Petition for Writ of Certiorari — North Coast Railroad Authority, Petitioner v. Friends of the Eel River, et al.

APPENDICES

1a

APPENDIX A

IN THE SUPREME COURT OF CALIFORNIA

FRIENDS OF THE EEL RIVER,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC RAILROAD

COMPANY,

Real Party in Interest and Respondent.

S222472

Ct.App 1/5 A139222

Marin County

Super. Ct. No. CV1103605

CALIFORNIANS FOR ALTERNATIVES

TO TOXICS,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC RAILROAD

COMPANY,

Real Party in Interest and Respondent.

Ct.App 1/5 A139235

Marin County

Super. Ct. No. CV1103591

Filed 7/27/17

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

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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

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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

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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 selfgovernance 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.

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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

The portion over which NCRA holds an easement for freight

service belongs to another public agency devoted to commuter

rail service (now named Sonoma Marin Area Rail Transit, or

SMART), while in turn SMART holds an easement for

commuter rail service over portions of the line owned by NCRA.

1

6a

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 rightof-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

7a

[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

In NCRA’s 2002 capital assessment report, NCRA

acknowledged that much of the line was “not in compliance

with several state environmental regulations,” a circumstance

it also acknowledged eventually led to a 1999 consent decree

with various state agencies. (See post, at p. 10.)

2

The capital assessment report described environmental

compliance concerns, leading to a recommendation that “a

combined document (CEQA and NEPA) be prepared and

processed …that involves facility upgrades, landslide

stabilization and reopening of the line …. The type of document

recommended is an EIR prepared pursuant to [CEQA].” The

capital assessment report also explained that “NCRA, as a state

created railroad authority, is required to comply with the

provisions of … CEQA prior to its decisions concerning …

carrying out or approving a project.”

The capital assessment report explained that NCRA had

issued a notice of categorical exemption under CEQA for certain

maintenance and repair of the track. But overall, the report

concluded, the use of categorical exemptions under CEQA was

considered unlikely to meet with approval by “state regulatory,

funding, or trustee agencies.” Step-by-step plans for the EIR

8a

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

process were described and consultation with approximately 30

federal, state, and local agencies was anticipated.

9a

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

10a

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)

11a

[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

After this operator ceased service, but before real party in

interest was certified, the STB was involved in resolving a

shipper’s action for damages against NCRA for failing to repair

the line and reinstitute service, in violation of its duty as a

common carrier. First in 2005, and then in 2007, the STB

denied the shipper’s complaint in part because the agency

accepted NCRA’s explanation that it lacked adequate funds for

repairs.

3

12a

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.

13a

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

In 2007 NCRA had filed a notice of categorical exemption

under CEQA for a separate project contemplating maintenance

and repair activities along the line. The City of Novato sought

mandamus and declaratory relief against NCRA and other

agencies. The Court of Appeal and the parties agree that the

4

14a

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

City of Novato’s lawsuit was directed at the categorical

exemption; the record does not appear to contain the complaint.

Under the parties’ consent decree of November 2008, NCRA

admitted the court’s jurisdiction. The parties bound themselves

to various mitigation measures within the City of Novato, and

to follow CEQA in accomplishing the work. (The decree also

referred to NCRA’s ongoing preparation of an EIR under CEQA

for the projected reopening of freight service — that is, the

project involved in the present litigation.)

15a

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

16a

approving the project, again defined as the

resumption of limited freight rail service on the socalled 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 peremptory writs of mandate directing NCRA to

set aside its findings and certification of the EIR and

17a

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

18a

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

The court explained that the term “ ‘ “[c]omplete preemption”

is a short-hand for the doctrine that in certain matters

Congress so strongly intended an exclusive federal cause of

5

19a

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

action that what a plaintiff calls a state law claim is to be

recharacterized as a federal claim.’ ” The court determined that

the ICCTA does not provide the exclusive cause of action for

plaintiffs’ CEQA claims. On the contrary, the court observed,

the federal act’s preemption provision does not purport to

displace any and all state law causes of action, quoting Fayard

v. Northeast Vehicle Services, LLC (1st Cir. 2008) 533 F.3d 42,

47: “ ‘No one supposes that a railroad sued under state law for

unpaid bills by a supplier of diesel fuel or ticket forms can

remove the case based on complete preemption simply because

the railroad is subject to the ICCTA.’ ”

20a

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.”

21a

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 preemption defense applied. The

court entered orders denying the petitions for writ of

mandate.

The Court of Appeal affirmed. The court held

initially that the controversy was not moot. It also

concluded that the ICCTA was broadly preemptive of

CEQA, and that the so-called market participant

doctrine did not defeat preemption. It rejected

plaintiffs’ view that principles of state sovereignty

require that the ICCTA be interpreted to spare from

preemption the state’s control over NCRA, the state’s

own subdivision. The Court of Appeal also held that

plaintiffs lacked standing to premise their challenges

on the agreement between NCRA and NWPCo.

Finally, it rejected their judicial estoppel argument.

In its opinion, the Court of Appeal rejected the

decision of another Court of Appeal, namely Town of

Atherton v. California High-Speed Rail Authority

22a

(2014) 228 Cal.App.4th 314, which had addressed a

route-selection element of California’s high-speed

rail project and, principally relying on a market

participant theory, had concluded that there was no

ICCTA preemption of CEQA in that case.

Friends of the Eel River and Californians for

Alternatives to Toxics petitioned for review,

challenging the Court of Appeal’s analysis and

conclusion on the preemption issue. (The issues of

mootness and judicial estoppel are not preserved for

our review.)

II. Discussion

A. Introduction

The Court of Appeal found that the ICCTA

preemption language is broad and concluded that

“CEQA is preempted by federal law when the project

to be approved involves railroad operations.”

Plaintiffs, by contrast, rely on presumptions

governing the proper analysis of federal preemption

language to contend that the ICCTA does not

preempt application of CEQA in this case.

We begin with general preemption principles,

including certain presumptions. Because the

question before us is fundamentally one of statutory

construction, we next turn to the text of the ICCTA

preemption provision, the overall function of the

ICCTA, and the unifying and deregulatory purpose

disclosed by legislative history of the federal law. We

observe that the ICCTA continues and strengthens a

federal approach calling for a national as opposed to

balkanized rail system. It also is apparent that the

ICCTA completes a congressional trend in favor of

relieving rail transportation of regulation and

substituting the market as a dominant force.

23a

We next consider the preemptive impact of the

ICCTA, especially as to state environmental

regulation. We briefly outline the CEQA scheme that

the Court of Appeal, along with NCRA and NWPCo,

contend is preempted here.

As the Court of Appeal correctly pointed out, the

national system of railroads is of peculiarly federal,

not state, concern. The ICCTA is both unifying and

deregulatory; it would undermine both values if

states could compel the rail industry to comply with

regulation of railroads that conflicted with federal

law, or even to comply with supplementary

regulation of railroads on a state-by-state basis. We

acknowledge that, at least as to privately owned

railroads, state environmental permitting or

preclearance regulation that would have the effect of

preventing a private railroad from operating pending

CEQA compliance would be categorically preempted.

As we will explain, federal courts — even those

that take a relatively narrow view of the preemption

language of the ICCTA — as well as the STB agree

in this respect. In the ordinary regulatory setting in

which a state seeks to govern private economic

conduct, applying CEQA to condition state

permission to go forward with railroad operations

would be preempted.

This conclusion, however, does not resolve the

application of CEQA to NCRA. The ICCTA preempts

solely regulation of rail transportation, and we will

discuss whether it actually constitutes regulation

when the state is the owner of the rail line and, by

state law, prescribes the process by which its own

subsidiary agency will make decisions concerning the

resumption of rail service along a rail line. We will

consider whether, when the state establishes the

24a

general law according to which the state’s own

subsidiaries are to use the funds and powers

allocated by the state — including for railroad

projects — this constitutes not regulation but instead

self-governance on the part of the state. We will

conclude that CEQA may be considered a matter of

self-governance in this setting — the control

exercised by the state over its own subdivision.

We acknowledge that, although a CEQA process

as applied to a private railroad might also be

considered to reflect self-governance — in the sense

that the state is governing how its subsidiary

governmental entity makes development decisions

concerning developments actually carried out by

other, private owners — such an application of

CEQA to a private line nonetheless would be

preempted. Yet we believe that the analysis is

different when the state is the owner of the railroad.

We will discuss United States Supreme Court

authority in support of this view, primarily the

presumption that in the absence of unmistakably

clear language, courts assume that congressional

preemption provisions are not intended to upset the

usual constitutional balance of state and federal

powers. We also will discuss, by analogy, the socalled market participant doctrine, relying on it for

its presumption that, in connection with state

market activities that are not regulatory, the state

ordinarily has the same freedom of action as a

private entity. And we will address the apparent

freedom of action accorded to owners over

environmental considerations presented by track

repair and increased levels of service on existing

railroad lines.

Because the present project appears to fall

within that area of freedom of action, applying CEQA

25a

to NCRA’s decisions on the project appears not to be

regulation by the state but instead self-governance

by the owner. As we will explain, because we see no

indication in the language of the ICCTA that

Congress intended to preempt such self-governance

in that field, we will conclude that application of

CEQA to NCRA in the present case is not preempted.

Finally, we will discuss the application of

principles developed in this opinion to NWPCo, the

private lessee that operates the freight service on the

railroad.

B. Federal Preemption

1. General Principles

“The Supremacy Clause provides that ‘the Laws

of the United States’ (as well as treaties and the

Constitution itself) ‘shall be the supreme Law of the

Land … any Thing in the Constitution or Laws of

any state to the Contrary notwithstanding.’ Art. VI,

cl. 2. Congress may consequently pre-empt, i.e.,

invalidate, a state law through federal legislation. It

may do so through express language in a statute. But

even where … a statute does not refer expressly to

pre-emption, Congress may implicitly pre-empt a

state law, rule, or other state action.” (Oneok, Inc. v.

Learjet, Inc. (2015) 575 U.S. ___ [135 S.Ct. 1591,

1594-1595] (Oneok); see Quesada v. Herb Thyme

Farms, Inc. (2015) 62 Cal.4th 298, 307-308

(Quesada).)

When express preemption is claimed, the court’s

“task is to ‘identify the domain expressly preempted.’ [Citation.] To do so, we focus first on the

statutory language, ‘which necessarily contains the

best evidence of Congress’ pre-emptive intent.’

[Citation.]” (Dan’s City Used Cars, Inc. v. Pelkey

(2013) 569 U.S. ___ [133 S.Ct. 1769, 1778].)

26a

Indeed, in all preemption cases, whether express

or implied preemption is claimed, the fundamental

question regarding the scope of preemption is one of

congressional intent. (Quesada, supra, 62 Cal.4th at

p. 308; Brown v. Mortensen (2011) 51 Cal.4th 1052,

1059-1060; see Wyeth v. Levine (2009) 555 U.S. 555,

565; Lorillard Tobacco Co. v. Reilly (2001) 533 U.S.

525, 541-542.)

Implied preemption exists under defined

circumstances. First, there may be “ ‘field’

preemption” when “Congress … intended ‘to foreclose

any state regulation in the area,’ irrespective of

whether state law is consistent or inconsistent with

‘federal standards.’ [Citation.] In such situations,

Congress has forbidden the State to take action in

the field that the federal statute pre-empts.” (Oneok,

supra, 575 U.S. ___ [135 S.Ct. at p. 1595], italics

omitted.) Alternatively, there may be “conflict” or

“obstacle” preemption. These are present when

“ ‘compliance with both state and federal law is

impossible,’ or where ‘the state law “stands as an

obstacle to the accomplishment and execution of the

full purposes and objectives of Congress.” ’ [Citation.]

In either situation, federal law must prevail.” (Ibid.;

see Quesada, supra, 62 Cal.4th at p. 308.)

Implied preemption may exist even in company

with an express preemption clause. (Sprietsma v.

Mercury Marine (2002) 537 U.S. 51, 65 [in context of

conflict preemption].)

2. Presumptions

There is a presumption that protects against

undue federal incursions into the internal, sovereign

concerns of the states. The United States Supreme

Court expressed the rule in Gregory v. Ashcroft

(1991) 501 U.S. 452 (Gregory) and Nixon v. Missouri

27a

Municipal League (2004) 541 U.S. 125 (Nixon). That

case law posits a presumption that Congress would

not alter the balance between state and federal

powers without doing so in unmistakably clear

language. (Nixon, supra, 541 U.S. at pp. 140-141;

Gregory, supra, 501 U.S. at pp. 459-461; Sheriff v.

Gillie (2016) 578 U.S. ___ [136 S.Ct. 1594, 1602]

(Gillie); City of Los Angeles v. County of Kern (2014)

59 Cal.4th 618, 631 [“Principles of federalism dictate

a distinct approach to the construction of statutes

impinging on state sovereignty, one designed to

ensure courts do not assume an incursion where

none was intended”].)

A related presumption arises in the context of

the so-called market participant doctrine. Federal

law ordinarily preempts only state regulation of a

defined field. Not all state law constitutes regulation.

There may be no regulation and hence no preemption

in circumstances when the state is acting in the

marketplace in a proprietary rather than regulatory

mode. This doctrine “is not a wholly freestanding

doctrine, but rather a presumption about

congressional intent.” (Engine Manufacturers Ass’n

v. South Coast Air Quality Management Dist. (9th

Cir. 2007) 498 F.3d 1031, 1042 (Engine

Manufacturers).) Courts presume Congress does not

intend to reach and preempt a state’s proprietary

arrangements in the marketplace in the absence of

evidence of such an expansive congressional intent.

(Building & Constr. Trades Council v. Associated

Builders & Contractors of Mass./R.I., Inc. (1993) 507

U.S. 218, 227, 231, 233 (Boston Harbor); see

American Trucking Ass’ns, Inc. v. City of Los Angeles

(2013) 569 U.S. ___ [133 S.Ct. 2096, 2102-2103]

(American Trucking); Engine Manufacturers, supra,

498 F.3d at p. 1042.)

28a

C. The ICCTA

We must apply these preemption principles to

the ICCTA. But first we must understand that

enactment.

1. The federal law.

The ICCTA contains an express preemption

provision, which provides: “The jurisdiction of the

STB over — [¶] (1) transportation by rail carriers,

and the remedies provided in this part with respect

to rates, classifications, rules (including car service,

interchange, and other operating rules), practices,

routes, services, and facilities of such carriers; and

[¶] (2) the construction, acquisition, operation,

abandonment, or discontinuance of spur, industrial,

team, switching, or side tracks, or facilities, even if

the tracks are located, or intended to be located,

entirely in one State, [¶] is exclusive. Except as

otherwise provided in this part, the remedies

provided under this part with respect to regulation of

rail transportation are exclusive and preempt the

remedies provided under Federal or State law.”

