OIL AND GAS:

Rising wineries, organic farms clash with BLM over leasing in energy-rich western Colo.

This story was updated at 4:40 p.m. EST.

At Azura Cellars and Gallery near Paonia, Colo., guests can sip cabernet franc while gazing across the valley at 11,400-foot Mount Lamborn.

That view is gold to Ty Gillespie, the winery owner, who is fighting to preserve it as the Obama administration gets ready to auction 20,000 acres of that valley for oil and gas development.

The Bureau of Land Management's Feb. 14 lease sale has sparked fury in the energy-rich North Fork Valley, where historical coal mining and ranching have encountered a growing number of organic farms and wineries.

Residents and business owners say gas drilling threatens local water supplies and could tarnish the valley's organic farming reputation and scare off tourists and other customers for food and wine.

"This is really about protecting the bucolic nature of our valley, which is so fundamental to our business," Gillespie said during a visit this month to Washington, D.C., where he and other North Fork businesspeople lobbied BLM and Colorado lawmakers to postpone the lease sale.

BLM has argued that oil and gas drilling is part of its multiple-use mandate and that safeguards are in place to protect surface water, wildlife and air quality. Last fall, it announced it had trimmed the North Fork sale from 30,000 acres to 20,000 acres to protect local watersheds, steep slopes and a local school.

The agency has already postponed the sale once, calling it off last May after hearing from conservationists, local activists and government officials that drilling was incompatible with the area's agrarian economy (Greenwire, May 3, 2012).

The changes, BLM said, are proof the Obama administration's oil and gas leasing reforms -- which encourage greater feedback from the public -- are working.

"It has really provided an additional avenue for us to take a closer look at the parcels out there," said Vanessa Lacayo, a spokeswoman in BLM's Denver office.

BLM officials met again last week with elected officials in the valley's three towns -- Paonia, Crawford and Hotchkiss -- to discuss drilling concerns.

While the lease sale is supported by petroleum groups, it's drawn protests from local wineries, the Valley Organic Growers Association, Gunnison County, the three towns, Colorado Parks and Wildlife and a bevy of conservation and sportsmen's groups (EnergyWire, Jan. 10).

It's a reflection of the challenges of managing federal lands for a multitude of stakeholders and, more specifically, preserving wild spaces while carrying out President Obama's "all of the above" energy platform.

While domestic oil and gas production has risen steadily over the past several years, most of that growth has taken place on state and private lands, not those owned by BLM. Oil production has risen slowly on federal lands, but gas production -- which is more common in western Colorado -- has fallen as drillers flock to more promising shale plays in Ohio, Pennsylvania and Louisiana.

In addition, leasing dropped during Obama's first term as BLM overhauled an oil and gas program officials argued had swung wildly in favor of industry under the George W. Bush administration.

In Colorado, oil and gas leasing fell from an average of 411,000 acres annually during the last three years of the Bush administration to less than 50,000 acres annually during the first three years of the Obama administration.

But BLM's Feb. 14 lease sale includes a total of about 110,000 acres in the Little Snake, Royal Gorge, Tres Rios and Uncompahgre field offices, making it one of the largest state sales in recent history.

Opposition now threatens to land the agency in court.

A Delta County-based environmental group Friday said it would file a lawsuit if BLM sells the North Fork parcels (E&ENews PM, Jan. 25). Separately, the National Parks Conservation Association and the Wilderness Society last month filed a protest of parcels they argued fall too close to northwest Colorado's Dinosaur National Monument, which is famous for its Jurassic dinosaur fossils.

BLM on Jan. 14 announced it was deferring parcels near the monument.

"My home is heated with gas. I flew here on an airplane. You know, we all use energy," said Pete Kolbenschlag, a Paonia resident and consultant who lobbied against the proposed North Fork sale in Washington last week. "But we need to be smart about where we get it."

