SAN FRANCISCO (CBS SF/AP) — The Environmental Protection Agency’s battle with California officials heated up another notch Tuesday, with the feds warning the state it could lose federal highway funds if it doesn’t clean up its air.

The federal threat came within hours of California Attorney General Xavier Becerra filing a federal lawsuit challenging the EPA’s determination that 1,365 acres of salt ponds in Redwood City are not “waters of the United States” under the Clean Water Act.

It was just the latest exchange of blows in what is becoming an extremely hostile relationship between the EPA and California.

In a letter sent Tuesday to the California Air Resources Board, the EPA described the state’s air quality as the worst in the country with 34 million people living in areas that do not meet National Ambient Air Quality Standards. That is twice the number of people as in any other state, the agency said.

EPA called on the state to address a backlog in plans aimed at reducing air pollution and to work with the agency to develop workable plans or risk highway funding sanctions and other penalties.

“California has failed to carry out its most basic responsibilities under the Clean Air Act, and as a result, millions of Californians live in areas that do not meet our nation’s air quality standards,” EPA Administrator Andrew Wheeler said. “EPA stands ready to work with California to meet the Trump Administration’s goal of clean, healthy air for all Americans, and we hope the state will work with us in good faith.”

The move by the EPA is the latest battle the Trump administration has picked with California over its environmental policies.

Last week, the Trump administration revoked California’s authority to set its own emission standards — authority the state has had for decades under a waiver from the federal Clean Air Act.

In response, California sued to stop the Trump administration from revoking its authority to set greenhouse gas emission and fuel economy standards for cars and trucks, enlisting help from other states in a battle that will shape a key component of the nation’s climate policy.

Federal law sets standards for how much pollution can come from cars and trucks. But since the 1970s, California has been permitted to set tougher rules because it has the most cars and struggles to meet air quality standards. On Thursday, the National Highway Traffic Safety Administration withdrew California’s waiver.

California has also sued the Trump administration over its rollback of environmental and clean air regulations.

In the dispute over development of salt marshes on the San Francisco Bay, California officials have joined actor/activist Robert Redford and a host of environmental groups at odds with the EPA’s actions.

The Salt Ponds – an area adjacent to the San Francisco Bay and containing tidal channels and impoundments of bay waters – have been identified as a key area for restoration to improve the Bay ecosystem and to provide resiliency against sea level rise.

The EPA’s decision, made at the request of developers, would allow this area to be built upon without the protections afforded by the Clean Water Act. In the lawsuit, Becerra called the action unlawful.

“The Trump Administration continues to endanger California’s efforts to protect our environment and public health,” Becerra said in a release. “It’s a sad day when the country’s ‘environmental protection agency’ looks at San Francisco Bay and doesn’t see a body of water that it should protect. We should restore the Bay, not build on top of it. This unlawful proposal is simply an attempt by the EPA to overlook its obligation to protect our nation’s waters in order to fast track development. President Trump, California’s precious San Francisco Bay is not for sale.”

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