The Federal Railroad Administration on September 22 formally increased the amount of money to be distributed in the next round of Federal-State Partnership for Intercity Passenger Rail (FSP) grants outside the Northeast Corridor from $1.06 billion to $5.07 billion. $3.07 billion of that amount is money that has been taken away from the previous recipient, the California High Speed Rail Authority, by the Trump Administration and reprogrammed.

Background. The 2021 IIJA infrastructure law provided an astounding $36 billion over five years for the FSP program in “advance appropriations” over the FY 2022-2026 period, and Congress supplemented that amount here and there. The IIJA also specified that no more than $24 billion of the $36 billion could go to projects on the Northeast Corridor. But with President Biden being Mr. NEC, the previous Administration treated that $24 billion amount as both a floor and a ceiling.

In December 2023, the Biden Administration announced a commitment of $3.07 billion over five years for the California HSR project, which was a little more than one-fourth of their intended $12 billion in outside-NEC FSP funding. This money was broken into several pieces:

That was the situation at the end of the Biden Administration. After an investigation, the Trump Administration on July 16 announced they were canceling the $3.07 billion (after $1.4 million had been spent), and also canceling a $929 million HSR grant to CHSRA from back in fiscal year 2010. CHSRA immediately filed a lawsuit in federal court the following day – the same day that FRA deobligated the money in the federal accounting system.

Two days later, on July 19, CHSRA and FRA then entered into a stipulation agreement saying that “in order to avoid unnecessary, emergency motion practice,” none of the deobligated money “will be re-obligated, transferred, or awarded to any other program(s) or recipient(s), except through a new Notice of Funding Opportunity (NOFO) and award to be issued by Defendants pursuant to the applicable rules and regulations and standard practices and procedures, and for purposes authorized by the applicable appropriations that funded the Cooperative Agreements.”

There things stood for two months.

New NOFO. Between $3.07 billion for CHSRA, $3.0 billion for Brightline West, $1.1 billion for Richmond-Raleigh, $729 million for Northern Virginia, and some odds and ends, there was only $1.06 billion of FY 2024 money remaining for a NOFO issued one year ago for the FSP money outside the Northeast Corridor. But on September 22, 2025, FRA withdrew that NOFO and issued a new NOFO that increases the available funding substantially:

Applications for a share of this $5.07 billion are due by midnight on January 7, 2026.

At the time the new NOFO was rolled out, a CHSRA representative indicated that the authority would file a motion to ask a federal court to prevent the deobligated money from being awarded to someone else until CHSRA’s original lawsuit protesting the deobligation is adjudicated. However, no such lawsuit has been filed yet (that we could find).

Setting aside the legal issues, the political implications of reallocating the $3.1 billion formerly belonging to CHSRA are self-evident. Awarding the money somewhere else creates multiple claimants for the same dollars and has the potential to pit their representatives in Congress against each other.

Hypothetical scenario: early next year, imagine that DOT awards most or all of that $3.1 billion that formerly belonged to CHSRA to Washington and Oregon, to beef up Cascades service operated by Amtrak. This would give key legislators a vested interest in CHSRA not getting its money back – the head Democrat on the House Transportation and Infrastructure Committee, the head Democrat on the Senate Commerce, Science, and Transportation Committee, and the head Democrat on the Senate Appropriations Committee.

California cap-and-trade. Meanwhile, whether nor not California gets its $4 billion back, the state’s high speed rail project got a financial shot in the arm this month from its political class, when the governor signed a new bill into law on September 19 extending the state’s cap-and-trade emissions program. SB840 extended the cap-and-trade program from one that expires in 2030 to one that expires in 2046.

Crucially, the old cap-and-trade program set aside 25 percent of proceeds for the CHSRA project, but required the legislature to act to appropriate the money annually. This 25 percent has averaged around $300 million per year at best. The new program guarantees CHSRA a flat $1.0 billion per year, automatically appropriated.

This is a lot of money, but without any other assistance, and at best, it would take 8 to 12 more years just to complete the Merced-Bakersfield segment (since they are currently either $8 billion or $12 billion short on cash, depending whether or not they can stop DOT from taking back the $4 billion in grants).

And at $1 billion per year in new revenues, it would take around 60 years to build the San Francisco to Palmdale part of the system.

So the next step would be for California to pass a law allowing CHSRA or the state itself to issue more construction bonds for the system, backed by those future cap-and-trade revenues. (Or just hang on until a Democrat is elected President and hope that they give California a $50-ish billion RRIF loan, securitized with cap-and-trade money.)