(49 U.S.C. § 10501(b).)

To understand this preemption provision, we

must gain a general understanding of the ICCTA

and must understand some of its key terms. The

term “ ‘rail carrier’ means a person providing

common carrier rail transportation ….” (49 U.S.C.

§ 10102(5).) The term “ ‘transportation’ includes [¶]

(A) a locomotive, car, vehicle, vessel, warehouse,

wharf, pier, dock, yard, property, facility,

instrumentality, or equipment of any kind related to

the movement of passengers or property, or both, by

rail, regardless of ownership or an agreement

concerning use; and [¶] (B) services related to that

movement, including receipt, delivery, elevation,

29a

transfer in transit, refrigeration, icing, ventilation,

storage, handling, and interchange of passengers and

property ….” (Id., § 10102(9).)

As for the general outlines of the ICCTA, it

requires carriers to establish reasonable rates, rules,

and practices related to transportation or services

(49 U.S.C. § 10702); prohibits discriminatory pricing

(id., § 10741); and establishes common carrier

obligations requiring provision of transportation or

services on reasonable request. (Id., § 11101; see

Decatur County Commissioners v. Surface Transp.

Bd. (7th Cir. 2002) 308 F.3d 710, 715 (Decatur) [“A

railroad may not refuse to provide services merely

because to do so would be inconvenient or

unprofitable. [Citation.] The common carrier

obligation, however, is not absolute”].) The act

prohibits rail carriers from improper obstruction of

through traffic or freight (49 U.S.C. § 10744), and

prohibits state or local tax discrimination against

rail property. (Id., § 11501.)

The ICCTA assigns administrative and

regulatory duties to the STB. (49 U.S.C. §§ 13011302.) The STB “has jurisdiction over transportation

by rail carrier.” (Id., § 10501(a)(1).) The STB’s

jurisdiction applies even to intrastate transportation

so long as it is “part of the interstate rail network.”

(Id., § 10501(a)(2)(A).) A number of transactions

require approval from the STB. The ICCTA provides

for STB licensing of railroad construction and

operations (id., § 10901), as well as for STB

authorization to abandon a rail line or discontinue

service. (Id., § 10903; but see GS Roofing Products

Co., Inc. v. Surface Transp. Bd. (8th Cir. 2001) 262

F.3d 767, 773 [carriers unilaterally may temporarily

discontinue service by announcing embargo]; see also

Decatur, supra, 308 F.3d 710 [20-month embargo

30a

held reasonable].) The STB has authority to

prescribe routes and certain rates (49 U.S.C.

§ 10705) and to adjudicate claims of unreasonable

rates arising from market dominance. (Id., § 10707.)

The act provides for STB approval of railroad

mergers and consolidation (id., §§ 11323-11324),

including leases or contracts to operate property of

another rail carrier, acquisition of control of a rail

carrier or nonrail carrier, and acquisition by a rail

carrier of trackage rights over a line owned or

operated by another. (Ibid.)

As relevant to the present case, a certificate from

the STB is required for rail carriers to construct or

operate on new or extended lines, and noncarriers

require a certificate authorizing acquisition or

operation of a line. (49 U.S.C. § 10901(a).) At the

same time, the STB must grant such certificates

unless the request is “inconsistent with the public

convenience and necessity.” (Id., § 10901(c).)

STB regulations also govern the application of

federal environmental protection law to railroad

projects. (49 C.F.R §§ 1105.1-1105.12 (2016); see

especially id., § 1105.6 [environmental impact

statements normally are required for rail

construction projects, with specified exceptions; STB

environmental assessments are required for

abandonment, discontinuance of passenger or freight

services (with exceptions) and for acquisitions,

leases, or mergers resulting in changes exceeding

certain thresholds; the STB has authority to modify

requirements for certain proceedings]; see also

Alaska Survival v. Surface Transp. Bd. (9th Cir.

2013) 705 F.3d 1073, 1078 (Alaska Survival) [when

determining whether to authorize construction of a

new extension of a railroad line, the STB considers

the environmental record]; 3 West’s Fed.

31a

Administrative Prac. (2016) Transportation, ch. 53,

Surface Transportation Board, § 5390.) Other federal

agencies, including the FRA, also participate along

with the STB in environmental regulation of the rail

industry, especially with regard to construction of

new railroad lines. (Alaska Survival, supra, 705 F.3d

at p. 1078; see also California High-Speed Rail

Authority, Exemption (STB, June 13, 2013, No. FD

35724) 2013 WL 3053064, p. * 22.)

2. Purpose and history of the ICCTA

The ICCTA both unifies the rail industry into a

national system subject to unitary federal regulation,

and also deregulates the industry. The deregulatory

and unifying purpose of the ICCTA appears in its

history. Preemption of state regulation of rail

transportation has a long history that is part of a

federal effort to establish uniform regulation of the

rail industry across state lines. More recent

enactments (including the Staggers Rail Act of 1980

(Staggers Act) and the current enactment, the

ICCTA), achieve broad deregulation at the federal

level as well, while maintaining preemption of state

remedies.

The ICCTA arose in the following context. In the

19th century, railroad owners achieved monopolies

that were oppressive to other businesses and

distorted the market for freight rates and services.

(See H.R.Rep. No. 104-311, 1st Sess., p. 90 (1995);

Sen.Rep. No. 104-176, 1st Sess., p. 2 (1995);

Eldredge, Who’s Driving the Train? Railroad

Regulation and Local Control (2004) 75 U.Colo.

L.Rev. 549, 557-558 (hereafter Eldredge).) In

response, Congress adopted the Interstate Commerce

Act of 1887 to regulate rates and services in the rail

industry (as well as the motor carrier industry) and

32a

resolve some of these distortions on a national basis.

(See H.R.Rep. No. 104-311, supra, p. 90; Sen.Rep.

No. 104-176, supra, p. 2; Eldredge, supra, at p. 558.)

Even without an express preemption clause in that

law, the high court concluded that state court

remedies for matters regulated by this earlier federal

act were preempted. (Chicago & N. W. Tr. Co. v. Kalo

Brick & Tile Co. (1981) 450 U.S. 311, 318 (Chicago &

N. W.) [“ ‘[I]t would be inconsistent with [federal]

policy’ … ‘if local authorities retained the power to

decide’ whether the carriers could do what the Act

authorized them to do”]; Texas & Pac. Ry. v. Abilene

Cotton Oil Co. (1907) 204 U.S. 426, 440-441 (Texas &

Pac.) [inconsistency between jurisdictions would

destroy the uniformity and equality in rates that the

enactment was intended to achieve].)

Although the earlier act was intended to achieve

nationwide uniformity, it came to be seen as also

having imposed an onerous regulatory burden on the

industry that Congress believed should be lifted.

(H.R.Rep. No. 104-311, supra, pp. 90-91.) In an effort

to improve the railroads’ ability to compete

economically, Congress began to relieve the industry

of what it termed a “Kafkaesque regulatory regime.”

(Id., at p. 91.) Congress accordingly adopted the

Staggers Act, the precursor to the ICCTA. (Pub.L.

No. 96-448, supra, 94 Stat. 1895; see H.R.Rep. No.

104-311, supra, p. 91; Eldredge, supra, 75 U.Colo.

L.Rev. at p. 558.)

The Staggers Act “deregulated most railroad

rates, legalized railroad shipping contracts,

simplified abandonments, and stimulated an

explosion of service and marketing alternatives … .”

(H.R.Rep. No. 104-311, supra, p. 91.) An important

deregulatory feature was a provision giving the

regulatory agency, the ICC, the administrative

33a

power to accomplish additional deregulation through

its exemption power. (Ibid.; G. & T. Terminal

Packaging Co., Inc. v. Consolidated Rail Corp. (3d

Cir. 1987) 830 F.2d 1230, 1234 (G. & T. Packaging)

[calling the exemption authority a “principal

component” of the enactment].) This administrative

power to afford exemption from regulation was

“employed aggressively,” producing what was viewed

as a “renaissance in the railroad industry.” (H.R.Rep.

No. 104-311, supra, p. 91.)

With the Staggers Act, Congress not only

deregulated, but also made its earlier implied

preemptive purpose express. In language that

basically parallels that appearing in 49 United

States Code section 10501 today, the Staggers Act

provided that “[t]he jurisdiction of the [ICC] … over

transportation by rail carriers, and the remedies

provided in this title with respect to the rates,

classifications, rules, and practice of such carriers, is

exclusive.” (49 U.S.C. former § 10501(d), added by

Pub.L. No. 96-448 (Oct. 14, 1980) 94 Stat. 1895,

1915.) This language was intended to “assure

uniform administration of the regulatory standards

of the Staggers Act.” (H.R.Rep. No. 104-422, 1st

Sess., p. 167 (1995).) It was held to go beyond the

question of jurisdiction, and to indicate that with

respect to rail regulation, the Staggers Act remedies

themselves were exclusive, displacing state

remedies. (G. & T. Packaging, supra, 830 F.2d at p.

1234; see also H.R.Rep. No. 96-1430, 2d Sess., p. 106

(1980), reprinted in 1980 U.S. Code Cong. & Admin.

News 4110, 4138 [“The remedies available against

rail carriers with respect to rail rates, classifications,

rules and practices are exclusively those provided by

the Interstate Commerce Act … and any other

federal statutes which are not inconsistent with the

34a

… Act. No state law or federal or state common law

remedies are available”].) State common law

remedies with respect to matters such as reasonable

rates could not be substituted to fill a gap when the

ICC had decided in favor of deregulation. (G. & T.

Packaging, supra, 830 F.3d at p. 1235.) The statute

did provide a limited exception to the exclusive

remedy provision, however, that permitted states to

obtain ICC certification to enforce the federal act as

to purely intrastate transportation. (H.R.Rep. No.

104-311, supra, p. 83.) There was also a disclaimer

explaining that ordinary state police powers were not

preempted.

The Staggers Act relieved the industry of heavy

federal regulation, but Congress evidently believed

further deregulation was called for. Congress

“recogni[zed] that the surface transportation

industry is competitive and that few economic

regulatory activities are required to maintain a

balanced transportation network.” (H.R.Rep. No. 104311, supra, p. 82, italics added.) Accordingly in 1995,

Congress adopted the current regulatory scheme —

the ICCTA. (49 U.S.C. § 10101 et seq.) According to a

congressional report on the bill, the ICCTA “builds

on the deregulatory policies that have promoted

growth and stability in the surface transportation

sector. For the rail industry, only regulations are

retained that are necessary to maintain a ‘safety net’

or ‘backstop’ of remedies to address problems of rates,

access to facilities, and industry restructuring… .”

(H.R.Rep. No. 104-311, supra, p. 93, italics added.)

The express, statutorily defined policy of the

ICCTA is “to minimize the need for Federal

regulatory control over the rail transportation

system” (49 U.S.C. § 10101(2)), “to reduce regulatory

barriers to entry into and exit from the industry”

35a

(id., § 10101(7)), to promote a “sound rail

transportation system with effective competition”

(id., § 10101(4)), and to permit the market to

establish reasonable rates. (Id., § 10101(1); see Fayus

Enterprises v. BNSF Railway (D.C. Cir. 2010) 602

F.3d 444, 450 (Fayus) [commenting that alterations

in the ICCTA were “entirely in a deregulatory

direction”].) The power vested in the governing

agency to afford additional exemptions from

regulation on an administrative basis was enhanced;

now the agency has a statutory duty to afford

exemptions “to the maximum extent consistent with

[the ICCTA].” (49 U.S.C. § 10502(a); see H.R.Rep.

No. 104-311, supra, p. 96 [also noting the elimination

of some former restrictions on the granting of

exemptions that were viewed as unnecessary in light

of the functioning of the market].) This provision is

seen as streamlining the regulatory process. (Alaska

Survival, supra, 705 F.3d at p. 1078.) Regulations

provide for routine exemption from acquisition and

operations certificate requirements (see 49 C.F.R.

§ 1150.31 (2016)) — which is what occurred in the

present case both for NCRA and NWPCo.

Still, the ICCTA does provide for federal

regulation, including “Federal regulatory oversight of

line constructions, line abandonments, line sales,

leases, and trackage rights, mergers and other

consolidations … , antitrust immunity for certain

collective activities … , competitive access, financial

assistance, feeder line development, emergency

service orders, and recordation of equipment liens.”

(Sen.Rep. No. 104-176, supra, p. 7.)

As for the preemption provision itself, as noted,

former language stating the exclusive jurisdiction of

the federal agency to provide remedies was largely

retained, but the preemptive force of the statute was

36a

enhanced. Additional preemptive language was

added in the ICCTA, specifically this sentence:

“Except as otherwise provided in this part, the

remedies provided under this part with respect to

regulation of rail transportation are exclusive and

preempt the remedies provided under Federal or

State law.” (49 U.S.C. § 10501(b).) With this

language, the limited regulatory role of the states

that had been retained by the Staggers Act was

eliminated. Congressional reports announced that

“[t]he bill is intended to standardize all economic

regulation (and deregulation) of rail transportation

under Federal law, without the optional delegation of

administrative authority to State agencies to enforce

Federal standards, as provided in the relevant

provisions of the Staggers Rail Act.” (H.R.Rep. No.

104-311, supra, p. 95, italics added.) The unifying

intent of the statute remains vital. (Sen.Rep. No.

104-176, supra, p. 6 [“The railroad system in the

United States is a nationwide network. The

hundreds of rail carriers that comprise the railroad

industry rely on a nationally uniform system of

economic regulation. Subjecting rail carriers to

regulatory requirements that vary among the States

would greatly undermine the industry’s ability to

provide the ‘seamless’ service that is essential to its

shippers and would w[e]aken the industry’s

efficiency and competitive viability”].) Yet it was

acknowledged that outside the regulated field, states

“retain the police powers reserved by the

Constitution.” (H.R.Rep. No. 104-311, supra, p. 96.)

D. Preemptive impact of the ICCTA on state

regulation

To review, we have seen that under 49 U.S.C.

section 10501, the STB has exclusive jurisdiction

over transportation by rail carrier, including the

37a

movement of goods and all services related to that

movement. Its remedies are exclusive and expressly

preempt state remedies “with respect to regulation of

rail transportation.” (Id., § 10501(b).)

