The Denver & Rio Grande Railway (D&RG) was incorporated on October 27, 1870. It was originally announced that the new 3 ft. (914 mm) railroad would proceed south from Denver and travel an estimated 875 miles (1,408 km) south to El Paso via Pueblo, westward along the Arkansas River, and continue southward through the San Luis Valley of Colorado toward the Rio Grande. The first rails out of Denver were laid on July 28, 1871 and reached Colorado Springs by October 21. Narrow gauge was chosen in part because construction and equipment costs would be relatively more affordable when weighed against that of the prevailing standard gauge. Eventually the route of the D&RG would be amended and added to as new opportunities and competition challenged the railroad's expanding goals. Feverish, competitive construction plans provoked the 1877–1880 war over right of way with the Santa Fe and both rivals hired gunslingers and bought politicians while courts intervened to bring settlement to the disagreements. In March 1880, a Boston Court granted the AT&SF the rights to Raton Pass, while the D&RG paid an exorbitant $1.4 million for the trackage extending through the Arkansas River's Royal Gorge. The D&RG's possession of this route allowed quick access to the booming mining district of Leadville, Colorado. While this settlement did not exactly favor the purist of original D&RG intentions, the conquering of new mining settlements to the west and the future opportunity to expand into Utah was realised from this settlement.
The D&RG built west from Pueblo reaching Cañon City in 1874. The line through the Royal Gorge reached Salida on May 20, 1880 and was pushed to Leadville later that same year. From Salida, the D&RG pushed west over the Continental Divide at the 10,845 feet (3,306 m) Marshall Pass and reached Gunnison on August 6, 1881. From Gunnison the line entered the Black Canyon of the Gunnison River passing the famous Curecanti Needle seen in their famous Scenic Line of the World Herald. The tracks left the increasingly difficult canyon at Cimarron and passed over Cerro Summit, reaching Montrose on September 8, 1882. From Montrose, a line was laid north through Delta, reaching Grand Junction in March 1883, which completed a narrow gauge transcontinental link with the Rio Grande Western Railway to Salt Lake City, Utah. The line from Pueblo to Leadville was upgraded in 1887 to three rails to accommodate both narrow gauge and standard gauge operation.
The original Denver & Rio Grande Western Railway (D&RGW) built a narrow gauge line from Ogden, Utah via Soldier Summit, Utah to Grand Junction, Colorado. The railroad became the Rio Grande Western Railway in 1889 and built several branch lines in Utah to reach lucrative coal fields. In 1901, the Denver & Rio Grande merged with the Rio Grande Western, consolidating in 1908.
In 1931, the D&RGW acquired the Denver and Salt Lake Western Railroad, a subsidiary of the Denver and Salt Lake Railroad (D&SL) which had acquired the rights to build a 40-mile (64 km) connection between the two railroads. In 1932, the D&RGW began construction of the Dotsero Cutoff east of Glenwood Springs to near Bond on the Colorado River, at a location called Orestod. Construction was completed in 1934, giving Denver a direct transcontinental link to the west. The D&RGW merged with the D&SL on March 3, 1947, gaining control of the "Moffat Road" through the Moffat Tunnel and a branch line from Bond to Craig, Colorado.
F7 #5771 Colorado Railroad Museum ©
Dennis Turner, 2016
F7 #5771 Colorado Railroad Museum © Dennis Turner, 2016
The Denver & Rio Grande Railway, brainchild of Civil War veteran General William Jackson Palmer, was incorporated by Palmer and his associates on Oct. 12, 1870. Palmer intended to provide a north-south link between the major transcontinental railroads that passed north and south of Colorado. The first trip on the line occurred Oct. 26, 1871, and took passengers (primarily local newspapermen) from Denver to Colorado Springs. While the original plan was to build south to El Paso, Texas, circumstances soon turned the line westward. The Denver & Rio Grande never reached farther south than northern New Mexico.
As the D&RG Railway expanded westward, it ran into conflicts with other railroads that also wanted to build in the lucrative mining regions of the Rocky Mountains. The Atchison, Topeka & Santa Fe Railroad was particularly aggressive in this area. A quarrel over the right-of-way through the Royal Gorge escalated into a “war” in 1878 and was not settled by the courts (in favor of the D&RG) until 1880.
