Early timber harvesting began in the 1860s by Hugh Mahony, who cut and hauled cedar logs to mills in Ipswich.

Francis Lahey, his wife and eleven children arrived in Sydney, but immediately travelled north to Brisbane.

[1] After being informed of the "good timber" in the region, David Lahey commenced work on the construction of the first sawmill in Canungra on 2 October 1884.

During the same year David, John, Isaiah, Thomas and Evangeline Lahey all applied for and were granted selections of land around Canungra totaling over 3,000 acres (1,200 ha).

[1] The mill at Canungra flourished during the first sixteen years of operation with timber readily obtained from the immediate area.

By this time the Laheys had acquired timber leases amounting to over 16,000 acres (6,500 ha) in the Canungra and Pine Creek Valleys, thereby requiring the slow and expensive bullock teams to haul logs over ever-increasing distances.

After a failed experiment with a steam traction engine, it was decided to build a tramway into the Pine Creek Valley to help keep transportation costs down.

A geared Climax locomotive, claimed to be capable of operating on grades as steep as 1 in 10, depending on haulage weight, was selected.

George Phillips, a celebrated civil engineer, was then engaged to make a detailed survey of the route, which was completed in February 1900.

An immediate problem he faced was a ridge of the Darlington Range that separated the mill in Canungra from the timber leases in the Coomera Valley.

The tunnel was officially re-opened for pedestrian and visitor use on 21 January 2001,[1] but subsequently fenced off due to safety concerns.

[1] Lahey's Canungra Tramway Tunnel was listed on the Queensland Heritage Register on 11 April 2005 having satisfied the following criteria.

The tunnel is important in demonstrating the high degree of creative and technical achievement required to solve complex engineering problems associated with the construction of Queensland's early railways in challenging environments and through the use of new and untried technologies.

The tunnel holds strong social significance for the community for its landmark values and for the contribution that the early timber industry and subsequent tramway operations had for the economic and cultural development of the Canungra region.

[1] The place has a special association with the life or work of a particular person, group or organisation of importance in Queensland's history.