There is no dispute that NCRA and NWPCo are

rail carriers within the meaning of the ICCTA and

have

received

exemptions

from

certificate

requirements, permitting eventual operation of

services. Nor is there any dispute that their

operation of freight service on the rail line in this

case is “rail transportation” and is within the

jurisdiction of the STB.

1. CEQA

To understand whether application of CEQA to

the rail carriers in this case would constitute

regulation of rail transportation within the terms of

the ICCTA, we must review some essential features

of CEQA.

CEQA embodies a central state policy to require

state and local governmental entities to perform

their duties “so that major consideration is given to

preventing environmental damage.” (Pub. Resources

Code, § 21000, subd. (g); see Laurel Heights

Improvement Assn. v. Regents of University of

California (1988) 47 Cal.3d 376, 390 (Laurel

Heights).)

CEQA prescribes how governmental decisions

will be made when public entities, including the

state itself, are charged with approving, funding —

or themselves undertaking — a project with

significant effects on the environment. (Pub.

Resources Code, § 21065, subd. (a) [defining a

“project” to include “activit[ies] directly undertaken

by any public agency”]; see also id., §§ 21100 [state

agency procedures], 21102 [state agency generally

38a

cannot request state funds for a project which may

have a significant effect on the environment without

an EIR], 21104 [responsibilities of state lead

agencies], 21105 [state agency EIRs], 21151 [local

agencies]; Sunset Sky Ranch Pilots Assn. v. County of

Sacramento (2009) 47 Cal.4th 902, 907; Mountain

Lion Foundation v. Fish & Game Com. (1997) 16

Cal.4th 105, 119 (Mountain Lion Foundation);

Laurel Heights, supra, 47 Cal.3d at pp. 390-391.)6

The Legislature, in enacting CEQA, imposed

certain principles of self-government on public

entities. In other words, CEQA is a legislatively

imposed directive governing how state and local

agencies will go about exercising the governmental

discretion that is vested in them over land use

decisions. (See California Building Industry Assn. v.

Bay Area Air Quality Management Dist. (2015) 62

Cal.4th 369, 383 [emphasizing CEQA’s function in

self-government]; Citizens of Goleta Valley v. Board

of Supervisors (1990) 52 Cal.3d 553, 564 (Citizens of

Goleta Valley) [same]; Laurel Heights, supra, 47

Cal.3d at p. 392 [same]; see also Mountain Lion

Foundation, supra, 16 Cal.4th at p. 112 [CEQA

applies to projects calling for the lead agency to “use

its judgment in deciding whether and how to carry

out the project”]; Western States Petroleum Assn. v.

Superior Court (1995) 9 Cal.4th 559, 566-567 [CEQA

prescribes rules under which state and local agencies

are to exercise quasi-judicial as well as quasilegislative discretion].)

Certain projects are exempt from CEQA, including passenger

or commuter rail services (Pub. Resources Code, § 21080, subd.

(b)(10)), but there is no exemption for freight rail projects.

6

39a

CEQA review is undertaken by a lead agency,

defined as “the public agency which has the principal

responsibility for carrying out or approving a project

which may have a significant effect upon the

environment.” (Pub. Resources Code, § 21067, italics

added.) The lead agency’s function in the

environmental review process is so important that it

cannot be delegated to another body. (Planning &

Conservation League v. Department of Water

Resources (2000) 83 Cal.App.4th 892, 907.)

CEQA provides for extensive review on the part

of the lead public agency. (Laurel Heights, supra, 47

Cal.3d at p. 390.) “The EIR has been aptly described

as the ‘heart of CEQA.’ [Citations.] Its purpose is to

inform the public and its responsible officials of the

environmental consequences of their decision before

they are made.” (Citizens of Goleta Valley, supra, 52

Cal.3d at p. 564, fn. & italics omitted.)

Agencies are directed to mitigate or avoid

significant environmental impacts in projects they

carry out (or approve) if it is feasible to do so (Pub.

Resources Code, § 21002.1, subd. (c)), retaining

discretion to carry out the project notwithstanding

impacts when mitigation is infeasible and certain

findings have been made. (Id., §§ 21002.1, subd. (c),

21081.) The EIR must set forth not only

environmental impacts and mitigation measures to

be reviewed and considered by state and local

agencies, but also project alternatives (id., §§ 21001,

subd. (g) [local lead agencies], 21002.1, subd. (a),

21100, subd. (b)(4) [state lead agencies]; Citizens of

Goleta Valley, supra, 52 Cal.3d at pp. 564-565) —

including a “no project” alternative. (Cal. Code Regs.,

tit. 14, § 15126.6.) As we have said, “the mitigation

and alternatives discussion forms the core of the

EIR.” (In re Bay-Delta etc. (2008) 43 Cal.4th 1143,

40a

1162.) When economic, legal, or other considerations

make mitigation or avoidance infeasible, the agency

must make a finding of overriding benefits that

outweigh environmental effects. (Pub. Resources

Code, § 21081, subds. (a)(3), (b).)

Typically CEQA requirements must be complied

with as a condition of the approval of projects or the

undertaking of a project by the public agency itself.

An agency must not carry out a project when an EIR

is certified identifying significant environmental

impacts, without first making specific findings

regarding mitigation and overriding benefits. (Pub.

Resources Code, § 21081; City of Marina v. Board of

Trustees of California State University (2006) 39

Cal.4th 341, 350.)

CEQA is enforced with powerful remedies to

ensure that the review process is completed

appropriately and the various findings are made

before projects go forward. Litigants, including

members of the public, may apply to courts to order

agencies to void, either in whole or in part “any

determination, finding, or decision … made without

compliance” with CEQA. (Pub. Resources Code,

§ 21168.9, subd. (a); see also Code Civ. Proc., § 1086

[standing for persons beneficially interested]; Save

the Plastic Bag Coalition v. City of Manhattan Beach

(2011) 52 Cal.4th 155, 166, 170 [summarizing

principles of standing under CEQA].) CEQA affords

enforcement mechanisms that may have the effect of

preventing or impeding progress on a public or

private project pending compliance with CEQA

requirements. (Pub. Resources Code, § 21168.9, subd.

(a)(2) [mandate to public agency and real party in

interest to suspend any or all specific project

activities until agency “has taken any actions that

may be necessary to bring the determination,

41a

finding, or decision into compliance with [CEQA]”].)

But orders may be limited and include “only those

mandates which are necessary to achieve

compliance” and “only those specific project activities

in noncompliance” with CEQA. (Id., § 21168.9, subd.

(b) [severability findings].)

Using the mechanisms we have just described,

plaintiffs challenged the evidentiary basis of NCRA’s

findings and EIR certification, seeking an order that

NCRA set aside its findings, certification, and project

approval pending CEQA compliance. In addition,

plaintiffs relied on CEQA to seek an injunctive

remedy to halt the project as to both NCRA and

NWPCo pending NCRA’s further reporting,

mitigation

measures,

and

consideration

of

alternatives as provided by CEQA. In other words,

plaintiffs sought to require NCRA, as the lead

agency, to comply more fully with CEQA. They would

impose state law requirements on that agency as a

condition of its decision to proceed with a project

defined as the resumption of freight rail service

along an existing line (together with some limited

track repairs).

2. CEQA would be preempted as applied to

halting operations by a private rail line

As the Court of Appeal recognized in its opinion

in this case, there is little doubt that application of

CEQA to halt resumption of service by a private rail

carrier pending CEQA review by a state or local

agency would have the effect of regulating rail

transportation and would be categorically preempted

regulation.

As the Court of Appeal pointed out, regulation of

the national system of railroads is of peculiarly

federal concern, rather than one involving historic

42a

state police powers. (See Scheiding v. General Motors

Corp. (2000) 22 Cal.4th 471, 481.) We have noted

that even when the early federal law governing

railroads was adopted without an express

preemption clause, the high court concluded that the

need for a unified federal system meant that state

remedies must be superseded. (See Texas & Pac.,

supra, 204 U.S. at pp. 440-441; see also Chicago & N.

W., supra, 450 U.S. at p. 318.)

The ICCTA is unifying and deregulatory; it

would undermine these values if states could compel

the railroad industry to halt service pending

compliance with regulations that conflict with

federal law or invade the regulatory field of the STB.

Requiring a private rail carrier to undergo a state

agency’s CEQA review as a condition of operations

would impose an extensive state law regulatory

burden on the rail carrier as a condition of providing

service. CEQA remedies could halt service on a line

pending environmental compliance even though the

rail carriers were licensed by the STB to undertake

operations, and even though the STB may have

determined that no environmental review was

required. Although CEQA does not on its face

specifically regulate rail transportation, its

enforcement mechanisms requiring environmental

compliance as a condition of project approval

involving a private rail carrier would have the effect

of regulating rail transportation, a result

inconsistent with 49 U.S.C. section 10501.

Permitting a state to regulate private railroad

operations even where STB regulation is absent or

has been satisfied is also inconsistent with the broad

deregulatory purpose of the ICCTA. State regulation

would be in tension with the fact that the ICCTA,

like its predecessors, contemplates a national rail

43a

system operating with minimal regulation, not an

industry subject to a patchwork of state regulation.

It would undermine the purpose of the ICCTA if

states could compel the rail industry to comply with

supplementary regulation on a state-by-state basis

even when the STB has left a regulatory hole, or, to

put it more positively, a sphere of freedom of action

for the owner. As a number of courts have indicated,

given the deregulatory purpose of the ICCTA, what

is deregulated under the ICCTA cannot be

reregulated by the states. (See Fayus, supra, 602

F.3d at p. 450 [the ICCTA contains no “invitation to

states to fill the regulatory void created by federal

deregulation”]; Florida East Coast Ry. v. City of West

Palm Beach (11th Cir. 2001) 266 F.3d 1324, 1338

(Florida East Coast Ry.); Port City Properties v.

Union Pacific Ry. Co. (10th Cir. 2008) 518 F.3d 1186,

1188-1189 [the ICCTA permits entities to construct

certain tracks without STB approval, but this “void”

does not permit state regulation of such tracks]; CSX

Transp., Inc. v. Georgia Public Serv. Com’n (N.D.Ga.

1996) 944 F.Supp. 1573, 1581 [rejecting claim that

Georgia could regulate the closure of ticketing

agencies in the absence of federal regulation or

remedies on that subject]; Sen.Rep. No. 104-176,

supra, p. 6 [nothing in the ICCTA “should be

construed to authorize States to regulate railroads in

areas where Federal regulation has been repealed”];

see also Boston & Maine Corp. and Town of Ayer,

MA, Petition (STB, Apr. 30, 2001, No. FD 33971)

2001 WL 458685, p. * 4 (Boston & Maine), affd. sub

nom. Boston & Maine Corp. v. Town of Ayer (D.Mass.

2002) 191 F.Supp.2d 257 [town’s preconstruction

permit requirement preempted although STB

approval not required]; Thomas Tubbs, Petition

(STB, Oct. 29, 2014, No. FD 35792) 2014 WL

5508153, p. * 6; Cities of Auburn & Kent, WA,

44a

Petition (STB, July 1, 1997, No. FD 33200) 1997 WL

362017, p. * 7 (Auburn & Kent), affd. sub nom. City

of Auburn v. U.S. Government (9th Cir. 1998) 154

F.3d 1025; North San Diego County Transit

Development Board, Petition (STB, Aug. 19, 2002,

No. FD 34111) 2002 WL 1924265, p. * 5 (North San

Diego).)

For the foregoing reasons, we acknowledge that

state environmental permitting or preclearance

regulation that would have the effect of halting a

private railroad project pending environmental

compliance would be categorically preempted. In the

ordinary regulatory setting in which a state seeks to

govern private economic conduct, requiring CEQA

compliance as a condition of state permission to go

forward with railroad operations would be

preempted.

Federal courts — even those that do not regard

the ICCTA’s preemption clause as broad and

sweeping — as well as the STB agree with the

foregoing conclusion. Some decisions refer to the

preemption provision as “sweeping,” “pervasive” and

“comprehensive.” (Auburn, supra, 154 F.3d at p.

1029 (Auburn); see also Union Pacific Ry. Co v.

Chicago Transit Auth. (7th Cir. 2011) 647 F.3d 675,

678 (Union Pacific).) Many federal decisions, on the

other hand, characterize the preemption clause of

the ICCTA as relatively narrow. (Florida East Coast

Ry., supra, 266 F.3d at p. 1331 [the ICCTA preempts

“ ‘regulation of rail transportation,’ ” not all laws

“ ‘with respect to rail transportation’ ”]; see Franks

Investment Co. LLC v. Union Pacific Ry. Co. (5th Cir.

2010) 593 F.3d 404, 410 (Franks); PCS Phosphate

Co., Inc. v. Norfolk Southern Corp. (4th Cir. 2009)

559 F.3d 212, 218 (PCS Phosphate); New York

45a

Susquehanna v. Jackson (3d Cir. 2007) 500 F.3d 238,

252 (Susquehanna).)

But it is unnecessary to address disputes among

federal courts concerning whether to designate the

preemption provision as broad or narrow, because in

fact, even those with a narrow view of preemption

accept the same formulation concerning state

environmental laws. In this view, the “preemption

analysis distinguishes between two types of

preempted state actions or regulations. First, there

are those state actions that are ‘categorically

preempted’ by the ICCTA because such actions

‘would directly conflict with exclusive federal

regulation of railroads.’ [Citation.] Regulations

falling within this first category are ‘facially

preempted’ or ‘categorically preempted’ and come in

two types: [¶] ‘The first is any form of state or local

permitting or preclearance that, by its nature, could

be used to deny a railroad the ability to conduct some

part of its operations or to proceed with activities

that the [STB] has authorized … . [¶] Second, there

can be no state or local regulation of matters directly

regulated by the [STB] — such as the construction,

operation, and abandonment of rail lines [citation];

railroad mergers, line acquisitions, and other forms

of consolidation [citation]; and railroad rates and

service [citation].’ [¶] [Citation.] State actions such

as these constitute ‘per se unreasonable interference

with interstate commerce.’ [Citation.] As such, the

preemption analysis for state regulations in this first

category is addressed to ‘the act of regulation itself’

and ‘not to the reasonableness of the particular state

or local action.’ [Citation.] [¶] The second category of

preempted state actions and regulations are those

that are preempted as applied. Section 10501(b) [of

49 U.S.C.] may preempt state regulations, actions, or

46a

remedies as applied, based on the degree of

interference the particular state action has on

railroad operations. ‘For state or local actions that

are not facially preempted, the section 10501(b)

preemption analysis requires a factual assessment of

whether that action would have the effect of

preventing or unreasonably interfering with railroad

transportation.’ [Citation.] … . [T]he STB stated that

‘it is well settled that states cannot take an action

that would have the effect of foreclosing or unduly

restricting a railroad’s ability to conduct any part of

its operations or otherwise unreasonably burdening

interstate commerce.’ ” (New Orleans & Gulf Coast

Ry. Co. v. Barrois (5th Cir. 2008) 533 F.3d 321, 332,

italics added & omitted (New Orleans & Gulf Coast);

see also Union Pacific, supra, 647 F.3d at p. 679;

Franks, supra, 593 F.3d at pp. 410, 413; Adrian &

Blissfield Ry. Co. v. Village of Blissfield (6th Cir.

