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In May 1916 Minister William James Roche began negotiations, and the subsequent Minister of the Interior agreed with the provincial counterparts to the Banff-Windermere Agreement, that the federal government would complete the road within 4 years of the end of war, and maintain it thereafter, in exchange for the agreed upon land to be used for park purposes and a resolution to jurisdictional matters in the other federal parks in BC.

The agreement was signed on March 12, 1919, and the federal government took ownership of the land in July 1919.

The Continental Divide is the boundary between the Kootenay and Banff National Park boundary, as well as the BC-Alberta provincial border.

To the northwest, the watershed boundary between the Vermillion River and the Kicking Horse River is the park boundary between the Kootenay and Yoho National Park.

The Palliser expedition used the Vermilion Pass in 1858 and reported to British government its potential as a transportation route.

On the Columbia River side, an early homesteader included the hot spring that would later become Radium Hot Springs in his land claim in the 1880s, but it was Roland Stuart and his business partner H. Pearse who were successful in acquiring the 160 acres around the springs in 1890 as a provincial crown grant.

Archaeological evidence suggests humans have been either traveling through, or temporarily residing in, the area for about 10,000 years.

Development of the hot springs began in earnest after a British medical journal suggested, and a 1914 chemical analysis by Mc Gill University confirmed, the presence of radium within the water.

Initially called "Kootenay Dominion Park", the park was created in 1920 as part of an agreement between the province of British Columbia and the Canadian federal government to build a highway in exchange for title to a strip of land, approximately 8 km (5.0 mi) on either side of the 94 km route, the Banff–Windermere Highway, to be used solely for park purposes.

While the park is open all year, the major tourist season lasts from June to September.

While they intended on bottling the spring water, its remote location prevented such development and Stuart offered to sell the property in 1909 to the Canadian Pacific Railway Company for 00.

Though the offer was not accepted, railway engineer Robert Randolph Bruce recognized the potential for a road through the area and advocated for it in 1910 with CPR president Thomas Shaughnessy and Premier Richard Mc Bride, as a commercial link for the province to Calgary and eastern Canada.

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