, as a condition to NWPCo's right to operate the line, and NWPCo had the legal right to immediately commence operations at that time.”

         With respect to its representations in its 2006 application for state funds, resulting in appropriation to NCRA of $31 million for track repair and restoration (see ante, at pp. 5-6), the rescission resolution stated that the Board mistakenly had believed it must prepare an EIR, but that in any event, the appropriated money had been exhausted on the track repair project that was the subject of the categorical exemption. It averred that “well before... the [FRA's] partial lifting of [its emergency order], the TCRP [traffic congestion relief program]-funded repair work had been substantially completed and all TCRP funds allocated by the CTC [California Transportation Commission] to NCRA for the repair work had been used;... [¶] [and] no TCRP funds were allocated to NCRA by the CTC for railroad operations on the line, nor were any TCRP funds used for actual railroad operations.”

         As for NCRA's operating and lease agreement with NWPCo, the Board acknowledged that “the lease agreement contains a provision that NCRA will comply with CEQA ‘as it may apply to this transaction' (meaning the NCRA's entry into the lease agreement), but the lease transaction was not challenged on CEQA grounds within the statutory time period, thus obviating NCRA's obligation to determine whether CEQA would have attached to the lease transaction.”

         The Board noted that freight rail operations had resumed in July 2011.

         Once the matters returned from federal to state court, NCRA and NWPCo demurred on the ground that the challenge under CEQA was preempted by the ICCTA and was time-barred. The trial court agreed with them that the application of CEQA was preempted, but overruled the demurrer because it found NCRA judicially estopped from pursuing that defense in light of positions it had taken in litigation ending in the consent decrees.

         NCRA and NWPCo thereafter filed a motion to dismiss for mootness in light of the Board's rescission of its earlier resolution. The matter proceeded to a contested hearing before a different judicial officer. That officer reconsidered the estoppel point and rejected it, albeit agreeing with the first judicial officer that the ...

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