2008) 550 F.3d 533, 539-540 (Adrian & Blissfield);

Emerson v. Kansas Southern Ry. Co. (10th Cir. 2007)

503 F.3d 1126, 1130, 1132-1133 (Emerson); see also

People v. Burlington Northern Santa Fe Railroad

(2012) 209 Cal.App.4th 1513, 1528 (Burlington).)

More specifically, the rule seems well accepted in

federal courts that the ICCTA preempts state and

local environmental regulation requiring private

railroad companies to acquire permits or

preclearance as a condition to operating the railroad,

as well as remedies that would prohibit the conduct

of railroad business pending compliance with state or

local environmental requirements.

For example, in Auburn, supra, 154 F.3d 1025, a

private rail carrier was before the STB seeking

approval to reacquire a portion of a rail line through

the Stampede Pass in Washington State, and to

reopen service on the route. The rail carrier’s plans

47a

included repairs and improvements on the line. STB

environmental

staff,

following

environmental

assessments under the federal environmental law,

concluded the project would not have a significant

environmental effect if certain mitigation efforts

were undertaken. The STB approved the project, but

the City of Auburn challenged the agency’s decision,

arguing that the agency erroneously had found state

and local environmental review of the project and the

related permitting process to be preempted by the

ICCTA. The city sought to compel the private rail

carrier’s

compliance with

state and local

environmental rules as a precondition to rail

operations, but the court determined that such

application of state and local law was preempted.

The City of Auburn argued, as do plaintiffs and

amici curiae supporting them in the present case,

that the ICCTA preempts solely economic regulation

of railroads, but not a state’s exercise of traditional

police power to protect the environment. The Ninth

Circuit responded that, on the contrary, rail

regulation has long been viewed as a subject of

federal concern from which states are excluded, and

that prior law, as continued in effect by the ICCTA,

was “recognized as ‘among the most pervasive and

comprehensive of federal regulatory schemes.’ ”

(Auburn, supra, 154 F.3d at p. 1029.) The court

referred to both 49 U.S.C. section 10501(b)’s

statement of exclusive jurisdiction and its explicit

preemption clause displacing state remedies “ ‘with

respect to regulation of rail transportation’ ” (154

F.3d at p. 1030), as well as other language,

commented on the absence of language in the act

expressly sparing state environmental regulation

from preemption (Auburn, supra, p. 1031 [“there is

no evidence that Congress intended any such state

48a

role under the ICCTA to regulate the railroads”]),

and drew parallels with the preemptive scope of

assertedly similar federal laws. (Ibid.)

In conclusion, the Auburn court observed, “the

distinction between ‘economic’ and ‘environmental’

regulation begins to blur. For if local authorities

have the ability to impose ‘environmental’ permitting

regulations on the railroad, such power will in fact

amount to ‘economic regulation’ if the carrier is

prevented from constructing, acquiring, operating,

abandoning, or discontinuing a line. [¶] We believe

the congressional intent to preempt this kind of state

and local regulation of rail lines is explicit in the

plain language of the ICCTA and the statutory

framework surrounding it. [Citation.] Because

congressional intent is clear, and the preemption of

rail activity is a valid exercise of congressional power

under the Commerce Clause, we affirm the STB’s

finding of federal preemption.” (Auburn, supra, 154

F.3d at p. 1031, fn. omitted; see also Susquehanna,

supra, 500 F.3d at p. 252 [rejecting the view that the

ICCTA preempts solely economic regulation]; Florida

East Coast Ry., supra, 266 F.3d at p. 1331 [same].)

In another decision — also involving state

attempts to exert control over a private rail carrier

— the court in Green Mountain Railroad Corp. v.

Vermont (2d Cir. 2005) 404 F.3d 638 (Green

Mountain) held that the ICCTA preempted

Vermont’s efforts to obtain a declaratory judgment

requiring the railroad carrier to go through a state

environmental law process imposing mitigation

conditions before the carrier could obtain a permit to

construct a transloading facility on its land. The

Second Circuit relied on the ICCTA’s language

expressly preempting “remedies … with respect to

regulation of rail transportation” (49 U.S.C.

49a

§ 10501(b)), vesting in the STB exclusive jurisdiction

over transportation by rail carriers (ibid.), and

defining the term “transportation” broadly to include

facilities related to movement of passengers or

freight under section 10102(9). (Green Mountain, at

p. 642.) The state preconstruction permit

requirement in that case was preempted because it

“ ‘unduly interfere[s] with interstate commerce by

giving the local body the ability to deny the carrier

the right to construct facilities or conduct

operations,’ [citation]; and … it can be timeconsuming, allowing a local body to delay

construction of railroad facilities almost indefinitely.”

(Id. at p. 643.) The court also relied on Auburn,

federal district court opinions, and STB decisions for

the proposition that “ ‘state and local permitting or

preclearance requirements (including environmental

requirements) are preempted because by their

nature they unduly interfere with interstate

commerce.’ ” (Ibid.)

The Green Mountain court acknowledged, as

numerous other cases have, that state and local

governments retain some “traditional police powers

over the development of railroad property,”

suggesting that such police powers should be

recognized solely “to the extent that the regulations

protect public health and safety” and are defined,

settled, and can be obeyed with certainty and

without delay or exercise of discretion. (Green

Mountain, supra, 404 F.3d at p. 643.) “Electrical,

plumbing and fire codes, direct environmental

regulations enacted for the protection of the public

health and safety, and other generally applicable,

non-discriminatory

regulations

and

permit

requirements would seem to withstand preemption.”

(Ibid.; see also Susquehanna, supra, 500 F.3d at

50a

pp. 253-254; see generally cases discussed post, pt.

II.E.1.) But the Green Mountain court found no need

to identify the dividing line between permissible and

impermissible state or local regulation, on the

ground that preemption was clearly called for in the

case before it. The environmental permitting law

gave the local agency the ability to inordinately delay

or deny the rail carrier the right to build. Preemption

was required because “the railroad is restrained from

development until a permit is issued” and issuance of

the permit depends on an exercise of state or local

agency discretion. (Green Mountain, supra, 404 F.3d

at p. 643.)

STB decisions are to the same effect, including

decisions involving CEQA. In one case, for example,

the STB entered a declaratory order finding that a

private rail carrier’s proposed construction of a highspeed rail line between California and Nevada would

come within federal environmental provisions, but

that “state permitting and land use requirements

that would apply to non-rail projects, such as the

California Environmental Quality Act, will be

preempted. [Citation.] But state and local agencies

and concerned citizens will have ample opportunity

to participate in the ongoing [environmental impact

statement] process under [federal environmental]

and related laws.” (DesertXpress Enterprises, LLC,

Petition (STB, June 25, 2007, No. FD 34914) 2007

WL 1833521, p. * 3.) And the STB has reached

similar decisions with respect to the laws of other

states. (See CSX Transportation, Inc., Petition (STB,

May 3, 2005, No. FD 34662) 2005 WL 1024490, pp. *

3, * 4 [D.C. law governing transportation of

hazardous materials near the United States Capitol

Building was preempted; it would require railroads

to obtain a permit to move rail traffic and would be

51a

“directly covered by the categorical preemption

against state and local permitting processes” and any

ban on certain cargo “would directly conflict with the

[STB’s] regulatory authority over rail operations”];

Boston & Maine, supra, 2001 WL 458685, p. * 5

[town’s

preconstruction

permit

requirement

preempted].)

In conclusion, there seems little doubt that, in

the ordinary regulatory setting in which a state

seeks to regulate a private rail carrier, applying

CEQA to condition permission for that carrier to go

forward with railroad operations would be

preempted by the ICCTA.

E. The Court of Appeal’s conclusion

nonetheless is overbroad and incorrect

The Court of Appeal declined to invoke any

presumptions concerning the scope of ICCTA

preemption, and, as noted, declared that “CEQA is

preempted by federal law when the project to be

approved involves railroad operations.” The court’s

conclusion exceeds the proper scope of the ICCTA

and violates the preemption principles we have

discussed.

1. Police powers

Preliminarily, we note that the quoted language

is too broad in that the federal interest in rail

transportation does not entirely sweep away the

exercise of the state’s regulatory police powers when

such

regulation

merely

implicates

rail

transportation. Even as to powers that are

exclusively federal, “it does not follow that any and

all state regulations touching on [that power] are

preempted.” (In re Jose C. (2009) 45 Cal.4th 534, 550,

italics added [upholding state law connected to

immigration matters].) The federal decisions we have

52a

discussed differentiate state laws that are

categorically preempted by the ICCTA, such as

environmental

preclearance

requirements

for

railroad operations, from those that merely burden

rail transportation and may be preempted as applied

if, under the particular facts, they would interfere

unduly with railroad operations or unreasonably

burden interstate commerce. (New Orleans & Gulf

Coast, supra, 533 F.3d at p. 332; see also Franks,

supra, 593 F.3d at pp. 410, 413; Adrian & Blissfield,

supra, 550 F.3d at pp. 539-540; Emerson, supra, 503

F.3d at pp. 1130, 1132-1133; Burlington, supra, 209

Cal.App.4th at p. 1528.) The case law supports the

conclusion that the ICCTA does not broadly preempt

all historic state police powers over health and safety

or land use matters, to the extent state and local

regulation and remedies with respect to these issues

do not discriminate against rail transportation, do

not purport to govern rail transportation directly,

and do not prove unreasonably burdensome to rail

transportation. (Emerson, supra, 503 F.3d at pp.

1130, 1132-1133 [state tort claims for improper

disposal of railroad ties not preempted]; see also

Franks, supra, 593 F.3d at p. 410 [the ICCTA does

not preempt state law with a remote or incidental

effect on rail transportation; state action enjoining

railroad from removing privately owned railroad

crossings not preempted]; PCS Phosphate, supra, 559

F.3d at pp. 218-220 [ICCTA preemption does not

displace ordinary voluntary agreements between

private parties]; Adrian & Blissfield, supra, 550 F.3d

at pp. 540-541 [state track maintenance statute that

would require the railroad to pay for pedestrian

crossings across its tracks was not preempted;

imposing increased costs on railroad is not by itself

enough to establish unreasonable interference];

Susquehanna, supra, 500 F.3d at pp. 252-255 [fines

53a

may be imposed under state law on railroad for

environmental hazards at transloading facility; the

ICCTA would not preempt, for example, rules fining

the railroad for dumping debris or harmful

substances]; Green Mountain, supra, 404 F.3d at

p. 643; Florida East Coast Ry., supra, 266 F.3d at

pp. 1328, 1331 [ICCTA preemption does not extend

to traditional police power of zoning and health and

safety regulation]; Jones v. Union Pacific Railroad

Co. (2000) 79 Cal.App.4th 1053, 1060 [state nuisance

action based on train noise and fumes not necessarily

preempted if the plaintiffs can demonstrate the

challenged nuisance did not further the railroad’s

operations]; In re Vermont Ry. (Vt. 2000) 769 A.2d

648, 655 [zoning conditions imposed not on rail line

but on truck traffic and environmental conditions at

railroad’s salt shed not preempted]; City of Girard v.

Youngstown Belt Ry. Co. (Ohio 2012) 979 N.E.2d

1273, 1283 [eminent domain action not categorically

preempted]; Home of Economy v. Burlington

Northern Santa Fe Ry. (N.D. 2005) 694 N.W.2d 840,

845-846 [state injunctive relief requiring reopening

of grade crossing not preempted].) This conclusion is

confirmed in the legislative history. (See H.R.Rep.

No 104-311, supra, p. 96 [while the ICCTA is

intended to preempt state economic regulation, in

other respects “States retain the police powers

reserved by the Constitution”].)

The STB itself has confirmed that the exercise of

historic

state

police

powers

concerning

environmental matters is not necessarily preempted

by the ICCTA. (Auburn & Kent, supra, 1997 WL

362017, p. * 6] [“even in cases where we approve a

construction or abandonment project, a local law

prohibiting the railroad from dumping excavated

earth into local waterways would appear to be a

54a

reasonable exercise of local police power. Similarly …

a state or local government could issue citations or

seek damages if harmful substances were discharged

during a railroad construction or upgrading project.

A railroad that violated a local ordinance involving

the dumping of waste could be fined or penalized for

dumping by the state or local entity. The railroad

also could be required to bear the cost of disposing of

the waste from the construction in a way that did not

harm the health or well being of the local

community”].)

The STB has recognized, too, that a state law

simply requiring, for example, the development of

information concerning a railroad project would not

necessarily be preempted. In Boston & Maine, for

example, the STB stated, “While a locality cannot

require permits prior to construction, … a railroad

can be required to notify the local government ‘when

it is undertaking an activity for which another entity

would require a permit’ and to furnish its site plan to

the local government” (Boston & Maine, supra, 2001

WL 458685, p. * 5), adding that “[l]ike any citizen or

business, railroads have some responsibility to work

with communities to seek ways to address local

concerns in a way that makes sense and protects the

public health and safety” with pragmatic solutions.

(Id., p. * 7.) “Examples of solutions that appear …

reasonable include conditions requiring railroads to

(1) share their plans with the community, when they

are undertaking an activity for which another entity

would require a permit, (2) use state or local best

management practices when they construct railroad

facilities; (3) implement appropriate precautionary

measures … ; (4) provide representatives to meet

periodically with citizen groups or local government

entities to seek mutually acceptable ways to address

55a

local concerns; and (5) submit environmental

monitoring or testing information to local

government entities for an appropriate period of time

after operations begin.” (Ibid., fns. omitted.)