In the summer of 1881, in order to facilitate the D&RG’s westward push, Palmer incorporated a new railway in Salt Lake City – the Denver & Rio Grande Western Railway. The two lines met near Green River, Utah in 1883. Around the same time, the D&RG Railway leased the tracks of the D&RGW Railway for thirty years. The lease, in conjunction with Palmer’s constant program of expansion (he feared other lines moving into D&RG territory), put the D&RG in a difficult financial situation. By the summer of 1883 the Board of Directors wanted Palmer out, and they asked for his resignation. He consented, but remained not only as president of the D&RGW Railway, but as a Director of the D&RG. He resigned his position as Director in June 1884 in the midst of a dispute between the two lines over the terms of the D&RG’s lease of the D&RGW tracks.
By July 1884, the D&RG’s financial condition was so poor it went into receivership. The court appointed William S. Jackson as receiver. Not long after Jackson took control of the D&RG, the D&RGW also found itself in receivership, with W.H. Bancroft as its receiver. Jackson’s management of the Denver company could not forestall the D&RG’s sale at foreclosure in 1886. British and American stockholders purchased the troubled line, incorporated it as the D&RG Railroad, and named Jackson as president. The courts released the D&RGW from its receivership in August of 1886, and Palmer resumed control of his railroad.
David H. Moffat, an important figure in the development of Colorado railroading, succeeded Jackson as D&RG president in 1887. He remained in that position until 1891, when he resigned in anger over criticism of his management of the line. During his term of office, the D&RG began to convert its main line tracks from narrow gauge to standard gauge. The D&RG also joined with the Colorado Midland to incorporate the Rio Grande Junction Railway for the purpose of building a line between Rifle and Grand Junction. After Moffat resigned, the Board appointed Edward T. Jeffery to head the company. He was immediately under pressure to make the D&RG profitable, and enable it to meet the interest payments on its bonds. Jeffery met the challenge, and by 1893 the road was in excellent financial condition. Thanks to his conservative policies the D&RG weathered the financial panic of 1893 relatively well.
In 1901 the D&RG purchased a controlling interest in the Rio Grande Western Railway (formerly the D&RGW, it reincorporated in 1889). In that same year General Palmer retired from the RGW, and George Gould (son of Jay) became Chairman of the Board of the D&RG. Competition from the Union Pacific in Utah (the UP tried to deny the D&RG any traffic) forced Gould to make plans to expand his line westward from Ogden, Utah.
To this end Gould and his associates incorporated the Western Pacific Railway in California in 1903, with E.T. Jeffery as its president. The birth of the WP marked the beginning of very difficult times for the D&RG. Three contracts between the D&RG/RGW and the WP obligated the D&RG system to bear the cost of constructing the WP (in the form of bonds), guarantee the semi-annual interest on 30-year 5% gold bonds, and to honor a traffic agreement. In addition, the RGW was to pay any construction cost overruns.
The burden placed upon the D&RG by the contracts with the WP was almost unbearable. By 1913 the Boards of Directors of the D&RG, WP and Missouri Pacific (many of the members served on more than one of the boards) began to discuss the D&RG’s plight. The discussions and the continuing financial difficulties of the D&RG led to court battles with the Equitable Trust Co. (which brought suit against the D&RG for non-payment of debts) and a reorganization plan for the WP. In July 1916 the WP Railway was sold to stockholders and reorganized as the Western Pacific Railroad Company.
The D&RG lost the case with the Equitable Trust Co. in August of 1917. The court determined the railroad owed Equitable $38 million. The D&RG did not have that much money on hand, but did have some assets in the form of cash, stocks, and bonds. The Equitable Co. sued in New York and Chicago courts to obtain some payment on the $38 million owed to it, and in 1918 was awarded over $6.5 million of the D&RG’s assets. Another $4 million was handed to the Equitable Co. when the shares of the Utah Fuel Co., a D&RG subsidiary, were sold at a public auction and the proceeds applied toward the judgment against the D&RG.
