In 1872, the Fairfield Canal Company entered into a contract with the Albemarle & Chesapeake Canal Company for the A&C to excavate with their steam dredges a proposed canal in Hyde County - from the headwaters of the Alligator River to Lake Mattamuskeet. The purpose of the canal was to drain the surrounding countryside to improve the land, and for a valuable feeder with proposed steamboat service.

The Fairflied Canal is cited in one of the Albemarle & Chesapeake Canal Company's Annual Report from 1872-1880 as "the only other navigable canal in North Carolina" at the time. This report also states that A&C owned 50% of the Fairfield Canal Company's stock, and that A&C owned a small steamboat running from Elizabeth City tri-weekly.

This canal apparently silted in due to abandonment - unknown when. A later canal - the Alligator-Pungo Canal, from which a lateral canal leads to Lake Mattamuskeet was built and also named the Fairfield Canal - perhaps it is only a redredging of the earlier canal. Dates for these later canals are unknown at this time.