Mr. LaHood, who was also angry at Mr. Christie, demanded that New Jersey repay all of the $271 million in federal money that had gone toward the early stages of building the tunnels. The governor responded by declaring, “We are not paying the money back.”

In April, Mr. LaHood threatened to use tough methods to recoup the government’s investment if Mr. Christie would not agree to “a workable payment schedule.” Taking a characteristically combative stance, Mr. Christie hired a prominent Washington law firm, Patton Boggs, to argue that the state should not have to reimburse the federal government.

That effort failed to convince federal officials, though it cost the state about $1.2 million in legal bills. All the while, interest and penalties were accruing on the $271 million debt.

So, the $95 million settlement disclosed on Friday amounted to a compromise. In a statement, Mr. LaHood said the settlement would cover all of the $51 million in federal money that came from a program for new transit projects. The balance, he said, would amount to almost half the money that the project received through President Obama’s economic stimulus program.

But Mr. Christie framed the agreement as a victory for New Jersey taxpayers. He said the state would pay back the $95 million over five years and expected to recover more than $100 million from insurance companies in prepaid liability premiums on the canceled project.

“This represents a fraction of the federal government’s initial claim and won’t cost New Jerseyans any additional money,” Mr. Christie said.

The Governor of New Jersey refused to pay back $270 million to the Feds for refusing to participate in the construction of tunnels between Manhattan and the Graden State. After some negotiations using the law firm as an intermediary, at the cost of $1.2 million, the parties reached a settlement, and only had to pay back $95 million. Pay $1 million, save $170 million. Seems like Patton Boggs did a good job here!