In a case that could end up in the U.S. Supreme Court, the California Supreme Court today holds that federal law does not preclude state public entity compliance with CEQA regarding a railroad project that the state owns.  The court’s 6-1 opinion in Friends of the Eel River v. North Coast Railroad Authority, by Chief Justice Tani Cantil-Sakauye, concludes that, although the federal ICC Termination Act of 1995 would not allow the state to impose CEQA regulations on a privately owned railroad, CEQA compliance by the state concerning its own rail line is not state regulation at all, but a permissible “act of self-governance on the part of the state.”  The state acting in accord with CEQA is operating within “a sphere of regulatory freedom enjoyed by owners” and is comparable to a private owner following its “internal corporate rules and bylaws” in guiding its “market-based decisions,” the opinion says.  The court finds that the federal law must allow “the state as owner [to] make its decisions based on its own guidelines rather than some anarchic absence of rules of decision.”

Justice Leondra Kruger signs the majority opinion, but also writes a separate concurrence.  She stresses it remains an open question whether “particular CEQA remedies might be preempted by the ICCTA to the extent the remedy is one that unreasonably interferes with the jurisdiction of the [federal] Surface Transportation Board, which has authorized service over the rail line in question.”

Justice Carol Corrigan dissents.  She says that finding “a law of general application” like CEQA to “be considered a ‘regulation’ of private activity, but not of public activity in the same sphere, appears to be unsupported by precedent” and it unfairly “forces the state to undertake a burden no private railroad owner must bear.”

The court reverses the First District, Division Five, Court of Appeal.