Altamont #19 shows the UP Santa Cruz Industrial Lead as Excepted track throughout, with a speed limit of 10 and authority via UP dispatcher. Presumably control is now local considering that RTC owns the line and SC&MB operates. SCBG listing in #19 shows the UP segment from the wye to Casino as "Other Than Main Track" (OMT) under UP dispatcher control. How all that 1) allows the passenger train on the otherwise excepted UP (now SC&MB) track, and 2) how it governs how close the trains are (other than normal restricted-speed rules - essentially, don't hit the other guy) I can't tell - somebody who operates under those conditions is probably needed to describe it.

FWIW, streetcars and light rail often operate "VFR" so to speak, following closely and mainly observing rules like not blocking street crossings too long and "don't hit the other one." Operators do of course need to know the stopping characteristics of their train or streetcar, so they know how much space to the one in front is the absolute minimum. Generally, it works if done cautiously.