The infrastructure, initially costing $US17 million, will include a 5.2-mile industrial spur at Bear Run. Peabody said this week the mine, once complete, would be the largest surface operation in the eastern coalfields.

An additional $5 million in improvements over the coming two years to make room for increased traffic is also part of the deal.

Indianapolis-based IRRC said construction on the spur would start once the proper orders had been received from the Surface Transportation Board, and it expected the work to be finished by early 2010.

"Peabody's investment is one of the most significant industrial developments in Indiana in this decade and it is the largest single new business opportunity ever awarded to The Indiana Rail Road Company," Indiana Rail Road president and chief executive officer Thomas Hoback said.

“We project that it will increase our current coal transportation volumes by more than 30 per cent. We value the confidence shown by Peabody, a global leader, in our ability to provide world-class service."

The decision comes just days after Peabody’s announcement of the new mine, from which it has signed more than $6 billion in coal supply deals.

The producer, who expects to invest between $350 and $400 million in Bear Run, has entered into long-term deals with two Midwest-based power generation companies for over 90 million tons of coal under terms of up to 17 years.

Bear Run is expected to commence production during the latter half of this year, produce 2Mt to 3Mt next year and ramp up to an 8Mt per annum target thereafter.

The largest coal transporters in the eastern coalfields are CXS and Norfolk Southern. IRRC, one of the largest freight railroads in the region, claims about 170,000 carloads annually.