The work, expected to be completed by August next year, will include construction of two storage areas and a rail system capable of transporting 90% of the milk powder and cheese to be stored at the site.
Up to 22 trains a day, each up to 260m long and towing 14 carriages, will visit the facility most of the year.
Some will transport milk powder from Fonterra's Edendale plant to North Taieri, while milk powder and cheese from the company's Stirling factory will also be taken by train from North Taieri to Port Chalmers for export.
The company plans to expand the facility again after 2014, when train numbers are predicted to reach up to 36 a day.
During construction of the rail facilities, up to 108 truck movements are expected daily.
This will drop to about 43 a day from next August.
Fonterra bought the former dishwasher manufacturing plant in December for about $20 million and said then it intended to invest heavily in rail infrastructure.
Obtaining resource consent was "quite an exciting opportunity", warehousing transformation manager Greg Pope said yesterday.
"It is an opportunity to support dairying, to make use of a facility which has come available, and to move from road transportation to rail. Switching to rail will lower our carbon footprint . . . and benefit the community."
Fisher and Paykel continued to lease the site until last month.
Mr Pope said conversion of the factory into a dry-storage area was already under way and the first product should be received there in October.
Tenders had been called for construction of the new cheese cold store, with tenders for the railway work and additional dry store expected to be advertised within two months.
Consent was granted without a public hearing.
Council resource consents manager Alan Worthington said that was because the site was already zoned industrial and had existing rail-head facilities, and the effects on the environment of the proposed developments were considered to be no more than minor.
Trains would cross Stedman Rd at low speeds and their progress would be controlled by an operator.
Each train would take about three minutes to cross the road, meaning traffic could be disrupted frequently but for short periods, the consent decision said.
KiwiRail did not believe warning lights and bells were required at either of the crossing points, although it said compulsory stop signs and rail crossing signs should be installed.
The consent set strict noise conditions.
Noise measured at the site boundaries should not exceed 55 decibels between 7am and 9pm Monday to Saturday, 45 decibels on Sundays and statutory holidays, and 40 decibels at night.
The site has no residential neighbours.
The Otago Central line is used by Taieri Gorge Railways, which operates the Taieri Gorge train to Pukerangi and Middlemarch.
Chief executive Murray Bond said yesterday the company had been negotiating with Kiwi Rail to ensure its services got priority.
"We are not particularly worried, as Fonterra has told us its freight movements can fit within our services."
