A contentious Lower Manhattan tunnel project has been shelved after Goldman Sachs & Co. cried foul. The tunnel was originally slated to run alongside the World Trade Center memorial and Freedom Tower, allowing pedestrian traffic to access the western shore without crossing several lanes of busy highway.

Last week, however, investment bank Goldman Sachs leaked their concerns to the media, suggesting that their proposed 40-story, $2 billion headquarters tower—which will be developed on West Street adjacent to the tunnel—might not be built. Goldman claimed that the four-lane wide mouth of the tunnel would come to close to its new building’s entrance. New York State’s Department of Transportation has publicly recommended reconstructing the highway along the same grade as the area’s existing streets.

The upshot of the decision is that Lower Manhattan should expect the completion of another large skyscraper near the Ground Zero site. This one—unlike the others—would be built and financed by Goldman Sachs, making it the only proposed tower that will be built without insurance proceeds.

The federal transit proceeds for the tunnel will instead be plowed into a rail link project connecting Long Island to Lower Manhattan. This is a reversal for New York State Gov. George Pataki, who for the past two years has advocated using the funds to bury a section of the highway. The World Financial Center—a series of conjoined office towers linked by a glass atrium—occupies the western shore of Lower Manhattan.

The change of plans comes as Lower Manhattan braces for a wave of construction over the next few years. The first office tower to rise on ground Zero—7 World Trade Center—will be ready for occupancy early in 2006. The Freedom Tower will be developed near 7 WTC, but it’s unclear when the actual construction will begin. Roughly $13 billion worth of federal, state and insurance funds will be used in the 16-acre Ground Zero rebuilding process.