Much has changed

Much of the controversy over the North Fork parcels stems from BLM's 1989 resource management plan (RMP), the blueprint that decides where and how drilling can take place in the agency's 900,000-acre Uncompahgre field office.

Over the past 30 years, several wineries have sprouted along Colorado State Highway 133, which follows the North Fork of the Gunnison River, the valley's namesake. The Treasury Department in 2001 designated the area the West Elks American Viticultural Area, one of only two in Colorado and -- at about 6,000 feet -- the highest wine-growing region in the United States.

"It's always been a fruit, ranching and energy area, but a lot has changed in the intervening years," Kolbenschlag said. "The BLM lands are right in the center of the valley. They are not removed from the population. All of our irrigation water moves through these parcels that BLM is getting ready to lease."

Gillespie, the winery owner, said one BLM parcel comes within 40 feet of his well. The irrigation ditch that serves one-third of the wineries in the valley is located 50 feet downhill from a BLM parcel, he said.

Landon Deane, who raises grass-fed cattle on a 1,000-acre ranch near Paonia, said her land is surrounded on three sides by BLM parcels. Another subsurface parcel is in the middle of her ranch where she had planned to plant organic hops. While Deane owns the surface, BLM owns the minerals, a situation known as split-estate in which surface owners have little say over whether the land is drilled.

"We have a very vested interest in getting these leases thrown out," said Deane, whose beef is sold to restaurants in Aspen. This month was the second time she has come to D.C. to lobby against the lease sale.

Deane, Gillespie and Kolbenschlag met with BLM acting Director Mike Pool and the acting deputy director of programs and policy, Neil Kornze, urging the agency to halt the sale until it completes a new RMP, a process that would likely take years. Kolbenschlag said it appears BLM has not made a final decision on the North Fork parcels.

The group also met with Sens. Mark Udall (D-Colo.) and Michael Bennet (D-Colo.) and Rep. Scott Tipton (R-Colo.). Udall's and Tipton's offices did not respond to a request for comment. Bennet's office said the senator has heard from many stakeholders and is "helping the community weigh in."

In all likelihood, the shale rocks underlying the North Fork would need to be hydraulically fractured in order to produce gas, a process that would require new roads, hundreds of truck trips and millions of gallons of water per well.

While fracturing, or fracking, has been performed safely for decades, the technique is viewed with suspicion by the public.

"Many of our farmers are very concerned that the mere perception of polluted air, soil and water will drive away agricultural customers in search of other quality vendors," the Paonia Chamber of Commerce said in a letter last January. "Our hospitality industry and community at large is concerned about the potential impacts on our growing agro-tourism economy and the West Elk Scenic and Historic Byway Tourism Loop, of which we have just received recognition and funds to promote as a 'healthy community travel destination.'"

In addition, the area's hunting and fishing opportunities in 2007 generated $81 million in economic benefits and supported 912 jobs in Delta and Gunnison counties, according to Colorado Parks and Wildlife.

The state agency protested 25 parcels in the Feb. 14 lease, including most of the North Fork parcels, which it argued contained insufficient stipulations to protect wildlife such as elk that migrate down to the valley in winter.

Given the "investment-backed expectation of the lessee," it will be very difficult to add new environmental stipulations to leases once they are issued, the state agency said.

A plan is a plan

David Ludlam, executive director of the West Slope Colorado Oil and Gas Association, said opposition in the North Fork is a symptom of a wider disconnect among Americans with the energy they use.

"Everybody thinks their community is more special and unique than everyone else's," he said, noting that the majority of western Colorado is owned by the federal government so there are fewer private areas to develop oil and gas. "This is a community with historic energy development going back 100 years."

BLM's data back up his claim.

Citing state historical records, BLM said 116 gas wells have been drilled in the North Fork area on federally managed oil and gas leases, including split estate lands. The Muddy Creek area of the North Fork has about 47 active wells, though those are a dozen miles up the valley and likely out of view from the towns.

