Jerry Brown’s dream of constructing a high-speed rail line connecting the Bay Area with Southern California suffered a major setback this week, but rest assured: every effort is being made to spend enough money quickly enough to make pulling the plug seem unreasonable.  Construction costs of the project have escalated so rapidly since the time state voters narrowly approved a bond issue that instead of constructing new tracks in the Bay Area and Los Angeles, the trains will share existing tracks with conventional freight and commuter trains, drastically increasing travel time and making the trains half-fast at best.  But even with this economy measure, funding is turning out to be a problem.

Ralph Vartarbedian reports in the Los Angeles Times:

The latest auction in California’s cap-and-trade market for greenhouse gases fell sharply below expectations, as buyers purchased just 2% of the carbon credits whose sale funds a variety of state programs -- notably, the proposed high-speed rail project.

The quarterly auction, conducted May 18 and announced Wednesday, will provide just $10 million for state programs, including $2.5 million for the bullet train. The rail authority had been expecting about $150 million.

Those revenues are crucial, because the federal money promised to the project have to be matched by state funds.  The greenies had assumed that carbon credits would be a means of avoiding appropriating taxpayers’ money to the project.  But enthusiasm for paying for carbon credits has diminished:

One possible cause is that potential buyers believe a pending lawsuit could overturn the entire system. The California Chamber of Commerce is the lead plaintiff in a suit that contends the fees are a tax that was never authorized by the required two-thirds of the Legislature and that the law never specifically authorized the auctions. The state contends the fees are not taxes, but a consequence of regulations.

The lawsuit was filed years ago, however, well before the first auction. A judge recently asked a series of questions that perhaps fueled speculation that he might rule in favor of the suit. 

Another serious possibility is that emitters of carbon dioxide are making better-than-expected progress at cutting their gas output. That would mean the program is more successful than expected, but the success would be a blow to the bullet train.

A third potential cause is that markets sometimes behave irrationally when buyers and sellers make wild swings in their behavior.  David Clegern, a spokesman for the state Air Resources Board, said he believed the auction results reflected simple volatility.

If the auction results reflect a long-term shift in greenhouse gas revenue, it would raise new concerns about the viability of building the bullet train.

But fear not: money will still be found to pour into the project so as to make terminating it a difficult decision:

The Federal Railroad Administration just last week modified one of its two grants to allow the state to spend all the federal money by next year but not match it with state funds until 2022.

The grant modification also allows the federal agency to extend a cash advance, needed by the rail authority to cover a cash-flow problem it has experienced. It is unclear whether the auction shortfall will exacerbate that cash-flow problem or worse, undermine the state's already-stretched financial plan.

The rail authority's recently released 2016 business plan had counted on getting about $10.6 billion from the greenhouse gas fees through 2050, about half of it by borrowing on the future income stream in about 2025. The plan drew warnings even before the auction that there are no assurances the market will generate the expected revenue or that private lenders would make loans vital to the project without demanding high-risk premiums on the interest rate.

Translation: The financial crisis has been postponed, and will be even worse.  But by then, cronies will have received contracts, spent money, and poured concrete, so that terminating the boondoggle will be even more expensive.  They will even consider using up the entire contingency fund immediately:

[H.D.] Palmer [a spokesman for the California Department of Finance] noted that there is a $500-million reserve set up in anticipation of volatility that could help close the gap. The use of that reserve will have to be agreed upon by Gov.Jerry Brown and the Legislature, he said.

This would be the height of irresponsibility.  But then again, so is the entire project.