The Aransas Harbor Terminal Railway was chartered on June 13, 1892, to begin on Aransas Harbor in Aransas County and run east across the north end of Harbor Island, then turn south to Turtle Cove, and then east across Turtle Cove to the north end of Mustang Island, for a total distance of ten miles. The capital was $250,000, and the principal place of business was Aransas Harbor. The members of the first board of directors were J. P. Nelson and Edgar Foster of San Antonio, John W. Maddox of Austin, D. M. Picton of Rockport, T. P. McCampbell of Goliad, Fred S. LØvenskjold of Nueces County, and J. Reiley of Refugio County.
The charter was later amended to provide for the construction of a harbor at Aransas. The Baltimore syndicate managed by Alexander Brown and Company controlled this operation. After several private and government attempts failed to get a deepwater pass between Mustang and St. Joseph islands, the United States Army Corps of Engineers took over the project in 1907 and built Aransas Pass.
The D. M. Picton firm of Rockport was contracted to do the jetty work. Picton and J. P. Nelson began by constructing a railroad to carry granite blocks to be used on the jetties into the Gulf of Mexico. The railroad was built on a series of man-made islands connected by trestles ending at Morris and Cummins Cut, a distance of 3½ miles. Rock for the jetties was brought into Aransas Pass by the San Antonio and Aransas Pass Railway and then onto the Terminal Railway. At the end of the line the rock was loaded onto barges for the trip to the jetty site. Later the barges were equipped with tracks so that the entire car could be transferred to the building site. Old-timers referred to this line as the Old Terminal Railway to distinguish it from one later completed all the way to Harbor Island by a different route. The Old Terminal was abandoned in 1917.
In June 1909 the Aransas Pass Channel and Dock Company filed for a charter with the announced intention of building a channel 8½ feet deep and 100 feet wide from deep water at Harbor Island to Aransas Pass on the mainland. The dredge from this channel was thrown up on one side, and this fill became the roadbed for the new Terminal Railway. The deepwater port and railroad were completed in 1912, and for the next six years the 9½-mile railroad served the booming oil port at Harbor Island. The hurricane of 1916 damaged the line, but it was put back in operation within a short time. The hurricane of 1919 did major damage to the line, and it was 1922 before service was resumed (see HURRICANES).
In 1916 the Aransas Harbor Terminal Railway reported passenger earnings of $320 and freight earnings of $58,000 and owned two locomotives and thirty-seven cars. In 1931 it reported total earnings of $11,000 and owned two locomotives and fourteen cars. When Corpus Christi was opened as a deepwater port in 1926, business on the Terminal Railway diminished. During World War I a Model-T Ford truck was converted to an engine, and a very popular passenger service was opened between Harbor Island and the mainland. Later the little railroad began hauling automobiles on flatcars to Harbor Island, from where they went to Mustang Island by ferry. Still later, planks were put in between the rails, and a road was made for motorists to drive to Harbor Island. A toll road was opened in 1931. After the railroad closed in 1947, auto traffic continued until 1960, when the state constructed a new road to Harbor Island. All that remained in 1990 was a few pilings that offered grandstand seats for sea birds to watch the traffic roar by.