The U.S. Department of Transportation's Federal Railroad Administration notified the California High-Speed Rail Authority on Tuesday that it intends to cancel a $929 million grant agreement for construction of the bullet train project through the state's Central Valley region. 

In a letter to the authority's CEO, Brian Kelly, FRA Administrator Ronald Batory said the FRA was terminating the agreement effective March 5 because the CHSRA had “materially failed to comply with the terms of the agreement,” and has not made “reasonable progress,” putting in doubt the ability of the authority to meet the FRA’s required completion schedule. 

Batory added that also impacting the FRA's decision to deny the project almost $1 billion in federal grants is California Gov. Gavin Newsom’s announcement earlier this month that the state would abandon all but the Central Valley section of the $77 billion bullet train. This, the FRA said, “represents a significant retreat from the state’s initial vision and commitment and [has] frustrated the purpose for which federal funding was awarded.” The administration said it would take authority rebuttals under consideration before it takes final action on the termination. 

More specifically, the FRA in its letter said the authority had failed to:  

• Make the required state contributions. 
• Make expenditures at a pace adequate to advance construction and design on schedule.
• Provide the FRA with mandatory financial reports and other deliverables.  
• Take corrective administrative and management actions requested by the FRA.
• Make the progress necessary to demonstrate it can meet the agreement’s Dec. 31, 2022 performance deadline.

But the $10.6 billion Central Valley segment is not only under fire from the federal government. California State Auditor Elaine Howle determined last year that the authority’s premature start of construction on the line was just one of the bad decisions that has contributed to billions of system cost overruns and schedule delays. In her estimation, the authority would have to double the pace of construction in order to meet the FRA’s 2022 completion deadline or prepare itself to return a total of $3.5 billion in federal funding. 

If the FRA does decide to withhold the money, the state could always come up with the cash to finish the project on its own or choose to stop construction altogether. If the latter comes to pass, the authority would have to deal with the contractors currently working on the Central Valley line. The state would still owe the contractors for work completed and possibly demobilization costs as well as profit and overhead, depending on the provisions of their contracts. 

President Donald Trump weighed in on the project today on Twitter. "California now wants to scale back their already failed 'fast train' project by substantially shortening the distance so that it no longer goes from [Los Angeles] to San Francisco," he wrote on Twitter. "A different deal and record cost overruns." Trump claimed the state owed the federal government billions of dollars.

Newsom had tweeted several days before in response to a prior Trump threat to pull back federal grant money that Congress had already allocated California funds for the project and that the state would not be "giving it back."