Moreover, there are various instances in which

rail operations may also be subject to regulation

under other federal laws that preserve state power to

a defined degree. (See Burlington, supra, 209

Cal.App.4th at pp. 1523-1524, and cases cited

[discussing the extent to which the federal rail safety

law may preserve state rail safety provisions

notwithstanding the ICCTA].) In their amici curiae

brief, the California Environmental Protection

Agency and the California Natural Resources Agency

appropriately counsel caution and would avoid the

Court of Appeal’s broad formulation quoted above. In

their view, such a statement of the law could

undermine viable state environmental regulations,

including those that implement those federal laws

that must be harmonized with the ICCTA. They cite

authority declaring that “ ‘nothing in [49 U.S.C.]

section 10501(b) is intended to interfere with the role

of state and local agencies in implementing Federal

environmental statutes,’ ” including the Clean Air

Act (42 U.S.C. § 7401 et seq.; see especially

§ 7401(a)(3)); the Clean Water Act (33 U.S.C. § 1251

et seq.; see especially §§ 1370, 2718); and the Safe

Drinking Water Act (42 U.S.C. § 300f et seq.). (See

Ass’n of American Railroads v. South Coast Air

Quality Management Dist. (9th Cir. 2010) 622 F.3d

1094, 1097-1098 [harmonizing the ICCTA with other

federal statutes and those state laws that are

preserved thereunder]; see also U.S. v. St. Mary’s Ry.

West, LLC (S.D.Ga. 2013) 989 F.Supp.2d 1357, 13601363; Boston & Maine, supra, 2001 WL 458685, p. *

5.) We do not, however, employ or endorse the Court

56a

of Appeal’s unduly broad formulation, and our

opinion should not be read to suggest that the ICCTA

preemption clause is so sweeping as to displace state

powers preserved under other federal provisions.

2. Self-government

But what is far more significant to the present

case, we recall that the ICCTA preempts solely

“regulation” of rail transportation. (49 U.S.C.

§ 10501(b).) We now consider whether a state

engages in regulation within the meaning of the

ICCTA’s preemption language as applied to state law

directing a subdivision of the state to develop the

state’s own freight rail transportation project

according to certain environmental guidelines.

CEQA embodies a state policy adopted by the

Legislature to govern how the state itself and the

state’s own subdivisions will exercise their

responsibilities. (See ante, pt. II.D.1) When CEQA

conditions the issuance of a permit for private

development on CEQA compliance, and thereby

restricts the ability of private citizens and companies

to develop their property, this seems plainly

regulatory. But CEQA also operates as a form of selfgovernment when the state or a subdivision of the

state is itself the owner of the property and proposes

to develop it. Application of CEQA to the public

entity charged with developing state property is not

classic regulatory behavior, especially when there is

no encroachment on the regulatory domain of the

STB or inconsistency with the ICCTA, as explained

in the next section. Rather, application of CEQA in

this context constitutes self-governance on the part

of a sovereign state and at the same time on the part

of an owner. It appears to us extremely unlikely that

Congress, in enacting the ICCTA, intended to

57a

preempt a state’s adoption and use of the tools of

self-governance in this situation, or to leave the

state, as owner, without any means of establishing

the basic principles under which it will undertake

significant capital expenditures.

a. Principles derived from deregulation

We have seen from the summary of the ICCTA

(see ante, pt. II.C), that the law provides for limited

federal regulation in defined spheres. We have also

seen that the ICCTA was intended to complete a

deregulatory trend. Statutorily defined policy

minimizes regulatory control and barriers (49 U.S.C.

§ 10101(2), (7)), and imposes a duty on the STB to

afford regulatory exemptions “to the maximum

extent consistent with [the ICCTA].” (Id., § 10502(a);

see also 49 C.F.R. § 1150.31.)

Deregulation means that once general ICCTA

compliance obligations are met, the railroad owner

has a protected domain that is subject neither to

federal nor to state regulation, a freedom to plan,

develop, and restore rail service on market principles

but within the framework of modest federal

regulation. The text and history of the enactment

indicate that, in the domain that has been

deregulated, the owner may carry out its activities

according to its own corporate goals and in response

to market forces. This freedom, of course, is subject

to the proviso that the owner’s actions cannot conflict

with federal regulations. But within the zone of the

owner’s control, the owner has considerable freedom.

Freedom does not imply anarchy — the private

owner ordinarily will have internal corporate rules,

policies and bylaws to guide its market-based

decisions. In other words, we may presume that a

private conglomerate that owns a subsidiary that is a

58a

railroad company is not required to decide when it is

prudent to go forward with the development of a

railroad project by, for example, tossing a coin.

Rather, it can make its decisions based on its own

internal guidelines, so long as there is no conflict

with federal law.

But how is the freedom accorded to the private

owner by the ICCTA to be given effect when the state

is the owner of a rail line? The ICCTA’s deregulatory

sweep must protect the zone of autonomy belonging

to the state when it is the owner, such that within

the deregulated zone, the state as owner may make

its decisions based on its own guidelines rather than

some anarchic absence of rules of decision. And we

have already established that CEQA is an internal

guideline governing the processes by which state

agencies may develop or approve projects that may

affect the environment. (See ante, pt. II.D.1.)

If a private owner has the freedom to adopt

guidelines to make decisions in a deregulated field,

we see no indication the ICCTA preemption clause

was intended to deny the same freedom to the state

as owner. The ICCTA does not appear to us to be

intended to effect a blanket preemption of state law

governing how a state’s own subdivision — its

subsidiary — will enter and engage in the railroad

business, so long as there is no inconsistency with

regulation provided for by the ICCTA.

In fact, even putting aside broader owner

decisions concerning entry into a railroad market, it

appears that the specific project under consideration

in the present case was within an owner’s sphere of

control. We can discern that the track repair element

of the project in the present case was within the

owner’s sphere under the ICCTA because the STB

59a

has chosen not to regulate track repair and

renovation on existing lines. (See Lee’s Summit, MO

v. Surface Transp. Bd. (D.C. Cir. 2000) 231 F.3d 39,

42-43, fn. 3 (Lee’s Summit); Detroit/Wayne County

Port Authority v. I.C.C. (D.C. Cir. 1995) 59 F.3d

1314, 1317 [same, under ICC]; Flynn v. Burlington

Northern Santa Fe Corp. (E.D.Wn. 2000) 98

F.Supp.2d 1186, 1190 [although the STB has

jurisdiction over rail construction, it appears it does

not in fact regulate refurbishing of existing lines].)

And we can discern that decisions about resuming a

certain level of service, and particularly about

undertaking environmental review of the impact of

resumption of freight service along the line are

within the owner’s sphere of independent action,

because the STB determined that the level of service

along the line in the present case did not cross a

threshold that would require federal environmental

review. (See ante, at pp. 9-10; see also Lee’s Summit,

supra, 231 F.3d 39 [approving STB determination

that no environmental assessment is required under

the ICCTA for restored level of service, under a

certain threshold, over existing but unused railroad];

Boston & Maine, supra, 2001 WL 458685, p. * 4

[railroads do not need STB approval to upgrade or

increase traffic on an existing line]; see also 3 West’s

Fed. Administrative Prac., supra, § 5390, fns. 1 &

13.)

In the present case, the STB accepted NCRA’s

and NWPCo’s petitions for exemption from STB

certification requirements, but the STB’s recognition

of each entity’s status as a rail carrier did not

instruct them how soon they had to complete track

repairs on the shuttered line, what the best method

of repair might be, or when, specifically, they must

resume service. Nothing in the exemptions tells

60a

NCRA or NWPCo how to evaluate choices about

services or how to decide what methods to employ for

track rehabilitation. These were owner decisions in a

deregulated sphere.

b. The Gregory-Nixon rule

We are all the more confident of our

interpretation of the ICCTA preemption provision

when we return to the presumptions we discussed

earlier in introducing preemption principles. (See

ante, pt. II.B.2.) We presume that Congress, in

adopting a preemption provision, does not intend to

deprive a state of its sovereign authority over its

internal governance — at least not without a

particularly clear statement of intent. (Raygor v.

Regents of Univ. of Minn. (2002) 534 U.S. 533, 543

[“When ‘Congress intends to alter the “usual

constitutional balance between the States and the

Federal Government,” it must make its intention to

do so “unmistakably clear in the language of the

statute” ’ ”].) This principle cautions against an

interpretation of a preemption clause that

encroaches on states’ internal authority over the

structure of their governments. (See Iskanian v. CLS

Transportation Los Angeles, LLC (2014) 59 Cal.4th

348, 388; see also Printz v. United States (1997) 521

U.S. 898, 928 [“It is an essential attribute of the

States’ retained sovereignty that they remain

independent and autonomous within their proper

sphere of authority”].)

We agree with plaintiffs that application of

CEQA to NCRA’s decisions in the deregulated sphere

in this case simply constitutes the state’s governance

of its own subdivision, a matter of self-management

that the ICCTA presumptively was not intended to

entirely preempt. We rely on the high court’s

61a

decisions in Gregory, supra, 501 U.S. 452, and Nixon,

supra, 541 U.S. 125, in support. Those decisions hold

that an interpretation of a federal statute that would

infringe on state sovereignty should not be adopted

absent unmistakably clear language of intent to

achieve that result — language we believe is missing

from the ICCTA’s preemption clause.

In Gregory, supra, 501 U.S. 452, state judges

challenged

a

state

constitutional

provision

prescribing a mandatory retirement age, claiming

that application of the provision to them would

violate a federal statute barring age discrimination

in employment. The high court disagreed, relying

upon certain exclusionary language in the federal

enactment to avoid a conclusion that would

constitute an undue incursion on “the usual

constitutional balance of federal and state powers.”

(Id. at p. 460.)

The Supreme Court acknowledged that in the

balance between state and federal sovereign powers,

the supremacy clause leaves the federal government

with a “decided advantage.” (Gregory, supra, 501

U.S. at p. 460.) “As long as it is acting within the

powers granted it under the Constitution, Congress

may impose its will on the States. Congress may

legislate in areas traditionally regulated by the

States. This is an extraordinary power in a federalist

system. It is a power that we must assume Congress

does not exercise lightly.” (Ibid., italics added.)

In the Gregory situation, the high court said, the

state constitutional provision setting qualifications

for judges was more than simply a matter

traditionally regulated by states. Rather, it was “a

decision of the most fundamental sort for a sovereign

entity.” (Gregory, supra, 501 U.S. at p. 460.)

62a

“Through the structure of its government, and the

character of those who exercise government

authority, a State defines itself as a sovereign.”

(Ibid.) Congressional interference in this sphere

“would upset the usual constitutional balance of

federal and state powers. For this reason, ‘it is

incumbent upon the federal courts to be certain of

Congress’ intent before finding that federal law

overrides’ this balance. [Citation.] We explained

recently: ‘[I]f Congress intends to alter the “usual

constitutional balance between the States and the

Federal Government,” it must make its intention to

do so “unmistakably clear in the language of the

statute.” [Citations.]’ ” (Id. at pp. 460-461, italics

added.)

In Gregory, the high court explained that the

requirement that courts avoid an interpretation of

federal statute that would encroach on state

sovereign powers was not a retreat from the

rationale of Garcia v. San Antonio Metro. Transit

Auth. (1985) 469 U.S. 528 (Garcia), a decision that

relied primarily on the political process to protect

state sovereignty from congressional commerce

clause power in the context of the 10th Amendment.

(Gregory, supra, 501 U.S. at p. 464.) Instead, the

Gregory opinion said, the rule of interpretation the

court was adopting — the “unmistakably clear”

requirement — actually was consistent with Garcia.

“Indeed, inasmuch as this Court in Garcia has left

primarily to the political process the protection of the

States against intrusive exercises of Congress’

Commerce Clause powers, we must be absolutely

certain that Congress intended such an exercise.

‘[T]o give the state-displacing weight of federal law to

mere ambiguity would evade the very procedure for

63a

lawmaking on which Garcia relied to protect states’

interests.’ [Citation.]” (Ibid.)

In the second leading case on this point, Nixon,

supra, 541 U.S. 125, the high court applied Gregory

and concluded that a federal telecommunications

enactment did not preempt a state law that barred

municipalities

from

entry

into

the

telecommunications business. The federal act

provided that “[n]o State or local statute or

regulation … may prohibit or have the effect of

prohibiting the ability of any entity to provide any

interstate or intrastate telecommunications service.”

(47 U.S.C.

§ 253(a),

italics

added.)

Certain

municipalities claimed they fell within the

designation “any entity” and that the federal law

preempted the state law barring municipalities from

entering the telecommunications business. The

United States Supreme Court found the federal

statute’s reference to “any entity” ambiguous,

however, and certainly not “unmistakably clear”

enough to encompass public entities. To better

understand

congressional

intent,

the

court

considered how the statute would work in practice if

applied to prevent the state from barring

municipalities from entering the telecommunications

market. “We think that the strange and

indeterminate results of using federal preemption to

free public entities from state or local limitations is

the key to understanding that Congress used ‘any

entity’ with a limited reference to any private entity

when it cast the preemption net.” (Nixon, supra, 541

U.S. at p. 133.)

The Supreme Court explained that regulatory

preemption usually works by “preempting state

regulation in some precinct of economic conduct

carried on by a private person or corporation,”

64a

thereby “simply leav[ing] the private party free to do

anything it chooses consistent with the prevailing

federal law… . On the subject covered, state law just

drops out.” (Nixon, supra, 541 U.S. at p. 133.) Under

normal preemption of state regulation of economic

activity, to give an example, if state regulation of

cigarette advertising is preempted “a cigarette seller

is left free from advertising restrictions imposed by a

State, which is left without the power to control on

that matter.” (Ibid.)

According to the high court, preemption of a

state law banning municipalities from entering the

telecommunications business would yield no such

simple result. The municipalities had argued in favor

of preempting the state’s ban on their entry into the

market, but even if the ban were preempted, the

Supreme Court said, the local entities would still

need a state law authorizing them to enter the

market in the first place. (Nixon, supra, 541 U.S. at

pp. 134-135.) And preemption would still leave the

local entities at the mercy of the state over the

crucial matter of funding. (Id. at pp. 134, 136.)

Unlike with economic regulation of private actors,

governmental self-regulation is an expression of

governmental authority and operates so differently

that the high court thought it unlikely Congress

intended preemption to reach so far. (Id. at p. 134.)

The Supreme Court gave several examples of the

unfortunate results of the municipalities’ position —

unlikely to have been intended by Congress —

including the memorable “one-way ratchet.” In the

hypothetical, a state has at one time authorized

municipalities to provide water, electricity and

telecommunications services. Later the state statute

is amended so that only water services are

authorized. If the law removing authority to provide

65a

telecommunications services were preempted, “[t]he

result … would be the federal creation of a one-way

ratchet. A State or municipality could give the

power, but it could not take it away later. Private

counterparts could come and go from the market at

will … ; [but] governmental providers could never

leave … , for the law expressing the government’s

decision to get out would be preempted.” (Nixon,

supra, 541 U.S. at p. 137.)

