July 30 (Reuters) - A U.S. appeals court on Tuesday

threw out a federal regulator's "arbitrary and capricious"

approval of a new $1 billion natural gas project running through

five mid-Atlantic states and intended to serve 3 million

customers.

Agreeing with six environmental groups and eight U.S.

states, the D.C. Circuit Court of Appeals said the Federal

Energy Regulatory Commission did not properly address objections

to the Regional Energy Access Expansion Project planned by

Transcontinental Gas Pipe Line, a unit of Williams Cos ( WMB ).

Circuit Judge J. Michelle Childs wrote for a three-judge

panel, whose members were judicially appointed by Democratic

presidents, that FERC should have better assessed the risk of

significant greenhouse gas emissions, and how the Williams unit

might reduce them.

She also said FERC did not properly consider the public

interest, citing its failure to adequately review New Jersey

laws designed to advance the state's clean energy goals, and

whether the state needed more capacity.

Childs pointed to two studies that said current capacity

would suffice beyond 2030.

About three-quarters of gas from the proposed project would

go to New Jersey customers, with the rest going to Delaware,

Maryland, New York and Pennsylvania. The appeals court returned

the matter to FERC for "appropriate action."

FERC declined to comment. Williams and Transco's lawyers did

not immediately respond to requests for comment.

The environmental groups included the New Jersey

Conservation Foundation, Delaware Riverkeeper Network and Sierra

Club, and had viewed FERC's approval as a rubber stamp.

Their lawyer, Moneen Nasmith of Earthjustice, said Tuesday's

decision "made it clear that FERC's longstanding flawed

rationale that private contracts for capacity demonstrate a

public need for a gas project is no longer sound."

In opposing FERC, the eight states led by New Jersey and

Washington cited their "critical interest" in reducing

greenhouse gas pollution and enforcing their clean energy laws.

Circuit Judges Cornelia Pillard and Brad Garcia were

also on the appeals court panel. Pillard is an appointee of

former President Barack Obama. Childs and Garcia were appointed

by President Joe Biden.

The case is New Jersey Conservation Foundation et al v FERC,

D.C. Circuit Court of Appeals, No. 23-1064.