National Grid is inching closer to a moratorium on new natural gas service for all of its customers in New York City, including residential users, after the state rejected a key pipeline project.

The company had already put potential commercial and industrial users on notice that its ability to provide natural gas was limited ahead of a decision from the New York State Department of Environmental Conservation (DEC) late Wednesday denying the Northeast Supply Enhancement Project’s water quality certification (WQC) application. Without the permit, construction on the Transcontinental Gas Pipe Line Co. LLC expansion may not proceed.

National Grid President John Bruckner told Newsday, which first reported the development on Thursday, that while the company hasn’t implemented a complete moratorium on new service for customers, supplies for smaller end-users will now be tied to completing Northeast Supply.

“We are in a contingency status,” spokesperson Wendy Ladd told NGI on Friday, confirming Bruckner’s comments. “We are accepting applications, but we cannot commit to offering firm gas unless this project is approved.”

Northeast Supply is fully subscribed by National Grid subsidiaries serving customers in Brooklyn, Queens and Long Island. Transco has said it plans to quickly file a new WQC application, but it could take up to a year for the DEC to review any changes.

National Grid is the largest gas distributor in the Northeast, with more than 20 million electricity and gas customers in New York, Massachusetts and Rhode Island.

For now, there are no other alternatives for the utility, which receives thousands of applications for new service annually. Consolidated Edison (Con Ed), which shares infrastructure with National Grid serving the city, has already imposed a moratorium on new service to the north in Westchester County and warned of additional disruptions in the city without Northeast Supply. Con Ed has also signed agreements to expand existing interstate systems to get more gas into the region in the coming years.

Northeast Supply is designed to create 400 MMcf/d of incremental firm capacity to meet demand for gas in New York City. Environmental groups have staunchly opposed the project, mainly over concerns about its proposed crossing of the Raritan and New York bays, alleging too that the utilities have wrongly overstated natural gas demand.

The DEC has denied WQCs for other infrastructure projects in the state in recent years, which has limited supplies there.