Thus, according to the Supreme Court, the

federal provision “would not work like a normal

preemptive statute if it applied to a governmental

unit. It would often accomplish nothing, it would

treat States differently depending on the formal

structures of their laws authorizing municipalities to

function, and it would hold out no promise of a

national consistency. We think it farfetched that

Congress meant [the provision] to start down such a

road in the absence of any clearer signal … .” (Nixon,

supra, 541 U.S. at p. 138.)

The presumption described in Nixon and Gregory

supports the view that CEQA is not preempted in

this case. In fact, the Nixon decision is peculiarly apt

here. The court concluded that preemption, if

recognized in such a situation, would work “by

interposing federal authority between a State and its

municipal subdivisions, which our precedents teach,

‘are created as convenient agencies for exercising

such of the governmental powers of the State as may

be entrusted to them in its absolute discretion.’

[Citations.] Hence the need to invoke our working

assumption that federal legislation threatening to

trench on the States’ arrangements for conducting

their own governments should be treated with great

skepticism, and read in a way that preserves a State’s

chosen disposition of its own power, in the absence of

66a

the plain statement Gregory requires.” (Nixon, supra,

541 U.S. at p. 140, italics added; see also Gillie,

supra, ___ U.S. ___, ___ [136 S.Ct. at p. 1602]

[warning against “constru[ing] federal law in a

manner that interferes with ‘States’ arrangements

for conducting their own governments’ ”].)

We may presume that the term “regulation of

rail transportation” found in the ICCTA preemption

provision was not intended to entirely sweep away a

state’s ability to engage in self-government over its

own subsidiaries — specifically, subsidiary entities

that are charged by the state with developing or

reestablishing a rail line. Just as in Nixon, the

preemption claimed by NCRA here would not work

like normal preemption of a state’s economic

regulation in the private marketplace, but rather

would intrude on state sovereignty. Preempting

regulation of economic activity by a private person

would, as the Nixon court said, “simply leave[] the

private party free to do anything it chooses

consistent with the prevailing federal law.” (Nixon,

supra, 541 U.S. at p. 133.) In other words, the

private party could freely engage in self-governance

as long as there was no violation of federal law. But

the impact of preemption on the state as owner of a

rail line would be quite different — it would leave

the state without the ability to achieve selfgovernance through the medium normally and

constitutionally available to states — the adoption of

state law of general application. Without plainer

language to that effect, we do not believe Congress

intended to displace the exercise of a state’s ordinary

power of self-governance when the state does not

propose to act in contravention of the dictates of the

ICCTA.

67a

Crucially, what is at stake here is the state

trying to govern itself — to engage in “decision[s] of

the most fundamental sort for a sovereign entity.”

(Gregory, supra, 501 U.S. at p. 460.) Unlike with

economic regulation of private actors, “when a

government regulates itself (or the subdivision

through which it acts) there is no clear distinction

between the regulator and the entity regulated.

Legal limits on what may be done by the government

itself (including its subdivisions) will often be

indistinguishable from choices that express what the

government wishes to do with the authority and

resources it can command. That is why preempting

state or local governmental self-regulation (or

regulation of political inferiors) would work so

differently from preempting regulation of private

players that we think it highly unlikely that Congress

intended to set off on such uncertain adventures.”

(Nixon, supra, 541 U.S. at p. 134, italics added.)

As in Nixon, preempting the state’s ability to

dictate how its own subdivisions will handle

environmental concerns caused by the state’s own

railroad business would operate so entirely

differently from the usual regulatory scenario

involving the private marketplace that we do not

believe this was what Congress intended.

Preempting the state’s ability, through its laws, to

adopt general precepts governing its own

development schemes in the sphere in which private

owners would have freedom of action would leave the

state, as owner, without the tools necessary to

govern its own subdivision. Such preemption could

deprive the state of the ability to make decisions that

would carry out the goals the state embraced

concerning

development

projects,

including

undertaking environmental mitigation or deciding

68a

not to undertake a project at all because of its

environmental hazards. State law, specifically

CEQA, would not be regulating as applied to NCRA

in any commonly understood interpretation of the

term, but rather would be an expression of state

governmental decisions about the disposition of state

authority and resources. (See Nixon, supra, 541 U.S.

at p. 134.) We see no unmistakably clear indication

in the language of 49 U.S.C. section 10501(b) that

would direct us to the surprising conclusion that a

state must operate without its usual tools and

guidelines when it becomes an owner-participant in

the railroad industry.

Preemption of CEQA as applied to NCRA also

would mean that the state can start a railroad and

fund it, but cannot control how the work is done on

the line even as to matters a private owner could

control. Indeed, if state law of general application

does not apply to NCRA’s decisions concerning the

state’s railroad project it is difficult to know under

what rules NCRA should make its decisions. NCRA

is not an independent corporation or a private

company, but an arm of the state, created and

funded by the state to carry out goals established by

the Legislature. What rule of decision — with respect

to matters not directly regulated by the STB — other

than whim would guide NCRA’s decisions, if not

state law? The state would be committed to some

version of the one-way ratchet — able to enter the

rail business, but unable to require anything of the

subordinate agency it set up to carry out the state’s

rail initiative. We presume Congress did not intend

such an absurd result or one so intrusive on state

powers of self-governance in its own forays into the

market in the absence of unmistakably clear

language.

69a

The

availability

of

citizen

enforcement

mechanisms does not change our view that CEQA

operates as a system of self-governance as applied to

NCRA in this case. What is at stake here is whether

the application of state law is regulatory within the

meaning of 49 U.S.C. section 10501(b). CEQA actions

in this case do not become regulatory simply because

they are brought by citizens.

When it created NCRA, the Legislature did not

afford it a CEQA exemption, thereby committing

NCRA to follow CEQA. CEQA’s substantive

provisions

and

citizen-suit

provisions

are

intertwined. CEQA requires government entities to

gather the information the entities need to make

decisions about pursuing their own development

projects; CEQA requires that entities engaged in

considering a project with environmental impacts

make findings that are supported by substantial

evidence; and CEQA requires that entities avoid

abuses of discretion when weighing mitigation,

considering project alternatives and feasibility, and

in approving projects. The state, with these rules

about the process of decisionmaking for its

subdivisions, engages in self-government. And the

Legislature has seen fit to permit these rules of selfgovernance to be enforced by citizen suits. Thus

citizen actions are a method of enforcement chosen

by the state itself, again as a matter of selfgovernance.

It seems evident that the state’s interest in selfgovernance extends to designing a system of

enforcement. It is not unusual for the state to

authorize citizen enforcement of state-adopted rules

governing how the state and its subdivisions will

conduct the public’s business. Indeed, citizen actions

may be authorized precisely because there may be

70a

particular procedures with which a subordinate

public agency is reluctant to comply. (See Gov. Code,

§ 11130 [action to enforce state-entity open meeting

law]; id., § 54960, subd. (a) [action to enforce localentity open meeting law]; see also Code Civ. Proc.,

§ 1094.5 [administrative mandamus].)

We acknowledge that CEQA actions might cross

the line into preempted regulation if the review

process imposes unreasonable burdens outside the

particular market in which the state is the owner

and developer of a railroad enterprise. But in the

context of addressing the competing federal and state

interests in governing state-owned rail lines that are

before us in this case, such a line is not crossed by

recognizing CEQA causes of action brought against

NCRA to enforce environmental rules of decision

that the state has imposed on itself for its own

development projects.

We by no means posit that the ICCTA does not

govern state-owned rail lines. It appears undisputed

that state-owned rail lines, like private ones, must

comply with the ICCTA’s provisions and with STB

regulation and that state regulation of rail carriers is

preempted even when the state owns the line.7 But it

A ruling that the ICCTA is inapplicable to state-owned

railroads would be inconsistent with the plain purpose of the

ICCTA and its predecessors to ensure a uniform national

system of rail service subject to national — but limited —

federal regulation. We have seen that the ICCTA goes beyond

its predecessor in this respect, even preempting former limited

state regulation of purely intrastate lines. Indeed it would be

impossible to have a unified national rail system if a state could

march to a different drummer when it owned the railroad. In

view of the national system contemplated by the ICCTA, it

would be absurd to suppose that a state could require a stateowned rail line that connects with interstate tracks to, for

7

71a

example, abandon essential connecting lines without respect to

STB requirements, shrug off its common carrier obligations

without

STB

approval,

charge

discriminatory

rates

notwithstanding ICCTA rate restrictions, or engage in a sale

that would be disapproved by the STB.

There is authority demonstrating as much. State-owned rail

lines and entities have been held subject to the common carrier

obligations of the predecessor statute, the Interstate Commerce

Act. (City of New Orleans v. Texas & Pac. Ry. Co. (5th Cir.

1952) 195 F.2d 887, 889 [“So long as it engages in interstate

and foreign commerce [the publicly owned line] is subject to the

federal law and the Interstate Commerce Commission, like any

other railroad”]; City of New Orleans Public Belt Ry. Comm. v.

Southern Scrap Material Co. (E.D.La. 1980) 491 F.Supp. 46, 48;

see also International Long. Ass’n, AFL-CIO v. North Carolina

Ports Auth. (4th Cir. 1972) 463 F.2d 1, 3-4.)

More generally (albeit in the context of a claim under the

Federal Employers’ Liability Act), the high court has said it

would not “throw into doubt” prior decisions “holding that the

entire federal scheme of railroad regulation applies to stateowned railroads.” (Hilton v. South Carolina Public Railways

Comm’n (1991) 502 U.S. 197, 203, italics added; see also

Transportation Union v. Long Island R. Co. (1982) 455 U.S.

678, 685, 687-689 [applying National League of Cities v. Usery

(1976) 426 U.S. 833 (which later was overruled in Garcia,

supra, 469 U.S. 528), and concluding that because state

operation of railroads is not an integral part of traditional state

activities, there was no 10th Amend. violation in applying

federal railroad labor law to a state-owned railroad]; California

v. Taylor (1957) 353 U.S. 553, 567 [federal Railway Labor Act

was intended “to apply to any common carrier by railroad

engaged in interstate transportation, whether or not owned or

operated by a State”]; Int. Com. Comm. v. Detroit & Railway

Co. (1897) 167 U.S. 633, 642 [state railroad is a common carrier

subject to the Interstate Commerce Act and its prohibition on

discriminatory rates].)

The STB certainly asserts and exercises jurisdiction over

state and municipally owned rail lines — as it has done in this

case. The STB has asserted that authority in a case involving

another public project in California. (See California High-Speed

Rail Authority, Petition (STB, Dec. 12, 2014, No. FD 35861)

72a

does not appear unmistakably clear that in adopting

the preemption provision of the ICCTA, Congress

intended that state self-governance extending over

how its own subdivisions would enter a business and

make decisions a private owner could decide how to

make for itself would be considered preempted

regulation of rail transportation within the meaning

of the preemption clause.

The Court of Appeal rejected the Nixon analysis

on the ground that whereas in Nixon there was

ambiguity in the statutory phrase “any entity”

(Nixon, supra, 541 U.S. at p. 133), leaving room for

the presumption that Congress would not interfere

with state sovereignty to the extent of displacing

state authority over municipalities unless it made its

purpose unmistakably clear, in the case of the

ICCTA, there is no ambiguity. According to the Court

of Appeal, the ICCTA preempts all laws that have

the effect of managing or governing rail

transportation, a definition the court believed

encompassed CEQA. The Court of Appeal

2014 WL 7149612, p. * 11.) Prior authority is in accord. (North

San Diego, supra, 2002 WL 1924265, pp. * 5, * 6 [public-agencyowned rail carrier could not be required to obtain a coastal

development permit under the California Coastal Act or to

prepare an environmental report prior to construction of a

passing track]; see also Alaska R. Corp., Exemption (STB, Jan.

5, 2010, No. FD 34658) 2010 WL 24954, p. * 1; California HighSpeed Rail Authority, Exemption, supra, 2013 WL 3053064;

South Carolina Division of Public Railways d/b/a Palmetto

Railways, Exemption (STB, Sept. 10, 2013, No. FD 35762) 2013

WL 4879234; State of North Carolina, Exemption (STB, Apr. 15,

1998, No. FD 33573) 1998 WL 191270; Morristown & Erie

Railway, Inc., Certificate (STB, June 22, 2004, No. FD 34054)

2004 WL 1387314, pp. * 3, * 4 [discussing STB regulations

implementing NEPA in context of railroad owned by the state

and operated by a county].)

73a

maintained that Congress has authority under the

commerce clause to regulate rail transportation, and

that “[i]f Congress has the authority under the

[c]ommerce [c]lause to act, that action does not

invade ‘the province of state sovereignty preserved

by the Tenth Amendment. [Citations.] The ICCTA’s

preemption of CEQA as a preclearance requirement

to railroad operations does not violate the Tenth

Amendment.”

We believe this analysis fails to grapple with the

status of the state as the owner of the railroad line,

and the related question of the freedom of action

afforded to owners under the deregulatory aspect of

the ICCTA. It also fails to abide by the presumption

established in Nixon and Gregory — that federal

preemption does not trench on essential state

sovereignty

and

self-governance

without

unmistakably clear language to that effect — and

mistakenly suggests that just because Congress has

power to assert preemptive control over an area of

commerce, the existence of such power means that it

necessarily has preempted control even as to areas of

traditional state sovereignty. We believe the analysis

must be more nuanced, and that the appropriate

presumptions must be invoked. Where owners are

free from regulation, this freedom belongs to both

public and private owners. When there is state

ownership, we do not believe it constitutes regulation

when a state applies state law to govern how its own

state subsidiary will act within the area free of STB

and ICCTA regulation.

