Construction began on the Access to the Region's Core tunnel in 2009; before the work stopped, $600 million had been spent. The rail tunnel would have doubled train capacity between New Jersey and New York, linking Secaucus, N.J., with Manhattan.

Port authority spokesman John Kelly says the decision to divert the funds would be better described as a procedural half step, adding, The governors haven't even talked on this.

Christie said at a transportation summit in early March that he is open to alternatives, such as extending Manhattan's No. 7 subway line to Newark, N.J.'s Pennsylvania Station using the ARC tunnel pathway. Christie also suggested shifting the responsibility for cost overruns to the federal government.

The ARC tunnel was to be funded by $3 billion from the port authority, $1.25 billion from the New Jersey Turnpike Authority, $1.32 billion from the federal Congestion Mitigation and Air Quality program and the Federal Highway Administration, $130 million from the federal American Recovery and Reinvestment Act, and $3 billion from the federal New Starts program.

When project costs rose to almost $11 billion from the projected $8.9 billion, the federal money was forfeited. The FTA requested a repayment of $271 million by Dec. 24, 2010a request the governor's office has hired an attorney to fight. FTA declined comment.