Three underground coal mines north of Paonia employ about 1,000, a major source of income in the valley.

Oil and gas drilling has occurred alongside farming and recreation for several generations in the West, Ludlam said.

"Look no further than Durango, Colo., a place where oil and gas and tourism and recreation have coexisted for over a century," he said.

Moreover, while BLM's RMP was last updated in 1989, the plan is still the law of the land, Ludlam said.

He likened the North Fork situation to the development of a new movie theater. A group of investors may spend many months raising funds and planning a project on the assumption that the current zoning plan will be upheld, regardless of how old it is. It would be unfair if local authorities forced the group to wait until a new plan is developed, potentially barring development, he said.

Likewise, it would send a chilling signal to energy firms if BLM arbitrarily halted development in some field offices pending a new RMP. BLM designs its lease sales around parcels nominated by industry.

"There's a lot of due diligence that goes into just nominating," Ludlam said. "Companies don't just nominate parcels for fun. Today's speculation and entrepreneurialism is what brings about tomorrow's energy resources."

BLM appears to support Ludlam's position.

Lacayo, the spokeswoman in the Denver office, said it is inaccurate to assume the agency has not evaluated changes in the North Fork since 1989. For one, the agency in the fall released a 280-page environmental assessment that factored in changing demographics in the valley.

In addition, BLM said leasing alone does not authorize a company to drill. When, and if, a company applies to drill, BLM will seek additional public comments to ensure resources are protected.

While BLM plans to issue a draft revised RMP by summer, it cannot halt oil and gas development any more than it can halt other provisions of its RMP, such as the management of off-highway vehicle trails, Lacayo said.

"To say we're going to hold off on any steps of one kind of BLM use over another, it kind of gets into a gray area," she said. "You kind of have to make a call to say we're going to continue to manage lands under the planning document we have."

Lacayo said the leasing process in Colorado and across the West is more transparent after leasing reforms established by former BLM Director Bob Abbey in May 2010. Whereas previously, BLM would go straight to a sale notice following industry's nominations -- giving the public only one opportunity, protests, to voice concern -- it now provides two additional opportunities for public comments before a sale notice.

"As a result of the public feedback, we decided to defer and decided to scale back [the North Fork parcels] by a third," Lacayo said. "That's an example of how the process is working."

Protests decline nationwide

BLM said protests in fiscal 2012 were filed on less than 18 percent of the parcels offered for sale, which was the lowest percentage since fiscal 2003 and significantly down from a peak of 47 percent in 2009.

At the same time, BLM in 2012 offered more than 6 million acres for oil and gas development, which is about a third more than the previous year and double what was offered in 2009. Last year's data compare favorably with the George W. Bush administration, which offered an average of 4.357 million acres for oil and gas leasing annually over its last five years in office.

BLM and conservation groups say the leasing reforms are working. Critics say the agency is offering noncontroversial parcels, rather than those that contain the most oil and gas.

But the North Fork sale demonstrates the persistent challenge of energy development in a changing West.

Peter Heller, a journalist who owns an off-the-grid home in the North Fork, in a July 2012 Bloomberg Businessweek essay described Paonia, a town of 1,500, as "an unlikely, sometimes argumentative blend of coal miners, cowboys, hippies, and environmental journalists."

"Maybe not the best place for the BLM to get into a fight," he wrote.

While oil and gas protests are down across the West, they are up sharply in Colorado, where 172 were received for the Feb. 14 sale, 150 of which target the North Fork. According to conservationists, it is the most protested of any sale during the Obama administration.

The uproar has made it uncomfortable for some oil and gas supporters to voice their opinion, said Steven Hall, a BLM spokesman.

"We heard from the local community that those who support oil and gas development in the valley are afraid to speak up, because the local conversation has grown so vitriolic," he said. "Normally a community would want to have all points of view heard, and we certainly heard support as well as opposition to energy development."