Battleground shift heads up valley, exposes agricultural rift

North Fork Face-off

Rancher Nick Hughes raises 230 head of cattle on his 340-acre spread northwest of Delta. He uses irrigation water from both the Heartland ditch and the Gunnison River for his cattle and his fields. Hughes also owns a ranch north of Paonia — 2,500 acres in the middle of the Bull Mountain unit, including the mountain itself — where he grazes his cattle during the summer. He says he believes in having “a conversation” with the oil and gas interests. “That’s what we have to do as ranchers every day,” Hughes says. “We have to negotiate.”



A sign indicates Gunnison Energy oil and gas facilities off Colorado Highway 133 in the upper North Fork Valley; where SG Interests is proposing to drill 146 wells in the Bull Mountain area.



A crowd listens to a recent Bureau of Land Management presentation in Paonia on SG Interests’ proposed 146-well oil and gas development in the Bull Mountain area of the upper North Fork Valley.



The eastern tributary of Muddy Creek lives up to the creek’s name, running red as Ragged Peak rises behind it. Some Paonia-area residents worry that proposed oil and gas development in the area could contaminate Muddy Creek, tainting water supplies in the North Fork Valley.



QUICKREAD

‘GOOD TIME ... TO GET BUSY’

Although energy companies have been scaling back on drilling due to low oil and gas prices, SG Interests is anxious to get going on developing its federal Bull Mountain leases, rather than possibly just doing some private-mineral drilling in the area as it has in the past.

With other companies pulling back, drilling and production services are becoming less costly and more readily available, said Robbie Guinn, an SG vice president.

“This is a good time for a company like SG to get busy,” he said.

The company is debt-free, and can take advantage of a low-cost environment to have wells ready to produce when prices rebound, Guinn said.

“That’s been our business model for years,” he said.



Opponents who successfully, if perhaps only temporarily, fended off federal leasing of some 30,000 acres for oil and gas development in the lower North Fork Valley now have a battle of a different sort on their hands in the valley’s headwaters.

There, some 100,000 acres of federal leases already have been issued, according to the local group Citizens for a Healthy Community, and private minerals also have been leased in the area. With the rights that go along with those leases, the battle isn’t so much over whether oil and gas development will occur, but how.

“Certainly we still get a say in what that development looks like,” said the group’s executive director, Jim Ramey.

People hoping to have such a say have an opportunity in the case of a 146-well proposal by SG Interests in the Bull Mountain area north of Paonia Reservoir and largely west of Colorado Highway 133. The Bureau of Land Management is accepting comments on a draft environmental impact statement on SG’s master plan until April 16.

It’s a proposal that is revealing something of a schism in the valley’s agricultural community. Some ranchers in the area where the drilling is proposed have stepped up to support it following outcry at a BLM meeting in Paonia, where many worried about potential impacts to the orchards, wineries, organic farms and other agricultural operations in the lower valley.

“It’s not like this is new activity,” rancher Nick Hughes said of drilling in the upper North Fork, where he owns some 2,400 acres.

He said SG and Gunnison Energy, which have both drilled some wells in the area of his ranch, have done so in a responsible way.

“We haven’t had any problems,” he said.

But Oogie McGuire, owner of Desert Weyr, LLC, which raises rare Black Welsh Mountain sheep for meat and wool outside Paonia, said her business has been impacted by the oil and gas development farther up the valley.

“Just the mere fact that it’s up there already means that I’ve lost sales,” McGuire said.

She said she’s had people refuse to buy her product because of research suggesting minor levels of contamination from oil and gas development can harm livestock.

“We’ve seen what happened over on the other side of the Grand Mesa (in heavily drilled Garfield County). We can’t afford that here. That will destroy us here,” she said.

‘RABID VOCAL MINORITY’

Hughes considers such concerns to be those of a “rabid vocal minority trying to push their way of life, as they understand it, on the rest of the residents” in the valley.

He compares worrying over oil and gas development to worrying about getting in an accident while driving to work.

“Or you can just drive to work,” he said. “It’s the same type of risk. You have to make some choices, and as long as we’re able to mitigate the risks properly and appropriately, life goes on.”

Outcry centered around concerns such as the need to protect North Fork’s burgeoning agritourism industry helped convince the BLM to defer its plans to offer some 30,000 acres for leasing in the lower valley.

Said McGuire, “Basically almost all of our business depends on tourism, because we have people who come into the valley, come to our farm, buy meat, buy wool, they visit the wineries that are our neighbors.”

After deferring the leases, the BLM agreed to consider a locally generated alternative for oil and gas leasing in a draft resource management plan for its Uncompahgre Field Office. Developed by Citizens for a Healthy Community and others, the alternative proposes no leasing on more than three-quarters of the 138,000 acres of BLM-managed fluid minerals covered in the plan, and no surface disturbance for another 17.5 percent that would be leased.

The debate over SG’s Bull Mountain proposal is sharply different in that it involves almost 20,000 acres that already have been leased. Only about 440 acres are federal land, with the rest being private, although more than 13,000 acres overlie federally owned minerals.

Because of the private leases, an estimated 55 wells might be drilled in the area no matter what the BLM decides on the master plan, the agency says.

