The foreclosure sales was held at Colorado City on September 8, 1897. The minimum acceptance bid was set at $290,000 and by bidding just $5,000 more Henry T. Rogers secured the entire Colorado Midland system. The Denver attorney was acting as agent for the bondholder reorganization committee.
On October 11, 1897 the Colorado Midland Railway Company was incorporated under Colorado law, it stated purpose being to:
. . . purchase, maintain, operate and extend the lines of the Colorado Midland Railroad Company.
The Atchison Topeka & Santa Fe no longer was represented on the Midland directorate, nor did it have any interest in the new company. Now reincorporated, reorganized, and with a more realistic financial structure, and with traffic again on the rise, the Colorado Midland prepared to play a more important role on the American railroad stage.
Though the Colorado Midland had seemingly made a fresh start, more troubles arose almost immediately. The first came barely two days after the September 8, 1897 foreclosure sale. Early on the morning of September 10th, the Midland chalked up its worst accident, both in terms of lives lost and property damage.
The accident just west of New Castle, on the track used jointly by the Rio Grande and the Midland, was a direct result of the loose methods too often used in 19th Century railroading. Rio Grande No. 506, known a Passenger Train No. 1, and C.M. 22, know as Stock Extra 22, collided 0.6 miles west of Gramid. Number 22 was trying to beat No. 506 to Gramid, and miscalculated. The accident resulted in 16 persons killed, including both engineers along with the wrecking of both engines, the Rio Grande head-end car, smoker and coach, plus half of the stock cars in the Midland extra.
For some time, George Ristine had felt that the rental for the Busk-Ivanhoe Tunnel was much too high. Throughout the summer of 1897, Ristine tried to negotiate with the officers of the Busk Tunnel Railway Company. Both sides soon "got their backs up" and issued simultaneous ultimatums to each other. As a result in September 1897, the Midland put crews to work rehabilitating the Hagerman Pass "high line." Four year of neglect to this line made for a very difficult task. By the last week of October, the "high line" was rehabilitated and ready for use. On October 31, 1897, the Colorado Midland surrendered possession of the Busk Tunnel Railway, and trains again labored over the "high line" loops.
All through the winter of 1897-1898 and the following summer, the Midland kept pushing its trains over the old Hagerman Pass line much to the surprise of the Busk Tunnel Railway Company. The onset of the winter of 1898 failed to bring with it any warning of what lay ahead.
At night, on Tuesday, January 24, 1899 the storm of all storms moved it. On Wednesday and Thursday the snow fell with ever-increasing intensity. Friday and Saturday so no respite and the rotary was sent to work. After passing through Hagerman Tunnel, the rotary met an eastbound livestock extra at Hagerman siding. The stock train immediately started through the tunnel and down the east side, powered by three engines. Upon reaching the second snowshed above Busk, the crew discovered that the structure had collapsed under the tremendous snow load. The extra was trapped, as the track behind the train had drifted shut.
A passenger train had struggled up the hill to Busk and had gone in the hole to await the stock train. When it failed to arrive, the passenger engine proceeded light up the hill cautiously. Upon reaching the first snowshed the crew found that it, too, had started to buckle. A further reconnaissance afoot revealed the collapse of the second shed and the entrapment of the stock train. The engine managed to return to its train at Busk, but drifts east of Busk made a return to Arkansas Junction impossible.