The MCR was originally built as the McCloud River Railroad chartered on January 22, 1897, as a forest railway bringing logs to the company sawmill on the Southern Pacific Railroad at a place called Upton a few miles north of Mount Shasta, California. Originally, locomotives were borrowed from the Southern Pacific, but in 1902, the railroad received their first locomotive, number 1. By 1901 the company sawmill was moved to McCloud, and the distance for hauling lumber produced at McCloud was reduced to by shifting the junction south to Mount Shasta in 1906. The locomotives shifted from wood to oil fuel as the railroad extended into the forests east of McCloud in 1907. Trains brought logs to the McCloud sawmill from the east, and carried lumber from the sawmill west to the Southern Pacific.