By David Shepardson

WASHINGTON (Reuters) - The Trump administration on Tuesday escalated its fight with California over environmental issues by threatening to withdraw billions of dollars in federal highway funds because of poor air quality in the state.

In a letter to California Air Resource Board chief Mary Nichols, U.S. Environmental Protection Agency (EPA) Administrator Andrew Wheeler said the state "has failed to carry out its most basic tasks under the Clean Air Act," and not produced timely plans to meet targets for ambient air quality goals.

The EPA said California must withdraw inactive plans that would most likely be denied. If the EPA rejects a plan, it could trigger "highway funding sanctions, which could result in a prohibition on federal transportation projects and grants in certain parts of California," Wheeler said.

California is set to receive just over $4 billion in federal highway funding in the budget year that starts Oct. 1.

Governor Gavin Newsom described the EPA's position as a "threat of pure retaliation. While the White House tries to bully us and concoct new ways to make our air dirtier, California is defending our state’s clean air laws from President (Donald) Trump’s attacks."

California has imposed strict state limits on vehicle emissions in defiance of Trump's attempts to roll back regulations. Those tailpipe emissions are regulated separately from ambient air pollutants, but California argues the vehicle rules are essential to meeting those goals.

Tuesday's move was the latest flashpoint in conflicts between the state and federal governments. The Trump administration this year withheld $929 million from California's high-speed rail project awarded in 2010, prompting the state to sue.

The Justice Department has opened a probe into four automakers that struck a voluntary emissions deal with California. Trump has promised EPA action against San Francisco over its homelessness problem and attendant pollution.

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EPA officials denied the letter was politically motivated. They say California has the largest backlog of state implementation plans to address ambient air quality standards.

Last week, the EPA said it was taking the unprecedented step of revoking California's ability to set tailpipe emissions standards and require zero emission vehicles.

Senator Dianne Feinstein, a California Democrat, said the "threat to withhold California’s highway funding over clean air quality reports is the height of hypocrisy."

Sierra Club Global Climate Policy Director John Coequyt said blocking the state's tailpipe emissions limits will make it harder to improve air quality.

On Tuesday, the state of California filed its 29th environmental lawsuit against the Trump administration, challenging the EPA's determination that 1,365 acres (552 hectares) of salt ponds in Redwood City are not "waters of the United States" under the Clean Water Act.





(Reporting by David Shepardson; Editing by David Gregorio, Marguerita Choy and Cynthia Osterman)