FREMONT -- Caltrans and the Alameda Creek Alliance reached a settlement Monday that will halt the first phase of an $80 million highway widening project in Niles Canyon along Alameda Creek.

As part of the settlement, Caltrans will rescind its 2006 approval and environmental review for the project, notify regulatory agencies that it is withdrawing the project, terminate the project construction contract and comply with mitigation requirements for work already done, including tree cutting along Alameda Creek.

Caltrans also will pay the Alameda Creek Alliance $147,000 in attorneys' fees.

"This is a victory both for protecting Alameda Creek and forcing transparency in public agency decisions," Jeff Miller, director of the alliance, said in a statement. "Caltrans must mitigate for damaged trees along Alameda Creek and cannot pursue a highway project in lower Niles Canyon without adequate environmental review and full public participation."

Caltrans officials could not be reached for comment Monday afternoon.

After the Alliance Creek Alliance filed suit, a judge in June indefinitely blocked Caltrans from beginning road work on the first of three safety projects in Niles Canyon.

Alameda County Superior Court Judge Frank Roesch, in issuing a preliminary injunction, said that Caltrans had failed to notify the public upon approving the project. He also ruled that the nonprofit alliance could proceed with a lawsuit charging that Caltrans approved the roadwork without performing adequate environmental studies.

The transportation agen- cy has proposed three projects, totaling $80 million, to widen Niles Canyon Road, a winding two-lane state highway connecting Fremont and Interstate 680 near Sunol. Studies show that road has an above-average number of fatal auto collisions.

But environmentalists, citizen groups and the city of Fremont oppose much of the proposed work, which they say will destroy sensitive habitat and ruin the canyon's beauty by removing hundreds of trees and adding more than two miles of concrete retaining walls.

Caltrans already has chopped down at least 81 trees in preparation for the first phase, slated to improve the intersection at Palomares Road and widen a small stretch of Niles Canyon Road.

A much larger project that would involve far more tree removal and retaining wall construction is still under environmental review.

Contact Rob Dennis at 510-353-7010.