A debate over New Jersey’s proposed $250 million settlement of what had been an $8.9 billion pollution lawsuit against Exxon Mobil Corporation has highlighted an obscure provision of a state law that would appear to allow Gov. Chris Christie to apply most if not all of the settlement toward balancing the state budget.

The current state appropriations law, as proposed by Mr. Christie last year, says that any funds beyond the first $50 million collected in damages or other environmental recoveries shall go to the state’s general fund.

When state lawmakers tried to amend the proposal to steer more money back toward environmental restoration, Mr. Christie vetoed the effort.

The proposed settlement, which was first reported by The New York Times on Friday, came after a legal battle that has lasted more than a decade and that had been aggressively litigated by the administrations of four New Jersey governors.