This strangulation of the railroad left it with only one option – yet another receivership. To forestall the Equitable Co. from asking for a receivership on terms favorable to it, the D&RG turned to a minor creditor, the Elliot Frog & Switch Co., and asked it to initiate receivership proceedings. Equitable’s lawyers tried to stop this in court, but were denied.In January 1918 the court appointed Edward L. Brown and Alexander R. Baldwin (a vice-president of the WP) as co-receivers. World War I, which the U.S. entered in 1917, complicated the receivership and Equitable’s continuing efforts to collect on the judgment awarded to it. All railroads in the country were under the control of the U.S. Railroad Administration, headed by Director General William G. McAdoo, from 1917 to 1920. McAdoo temporarily blocked the Equitable’s efforts, but in May of 1918 Judge Sanborn ruled that the D&RG must pay $3.6 million of its debts. The money came from the sale securities, cash in the bank, and $1.5 million contributed by the government for its use of the railroad. When the Railroad Administration ended its control of the country’s railroads in the spring of 1920, the D&RG was still in receivership.
The receivership did not improve the financial condition of the D&RG, and by the fall of 1920 the company’s creditors once again forced it onto the auction block. On Nov. 20, 1920 the D&RG was sold for $5 million, and on Nov. 30 the new owners incorporated the Denver & Rio Grande Western Railroad. Angry stockholders of the old company, who received nothing from the new D&RGW, held up the court’s confirmation of the sale for several months, but on Mar. 28, 1921 the court confirmed the sale. Serious financial problems, some caused by the devastating Pueblo flood in June of 1921, continued to plague the D&RGW, and by the summer of 1922, the Banker’s Trust Co. of New York and the New York Trust Co. instituted new foreclosure proceedings, based on the D&RGW’s failure to meet the interest payments on its bonds.
Federal judges Robert E. Lewis and J. Foster Symes named Joseph H. Young, president of the D&RGW, as receiver in July 1922 over the protests of the New York and Banker’s Trust companies, In addition, Judge Lewis further frustrated the bondholders by ordering Young to improve the condition of the D&RGW:
"It is common knowledge that the road is badly out of repair. When the case came into this court before, at the time of the forming of the Denver & Rio Grande Western Railroad out of the old Denver company, the railroad conditions were promising. The Western Pacific company took the road over, but they have done little with it. The present owners have not seen fit to keep it in condition, and when it comes into this court we shall see that it is put in condition and we shall see that done before it is turned back to the owners. Furthermore, it will be the policy of this court that no interest shall be paid on the bonds of the road until it is completely rehabilitated and the public thus safeguarded." (Rocky Mountain News, July 22, 1922).
As ordered by the Judge, receiver Young spent millions on upgrading the D&RGW, particularly the rails and rolling stock.
Even with the court-ordered improvements proceeding, the future of the D&RGW looked uncertain. In 1923 – 1924, the Missouri Pacific and the Western Pacific tried to absorb the smaller line, but these efforts drew protests from those bondholders who feared they would be wiped out as had the stockholders of the D&RG in 1920. In Dec.1923, the Interstate Commerce Commission approved a reorganization plan for the D&RGW, and in Oct. 1924 the D&RGW was sold to the reorganization managers – Kuhn, Loeb & Co. and Equitable Trust Co. The new D&RGW president was J.S. Pyeatt.
Over the next ten years the two major events for the D&RGW were the construction of the Moffat Tunnel in 1927 and the completion of the Dotsero Cut-off in 1934. The Moffat Tunnel, running under James Peak in northwestern Colorado, was named for the man whose dream it was – David H. Moffat. Moffat spent many years and a considerable portion of his personal fortune on the tunnel dream, but to no avail. Over a decade of failed efforts by Colorado business and political leaders to get construction financed and started followed Moffat’s death in 1911. Construction actually began in 1923 and was completed in 1927. Like the Moffat Tunnel, the completion of the Dotsero Cut-off in 1934 came only after years of legal battles and financial problems. Despite the opening of the cut-off the D&RGW’s financial woes worsened, due in no small part to the Depression. Thus in 1935 the D&RGW was once again in court, petitioning for reorganization under the Federal Bankruptcy Act. The U.S. District Court appointed Wilson McCarthy and Henry Swan as co-trustees. The two men, with the approval of Judge Symes, formulated a multi-million dollar improvement plan. In 1937 alone the two men spent $18 million on the company. By the end of 1939 the railroad’s fortunes had turned around to a remarkable degree. The D&RGW’s revenues continued to climb in the 1940s, particularly after the U.S. entered World War II in Dec. 1941.
