The Australian Rail Track Corporation (ARTC) is building the $134 million first stage of the Minimbah Bank rail line, which includes construction of about 10 kilometres of rail track from Minimbah, west of Belford to Whittingham.

Prime Minister Kevin Rudd started construction work on May 14 by turning the first sod.

ARTC chief executive David Marchant said the construction of stage one was expected to be complete by early next year.

"This is a vitally important project as part of the Federal Government's national building package to meet the forecasted increase in demand for export and domestic coal in the Hunter Valley," he said.

"Without the upgrade the main northern rail network, coal exported from the Hunter Valley through to the Port of Newcastle could start to be constrained from 2015."

ARTC recently formed the Hunter 8 Alliance with John Holland and GHD to design and build the new track, which will be built in two concurrent stages.

The alliance is making an environmental assessment and doing preliminary design work for stage 2, a third track of 32 kilometres from Maitland to Minimbah.

Mr Marchant said the project would bring benefits to the community with an estimated 650 full time jobs created during construction and opportunities for local and regional goods and service providers.

The alliance has prepared environmental and community management plans to alleviate the effect of the construction work on the community and the environment.