The U.S. Department of Transportation on July 16 officially canceled $4 billion in grant funding promised to the California high-speed rail project by the Obama and Biden Administrations.

The action cancels two grants – one dating back to fiscal year 2010 from the one-time appropriations made towards high-speed rail before the highs brought on by the ARRA stimulus bill wore off, and the other a three-stage grant from the Federal-State Partnership for Intercity Passenger Rail (FSP) program funded by the bipartisan IIJA infrastructure law of 2021.

In a 22-page letter from Acting Federal Railroad Administrator Drew Feeley, the California High Speed Rail Authority (CHSRA) was told that the two grants were canceled immediately, for cause: “FRA has determined CHSRA has breached the commitments made in the FY10 Agreement and the FSP Agreement. Based on CHSRA’s inability to complete the [Early Operating Segment between Bakersfield and Merced] by December 31, 2033, the CHSR Project does not adequately serve the purpose of the statute under which the FY10 Agreement was authorized and funded, and this failure constitutes a Project Material Change under the FSP Agreement. Furthermore, anything short of an operational EOS by December 31, 2033, undermines FRA’s basis for selecting the CHSR Project. For these reasons, as set forth in this letter, FRA has determined to terminate the FY10 Agreement and the FSP Agreement, effective today, and will de-obligate the associated funds.”

FRA first notified CHSRA on June 4 via letter of their tentative intent to terminate the grant agreements but gave CHSRA 30 days to respond. CHRSA sent an initial response on June 11 and then submitted a 31-page final response on July 7. In the latter document, CHSRA CEO Ian Choudri told Feeley, “I hope we can meet again to discuss proposals to resolve the issues. The Authority has a Board meeting on July 10. And the Authority issued a Request for Expressions of Interest for the Delivery of Operating Segments (RFEI) to private sector investors last week, with responses due the end of July. I propose that we meet again in early August, so that those discussions may be informed by input from our Board and responses we receive from the RFEI. We ask that you agree to pause any final decision regarding termination of the Cooperative Agreements until we complete our discussions about a possible resolution.” That obviously did not take place.

What now? This probably goes the same way it did the last time that the Trump Administration canceled the FY 2010 contract. California filed a lawsuit in federal court, which took so long that, before the case was decided, Democrats took control of the executive branch, settled the lawsuit, and re-signed the grant agreement.

This time, can the California project hold out until possible Democratic relief that may or may not come in January 2029? Per CHSRA’s 2025 Project Update Report, if you take away this $4.0 billion, CHSRA only has $4.4 billion left on-hand from all other sources, plus an estimated $5.5 billion coming from future cap-and-trade emissions credit auctions.

They were already some $7 billion short of having enough money to finish the Merced to Bakersfield EOS, and now that rises to an $11 billion shortfall. And that leaves for a later day the cost of tunneling through either the northern or southern mountain ranges to get to the population-dense Bay Area and L.A. Basin.

(Ed. Note: For the absolute final word on why this project was irretrievably flawed from the get-go, see my 2019 article “Seven Worst Practices.”)