Federal Government Drops Appeal Over Gateway Tunnel Funding

The federal government has dropped its appeal of a federal court ruling that barred the U.S. Department of Transportation from withholding funding for the $16 billion Hudson Tunnel Project, clearing the latest legal obstacle to federal payments for the Gateway program, according to multiple news outlets.

The Trump administration filed its appeal Aug. 28, challenging a June ruling by U.S. District Judge Jeannette Vargas that vacated the government’s suspension of Gateway funding. Vargas ruled that the September 2025 funding freeze violated federal law and permanently barred the Department of Transportation from using the suspension to withhold future grant disbursements.

On Sept. 18, the U.S. 2nd Circuit Court of Appeals issued a mandate stating that New York, New Jersey and the federal government had agreed to dismiss the appeal. The administration had indicated only weeks earlier that it intended to continue challenging the lower-court ruling.

Federal funding for the project resumed in February after the funding freeze forced construction to stop temporarily and affected nearly 1,000 workers. The Gateway Development Commission said in September that it had continued receiving federal reimbursements according to the schedule established in its funding agreements.

The Hudson Tunnel Project includes construction of a new two-tube rail tunnel beneath the Hudson River between New Jersey and Manhattan and rehabilitation of the existing North River Tunnel. The project is currently scheduled for completion in 2035.