By the 1790s, industrializing eastern population centers were having increasing trouble getting charcoal to fuel their growing kilns, smithies, and foundries. As local timber was denuded, efforts to find an alternative energy source began. During a fuel shortage in Philadelphia during the War of 1812, an employee at the direction of industrialist Josiah White conducted a series of experiments and discovered a number of ways that anthracite coal could be successfully ignited and burned. The fuel had been seen more to put out a fire than a fuel to build one up, so its use also had to overcome prejudice.
White and his partner Erskine Hazard founded the Lehigh Coal and Navigation Company, creating the Lehigh Canal, and inspiring the exploitation of anthracite deposits found by William Wurts in and around Carbondale, Pennsylvania, which led to the development of Scranton.
The Delaware and Hudson Canal Company originates from the 1823 New York corporation charter listing the unusual name of "The President, Managers and Company of the Delaware & Hudson Canal Co." authorizing an establishment of "water communication" between the Delaware River and the Hudson River. The D&H was chartered by separate laws in the states of New York and Pennsylvania in 1823 and 1826, respectively, allowing William Wurts and his brother Maurice to construct the Delaware and Hudson Canal and the gravity railroad that served it.
By 1824, the mills of White and Hazard, and the regular large boatloads of anthracite they proved they could supply, tipped the prejudice against anthracite in Philadelphia when the Lehigh River was damaged by flooding. The news of its rapid repair and restoration together with the fact anthracite stocks had for a time run down, but not out, establishing the reliable sourcing[a] finished off the bias, as did the beginning of mine output reaching the Delaware basin markets due to the long-delayed completion of the Schuylkill Canal.
Wurts was a large thinker and inspired his brothers to back forming a company to deliver the new fuel, anthracite, to New York City by building an ambitious canal to connect the Hudson River and the Delaware River, and both to the Coaldale coal deposits by chartering a Pennsylvania subsidiary corporation, the Delaware and Hudson Gravity Railroad, to bring coal to the Delaware and the new canal. This cable railroad would grow in importance and become the far-flung class I railroad, the Delaware and Hudson Railway.
The canal was a successful enterprise for many of its early years, but the company's management realized that railroads were the future of transportation and began investing in stock and trackage. In 1898, the canal carried its last loads of coal and was drained and sold. The next year, the company dropped the "Canal" from its name. The remaining fragments of the canal were designated a National Historic Landmark in 1968.
The canal was last used on November 5, 1891, and the gravity railroad closed January 3, 1899. On April 28, 1899, the name was changed to the Delaware and Hudson Company to reflect the lack of a canal, which was sold in June of that year.
In 1964, Norfolk & Western wanted the Wabash & Nickel Plate Roads. The ICC at the time informed them that to get those two roads, they would also have to take the Erie Lackawanna & D&H. The D&H company was reorganized as the Delaware and Hudson Railway, and both roads were placed into Dereco. The name Dereco is a synonym for Delaware & Hudson, Erie, Reading & CNJ. Dereco was a holding company created by the Norfolk and Western Railway in 1968. After New York and Pennsylvania were hit by Hurricane Agnes in 1972, which destroyed part of the EL main line west of Binghamton, and following the bankruptcy of numerous northeastern U.S. railroads in the 1970s, including D&H and E-L, N&W never lost control of Dereco stock, but Dereco lost control of the E-L stock in the bankruptcy of the E-L. Dereco sold the D&H to Guilford in 1984, and then Dereco was dissolved and folded into the N&W later that year. After several merger plans fell through, EL petitioned for and was included in the formation of the federal government's nascent Consolidated Rail Corporation (Conrail). While D&H was technically still owned by N&W, they were given financial support and told to "sink or swim" as an independent railroad again. In 1980, Conrail sold the former DL&W main line from Binghamton to Scranton to the D&H; being a flatter, more direct route to Scranton, this acquisition allowed the D&H to abandon its famed Penn Division between Carbondale and the connection with the ex-Erie/EL at Jefferson Junction. The D&H was left out of Conrail to maintain a semblance of competition in the Northeast. While the success of this move has often been discredited, since the D&H was simply too small to compete with all of the markets served by Conrail, in fact the railroad doubled in size by being granted trackage rights over Conrail reaching Newark, Philadelphia, Buffalo, and Washington, DC. The remainder of the Penn Division from Lanesboro, Pennsylvania, to Nineveh, New York, was abandoned after the Belden Hill tunnel was enlarged in 1986.
On June 30, 1983, Guilford Transportation Industries acquired the assets of the Boston & Maine Railroad who was bankrupt. In 1984, Guilford Transportation Industries purchased the D&H as part of a plan to operate a larger regional railroad from Maine and New Brunswick in the east, to New York City and the Midwest in the west, Montreal in the north, and the Philadelphia and Washington metropolitan areas to the south. For only $500,000, Guilford purchased the entire railroad. The price tag reflected the D&H's horrid financial shape and the poor condition of its physical plant. At the time of the purchase, the D&H had little freight traffic, relying on federal and state money to keep operating. Guilford's plans for expanded service did not come to fruition, and in 1988, after two intense labor strikes, Guilford declared the D&H bankrupt, abandoning its operation. Lackawanna County, Pennsylvania, purchased the line south of Carbondale to Scranton and currently serves a growing number of industries in the valley under the auspices of the designated operator Delaware Lackawanna Railroad.
With the D&H in limbo, the federal government ordered the New York, Susquehanna & Western Railway to operate the D&H without subsidy until a buyer could be found. Guilford claimed that the D&H had assets of $70M at the time of the bankruptcy.
In 1991, the Canadian Pacific Railway (CPR) purchased the D&H for $25M to give the CPR's transcontinental system a connection between Montreal and the New York City metropolitan area. CPR assumed all operations of the D&H system and eventually phased out the use of the D&H name and logos on locomotives or rolling stock. Under CPR, the D&H trackage was upgraded, and excess track was removed. Although successful for a short time, the D&H was soon in limbo again, and in 1996, CPR placed it and other money-losing trackage in the eastern U.S. and Canada into a separate operating company named St. Lawrence and Hudson Railway. In 2000, the St. L&H was merged back into CPR.
As of 2012, various trackage and haulage rights were assigned to Norfolk Southern Railway (NS) over the D&H between Sunbury and Mechanicville, New York, as was a connection to Canadian National via Rouses Point, New York. NS incorporated the former bridge-line route into its "Patriot Corridor", and the majority of the traffic on the D&H became that of the NS.
In 2017, CPR finished installing an updated signaling system on the line. In 2018, CPR started doing extensive work on the line, possibly in preparation for increased traffic.
In October 2014, Canadian Pacific's Delaware & Hudson put a portion of its lines south of CP's Mohawk Yard in Glenville, New York, to Sunbury, Pennsylvania, and the former Albany Main from Delanson, New York, to Voorheesville, New York, up for sale. Voorheesville Track is operated under contract by SMS Rail Services. Under the purchase agreement, CPR D&H would retain the lines from Mechanicville, New York, to Mohawk Yard and Rouses Point, New York, to Albany, to retain lucrative Bakken crude-oil traffic. Most of the current traffic on the offered routes already consisted of NS Intermodal Containers and Auto Rack trains bound for Ayer, Massachusetts, via Pan Am Southern. On November 17, 2014, NS acquired the Schenectady, New York, to Sunbury, Pennsylvania, and Delanson to Voorheesville, New York, segments for $217 million. On September 19, 2015, NS assumed ownership and operations of its newly purchased portion of the old D&H mainline.