New Jersey Governor Chris Christie agreed after meeting U.S. Transportation Secretary Ray LaHood to a study of options that he said might save a commuter rail tunnel, a day after canceling the project because of its cost.

The projects wind-down will continue during the two-week review, Kevin Roberts, a Christie spokesman, said today in an e- mail. The tunnel to Manhattan initially expected to cost $8.7 billion is still not financially viable and is expected to dramatically exceed its current budget, the governor said in a statement.

However, this afternoon Secretary LaHood presented several options to potentially salvage a trans-Hudson tunnel project, he said.

LaHood met with Christie and New Jersey Transit Administrator James Weinstein for about an hour in Trenton today.

Governor Christie and I had a good discussion this afternoon, during which I presented a number of options for continuing the ARC tunnel project, LaHood said in an e-mailed statement. We agreed to put together a small working group from the U.S. Department of Transportation and the office of N.J. Transit Executive Director Weinstein that will review these options and provide a report to Governor Christie within two weeks.

Never-Ending Hook

Christie, 48, a first-term Republican said yesterday he canceled the tunnel because of rising cost estimates that left New Jersey taxpayers on a never-ending hook.

U.S. Senator Frank Lautenberg said the tunnel cancellation will cripple New Jerseys prospects for growth for decades, by limiting access to New York City.

I expect the governor to now work in good faith with the federal government to move this project forward, Lautenberg said in a statement.

The secretary was clear with Governor Christie: If this tunnel doesnt get built, the $3 billion will go to other states. We cant allow that to happen.

The so-called Access to the Regions Core project would create an 8.8-mile (14-kilometer) conduit under the Hudson River to double the number of commuter trains to New York at peak times. Christie said a task force headed by Weinstein concluded the initial $8.7 billion cost might have reached $14 billion and the state couldnt afford it.

Out of Pocket

A cancellation might mean the loss of $600 million of taxpayer money that has already been spent. New Jersey, the most densely populated U.S. state, would have to repay the federal government about $300 million plus interest and penalties for its share, said Lautenberg.

Assemblyman John Wisniewski, a Sayreville Democrat who heads the transportation committee, filed a public-records request demanding to see all documents related to Christies decision to kill the project. The lawmaker also said his panel will hold an Oct. 14 hearing on the move.

Much of New Jerseys economic future depends on the governors willingness to work with others here to successfully solve this problem, he said in a statement released today.

Ben Dworkin, director of the Rebovich Institute for New Jersey Politics at Rider University, said accepting the two-week study is a win-win for Christie. Dworkin said its unclear what benefits the federal government might offer the state that would entice Christie to reverse his position.

If the federal government is going to make the terms so much better for New Jersey that he goes ahead, Chris Christie comes out smelling like a rose, Dworkin said. If the federal government doesnt come up with a deal that offers more money, he still looks like hes defending the taxpayers. Either way he wins.

To contact the reporters on this story: Ashley Lutz in New York at alutz8@bloomberg.net;

Terrence Dopp in Trenton at tdopp@bloomberg.net; Dunstan McNichol in Trenton, New Jersey, at dmcnichol@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net