By David Shepardson
Feb 12 (Reuters) - The commission overseeing the $16 billion Hudson Tunnel Project in New York said on Thursday it expected to soon receive $205 million in frozen federal funding after a U.S. appeals court did not undo a lower court order.
The funding freeze forced a halt to construction last week, putting 1,000 workers out of work.
U.S. District Judge Jeannette Vargas last week issued a preliminary injunction that required the federal government to release funds for a project to overhaul
critical rail infrastructure in New York and New Jersey that had been frozen by President Donald Trump since October 1.
The Second Circuit U.S. Court of Appeals said on Thursday it would refer the case to a panel of judges later this month, but did not enter an order sought by the government blocking Vargas' ruling from taking effect.
New York Attorney General Letitia James said the Trump administration must immediately release funding for the project.
"This administration never had the authority to freeze this funding, and it no longer has any excuse to delay," James said after the lower court order was upheld.
The U.S. Transportation Department did not immediately respond to a request for comment. It earlier warned that without a court order putting Vargas' ruling on hold it would have to release the funds. The White House referred questions to the Justice Department, which did not immediately comment.
The Gateway Development Commission, which is in charge of the project's management and construction, said "while this is a positive step, we need consistent, reliable access to the Hudson Tunnel Project’s federal funding moving forward."
Gateway said it was working with contractors "to plan how to deploy these funds in the most effective way and get workers to the sites to resume some construction as soon as possible."
Trump offered last month to unfreeze the funds, a source said, in return for support from Democrats to rename Washington Dulles Airport and New York's Penn Station after him. Democrats strongly criticized the offer.
The Hudson Tunnel Project is intended to build a new commuter rail tunnel connecting Manhattan and New Jersey and repair a century-old tunnel used by more than 200,000 travelers and 425 trains daily. Vargas handed down her ruling hours after New York and New Jersey said construction would halt for lack of funding.
The existing Hudson Tunnel, heavily damaged by Hurricane Sandy in 2012, needs frequent emergency repairs that disrupt travel on the nation's most heavily used passenger rail line.
The project was allocated about $15 billion in federal support under former President Joe Biden. Nearly $2 billion has been spent so far.
(Reporting by David Shepardson; Editing by Chris Reese and Jamie Freed)
