Opinion ID: 4190211
Heading Depth: 2
Heading Rank: 3

Heading: The ICCTA

Text: We must apply these preemption principles to the ICCTA. But first we must understand that enactment. 22
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, 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 23 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. §§ 1301- 1302.) 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 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., 24 § 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. 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.)
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 25 (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 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 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 26 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 . . . 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. 27 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. 104-311, 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‖ (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 28 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 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 29 ―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 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 30 agency generally 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 quasi-legislative discretion].) 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 6 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. 31 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. 564565) — 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, 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.) 32 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, 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). 33 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 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 34 purpose of the ICCTA. State regulation would be in tension with the fact that the ICCTA, like its predecessors, contemplates a national rail 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, 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).) 35 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 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 36 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 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 37 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 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 38 such state 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. § 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 39 operations,‘ [citation]; and . . . it can be time-consuming, 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 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 high-speed rail line between California and Nevada would come within federal environmental provisions, but that ―state permitting and land use 40 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 ―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 41 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 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 may be imposed under state law on railroad for environmental hazards at transloading facility; 42 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 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‖].) 43 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 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 44 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, 1360-1363; Boston & Maine, supra, 2001 WL 458685, p.  5.) We do not, however, employ or endorse the Court 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 self-government 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 45 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 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.
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 railroad company is not required to decide when it is prudent to go 46 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 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 47 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 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.
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 48 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 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.) 49 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.) ―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 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 50 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,‖ 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 51 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 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 52 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 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 53 self-governance when the state does not propose to act in contravention of the dictates of the ICCTA. 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 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 54 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 oneway 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 selfgovernance in its own forays into the market in the absence of unmistakably clear language. 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 55 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 selfgovernment. And the Legislature has seen fit to permit these rules of self-governance to be enforced by citizen suits. Thus citizen actions are a method of enforcement chosen by the state itself, again as a matter of self-governance. It seems evident that the state‘s interest in self-governance 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 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 local-entity 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 56 preempted even when the state owns the line.7 But it does not appear unmistakably clear that in adopting the preemption provision of the ICCTA, Congress intended that state 7 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 state-owned rail line that connects with interstate tracks to, for 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 state-owned 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 (Footnote continued on next page) 57 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 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.‖ (Footnote continued from previous page) Authority, Petition (STB, Dec. 12, 2014, No. FD 35861) 2014 WL 7149612, p.  11.) Prior authority is in accord. (North San Diego, supra, 2002 WL 1924265, pp.  5,  6 [public-agency-owned 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 High-Speed 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].) 58 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 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 59 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 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.
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 8 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. 60 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)].) 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.) 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 61 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. 231232; 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 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 62 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. 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].) 63 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 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. 64 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 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 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 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 (Footnote continued on next page) 65 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., 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. (Footnote continued from previous page) 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. 66 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 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 67 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 (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 selfgovernance 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. 68