The US Department of Transportation (DOT) says it is exploring legal options to claw back $2.5 billion from California in federal funds which have already been spent on the ill-fated statewide high-speed rail system, according to the New York Times.

The Trump administration is also canceling a $929 million grant which was allocated to the California High-Speed Rail Authority detailed in a letter from DOT, just one week after California Governor Newsom announced that the project had been derailed by cost overruns and numerous delays. Instead of canceling the entire project, however, Newsom announced that the state will focus on finishing the line currently under construction, running 171 miles from Merced to Bakersfield - and could open as soon as 2027.

Construction at a site near Fresno, Calif., for the new high-speed rail tracks. Photo: Jim Wilson/The New York Times

Just in: Trump administration tells CA it's backing out of $929 million grant to high-speed rail project and "is actively exploring every legal option" to get back the $2.5 billion already given to the effort. This comes one week after Newsom's #CASOTS statement on HSR troubles. pic.twitter.com/Ox6Lz0HwcZ — John Myers (@johnmyers) February 19, 2019

The decision to yank the grant money and claw back the billions in federal funds comes one day after California filed a lawsuit along with 15 other states challenging President Trump's emergency declaration on the border.

The $77 billion Los Angeles-to-San Francisco bullet train, which has been a goal of California transportation planners for decades, has long faced opposition from Mr. Trump and other Republicans. But on Tuesday morning, the president explicitly tied the rail line to efforts to stymie construction of the Mexican border wall. -New York Times

Trump slammed California's decision to sue, noting on Tuesday over Twitter that "The failed Fast Train project in California, where the cost overruns are becoming world record setting, is hundreds of times more expensive than the desperately needed Wall!"

The failed Fast Train project in California, where the cost overruns are becoming world record setting, is hundreds of times more expensive than the desperately needed Wall! — Donald J. Trump (@realDonaldTrump) February 19, 2019

One day after California canceled the project, President Trump tweeted of California: "They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a “green” disaster!"

California has been forced to cancel the massive bullet train project after having spent and wasted many billions of dollars. They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a “green” disaster! — Donald J. Trump (@realDonaldTrump) February 14, 2019

And on Wednesday, Trump tweeted: "California now wants to scale back their already failed “fast train” project by substantially shortening the distance so that it no longer goes from L.A. to San Francisco. A different deal and record cost overruns. Send the Federal Government back the Billions of Dollars WASTED!"

California now wants to scale back their already failed “fast train” project by substantially shortening the distance so that it no longer goes from L.A. to San Francisco. A different deal and record cost overruns. Send the Federal Government back the Billions of Dollars WASTED! — Donald J. Trump (@realDonaldTrump) February 20, 2019

Newsom slammed the DOT decision as retaliation for the border lawsuit, saying in a statement. "It’s no coincidence that the administration’s threat comes 24 hours after California led 16 states in challenging the president’s farcical ‘national emergency,’" adding "This is clear political retribution by President Trump, and we won’t sit idly by. This is California’s money, and we are going to fight for it."

On Tuesday, Trump hit back - disparaging the way California wasted the rail money, as well as the state's decision to spearhead the national emergency lawsuit.

"California, the state that has wasted billions of dollars on their out of control Fast Train, with no hope of completion, seems in charge!" tweeted Trump on Tuesday.

As I predicted, 16 states, led mostly by Open Border Democrats and the Radical Left, have filed a lawsuit in, of course, the 9th Circuit! California, the state that has wasted billions of dollars on their out of control Fast Train, with no hope of completion, seems in charge! — Donald J. Trump (@realDonaldTrump) February 19, 2019

Ronald Batory - administrator of the Federal Railroad Administration wrote that the federal funds were being pulled after the California High-Speed Rail Authority had "failed to make reasonable progress on the project."

The Transportation Department said in a separate statement on Tuesday that it was “actively exploring every legal option” to seek the return of the $2.5 billion. That threat, however, was not mentioned in Mr. Batory’s letter. Late Tuesday, a Trump administration official pointed to Mr. Newsom’s remarks last week as an indication that the project was too costly and would “never be constructed as planned.” Given that acknowledgment, the official said, the administration had a responsibility to taxpayers to “cancel the financial support for this boondoggle.” -New York Times

There may be hope for California's $929 million, however, as former chairman of the board of the high-speed rail project, Dan Richard (who stepped down last Thursday), noted that the federal notice reads that the Trump administration intends to terminate the agreement, rather than saying it was canceling it outright.

Richard believes this may give California room to negotiate.

"Of course it’s a serious matter — the federal government has a lot of power in this situation," said Richard, adding: "I’m hoping that the phrase ‘intends to terminate’ gives an opportunity for parties to resolve this issue."

The high speed rail project was going to be former California Governor Jerry Brown's legacy.