Friends River v. N. Coast R.R. Auth.

3 Cal.5th 677

399 P.3d 37

220 Cal.Rptr.3d 812

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.

Californians for Alternative 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.

S222472

Supreme Court of California

Filed July 27, 2017

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

Law Offices of Sharon E. Duggan, Sharon E. Duggan, San Francisco; Klamath

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

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

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

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

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

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

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

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

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

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

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

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

Cantil-Sakauye, C.J.

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

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

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

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

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

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

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

I. Factual and Procedural Background

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

A. History of public ownership

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

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