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The Texas state prison system established the railroad in 1881. Inmates built the line, which was used to transport hardwood which was used as fuel for the furnaces at the prison-operated iron smelter at the Rusk Penitentiary. The furnace supplied the State of Texas with iron products, including the columns and dome structure for the capitol building in Austin. The original construction was a narrow gauge line but was later built in standard gauge in order to join into the main line. In 1906 prison crews extended the rail line to Maydelle and in 1909 reached their final destination of Palestine. Once the train line was completed into Palestine the line was easily accessible to the main lines and commerce in and around the area flourished.