(Reuters) - A long-stalled plan to unblock a major transport bottleneck into New York City "may end up in the grave yard" unless space is reserved now for new train tunnels under the Hudson River, Senator Charles Schumer said Friday.

The so-called Gateway project, which would cost as much as $13.5 billion, would increase rail capacity between Newark, New Jersey's Pennsylvania Station and Manhattan's Pennsylvania Station.

Federally run Amtrak and New Jersey Transit share two 100-year-old tunnels under the Hudson River. Delays are common because of high over-use.

Amtrak's engineers say the only place to bring the new tunnels into Manhattan is under the Hudson Yards site in West Midtown, according to Schumer, a Democrat. He spoke at a breakfast sponsored by the New York Building Congress, a trade group.

A plan by developer Related Companies for the Hudson Yards site foresees construction of a residential, shopping and office complex over the site's active rail yards. Construction is to start by the end of this year.

"We will need contracts, design plans and construction dollars to flow over the next six to 12 months to make this a reality," Schumer said of the rail project. He wants the digging of the tunnels to start before the end of 2013.

A Related spokeswoman said: "We have been working intensively with Amtrak and the Long Island Rail Road," declining further comment.

The Long Island Rail Road shares Manhattan's Pennsylvania Station with Amtrak and New Jersey Transit.

Schumer pledged to work with Senator Frank Lautenberg of New Jersey, a Democrat, who also backs the new tunnels, to raise $120 million of federal funds for the project.

New Jersey Governor Chris Christie, a Republican, in 2010 killed a previous multi-billion-dollar plan to relieve congestion by digging another tunnel under the Hudson River, saying his state risked getting stuck with huge cost overruns.

His decision outraged transit advocates and his cost estimates were called into question by the federal General Accountability Office.

"As we've said ever since making that decision, we recognize the need for added rail capacity and will continue to work with all benefiting jurisdictions on an equitable - I repeat, equitable - solution," a Christie spokesman said.

Schumer said the Gateway project was superior to extending New York City's No. 7 subway from West Midtown into New Jersey, partly because the state authority that runs the city's subway and buses could not afford the new link.

(Reporting by Joan Gralla; Editing by Leslie Adler)