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Highlights from Congressional hearing on California high-speed rail project

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This article highlights issues discussed during the House Transportation Hearing held in Washington, DC on January 15, 2014 in regard to the state of the high-speed rail project in California. It includes some revealing information about how the high-speed rail Authority plans to move forward despite recent unfavorable court rulings.

Many notable speakers appeared at the hearing but this article will concentrate on what was learned from panel two. The witnesses included were Authority’s Chairman Dan Richard, Karen Hedlund; Deputy Administrator for the Federal Railroad Administration (FRA) who came in place of Joseph Szabo, FRA Administrator who was originally scheduled and Alissa M. Dolan, a legislative attorney from the Congressional Research Service who interpreted the recent court cases and the FRA funding agreements.

In a nutshell here are four highlights from the hearing:

1. Dan Richard unveiled the Authority's strategy to move forward with project construction. He revealed instead of curing the funding plan issues, namely to identify funding sources and show completed environmental work for the entire 300 mile Initial Operating segment (usable segment) ; they simply plan to rename what was called the Initial Construction Section (ICS) as the "usable segment," the130 miles from Madera to somewhere north of Bakersfield. Dan Richard says the Legislative Counsel report prepared June 8, 2012 supports this and added that the term Initial Operating Segment does not exist in Prop 1A law, only the term “usable segment” does.

Note: There is a significant difference in what California defines as a usable segment and the federal definition of independent utility, which will be discussed in the next article.

2. Dan Richard believes the use of Cap-and-Trade dollars are applicable to the rail project. In his formal written statement he stated they were committed to offset construction emissions so that there were net zero greenhouse gas emissions during construction.

He would not go so far as to predict that the legislature would approve the Governor’s proposal to use $250 million from Cap-and-Trade dollars but reported promising talks with environmental groups.

Note: Recent reports indicate that the Governor will request up to $500 million from the Cap-and-Trade fund yearly. How would this effect the ability of the project to go forward? The short answer not much. It gives the project breathing room to get another plan of action in play and help with the state’s matching fund requirements. But in reality in the HSR 2012 Revised Business Plan costs rise 3% a year, and with a $68 billion project cost, leaves the project losing financial ground by $1.5 billion per year even with help from Cap-and-Trade dollars.

3. Alissa Dolan did not feel at this time High-Speed Rail Authority was in violation of the grant agreement. She confirmed that if California failed to match the federal grants as required by their FRA funding agreement, the FRA could choose to collect the promised match funds from other FRA/DOT grants and if necessary any other grants going to California including those for education.

It was disclosed during the hearing that Governor Jerry Brown sent a letter to the FRA telling them he intends to honor California’s obligation to match federal spending. The first $180 million is due April 1, 2014. Since the Prop 1A bond funds are blocked from being sold due to the court order, the Cap-and-Trade dollars were therefore urgently needed. Budget passage is legally required by June 15th so the question is will Brown borrow from the state’s General Funds in order to be on time or will FRA grant a time extension?

4. FRA administrator Karen Hedlund confirmed they are still advancing funding the project and said she found no violation of the grant agreement with California at this time. She verified that they had not changed the agreement since the court ruling. Chairman Denham asked Ms. Hedlund why after 4 weeks, they had not complied with the committee’s requests for invoices about the project. She would not commit to a timeframe as to compliance but promised to give them what was requested.

For a video review, written testimony see: http://transportation.house.gov/calendar/eventsingle.aspx?EventID=366174

More will be written about this meeting as clips become available and there will be a short article about the choice the Authority has made to continue with the project.

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