Blue Creek No. 1 will be the Alabama-based miner’s third underground operation in Tuscaloosa County and is projected to produce 2.5-3.5 million tons of metallurgical coal annually.

Walter’s decision to proceed with the project came after the Alabama legislature passed House Bill 144 – a measure that expanded the state’s existing statutory incentives to the coal mining industry.

The $US1.2 billion development plan will also include a coal terminal to be located at the Port of Mobile, a barge load-out facility in Walker County and a rail spur in Fayette County.

The project is expected to create 530 full-time jobs and may begin practical works as early as Q3 2012.

Alabama governor Robert Bentley and Walter chief executive Walt Scheller confirmed the Blue Creek plan in a statement Monday from the governor’s office.

“Today's announcement by Walter Energy represents a significant and long-term investment in the state of Alabama and our local communities,” Bentley said.

“This is a perfect example of how development incentives lead to new jobs and new opportunities for people across the state. I appreciate Walter Energy’s continued commitment to Alabama with this project.”

According to the Birmingham News, Blue Creek will have a mine life of 40 to 45 years but would take about six years to reach prime production levels.