Trump is appealing the Gateway Tunnel ruling — and N.J. is ready for the fight

By Larry Higgs | NJ.com (TNS)

The Trump administration will appeal a judge’s order to resume Gateway Tunnel project reimbursements after New Jersey and New York sued over the funding freeze last year.

The notice of appeal, filed Friday in the 2nd U.S. Circuit Court of Appeals, challenges a June ruling by U.S. District Judge Jeannette A. Vargas that found the Federal Transit Administration violated federal law when it halted reimbursement payments to the Gateway Development Corporation (GDC) last year.

The $16 billion Gateway Tunnel project would build two new tunnels under the Hudson, rehabilitate the two existing tunnels and construct other infrastructure. The 116-year-old tunnels are notorious choke points and require constant maintenance performed overnight and on weekends by shutting down tunnels.

The lawsuit stemmed from a September 2025 Federal Transit Administration decision to freeze federal reimbursement payments for the project. The Trump administration halted the funding while it reviewed whether the project’s contracting program complied with a new rule limiting the consideration of race and gender in awarding federal contracts.

That rule targeted the federal Disadvantaged Business Enterprise program, which aims to increase opportunities for businesses owned by women and minorities.

New Jersey and New York sued President Donald Trump’s administration on Feb. 3 over the funding freeze, contending that the freeze put taxpayers on the hook for millions of dollars in added costs. Construction work had to be shut down on Feb. 6 after funding was exhausted due to the freeze.

The states won a temporary restraining order when Vargas ordered reimbursements to resume on Feb. 12 which allowed construction to resume and the Gateway Development Corporation to award additional construction contracts that were delayed until the issue was resolved.

Court documents showed that the Gateway Development Corporation provided proof that it complied with the new rule, but its communications with federal agencies went unanswered.

Vargas said that the U.S. Department of Transportation had never made any determination that the Gateway Development Corporation did not comply with federal law and that the funding freeze had still been in place as of February 2026.

“The September 30 suspension skipped right to payment suspension without any finding that GDC had violated the law,” Vargas wrote in a 59-page ruling. “DOT provided no opportunity for GDC to appeal the September 30 suspension. This is clearly contrary to law.”

The suspension notice came less than 24 hours after the new rule was published in the Federal Register.

The U.S. Department of Transportation did not respond to questions about why it is filing an appeal.

Gov. Mikie Sherrill reacted to news of the appeal on Monday and mentioned the Trump administration’s previous failures in court to stop Gateway funding.

“The Sherrill Administration has already won four times in court and restored funding for the nation’s most urgent infrastructure project,” Sean Higgins, a Sherrill administration spokesman, said. “Thousands of workers and 200,000 daily riders are relying on the Gateway Tunnel project, and Governor Sherrill will keep fighting Trump’s illegal attempts to stop it.”

U.S. Rep. Nellie Pou, D-9th Dist., predicted the appeal in July. She said Monday that she expects the case to reach the U.S. Supreme Court.

“I wish I could say I was surprised but sore losers don’t ever take losing well,” she said. “Attempts to block the Gateway Tunnel are about partisan politics and nothing else. The Trump Administration lost in district court and I am confident they’ll lose at the circuit court and then at the Supreme Court.”

“The Gateway Tunnel is essential to the economic growth of New Jersey,” said Pou, who is a member of the House Transportation and Infrastructure Committee.

“Thousands of construction jobs hang in the balance right now, and it is not hyperbole to say that our region’s future depends on its completion,” she added. “The law and the merits are clear as crystal: Gateway must proceed to completion.”

Gateway officials expressed gratitude for New York’s and New Jersey’s support to restore federal funding to the Hudson Tunnel Project.

“Prior to the freezing of federal funding, the Hudson Tunnel Project was on schedule and on budget, and we have made significant progress since federal funding for the project resumed in February,” officials said in a statement.

That progress includes a $1.28 billion contract awarded in April to drill the main section of the tunnel.

“We will continue working with our federal partners to maintain access to funding so we can keep workers on the job and this nationally important project moving forward,” Gateway officials said.

On Monday, crews could be seen working on a tunnel-boring machine at the construction site along Routes 1 and 9 where the drilling of the first tunnel through the Palisades is scheduled to begin.

The Biden administration awarded a full funding grant agreement for the Gateway Project in July 2024.

Vargas, a Biden administration appointee, also mentioned the political overtones that the fund freeze took on in her ruling.

She cited Trump’s Oct. 15 statement that Gateway was “terminated” and subsequent statements in which he said he defunded it to retaliate against Democratic legislators.

At the time, U.S. Sen. Chuck Schumer, D-N.Y., was leading the Democrats’ effort to win back federal tax support for millions of people covered by the Affordable Care Act; that effort led to a government shutdown.

“The ostensible reason for the suspension of funds was to allow DOT to conduct a review of GDC’s compliance with federal nondiscrimination laws,” Vargas wrote.

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