We acknowledge that the STB apparently applies

the same sweeping preemption to state and local

environmental rules even when the rail carrier is

publicly owned. (See North San Diego, supra, 2002

WL 1924265, pp. * 5, * 6 [publicly owned rail carrier

74a

could not be required to obtain a coastal development

permit under the California Coastal Act or to

prepare an environmental report prior to

construction of a passing track].) And in a divided

opinion now on appeal, the STB concluded

specifically that the ICCTA preempts any application

of CEQA to what appears to be a publicly owned

high-speed rail project in California. (California

High-Speed Rail Authority, Petition, supra, 2014 WL

7149612, p. * 7.) Although the California High-Speed

Rail Authority in that case had petitioned only for a

declaration that the ICCTA preempts injunctive

relief under CEQA that could prevent or delay

construction of the line, and though the authority

observed that it did not seek preemption of other

remedies such as an order requiring a revised EIR or

additional mitigation so long as there would be no

work stoppage, the STB majority filed a much

broader decision. It concluded that CEQA is

“categorically preempted” because its application to

new rail construction would impinge on the “[STB]’s

exclusive jurisdiction over rail transportation” and

constitute an attempt “to regulate a project that is

directly regulated by the [STB].” (Ibid.) The STB

majority held that CEQA is, in fact, an

environmental permitting or preclearance provision

that should be entirely preempted as to railroads,

relying largely on Auburn, supra, 154 F.3d 1025, and

the Court of Appeal decision in the present case. A

dissent to the STB’s decision objected that it was

unnecessarily broad and that the authority should be

held to its prior voluntary commitments to follow

CEQA. (California High-Speed Rail Authority,

Petition, supra, at p. * 13 (dis. statement of

75a

Begeman, Comr.).)8 But these decisions on the part

of the STB did not consider the deregulatory aspect

of the ICCTA and the different way in which

deregulation affects public and private rail lines. We

are not bound to follow them.

c. The market participant doctrine

There is another interpretive presumption,

namely the market participant doctrine, that

plaintiffs assert would lead to a conclusion that there

should be no preemption of CEQA here. The doctrine

acknowledges that in some circumstances, states

may be acting not as regulators of others, but as

participants in a marketplace who themselves need to

deal with private parties to obtain services or

products. In this proprietary capacity they generally

should have the same freedom as private actors in

the market, just as they must ordinarily carry the

same burdens. (Reeves, Inc. v. Stake (1980) 447 U.S.

429, 439 (Reeves) [state, which owned and operated a

cement plant, was permitted to sell preferentially to

in-state private purchasers; “state proprietary

activities may be, and often are, burdened with the

same restrictions imposed on private market

participants. Evenhandedness suggests that, when

acting as proprietors, States should similarly share

existing freedoms from federal constraints, including

the inherent limits of the Commerce Clause” (fn.

omitted)].)

A petition for reconsideration and request for stay was denied

on the ground that a majority of the STB could not agree on its

disposition. (California High-Speed Rail Authority, Petition

(STB, May 4, 2015, No. FD 35861) 2015 WL 2070594.) The

matter is pending on appeal in the United States Court of

Appeals for the Ninth Circuit.

8

76a

Whereas the commerce clause of the federal

Constitution implies a limitation on state authority

to interfere with interstate commerce, “either

through prohibition or through burdensome

regulation” (Hughes v. Alexandria Scrap Corp. (1976)

426 U.S. 794, 806), at the same time the Supreme

Court has recognized the importance of state

sovereignty in the market sphere as well. The high

court has cautioned that notwithstanding the scope

of Congress’s authority under the commerce clause,

“[r]estraint in this area is … counseled by

considerations of state sovereignty, the role of each

State ‘ “as guardian and trustee for its people,” ’

[citation], and ‘the long recognized right of trader or

manufacturer, engaged in an entirely private

business, freely to exercise his own independent

discretion as to parties with whom he will deal.’

[Citation.]” (Reeves, supra, 447 U.S. at pp. 438-439,

fns. omitted.)

The high court has cautioned that whereas the

market participant doctrine acknowledges that a

state can influence a discrete area of economic

activity in which it participates, the doctrine does not

afford “carte blanche to impose any conditions that

the State has the economic power to dictate, and does

not validate any requirement merely because the

State imposes it upon someone with whom it is in

contractual privity. [Citation.] [¶] The limit of the

market-participant doctrine must be that it allows a

State to impose burdens on commerce within the

market in which it is a participant, but allows it to go

no further. The State may not impose conditions,

whether by statute, regulation, or contract, that have

a substantial regulatory effect outside of that

particular market.” South-Central Timber Dev. v.

Wunnicke (1984) 467 U.S. 82, 97-98.)

77a

Here, of course, we do not simply confront the

inherent or implied limits imposed by the commerce

clause on state regulation, but an express

preemption provision. The market participant

doctrine applies, however, in both situations. And

when there is a preemptive federal statute, a

presumption as to its proper interpretation arises

from the market participant doctrine.

A congressional preemption clause ordinarily

displaces regulatory action on the part of states, but

the high court has held that it is unlikely that

Congress also meant to reach the proprietary conduct

of the states. (Boston Harbor, supra, 507 U.S. at pp.

231-232; Wisconsin Dept. of Industry v. Gould Inc.

(1986) 475 U.S 282, 290 (Gould).) At the same time,

reviewing courts must remain aware of the special

power of the state in the marketplace. The high court

in Gould, supra, 475 U.S. 282, for example,

acknowledged that even state purchasing decisions

involving private contractors may in some

circumstances have such an impact in the

marketplace as to be regulatory. (Id. at p. 290.) Thus

in Gould, a Wisconsin statute under which state

purchasing agents were barred from expending state

funds to contract with private employers who had

repeatedly violated the National Labor Relations Act

(NLRA) was essentially regulatory and therefore was

preempted under the NLRA. The state law imposed a

“supplemental sanction” on NLRA violations by

private employers (id. at p. 288), and was

inconsistent with congressional intent to prevent

states from “providing their own regulatory or

judicial remedies for conduct prohibited or arguably

prohibited by the Act.” (Id. at p. 286.)

But even in the context of the NLRA and state

contracts with private actors, the high court has

78a

confirmed the vitality of the market participant

doctrine. Under certain circumstances involving a

state as owner of property or purchaser of goods or

services, the high court has acknowledged that the

public entity may be permitted to “manage its own

property when it pursues its purely proprietary

interests … where analogous private conduct would

be permitted” and is not seen thereby to be engaging

in regulatory conduct. (Boston Harbor, supra, 507

U.S. at p. 231, italics added.) “When a State owns

and manages property, for example, it must interact

with private participants in the marketplace. In so

doing, the State is not subject to pre-emption by the

NLRA, because pre-emption doctrines apply only to

State regulation.” (Id. at p. 227.)

The Supreme Court in Boston Harbor

distinguished Gould, supra, 475 U.S. 282, explaining

that the Gould rule addressed a state agency’s

attempt, through limitations on state expenditures,

to compel NLRA compliance on the part of a private

employer — a matter “unrelated to the employer’s

performance of contractual obligations to the State”

but rather demonstrating an intent to deter NLRA

violations. (Boston Harbor, supra, 507 U.S. at

p. 229.)

The high court in Boston Harbor also pointed out

that it was merely permitting the public entity to act

in the same way any other proprietor could act. The

disputed contract in that case was between public

and private entities and involved a development

project. The contract’s prehire provisions, challenged

as regulatory, would actually be permitted under the

NLRA in private contracts in the construction

industry, and the same freedom was contemplated

when the public entity acted as a proprietor and

market participant. (Boston Harbor, supra, 507 U.S.

79a

at p. 231.) The court said: “To the extent that a

private purchaser may choose a contractor based

upon that contractor’s willingness to enter into a

prehire agreement, a public entity as purchaser

should be permitted to do the same.” (Ibid., italics

omitted.)

Boston Harbor reflects a situation in which the

state can interact in the marketplace in the same

way as a private actor without being considered as

engaging in preempted regulatory conduct. By

contrast, when the state engages with private

persons in the marketplace with tools that are not

available to private actors, the high court has viewed

this as regulatory, and therefore the state’s action

will be preempted. (American Trucking, supra, ___

U.S. ___, ___ [133 S.Ct. at p. 2103] [federal law

preempts a municipal entity’s requirement of its

private lessees that they impose certain contractual

terms on private parties on pain of potential

misdemeanor prosecution].)

Unlike plaintiffs, we do not find the market

participant doctrine fully on point, because it

ordinarily is used to analyze preemption when a

state interacts with private parties as a participant

in a private marketplace for goods, labor, or services.

When a state engages in the private marketplace on

terms available to any other proprietor, it may be

presumed that such conduct is not regulation in the

sense ordinarily meant by federal preemption

provisions. Here, by contrast, our focus is not on the

state’s interactions with the private railroad

marketplace, or even on its interactions with its

private lessee, NWPCo, but on the state’s ability to

govern the state’s own subsidiary, NCRA — the

governmental subdivision of the state through which

80a

the state proposes to enter into and engage with the

railroad marketplace.

Nevertheless, elements of the case law

concerning the doctrine are instructive. One useful

element is related to our earlier discussion of Nixon,

supra, 541 U.S. 125, and Gregory, supra, 501 U.S.

452, in that, similarly, it is based in part on the

presumption that Congress will not interfere lightly

with state sovereignty. Furthermore, the market

participant doctrine also instructs, in part, that

because states operating in a private marketplace

are subject to the same burdens imposed by Congress

on private proprietors, courts will presume that

Congress would afford states, as proprietors, the

same freedoms as private proprietors. These ideas

are useful because in a sense, application of CEQA is

not solely a matter of self-governance by the state.

CEQA can be seen as an expression of how the state,

as proprietor, directs that a state enterprise will be

run — an expression that can be analogized to

private corporate bylaws and guidelines governing

corporate subsidiaries. To the extent a private

corporate parent would have a zone of freedom under

the ICCTA to govern how its subsidiaries will engage

in the railroad business — including the freedom to

direct them to undertake environmental fact finding

as a condition of approving or going forward with

their projects — the state presumably has the same

sphere of freedom of action.

To make this point more concrete, we provide a

hypothetical

example.

A

private

corporate

conglomerate might require its subsidiaries,

including

its

rail

subsidiary,

to

perform

environmental studies to discover what climate

impacts a proposed project may have, to identify

liabilities in the event of the adoption of a federal

81a

carbon tax or, on the asset side of the ledger, the

availability of greenhouse gas credits for a project

with climate benefits in the event of the

establishment of a broad cap-and-trade system. A

corporate conglomerate could make the results of

environmental study one element of the cost-benefit

analysis it requires of its subsidiary or an element of

its own retained control over the subsidiary. To

ensure accomplishment of its own sustainability

goals, or even as a matter of public relations, a

corporation, as part of its internal governance

policies or its bylaws, could adopt a process that

permitted shareholder or stakeholder challenges to

its handling of the environmental review process. In

our view, the application of CEQA to NCRA

proceedings and decisions would perform a similar

decisionmaking function and afford similar

enforcement mechanisms. We see little reason to

suppose that when Congress forbade states to

regulate rail transportation, it meant to prevent

states, as owners of railroad lines, to have the

freedom of action we believe would be retained by

private businesses under the ICCTA.9

The Court of Appeal in the present case rejected plaintiffs’

reliance on the market participant doctrine because petitioner’s

suit to enforce CEQA was not itself a proprietary activity in the

marketplace: “NCRA, a political subdivision of the state,

undertook a project to reopen the Russian River Division of the

line. As part of that project, it prepared an EIR, which is now

challenged by [plaintiffs] as inadequate. Even if the project to

reopen the line is viewed as proprietary and the initial decision

to prepare the EIR a component of this ‘proprietary’ action, a

writ proceeding by a private citizen’s group challenging the

adequacy of the review under CEQA is not a part of this

proprietary action.” We do not believe that the market

participant doctrine applies solely to enforcement actions that

are themselves literally proprietary or commercial conduct in

9

82a

F. NWPCo

Despite our conclusion concerning NCRA, we

agree with the Court of Appeal that CEQA causes of

action cannot be the basis for an injunctive order

directed specifically at NWPCo to halt NWPCo’s

freight operations — a form of relief that falls within

plaintiffs’ prayer. Such an application of state law

would be tantamount to the operation of state

environmental preclearance rules that the Auburn

court and others have agreed cannot be used to halt

railroad operations pending compliance. (See, e.g.,

the market. This was certainly not the case in Boston Harbor,

supra, 507 U.S. 218, for example. Rather, what is critical is

whether the state is engaged in proprietary or essentially

regulatory conduct, with special attention to whether the same

enforcement tools would be available to private parties.

The Court of Appeal also implied that the doctrine can be

applied solely as a shield by a state seeking to avoid

preemption, and not as a sword for citizens seeking to enforce

state law. As our discussion above indicates, however, the

market participant doctrine is an aspect of a preemption

question, which is a question of law. (See Farm Raised Salmon

Cases (2008) 42 Cal.4th 1077, 1089, fn. 10 [preemption as

question of law].) Application of the market participant doctrine

turns on congressional intent underlying the preemption clause

under review, and on whether the state is involved in

essentially regulatory behavior. Because these questions of law

simply lead a court to the proper interpretation of a federal

statute, we are not persuaded the market participant doctrine

cannot be raised simply because plaintiffs are not a state or

local entity wishing to shield assertedly proprietary activity

from federal preemption. Indeed, the Court of Appeal’s

interpretation would lead to the anomaly that the scope of the

federal enactment’s preemption would turn on the litigation

strategy of individual states. It seems unlikely that the

ICCTA’s purpose contemplated preempting local law in one

state but not preempting an identical statute in another state,

based merely on the state’s appearance or nonappearance in

litigation.

83a

Auburn, supra, 154 F.3d 1025.) The Gregory-Nixon

presumption regarding congressional intent would

not be fully applicable, either, since the order

directly restraining NWPCo from operating freight

service pending CEQA compliance would not involve

simply the state’s autonomy and control over its

subdivisions, but would constitute use of state law to

restrict operations by a private rail carrier — a

classic example of state regulation.

Nor would the market participant doctrine apply

to prevent preemption. Even if the state is a

participant in the railroad market, when the state

uses enforcement mechanisms that would not be

available to a private party, this ordinarily

constitutes regulation. The mechanism sought to be

used here — public entity proceedings on a project

pursuant to CEQA — is not a mechanism that

private market actors could create and require of

others. That is, although a private actor, by contract,

could condition performance on compliance with

specified environmental norms, that private actor

would be unable, even by contract, to create and

implement a system of government proceedings. Only

the government can create and administer such a

system. In this way, application of CEQA to enjoin

NWPCo from operating rail service pending NCRA’s

CEQA compliance would run afoul of the teaching of

American Trucking. This, like the possibility of

criminal sanctions in that case, is not a tool “that the

owner of an ordinary commercial enterprise could

mimic.” (American Trucking, supra, ___ U.S. at p.

