Updated at 9:15 PM EST
After hearing arguments on February 6 by New York and New Jersey’s emergency request to restore funding for the $16 billion Hudson Tunnel project, US District Court Judge Jeannette A. Vargas ordered the federal government to temporarily stop withholding billions in federal grants pending new court proceedings, as first reported by the New York Times.
The Times reported the event at nearly 9 p.m. Eastern time, about four hours after the deadline at which the commission had said it would begin suspending work without judicial intervention. “Plaintiffs have adequately shown that they would suffer imminently [irreparable harm if the project were] forced to close its operations,” Vargas wrote in the 11-page ruling.
The order was issued as a temporary restraining order, preserving the status quo while the court considers a request for an injunction, according to the ruling. The ruling came after a day of crews preparing to wrap up much of those operations at various locations.
In a statement, GDC said it was “pleased” with the court’s decision. “We thank our partners in New York and New Jersey for taking steps to help us access federal funding for the Hudson Tunnel project,” the statement said. “As soon as the funds are released, we will work quickly to restart site operations and get our workers back to work.”
Earlier, at the court hearing for the Southern District of New York in Manhattan, Vargas was skeptical of the US Department of Justice’s assertion that states and their partners could finance the project themselves.
“I think they’re saying they’re going to have to fund this settlement because New York and New Jersey can’t provide all of that funding,” Vargas said, according to the Courthouse News Service.
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Shankar Duraiswamy, an attorney representing New Jersey, said during the hearing that leaving the project idle would cost the state and New York significant resources, Reuters reported. “Project sites cannot simply be abandoned,” he said. “There is literally a massive hole in the ground in North Bergen, New Jersey that needs to be secured.”
Reuters also reported that Justice Department attorney Tara Schwartz said states could pay for the project without federal funding. “The states claim that there is this parade of horrors that will occur if they have to bring down the hammers,” he said. “But the GDC [Gateway Development Commission overseeing the project] it’s funded by the states, the federal government and Amtrak … so it’s not clear why the states can’t keep the project going.”
Meanwhile, President Donald Trump previously said he would release funds if Washington Dulles International Airport and New York City’s Penn Station were renamed.
Separately, the commission filed a breach-of-contract lawsuit in the US Court of Federal Claims, seeking $205 million in disgorgement and damages related to the job cuts. The lawsuit argues that the funding agreements do not allow for unilateral suspension or termination in the absence of a documented breach and that a pause would result in substantial additional costs related to resequencing and restarting.
“Our goal has always been to work with our federal partners and get funding flowing again,” Prendergast said in a statement, adding that the commission must hold the federal government to its contractual obligations to avoid a shutdown.
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A megaproject at a crossroads
Early in the day February 6, the commission said it would begin suspending work at 5 p.m if federal funding was not unlocked. The announcement said that the works would stop in active locations in New York and New Jersey, and that would be four major acquisitions for the remaining build packs halted until funding was restored.
A prolonged shutdown could jeopardize roughly 11,000 jobs tied to current work and threaten the project’s broader economic impact — about 95,000 jobs and $19.6 billion in economic activity, it said. officials of the commission. They announced on January 27 that the project federal funding disbursements had been exhausted.
“Today is a setback, but it is not the end,” commission CEO Tom Prendergast said in a statement., “To those who have championed the project for so long, our workforce and the pilots they trust [the commission] to finally deliver the modern, reliable journeys they deserve – you know our work is far from over.” He said the commission would “continue to do everything in our power to get our funding back and deliver the country’s most urgent infrastructure project”.
The White House press office did not immediately offer comment on the planned suspension of the project.
The hearing came as the project’s backers said they had exhausted available cash and credit after a federal funding freeze that has since turned into a declaration by President Donald Trump that the project was over.
The dispute dates back to late 2025, when the US Department of Transportation halted grant and loan disbursements that had already been obligated for the project, citing a compliance review. In January, Trump publicly declared the Hudson Tunnel project “finished,” a stance that New York, New Jersey and the project’s sponsor say cut off the flow of federal cash needed to keep construction already underway.
Despite the funding halt, several early civilian packages directly linked to the short-term tunnel sequence have continued, including New Jersey approach construction, Hudson River soil stabilization, and Manhattan approach work.
Project presentations and prior ENR reports indicate that some of this work is designed to continue continuously, meaning a shutdown would require crews to secure partially completed excavations, stabilize work areas and demobilize specialized equipment, costs incurred before it can be restarted. Contractors would then face remobilization, resequencing and missed access windows once work resumes, increasing schedule and cost exposure.
With federal disbursements frozen and no replacement funding in place, the commission had warned it was running out of available cash and credit, prompting a possible pause without court intervention.
State officials argued that even a short outage would have immediate consequences on labor and costs. New Jersey Gov. Mikie Sherrill (D) warned that “1,000 workers will immediately lose their jobs” if construction is halted. New York Gov. Kathy Hochul (D) said the funding freeze — and the administration’s subsequent declaration that the project was ending — threatened “thousands of union jobs and billions of dollars in economic benefits” tied to a corridor that carries roughly 200,000 daily rail passengers.
In court filings, the two states argued that emergency relief was needed because the continued suspension would cause irreparable harm to an active construction program. Acting New Jersey Attorney General Jennifer Davenport said the freeze “jeopardizes safe and reliable infrastructure and puts thousands of jobs at risk,” while New York Attorney General Letitia James warned that stopping work on the Hudson Pass would be “disastrous for commuters, workers and our regional economy.”
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Federal funding freeze threatens to halt $16 million Hudson Tunnel project
The Hudson Tunnel project would add a new two-tube rail tunnel under the Hudson River and rehabilitate the 116-year-old North River Tunnel, which was damaged during Superstorm Sandy. Together, the tunnels are critical to maintaining capacity on the nation’s busiest passenger rail corridor.