The master plan was proposed to aid in analyzing and minimizing cumulative impacts from the anticipated development of the area’s federal and private leases, and to facilitate more orderly development.

Robbie Guinn, an SG vice president, also has noted that in the case of the federal leases, even if the BLM doesn’t approve the master plan, SG retains lease rights and will simply go through federal environmental analysis on individual wells rather than the entire area before being able to drill.

Hughes said it’s important for people to understand that most of the land in question is privately owned.

“It’s not BLM land, it’s BLM interest on two-thirds of the minerals. The other third belongs to us,” he said.

He added, “We still get to go ahead and exploit all of our private minerals on those properties as private interests.”

Ramey acknowledged that, but said where federal minerals are involved, the BLM is obligated to make “sure that their decisions don’t significantly and negatively impact other resources.”

For residents like the many who spoke up at the recent Paonia meeting, the potential negative impacts they fear range from air and water pollution, to heavy truck traffic and road damage, to a net negative effect on the current economy.

“It’s a threat to their way of life and they’re really concerned,” Ramey said.

Critics of the plan question how many of the estimated 470 jobs a year to be created during the project’s drilling phase would be local, versus workers temporarily coming in from other oil and gas fields.

Guinn says it will depend on the job, with many construction jobs possibly being filled locally, and drilling workers potentially coming from all over the place.

But even workers from elsewhere would benefit local businesses such as restaurants and lodging establishments, he said.
GUNNISON COUNTY’S VIEW

The Bull Mountain project is in Gunnison County, where Paula Swenson, chairwoman of the board of county commissioners, said the county understands that natural gas development “is here to stay.”

“That’s why we got ahead of the game and regulate the process ourselves,” she said.

The county has its own contracted oil and gas inspector who helps the county mitigate the industry’s impacts, she said.

“It really is a balancing act. Yes, gas development brings revenues to the county itself, it creates jobs, it is an economic driver, but there are also impacts that come with it and that’s why we are in the forefront and are regulating it.”

She was glad to hear Gunnison Energy recently clarify that it was likely to drill, at most, 60 wells in a project in the upper North Fork over the next four or five years.

At one point the company had mentioned the possibility of 400 wells being drilled, but it says that was a highly speculative forecast shared with the BLM and involving a longer time period, such as decades, and its current plans are more modest.

Swenson said fewer wells would mean fewer impacts. One concern for Ramey is the potential combined impacts of proposed drilling by several companies in the upper North Fork, another one of them being Petrox Resources. (See related story on page 6A.)

Hughes believes increased oil and gas development would be a benefit to a region that has been losing coal-mining jobs.

He acknowledged the valley’s growing emphasis on things such as wine-growing and organic farming to be good marketing, but considers them to still be a minor part of the economy.

He said ranchers have been making use of the upper North Fork for more than a century, summering livestock there and wintering it in lower terrain, as he does with his cattle in the Delta area.

Gary Volk has ranchland above Paonia Reservoir and in Eckert, and like Hughes has come forward to speak up on behalf of the energy development that has been occurring on and around his land.

He sees the resulting royalty and other revenues as being beneficial to ranchers and to the local economy.

“I’d much rather have this kind of activity in our area than us going broke or not having a livelihood,” he said.

But people like McGuire, and Wink Davis, a wine-maker and organic grape-grower who addressed the BLM at the recent Paonia meeting, think the stakes are too high for their way of life, with even one oil and gas spill into the valley watershed threatening their very businesses.

“We’re all downwind, downslope” from the SG project, Davis said.

McGuire fears that oil and gas companies will come, drill, and then be gone, harming the environment in the process, along with the sustainable agriculture for which the valley is becoming known.

 

LEASED VERSUS UNLEASED

McGuire doesn’t plan to let the fact that leases already have been issued keep her from continuing to try to stop oil and gas development in the valley.

“The people who live here are going to fight it any way they can,” she said.

Recognizing the challenges that go along with pre-existing leases, Ramey is taking an approach that includes things such as calling for SG to phase in its drilling to spread out the impacts.

It currently is envisioning drilling about 27 wells a year, a sharp increase in the rate of drilling in the area, Ramey says.

He said his group cares about all agriculture in the valley.

“I think all of it stands to be risked and threatened by (oil and gas) development increasing in a really significant way,” he said.

He said the situation in the upper valley shows why people have been fighting so hard to prevent the leasing the BLM has proposed down-valley. Stopping leasing keeps open the possibility of permanent protection without having to go through a process such as attempting to buy back leases from lease-holders, he said.

The Thompson Divide Coalition made lease buybacks part of its approach to trying to prevent drilling on public lands south of Glenwood Springs and west of Carbondale. But some energy companies said a $2.5 million offer the coalition made to try to buy out leases covering tens of thousands of acres was far too little.

Ramey said it’s too early to say if his group might consider trying to address the status of existing leases in the upper North Fork through means such as an attempted buyout.

But he acknowledged the high cost buyouts could entail.

“Quite frankly, we don’t have that money, so the buyouts are certainly a tremendously difficult issue and we’re perfectly aware of that.”


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