administration holds off redirecting California's high-speed rail money

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FILE PHOTO - California Governor Jerry Brown's name and others are pictured on a railroad rail after a ceremony for the California High Speed Rail in Fresno, California January 6, 2015.

FILE PHOTO - California Governor Jerry Brown's name and others are pictured on a railroad rail after a ceremony for the California High Speed Rail in Fresno, California January 6, 2015. REUTERS/Robert Galbraith

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By David Shepardson

(Reuters) - The administration on Wednesday agreed not to immediately redirect nearly $1 billion it is withholding from California's high-speed rail project, one of several disputes between Republican and the Democratic-controlled state.

In exchange, the state dropped its plans to ask a court to at least temporarily halt any planned shift in funds, California Governor Gavin Newsom's office said.

On Tuesday, California sued in U.S. District Court in San Francisco to challenge the administration's decision to withhold $929 million awarded in 2010 for a "bullet" train project hobbled by extensive delays and rising costs. The administration had rejected the state's administrative appeal.

The lawsuit argued that President Donald has "overt hostility to California" and its opposition to his initiative, so far unrealized, to build a wall along the U.S.-Mexico border. The Republican administration and California's Democrats have also clashed over immigration and air quality standards.

The Federal Railroad Administration (FRA) cannot re-obligate California’s funding to another state without first initiating a formal process of issuing a notice, according to a joint court filing from the state and U.S. Justice Department.

The filing said the FRA has "no present intention to issue" a new funding notice and said that after a notice was issued it typically takes at least four months to award the funds.

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California can seek a court order if FRA moves ahead with plans to send the money to projects in other states.

The Transportation Department declined to comment.

In formally canceling the grant last week, the FRA said California had "repeatedly failed to comply" with terms of the allocation and "failed to make reasonable progress on the project."

first threatened to pull the high-speed rail funding after Newsom said in February that he wanted to reduce the size of the $77.3 billion project, beset by rising costs, construction delays and management concerns.

Newsom has said the state remained committed to high-speed rail but would concentrate first on finishing a smaller segment of the line through California's Central Valley.

In a speech last week, called the project a "disaster" and "totally out of control."

(Reporting by David Shepardson; editing by Grant McCool)

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