The Federal Railroad Administration (FRA) has scrapped $929m of federal funding, which was granted for the California high-speed rail project in a 2010 agreement.
The announcement comes after the state had repeatedly “failed to comply” and “failed to make reasonable progress” on the project.
In a statement, the FRA said: “The decision follows FRA’s Notice of Intent to Terminate and consideration of the information provided by CHSRA on 4 March 2019. FRA finds that California High-Speed Rail Authority (CHSRA) has repeatedly failed to comply with the terms of the FY10 Agreement and has failed to make reasonable progress on the Project.
“Additionally, California has abandoned its original vision of a high-speed passenger rail service connecting San Francisco and Los Angeles, which was essential to its applications for FRA grant funding.”
In February, California Governor Gavin Newsom announced plans to scale back the $77.3bn high-speed rail project due to increasing costs.
Soon after, the FRA warned that it will cancel the funding support for the high-speed rail project.
In addition to cancelling the $929m funding, the FRA said it will take necessary options seeking the return of $2.5bn in federal funds the state has already received.
Originally, California planned to construct a 520-mile (826.8km) high-speed rail system between Los Angeles and San Francisco to reduce traffic congestion. It was expected that the project will become operational by 2033.
However, the project was getting out of control due to its inflating cost. The state announced last year that project costs have increased to more than $77bn and may again soar to up to $98.1bn.
Unable to bear the ballooning cost, California decided to scale back the high-speed rail project.
As per the revised plan, only the under-construction 119-mile (191km) section between Merced and Bakersfield will be completed, which will cost around $10.6bn.
The US federal Government committed a total of $3.5bn for the project, while California voters approved approximately $10bn in bond proceeds in 2008 to build the high-speed rail.