In April 1947 the trusteeship of Swan and McCarthy ended and the D&RGW returned to private ownership under an ICC-approved reorganization plan. The plan was opposed, unsuccessfully, by the Missouri Pacific and the Western Pacific all the way to the U.S. Supreme Court. The reorganization committee, headed by John Evans, elected a new Board of Directors with Evans as its chairman. The Board selected Wilson McCarthy as the president of the D&RGW.
In the post-war years passenger traffic declined on the line but freight traffic grew, thanks in part to McCarthy’s policy of encouraging industrial and agricultural development in Rio Grande territory. McCarthy provided strong leadership of the D&RGW until his death in 1956. Gale B. “Gus” Aydelott succeeded him in the presidency, and continued many of McCarthy’s forward-looking policies, especially that of improving the line. While Aydelott’s improvement program included attempts to reduce or eliminate passenger service on unprofitable runs, it also included technical advances in communications, locomotives and other areas. (This historical outline of the D&RGW was chiefly drawn from Robert G. Athearn’s Rebel of the Rockies: The Denver and Rio Grande Western Railroad. Yale University Press, 1962).
In 1969 the D&RGW formed Rio Grande Industries, Inc., a holding company designed to diversify and expand the company into other fields. In 1970 the various activities of RGI included real estate development, industrial contracting and insurance, but the railroad continued to produce the majority of RGI’s annual income, most of it from freight revenues. The 1960s and 1970s saw a steady downward trend in passenger traffic on all railroads. By 1970 the D&RGW had virtually abandoned passenger traffic, with the exception of a thrice-weekly run from Denver to Salt Lake on the Rio Grande Zephyr, formerly the California Zephyr. Competition from the airlines and the rapid growth in the number of private cars resulted in many passenger trains operating at a loss. The D&RGW retired the Rio Grande Zephyr in April 1983, and Amtrak took over the running of passenger trains over the Rio Grande route. (Denver Post Empire Magazine, Oct 25, 1970, p. 13; Green Light, summer 1983, p. 12).
By the time W. J. “Bill” Holtman succeeded Aydelott as President of the D&RGW in 1977 (and as CEO in 1978) Aydelott had built up the railroad’s annual freight revenue to over $305 million, and won the admiration and respect of railroad men nationwide for the “tight ship” he ran. Aydelott retired as chairman of the railroad in 1983, and died in 1991. (Railway Age,Sept. 11, 1978, pp. 26-32; Denver Post, Feb. 16, 1991.)
Between 1984 and 1987 Denver businessman Philip F. Anschutz purchased enough of the D&RGW stock to become a majority owner, and the formerly publicly-held company went private. In 1988 Anschutz purchased nearly a third of the stock of the Southern Pacific railroad and merged the two lines to form the Southern Pacific Rail Corp. In 1995 Anschutz and Union Pacific officials agreed to a deal that would merge the two lines and restore the UP to its former status as North America’s largest rail company. Despite a great deal of opposition from various interest groups, including farmers and ranchers who feared decreases in service and increases in freight rates, the deal was approved by the Surface Transportation Board on July 3, 1996. (Denver Post, Aug. 8, 1995, p. 1D; conversation with Harry Philips, retired Southern Pacific employee).
Author: Colleen P. Bradley, Project Archivist.
July 1996. © Colorado Historical Society
Author: Colleen P. Bradley, Project Archivist. July 1996. © Colorado Historical Society
2-8-0 Colorado Railroad Museum ©
Dennis Turner, 2016
2-8-0 Colorado Railroad Museum © Dennis Turner, 2016