From the start, workers realized that a standard-gauge railway (4' 8 1/2") would be way too costly. They decided on a three foot narrow gauge for the route instead. Construction started in May of 1898. After two months of construction, there was a passenger train running for four miles. Construction reached the White Pass summit on February 20, 1899. They had laid 21 miles of track from Skagway to the summit and it rose from sea level at Skagway to 2,885 ft. Construction on the railroad also began in Whitehorse, working towards Skagway.
Construction on the railroad was very difficult and dangerous. In some places, workers hung suspended from ropes over the cliffs and blasted through the solid granite. Often after they had blasted the side of the mountain, the workers would have to climb down the side of the mountain, clear the road, and then climb back up. Almost the entire route from Skagway to the summit was solid rock. Immense amounts of TNT were used. Workers also had to contend with brutally cold winter temperatures, as cold as -60C, and constant winds at the summit. Since the route went over solid rock, the gravel for the road bed had to be hauled from Skagway or Fraser. Dead Horse Gulch posed an engineering problem. Workers had to build a steel cantilever bridge 215ft high over the canyon. At the time, this was the largest of its kind in the world.
Thousands of workers were needed to build the railroad, but not many people wanted to work for wages in Skagway when the goldfields were just over the mountains. The number of workers on the railway varied each day from as few as 700 to as many as 2000. The men working on the construction crews came from many different backgrounds from all over the world. The worked on the railroad for three dollars a day, trying to earn enough money to go to the goldfields or back home. The work they did was dangerous, but they were well cared for. There were very few serious accidents, and little sickness. There wasn't much fighting at the work camps, because liquor wasn't allowed.
The railroad experienced other problems caused by Soapy Smith's gang of outlaws. They robbed pioneers when they arrived in Skagway and caused all kinds of trouble at the railroad work camps. These problems came to an end on July 9, 1898, when Soapy Smith and Frank Reid, an angered citizen of Skagway, had a shootout. Both of them were killed, and Soapy Smith's gang disbanded.
A dispute over the location of the Canadian-American border caused further grief for the railroad company. Canadians thought that the border should be at Skagway, but Americans felt it should be beyond the White Pass summit at Log Cabin. Finally , the two countries came to a compromise and agreed to have the border at the White Pass summit. When construction reached the summit, workers were told repeatedly by the RCMP that they could not cross into Canada. Stikine Bill, a friend of Heney's, brought a gift of scotch and cigars to the lone guard. When the guard finally awoke, two days later, construction had reached the shores of summit lake, a mile or so down the trail.
Due to a construction strike (because of unknown reasons) it was June by the time the track was far beyond the summit. The track reached Lake Bennett on July 6, 1899. The last spike was driven in Carcross on July 29, 1900. A group of dignataries were present for the ceremonies, as Samuel Graves tried to hammer in the golden spike. He was unsuccessful, so some of the other dignataries tried. The spike was bent and destroyed, so the track foreman had to pound in a regular spike. It had taken 27 months to build the 110 mile line from Skagway to Whitehorse. The total cost of the railroad was $10,000,000.
Full railroad service had begun by August 1900, but by then the gold rush was over. The railroad survived, however, hauling ore and serving as a vital link between the Yukon and the outside world.