In the mid-1890's George W. Scott and William W. Van Arsdale began laying track to connect McCloud with the recently arrived Southern Pacific R.R. in Sisson (what is now called Mt. Shasta). The two gentlemen's pursuit of business led to the purchase of a sawmill at Squaw Valley. Now having the ability to both produce and haul a commodity, in 1897 two businesses were formed, the McCloud River Lumber Co. and the McCloud River Railroad.
Over the years the railroad continued to grow and expand, reaching from Mt. Shasta in the west, to McCloud, to Hambone and a connection to the then Great Northern in the east (although owned by the Burlington Northern Santa Fe, the line from Hambone east to Lookout is exclusively operated by the McCloud) and south to Pondosa. By 1954 it was decided to build a 32-mile extension south from Pondosa, over Lake Britton and on to the town of Burney. Regular passenger service began on the McCloud River Railway in 1898 and continued until 1952. Although at times this service was used to carry lumbermen to the woods, public service was the majority of the business. After 1952 a strong influx of people interested in riding the line for pleasure appeared. Special Excursion trains were operated for these passengers with steam engine #25 during the 1950's and 1960's.
In 1992 Itel Corp. was looking to divest its railroad holdings which included the McCloud River Railroad. Jeff Forbis had been running the line for Itel and feared the line would be abandoned. At that time, the railroad was purchased by the Forbis family. Renamed the McCloud Railway, the company began exploring options to enhance the railroad in light of the dwindling timber business. Shortly after the line was purchased, "excursion" train service was brought back after an absence of many years. Movie and television production "on location" work has been encouraged and in 1996, the Shasta Sunset Dinner Train began operating over the McCloud Railway. In 1997, historic steam locomotive No.25 was restored to service.
The dinner train has enjoyed great success (expanding from 1 to 4 cars in less than one year) and guests from all over the USA, Europe and Australia have ridden the train. Excursion Train services have also greatly increased featuring both steam and diesel powered trains. Due to this success, two companies have been formed, the already existing McCloud Railway handles the freight business and Shasta Sunset Dinner and Excursion Trains provides passenger services.
McCloud River Railroad No. 18, a 2-8-2 built in 1914, is both quite ordinary and quite special. The Baldwin Locomotive Works built it to rather standard specifications - just slightly larger than sister McCloud engines Nos. 14 and 15 - but it was to have a brief career as a showgirl before settling down to the mundane existence of hauling logs in the woods. The McCloud River Lumber Company was one of several California white pine lumber producers to pool together their resources for a display at the Panama-Pacific International Exposition that celebrated the opening of the Panama Canal in 1915. Some questions remain as to whether No. 18 came to McCloud first or went directly to San Francisco, but regardless, she was part of the Panama-Pacific International Exposition held in that city and her pristine splendor is obvious in photographs of the day. The locomotive cost $16,851.79 when new and weighed 178,400 lbs. An oil burner from the factory, No. 18 remained in continuous service on the McCloud until 1956 when it was sold to the Yreka Western. Out of service on that road for a number of years, the 18 was repurchased by the McCloud Railway in 1998, brought back to home rails, restored and made its first run in February 2000.