Key Points:

Planning for a $1 billion-plus rail tunnel between downtown Auckland and Mt Eden has cleared its first big hurdle, obtaining a route out of the western end of Britomart Station.

Government rail agency Ontrack last night said it had told the Auckland Regional Council that it had reached agreement in principle with retail giant Westfield on the first part of a 3.5km route from Britomart to Mt Eden via Albert St.

Auckland City's approval in April of a proposal by Westfield for a 41-storey tower on its Downtown site opposite Britomart led to a flurry of negotiations over how a railway tunnel could be threaded through the building's foundations and an underground carpark.

Although the negotiations were instigated by the Auckland Regional Transport Authority, the onus for finding a solution moved to Ontrack after Finance Minister Michael Cullen asked it to work on designating a route for the tunnel.

Planners regard an inner-Auckland loop tunnel as essential, as Britomart is likely to reach its capacity of about 23 million passengers before 2020.

The Ontrack-Westfield agreement was reported to regional councillors yesterday by transport authority chairman Mark Ford.

His report was made before a confidential briefing on for ordering a fleet of 35 trains and support infrastructure as the council's half-share of a $1 billion rail electrification joint venture with the Government.

That follows Government approval last week of an order-in-council for a regional fuel tax starting at 2c a litre in July and rising to 9.5c in 2011 to pay for electrification and other public transport infrastructure.

The council passed a vote of thanks to the Government for approving what is being called a levy, but asked for more information from the transport authority on the best approach to buying electric trains, a maintenance depot and technical support.

Mr Ford's advice about the loop tunnel followed questions by council transport committee chairwoman Christine Rose about steps being taken to keep the rail momentum rolling beyond the first set of electric trains.

He said that now an agreement had been reached with Westfield, work could proceed on preparing the remainder of a tunnel route.

Transport authority chief executive Fergus Gammie said he understood Ontrack was discussing with the Government how to cover any costs incurred by Westfield in accommodating the tunnel.

Ontrack spokeswoman Ruth Larsen confirmed to the Herald that an agreement had been reached in principle on a practical way of getting the tunnel past the site, but said it was too early to provide more details.

Auckland City Mayor John Banks said the tunnel agreement was another step towards providing the "well-overdue infrastructure" necessary for an internationally-competitive metropolis.