Texas State Railroad's History 
1. Birth of the Texas State Railroad
The origin of the Texas State Railroad lies in the decision made in 1876 to construct a state prison in Rusk, Cherokee County. The new facility was designed to include manufacturing facilities that would provide inmates with a useful occupation during their incarceration. Ideally, the production of items for required by  the  State would significantly reduce the financial burden of the prison system on the State of Texas. An iron foundry was a clear choice given the availability of iron ore in the area.
Access to the prison by a railroad was necessary for the efficient transport of raw materials and finished products. Construction of the prison buildings was progressing in 1881, yet little had been done to construct the foundry, in particular the blast furnace. The Kansas and Gulf Shortline Railroad Company (K&GSL), which was chartered to construct a line from Tyler to Sabine Pass, were persuaded to use a route that would bring the railroad to the south of Rusk within 1.5 miles of the prison, rather than bypass the town to the east.

In order to accelerate construction, an exception was made to penitentiary rules that allowed prisoners who were serving long terms to work within 20 miles of the prison. With this aid, the K&GSL reached Rusk in 1882, reaching a point that was within the about 1.3 miles from prison. However, the railroad refused to provide a branch from that point to the penitentiary.
The prison had not budgeted for the construction of a spur from the K&GSXL's depot in Rusk to its property. In haste, the line was paid for with funds designated for improvements to the penitentiary. Eventually, the expenditure was reimbursed by the State of Texas. The spur was about 2300 yards long, and was completed by mid-1883. This was the first time that prisoners had constructed a railroad for the State.
The Texas State Railroad was born. Three years later, the K&GSL decided not to operate trains over the line. Consequently, it was necessary to procure a locomotive and a flat car,were purchased; thus the State of Texas became the owner and operator of the Texas State Railroad.
2. Prison Operation
Prisoners were housed in the 1000-bed facility at Rusk, toiling in the foundry, and on the railroad.  The railroad transported prisoners, supplies and charcoal, as well as the products of the prison.  All activities were overseen by guards, some of whom were quite brutal in their treatment of the inmates.
The blast furnace required iron ore, carbon, and usually limestone to produce iron. The limestone is needed to combine with impurities in the ore, and removed as slag. All materials are fed into the top of the furnace, while a blast of hot air is forced into the bottom of the furnace. Temperatures reach 3600ºF as the carbon burns to form carbon monoxide, which reduces the iron oxide in the ore to iron. From time to time the furnace is tapped allowing the molten iron to flow into molds known as 'pigs'.
The foundry produced pig iron for steel manufacture, and castings such as culverts, pipes, wheels for railroad cars. It is very probable that bases, columns, and pedestals of cast iron were produced for the State Capitol in Austin that was built from 1885 to 1887.  Such products would probably have been shipped from Rusk to the International - Great Northern Railroad at Jacksonville, which had a direct connection to Austin. It was not until 1896 that the track from Rusk to Jacksonville was changed from narrow gauge to standard gauge. Until then, all freight from the Penitentiary had to be transferred from narrow gauge cars to standard gauge cars, an expensive operation.
Normally coke was used as the source for carbon in blast furnaces. A purer form of carbon is charcoal, which could be produced locally from wood. The state acquired forestland and established “coaling camps” where prisoners were housed to fell trees and convert the wood into charcoal in covered pits.  It was cheaper to transport charcoal than wood. Felling was indiscriminate. Quality hardwood trees were simply reduced to furnace fuel.
3. Extension
Inevitably, areas of forest were depleted. Initially camps moved further away southwards from Rusk following the direction of the K&GSL railroad to Lufkin, laying spurs up to 5 miles long to each side. All loads to and from camps involved use of the main line of the K&GSR, for which haulage fees were paid. The spurs were operated by convicts.
When forests were acquired west of Rusk, a new line was constructed in late 1893 in a southwesterly direction from a point about 300 yards south of the prison.  After almost three years, the nine-mile extension was completed to a camp named Manila, north of Sardis, which still exists. Operating with its own rolling stock, lumber was hauled to the Penitentiary over this extension of the Texas State Railroad to serve a state saw mill and charcoal retorts that were now installed there.
Iron production at the prison was frequently scrutinized.  In 1899, it was curtailed until 1903 when another attempt to achieve profitability was made, this time using a new blast furnace that operated with coke. Also, the decision was made to improve the railroad's utilization by becoming a common carrier and providing a connection with the IGN at Palestine.  The last six miles of track of the line towards Sardis were lifted and relaid westwards towards Palestine, again using prison labor. In 1906, the railroad had extended to Camp Wright, close to the present location of Maydelle. Eventually, in late July of 1909, Palestine was reached. Public services over the railroad commenced in August with a connection with the International and Great Northern Railroad.
In 1913, iron production at the state prison ceased due to the competition arising from major developments in pig iron production in Birmingham, AL. Lumber haulage on the TSR provided its greatest income, but the railroad was operating at a loss and its condition of the railroad deteriorated. Eventually, the decision was taken to lease the railroad rather than continue sporadic State operation. Convicts from Rusk were used to return the track to an operable condition .
4. Private Operation
In 1921, the Texas & New Orleans Railroad acquired a lease to operate over the TSR, which allowed the TNO access to Palestine. Identified as the "Texas State Branch",  the railroad primarily transported lumber, and seasonal produce like tomatoes. A passenger service was provided until 1956.
n 1962, the decision was made not to renew the lease.  
In November 1962, the Texas South-Eastern Railroad (TSE) leased the TSR. The TSE was built to serve the needs of the lumber industry in the Angelina County area. It was owned by the Southern Pine Lumber Company, now Temple Industries, Inc.  A bulk grain dealer and a logging operation on the TSR line were served by trains originating from, and returning to, Diboll via the Cotton Belt line from Rusk to Lufkin.  At the end of 1969, the TSE did not renew the lease.
An unsuccessful attempt to run a tourist railroad was attempted in 1970. The Cherokee & Southwestern Tourist Railroad Corporation was formed to run from Rusk westwards for about 14 miles. Unfortunately the locomotive was lacking in both size and condition; trains could not be operated, and the company became bankrupt.
Missouri Pacific leased 3.7 miles of track from Palestine to serve a meat packing plant. 
Inevitably, the condition of unused track deteriorated, and farmers increased their land by extending their fences over the railroad's right of way.
5. Texas Department of Parks & Wildlife
Ownership of the Texas State Railroad was transferred to the Texas Department of Parks & Wildlife by the Texas State Legislature in February, 1972. The original intent was to create a biking and hiking trail, but pressure from rail enthusiasts and historians convinced the TP&W to return the railroad to operating condition. In due course the world's narrowest state park was created, again using convict labor, and opened to the public in June 1976 just in time for the bicentennial celebrations.