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In 1905 the Office of Public Roads was created within the United States Department of Agriculture in order to offer a professional road construction advisory service to other federal government agencies. However, it was not until 1912 that Congress granted authority for the Forest Service to expend ten percent of the annual receipts from the sale of timber, and other forest products for road and trail work. The passage of the Federal Road Act in 1916 marked an even greater federal interest in the construction of what came to be known as Forest Highways. The Federal Highway Act of 1921 appropriated funds for the construction of roads designed to provide the missing links in transcontinental highway travel, to aid state and community development, and to provide access for the conservation and development of natural resources. The act divided forest roads into roads of primary importance in the protection and development of the forest areas and roads of primary importance to the states, counties, and communities adjacent to or within the national forests.

Forest Highway funds were apportioned to the various states, one-half in the ratio of the area of National Forest lands in any state to the total area of such land in all states, and one-half in ratio of the value of National Forest land in any state to the total value of such land in all states. There was no limiting clause in the rules and regulations with respect to apportionment of funds between those sections of the Forest Highway System on the Federal Aid Highway System and those sections which were not on the Federal Aid System. The ultimate development of the Forest Highway System rested with the discretionary action of the Public Roads Administration or its predecessor agencies, the Forest Service, and the state highway department. The state highway department reviewed and approved plans for Forest Highway Projects before contracts were awarded, and, in doing such, represented the state and counties in designing the Forest Highways.

Construction activities were handled by the Public Roads Administration working in cooperation with the U.S. Forest Service and the state highway department. Responsibility for the maintenance of constructed sections on the system devolved upon the state highway organization, usually beginning two years after construction.

During the depression of the 1930s the direct federal highway construction program expanded in order to alleviate unemployment problems through public works projects. Between the mid-1920s and the beginning of World War II fifty-nine Forest Highway Projects were undertaken in Montana. During the Second World War Forest Highways Projects were suspended as direct federal construction employees were assigned to defense projects building roads to military sites.

In 1939 the Bureau of Public Roads was transferred from the Department of Agriculture and became the Public Roads Administration of the Federal Works Administration. In 1949 the Federal Works Agency was abolished and the Public Roads Administration was transferred to the newly-created General Services Administration. Immediately thereafter the Public Roads Administration was renamed the Bureau of Public Roads and placed in the Department of Commerce. In 1967 the Department of Transportation was established and the Bureau of Roads was transferred from the Department of Commerce to become the Department of Transportation's Federal Highway Administration.