You may be right about this interpretation of the case.

However, why engage Shute-Mihaly-Weinberger if
that's not where you're heading? They're not cheap.

Here's what the SMW letter stated on this subject:

As the Supreme Court Has Made Clear, the RTC’s Compliance with CEQA
Would Not Be Preempted By Federal Law.

For almost two decades, the RTC has acknowledged that it must comply with
CEQA in making decisions about the future of the Santa Cruz Branch Line. See, e.g.,
Exhibit 3 (Final Initial Study), at 26 (noting that all future use of the line would be
“subject to separate environmental review”); Exhibit 4 (Notice of Exemption). Yet, when
faced with a challenge over the RTC’s failure to complete an EIR prior to considering the
proposed ACL Agreement with Progressive Rail, the RTC’s counsel has now taken the
legal position that any effort by the RTC to comply with CEQA would be preempted by
the Interstate Commerce Commission Termination Act of 1995 (ICCTA). This position is
not supported by the facts or the law.

As explained in our April 18, 2018 letter, the California Supreme Court recently
held that the ICCTA does not preempt the application of CEQA to a decision undertaken
by a California public entity to expand freight service on a publicly owned rail line.
Friends of the Eel River v. North County Rail Authority (2017) 3 Cal.5th 677; see also
Association of Irritated Residents v. Kern County Bd. of Supervisors (2017) 17
Cal.App.5th 708. The RTC’s counsel attempts to distinguish this case on two grounds,
neither of which is adequate.

****

There's more and I can post the entire letter if interested.
Alternatively, here's the link: