The railway company was founded in 1903 as a wholly owned subsidiary of the Gilson Asphaltum Company. Construction began at a connection with the Denver and Rio Grande Western Railroad at what became known as Mack, Colorado. Twenty-eight miles of track was laid following West Salt Wash Creek upstream to the company town of Atchee, Colorado, named after a chief of the Ute people. Atchee served as a division point with maintenance shops for railway equipment. From Atchee, six miles of 7.5 percent grade were required to climb the Book Cliffs to Baxter Pass at an elevation of . From the summit of Baxter Pass, there were seven miles of 5 percent downhill grade to Wendella, Colorado, followed by twelve miles of 3 percent or shallower grades down Evacuation Creek to the Black Dragon Mine just west of the Utah border. The Black Dragon Vein of Gilsonite was exposed across the ground surface for a distance of , and averaged wide for half of that distance. Trains began hauling Gilsonite from the Black Dragon Mine in October, 1904. Shay locomotives pulled freight trains over Baxter Pass between the Dragon Mine and Atchee, and 2-8-0 engines pulled the freight trains between Atchee and Mack.