___ [133 S.Ct. at p. 2103].) Nor does plaintiffs’

reliance on the Engine Manufacturers decision assist

them, since that decision permitted state control over

the state’s own internal purchasing decisions, but did

not extend to permitting regulation of private third

84a

parties. (Engine Manufacturers, supra, 498 F.3d at

pp. 1045-1046, 1048.) Thus it appears that plaintiffs

cannot rely upon CEQA as a basis for an injunction

directed at NWPCo to halt its operations. Whether

NWPCo would be able to carry on with service

despite the application of CEQA to NCRA is a

question that is beyond the scope of this case. We

also agree with the Court of Appeal that in the

current litigation, plaintiffs did not preserve any

contract claim.

At the same time, the conclusion that a CEQA

cause of action cannot be the basis for an order

halting NWPCo’s operations does not require us to

conclude CEQA is also preempted as applied to

NCRA in this case. Even if CEQA is preempted as

applied to halt NWPCo’s freight operations because

in that context CEQA is essentially regulatory, the

application of CEQA, as a matter of self-governance,

to the state’s own railroad project is not. This result

is evident as a matter of legislative intent, since

CEQA contains a severability clause that is written

in broad terms: “If any provision of this division or

the application thereof to any person or circumstances

is held invalid, such invalidity shall not affect other

provisions or applications of this division which can

be given effect without the invalid provision or

application thereof, and to this end the provisions of

this division are severable.” (Pub. Resources Code,

§ 21173, italics added; cf. NFIB v. Sebelius (2012)

567 U.S. 519 [giving effect to a similarly worded

severability provision].) The severability clause

establishes a presumption that the Legislature

intended that the invalid (here, the preempted)

applications

be

severed

from

the

valid

(nonpreempted) ones. Insofar as CEQA governs

projects “directly undertaken” by public entities

85a

(Pub. Resources Code, § 21065, subd. (a)), its

provisions appear to be capable of operating

independently. And to sever the preempted

applications of CEQA from the nonpreempted

applications is consistent with our repeated

recognition that “CEQA is to be interpreted ‘to afford

the fullest possible protection to the environment

within the reasonable scope of the statutory

language.’ ” (Mountain Lion Foundation, supra, 16

Cal.4th at p. 112.)

Applying CEQA and its remedies to NCRA (but

not to NWPCo) may have some impact on the private

party, but this is merely derivative of the state’s

efforts at self-governance in this marketplace. We

see the two entities as distinct for the purposes of

preemption, at least in circumstances where the

ICCTA leaves a regulatory hole which owners are

free to exploit to their own advantage.

III. Conclusion

The ICCTA preempts state regulation of rail

transportation. In this case, the application of CEQA

to NCRA would not be inconsistent with the ICCTA

and its preemption clause. This is both because we

presume Congress does not intend to disrupt state

self-governance without clear language to that effect,

and because the ICCTA leaves a relevant zone of

freedom of action for owners that the state, as owner,

can elect to act in through CEQA. We conclude that

the judgment of the Court of Appeal should be

reversed and the matter remanded for further

proceedings consistent with this opinion.

CANTIL-SAKAUYE, C. J.

86a

WE CONCUR:

WERDEGAR, J.

CHIN, J.

LIU, J.

CUÉLLAR, J.

KRUGER, J.

87a

CONCURRING OPINION BY KRUGER, J.

I agree with the majority that, in the context of

the activities of a public rail authority, the California

Environmental Quality Act (CEQA; Pub. Resources

Code, § 21000 et seq.) is not categorically preempted

as a “regulation of rail transportation” within the

meaning of the ICC Termination Act of 1995 (ICCTA;

49 U.S.C. § 10501(b)). As it applies in this context,

CEQA represents a set of obligations the State of

California has voluntarily assumed in conducting its

own operations, and it functions as a rule of internal

state governance that the North Coast Railroad

Authority — much as every other California public

agency — must follow with respect to all projects it

undertakes. (See, e.g., Pub. Resources Code,

§§ 21001.1, 21065, subd. (a), 21150, 21151.) I agree

with the majority that the Congress that enacted the

ICCTA could not have intended to broadly displace

state laws governing how states and their

subdivisions carry out their own projects. (See maj.

opn., ante, at pp. 45–65.)

This decision clears the way for the courts below

to begin considering the merits of plaintiffs’ CEQA

claims, which the courts had previously found to be

preempted by the ICCTA as a categorical matter.

That is not to say that the ICCTA is irrelevant to the

proceedings on remand, however. The parties and

amici curiae have argued that particular CEQA

remedies might be preempted by the ICCTA to the

extent the remedy is one that unreasonably

interferes with the jurisdiction of the Surface

Transportation Board, which has authorized service

over the rail line in question. (Cf., e.g., Wedemeyer v.

CSX Transportation, Inc. (7th Cir. 2017) 850 F.3d

889, 895 [a remedy may be preempted “ ‘as

applied’ … if [it] would have the effect of preventing

88a

or

unreasonably

interfering

with

railroad

transportation”];

California

High-Speed

Rail

Authority,

Petition

(STB,

Dec.

12,

2014,

No. FD 35861) 2014 WL 7149612, p. *8 [opining that

even voluntary agreements may be preempted to the

extent they unreasonably interfere with interstate

commerce or rail operations].) I do not read the

majority opinion to foreclose such arguments on

remand. (Cf., e.g., maj. opn., ante, at pp. 47, 67.)

With these observations, I join the majority

opinion.

KRUGER, J.

89a

DISSENTING OPINION BY CORRIGAN, J.

I respectfully dissent. The majority properly

explains why any application of the California

Environmental Quality Act (CEQA) that interrupts

rail service would be preempted by the ICC

Termination Act (ICCTA). (Maj. opn., ante, at pp. 3441; see Pub. Resources Code, § 21000 et seq. (CEQA);

49 U.S.C. § 10101 et seq. (ICCTA).) The majority

acknowledges that no CEQA remedy can be imposed

on the Northwestern Pacific Railroad Company

(NWPCo) in this case. (Maj. opn., ante, at pp. 66-67.)

However, it reasons that as applied to the North

Coast Railroad Authority (NCRA), a state agency,

CEQA is not a “regulation” but a mere act of “selfgovernance.” (Id. at p. 20; see id. at pp. 45-65.) I do

not follow that logic.

There is no difference in CEQA procedures as

they apply to projects undertaken by public agencies,

as opposed to private projects over which an agency

has power of approval.1 The proposition that a law of

general application may be considered a “regulation”

of private activity, but not of public activity in the

same sphere, appears to be unsupported by

A project subject to CEQA is “an activity which may cause

either a direct physical change in the environment, or a

reasonably foreseeable indirect physical change in the

environment, and which is any of the following:

1

“(a) An activity directly undertaken by any public agency.

“(b) An activity undertaken by a person which is supported,

in whole or in part, through contracts, grants, subsidies, loans,

or other forms of assistance from one or more public agencies.

“(c) An activity that involves the issuance to a person of a

lease, permit, license, certificate, or other entitlement for use by

one or more public agencies.” (Pub. Resources Code, § 21065.)

90a

precedent.2 Nor does the majority explain how it is

that the state is free to “govern” itself by applying

CEQA when it undertakes a rail project, something

ordinarily done by the private sector, but not when

exercising its permitting authority over a private rail

project, which is a quintessentially governmental

function. The majority emphasizes the state’s “zone

of autonomy” as a railroad owner. (Maj. opn., ante, at

p. 47.) However, neither NCRA nor any of the other

state agencies involved in this case subscribe to the

self-governance theory. The majority’s approach

forces the state to undertake a burden no private

railroad owner must bear.

The majority recognizes that if a state decides to

enter the railroad business, it is subject to the same

federal regulations as private carriers. (Hilton v.

South Carolina Public Railways Comm’n (1991) 502

U.S. 197, 203; Transportation Union v. Long Island

R. Co. (1982) 455 U.S. 678, 685, 687-689; California

v. Taylor (1957) 353 U.S. 553, 566-567; maj. opn.,

ante, at pp. 57-58, fn. 7.) Nevertheless, it concludes

that ICCTA applies differently to public and private

rail operators. It attempts to minimize its disparate

treatment of public operators by reasoning that a

private operator might choose to subject itself to an

environmental review process, and permit its

shareholders or stakeholders to challenge its

handling of that process. (Maj. opn., ante, at p. 65.)

Hypothetically, a corporation might do that. But a

2 Neither Gregory v. Ashcroft (1991) 501 U.S. 452, nor Nixon v.

Missouri Municipal League (2004) 541 U.S. 125, nor the

“market participant doctrine” line of cases (see maj. opn., ante,

pp. 60-64) stands for the idea that the same law may be a

“regulation” as applied to a private party, but “self-governance”

as applied to a public agency.

91a

challenge that had the effect of interfering with the

operator’s obligations as a common carrier would be

subject to Surface Transportation Board (STB)

regulation. (See maj. opn., ante, at p. 24.) And if the

challenge were brought in court, it would be barred

by ICCTA’s specification that “the remedies provided

under this part with respect to regulation of rail

transportation are exclusive and preempt the

remedies provided under Federal or State law.”

(49 U.S.C. § 10501(b).)

The majority can avoid the consequences of its

rule here only because NCRA, despite its status as a

common carrier, does not directly operate the

Russian River line. It has transferred operational

responsibility to its franchisee, NWPCo. However, no

escape from the majority’s holding will be available

to public entities who operate rail lines themselves,

or who are sued at an early stage of a railroad

project, before a franchisee is in place. In such cases,

today’s holding will displace the longstanding

supremacy of federal regulation in the area of

railroad operations by allowing third party plaintiffs

to thwart or delay public railroad projects with

CEQA suits. Such an outcome is both unfair to public

entities and inimical to the deregulatory purpose of

ICCTA. (See maj. opn., ante, at pp. 27-29.)

Furthermore, as the majority recognizes, the

holding in this case is in direct conflict with the

stated views of the STB. (Maj. opn., ante, at pp. 5960.) I question the wisdom of creating such a conflict,

based not on settled law but on an entirely novel

theory construing regulation as a form of “selfgovernance.”

CORRIGAN, J.

92a

APPENDIX B

IN THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

FRIENDS OF THE EEL RIVER,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC RAILROAD

COMPANY,

Real Party in Interest and Respondent.

S222472

Ct.App 1/5 A139222

Marin County

Super. Ct. No. CV1103605

CALIFORNIANS FOR ALTERNATIVES

TO TOXICS,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC RAILROAD

COMPANY,

Real Party in Interest and Respondent.

A139222

Marin County

Super. Ct. No. CV1103605

Filed 1/17/14

Unmodified opinion attached

93a

ORDER MODIFYING

OPINION [NO CHANGE IN

THE JUDGMENT]

THE COURT:

The opinion filed September 29, 2014, is modified

as follows:

On page 30, delete footnote 7, and renumber all

subsequent footnotes.

There is no change in the judgment.

Appellants’ petition for rehearing is denied.

Dated:

________________, P.J.

94a

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL

OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

FRIENDS OF THE EEL RIVER,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD

AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC

RAILROAD COMPANY,

Real Party in Interest and Respondent.

A139222

(Marin County Super. Ct.

No. CIV1103605)

CALIFORNIANS FOR ALTERNATIVES TO

TOXICS,

Plaintiff and Appellant,

v.

NORTH COAST RAILROAD AUTHORITY et al.,

Defendants and Respondents;

NORTHWESTERN PACIFIC

RAILROAD COMPANY,

Real Party in Interest and Respondent.

A139235

(Marin County Super. Ct.

No. CIV1103591)

95a

The North Coast Railroad Authority (NCRA), a

public agency established by Government Code

section 93000 et seq., entered into a contract with

the Northwestern Pacific Railroad Company

(NWPRC), allowing the latter to conduct freight rail

service on tracks controlled by NCRA.

Two

environmental groups, Friends of the Eel River

(FOER) and Californians for Alternatives to Toxics

(CAT), filed petitions for writ of mandate under the

California Environmental Quality Act (CEQA; Pub.

Resources Code, §§ 21050 et seq., 21168.5) to

challenge NCRA’s certification of an environmental

impact report (EIR) and approval of NWPRC’s

freight operations.

The trial court denied the

petitions, concluding CEQA review was preempted

by

the

Interstate

Commerce

Commission

Termination Act (ICCTA; 49 U.S.C. § 10101 et seq.)

and rejecting petitioners’ claim that NCRA and

NWPRC were estopped from arguing otherwise.

FOER and CAT (collectively, petitioners) appeal.

They contend (1) the ICCTA preempts only the

“regulation” of rail transportation, whereas NCRA

agreed to conduct a CEQA review of the rail

operations and related repair/maintenance activities

as part of a contract allowing it to receive state

funds; (2) NCRA and NWPRC are estopped from

claiming no EIR was required, due to positions taken

in previous proceedings; and (3) the EIR was

insufficient because, among other things, it

improperly “segmented” the project, given that

96a

additional rail operations were contemplated on

other sections of the line. We affirm.1

I. STATUTORY OVERVIEW

A. The ICCTA And Federal Regulation Of

Railroad Service

“Congress has exercised ‘broad regulatory

authority’ over railroads for more than a century.

[Citation.] The Interstate Commerce Commission,

created by the Interstate Commerce Act (Feb. 4,

1887, ch. 104, 24 Stat. 379) in 1887, was abolished by

the ICCTA in January 1996, and the Surface

Transportation Board (STB) was created in its stead.

[Citation.]

The purpose of the ICCTA was to

‘eliminate many outdated, unnecessary, and

burdensome

regulatory

requirements

and

restrictions on the rail industry.’ [Citation.]” (People

v. Burlington Northern Santa Fe Railroad (2012) 209

Cal.App.4th 1513, 1517 (Burlington Northern).)

The ICCTA grants the STB jurisdiction over rail

operations, whether or not they take place entirely

within a single state. This jurisdiction “is exclusive.

Except as otherwise provided in this part, the

remedies provided under this part… are exclusive

and preempt the remedies provided under [f]ederal

or [s]tate law.” (49 U.S.C. § 10501(b).)

Before a rail carrier can operate, it must obtain a

certificate from the STB giving it permission to do so.

1 An amicus curiae brief has been filed on behalf of petitioners

by the Ecological Rights Foundation, and a joint amicus curiae

brief has been filed on behalf of petitioners by the Natural

Resources Defense Council, the Planning and Conservation

League and the Sierra Club. We have read and considered

those briefs in addition to those filed by the parties to the

appeal.

97a

(49 U.S.C. §§ 10901, 10902.) Depending on the

nature of the proposed operation, the applicant may

be required to perform an environmental review

under federal law, including the National

Environmental Policy Act of 1969 (NEPA). (42

U.S.C. § 4321 et seq.; 49 C.F.R.

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