SAN FRANCISCO, Calif. (CN) – In a ruling with implications for the future of high-speed rail in California, the state’s highest court ruled that while federal laws governing transportation trump state environmental laws for the most part, there are still areas where those state laws can prevail.

The California Supreme Court ruled that because the state has a controlling interest in the railroad line in question, it must adhere to its environmental laws when deciding whether to reopen a freight rail line that traverses through Northern California.

“To determine the reach of the federal law pre-empting state regulation of a state-owned railroad we must consider a presumption that, in the absence of unmistakably clear language, Congress does not intend to deprive the state of sovereignty over its own subdivisions to the point of upsetting the usual constitutional balance of state and federal powers,” California Supreme Court Justice Tani Cantil-Sakauye wrote in the 69-page majority opinion.

Justice Carol Corrigan wrote a brief dissent, which seemed to be a nod to the implications of the decision, including California’s burgeoning high-speed rail project.

“Today‘s holding will displace the longstanding supremacy of federal regulation in the area of railroad operations by allowing third-party plaintiffs to thwart or delay public railroad projects with CEQA suits,” Corrigan wrote in the dissent.

Indeed, high-speed rail supporters closely watched the case and the ruling, hoping the state Supreme Court would rule that federal law pre-empts state law when it comes to the regulation of railroads.

Had the court ruled in this direction, it could have prevented potential lawsuits against high-speed rail that will likely cite the environmentally rigorous California Environmental Quality Act as the basis for their complaints.

Now that the court has ruled states are obligated to follow their laws in the absence of federal regulation, CEQA-related lawsuits pertaining to high-speed rail are likely to follow.

Regardless, California’s high court carved out a small area where CEQA prevails and only in the absence of federal regulation, but did not say that state law could trump federal law – only that it could apply in areas where an absence of federal jurisdiction exists.

“The parties and amici curiae have argued that particular CEQA remedies might be pre-empted by the ICCTA [Interstate Commerce Commission Termination Act] to the extent the remedy is one that unreasonably interferes with the jurisdiction of the Surface Transportation Board, which has authorized service over the rail line in question,” Justice Leondra Kruger wrote in a concurrence. “I do not read the majority opinion to foreclose such arguments on remand.”

The dispute dates back to 1989, when the California Legislature expressed concern that shuttering a railroad line that carried consumer goods through the Napa, Sonoma, Mendocino and Humboldt counties would be bad for the economies of the mostly rural regions.

The Legislature then created the North Coast Railroad Authority with the intention of preventing closure of the line, which had been previously operated by private companies for more than a century.

In 2000, the Legislature allocated $60 million to the railroad authority for necessary repairs to comply environmental regulations, as floods, deterioration and deferred maintenance led to oil leaks and other ecological contamination.

Finally, the rail authority tapped a private company – the Northwestern Pacific Railroad Company – to operate the freight line in 2006, while receiving more federal money to bring the project into compliance.

The final environmental review was certified by the rail authority’s governing board in 2011, effectively allowing it to resume running freight 271 miles between Schellville and Eureka, California.

However, environmental groups Friends of the Eel River and Californians for Alternatives to Toxics sued, saying the environmental review was inadequate on several grounds. They asked the court to delay reopening of the line until the rail authority complied with CEQA.

Lawyers for the state and Northwestern Railroad argued they were not bound by CEQA because they had approval from a federal agency, in this case the Surface Transportation Board.

They pointed to ICCTA, which abolished the Interstate Commerce Commission and appointed as successor the Surface Transportation Board, which was given jurisdiction over all railroad operations in the United States.

The law explicitly makes clear that the Surface Transportation Board can pre-empt state and local regulations when it comes to construction, maintenance and operation of federal rail lines.

But in the present case, because the state is the operator of the rail line, the justices ruled that it must abide by its internal rules in the absence of federal regulation – much like a private operator adheres to its internal controls.

“In the area of activity in which a private owner is free from regulation, the private owner nonetheless ordinarily would have internal corporate rules and bylaws to guide those market-based decisions,” Cantil-Sakauye wrote for the majority. “In the circumstances here, those state laws are not regulation in the marketplace within the meaning of the ICCTA, but instead are the expression of the state’s choice as owner within the deregulated sphere.”

In other words, as private corporations adhere to their own rules in an atmosphere where federal regulations don’t abide, the state must also follow its laws in areas where federal agencies don’t assert jurisdiction.

The situation described by the court presents an obvious comparison to the California high-speed rail project which, like the North Coast Railroad Authority, will be owned by the state and operated by private companies.