The Denver and Rio Grande Railway (D&RG) was incorporated on October 27, 1870 by General William Jackson Palmer and a board of four directors. It was originally announced that the new 3 ft (914 mm) gauge 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 River. Closely assisted by his friend and new business partner Dr. William Bell, Palmer’s new “Baby Road” laid the first rails out of Denver on July 28, 1871. 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. Palmer’s first hand impressions of the Ffestiniog Railway in Wales buoyed his interest in the narrow gauge concept which would prove to be advantageous while conquering the mountainous regions of the Southwest. Eventually the route of the D&RG would be amended (including a plan to continue south from Pueblo over Raton Pass) 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 Atchison, Topeka and Santa Fe Railway. Both rivals hired gunslingers and bought politicians while courts intervened to bring settlement to the disagreements. One anecdote of the conflict recounts June 1879 when the Santa Fe defended its roundhouse in Pueblo with Dodge City toughs led by Bat Masterson; on that occasion, D&RG treasurer R. F. Weitbrec paid the defenders to leave. 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 “Treaty of Boston”  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 realized from this settlement
By late 1880 William Bell had begun to organize railway construction in Utah that would become the Palmer controlled Denver and Rio Grande Western Railway in mid 1881. The intention of the D&RGW (aka the “Western”) was to work eastward from Provo to an eventual link with westward bound D&RG in Colorado. This physical connection was realized near Green River, Utah on March 30, 1883, and by May of that year the D&RG formally leased its Utah subsidiary as previously planned. By mid 1883, financial difficulties due to aggressive growth and expenditures led to a shake up among the D&RG board of directors, and General Palmer resigned as president of the D&RG in August 1883, while retaining that position with the Western. Frederick Lovejoy would soon fill Palmer’s vacated seat on the D&RG, the first in a succession of post Palmer presidents that would attempt to direct the railroad through future struggles and successes. Following bitter conflict with the Rio Grande Western during lease disagreements and continued financial struggles, the D&RG went into receivership in July 1884 with court appointed receiver William S. Jackson in control. Eventual foreclosure and sale of the original Denver and Rio Grande Railway resulted within two years and the new Denver and Rio Grande Railroad took formal control of the property and holdings on July 14, 1886 with Jackson appointed as president. General Palmer would continue as president of the Utah line until retirement (due to company re-organization) in 1901.