Starting in 1903, the Weed Lumber Company built a private railroad from the main line of the Southern Pacific Company (SP), formerly the Oregon and California Railroad, in Weed to Grass Lake, California. On July 6, 1905, the California Northeastern Railway was incorporated to operate the line as a common carrier. The new company bought the line on July 29, and an SP-funded reconstruction was completed on September 1, 1906, when the line was opened to the public as a leased branch line of the SP.[2] Extensions were completed to Bray on September 6, 1907, Dorris on May 1, 1908, the Oregon state line on August 25, 1908, Worden on November 25, 1908, Ady on January 1, 1909, and finally the whole 86.15 miles (138.64 km) to Klamath Falls, Oregon on May 20, 1909.[3]
On August 21, 1905, the Oregon Eastern Railway was incorporated in the interest of the SP and Union Pacific Railroad (UP),[4] then both controlled by E. H. Harriman. This company surveyed a route from a line of SP lessor Oregon and California Railroad at Natron, near Springfield, over the Cascades in the direction of the UP near Ontario, Oregon. It also planned to build branches south to Klamath Falls and Lakeview, the former connecting with the California Northeastern. This company began construction in November 1909 on the line north from Klamath Falls, soon reaching Chiloquin under lease to the SP. The Oregon Eastern acquired the property of the California Northeastern on December 18, 1911, and on February 12, 1912, the property of the Oregon Eastern was sold to SP lessor Central Pacific Railway, which owned the main line through Weed.[5] The Central Pacific completed two segments on which the Oregon Eastern had begun work: Natron to Oakridge and Chiloquin to Kirk, in May and September 1912 respectively.[3] However, work was then placed on hold while the federal government decided whether the SP's lease of the CP violated the Sherman Antitrust Act. (It had already broken up the SP-UP combination in 1913.[6])
The Transportation Act of 1920 gave the Interstate Commerce Commission the power to approve combinations that would serve the public interest, and on February 10, 1923, the ICC approved the SP's continued control of the Central Pacific, which was backed by the Justice Department on June 11.[2] Construction resumed in October, and on September 1, 1926 the Natron Cutoff was completed.[3] Finally, On April 17, 1927, a new line opened between Black Butte (south of Weed) and Grass Lake, replacing the cheaply built former logging line, and allowing the SP to inaugurate the all-PullmanCascade between San Francisco and Portland over this route.[2][7]