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Boom or Bluff?

Natural gas prospectors are swarming the Eel River Valley, making some folks hot.

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Slideshows Boom or Bluff?

Some time ago -- about 10 million years, around about the time humanlike apes were transitioning to apelike humans and dogs were starting to look like dogs -- the Eel River Delta was taking shape. Great quantities of land continuously washed into the ocean, forming layers of sand, rotting plants and other deposits atop another deeply complicated geologic structure.

Nine million years later, the delta and surrounding area, always fitful what with two tectonic plates shoving under an opposing third plate, folded like ribbon candy and jumped up and down into broken blocks. In some of these compressed and faulted layers, hydrocarbons formed from the rotting plants, saturating the pores in the sandstone and rising until they hit an impermeable layer of rock in the tops of the folds.

Then, in 1963, some men from Zephyr Oil Co. came along poking holes into the tiny bit of Eel River Delta raised above the ocean. They weren't the first humans here -- up until about 1850, Wiyot Indians had thrived for thousands of years down in the verdant bottomlands pocked with conifers and seamed with alder-lined creeks. And they weren't the first men to seek hydrocarbons in Humboldt County -- gas wells on Tompkins Hill, to the northeast of Eel River, have been producing since the late 1930s, and people had long ago tapped into oil and gas reserves in the rugged region to the south in Briceland and the obviously-named Petrolia.

Anyway, these Zephyr men came along looking for oil. Finding none -- just a buncha pesky gas -- they went away. More petro-men came exploring in the '70s, '80s and early '90s. They, too, found gas. They, too, plugged their wells and went away, and it grew quiet out there.

Until recently, that is. In the past five or six years, it seems like every Tom, Dick and Harry Gas Man has been sniffing around the Grizzly Bluff Gas Field in the Eel River Basin. They want that natural gas. They're driving up and down the skinny, oft-flooded ranch roads named after the people living in the faded Victorians and farmhouses alongside them, no doubt getting chased by that feisty pair of caramel-colored shepherds down in that one elbow bend, and knocking on doors to ask folks to pretty please sign some papers. May we lease your mineral rights? May we build a road on your land, bury a pipe, build a well pad? May we come on your property and lay some cables and, just for a couple of weeks, shoot some explosives into the ground to size up the subsurface geology? It's for America, ma'am, so we can become self-sufficient and get off that foreign oil. Maybe Ferndale, now on propane, will get hooked up to gas. And you might make some money off it.

Dozens of ranchers have signed on. But a few are balking. It's an intrusion, they say. A gamble, where the gas man wins biggest and hauls his loot back to Texas or Bakersfield or somewhere twangy like that. And nobody's actually committed to hooking up Ferndale. Is all this disturbance worth it?

Calvin Shultz is 49, a big man, often clad in loose faded jeans and a gray hooded sweatshirt under a dark padded vest. He's got a short-cropped oval mustache-and-beard and wears a ball cap on his balding head. He drives a big pickup and wears brown leather work boots. Runs a hundred sheep, more or less, up on his 96-acre hilly ranch on Weymouth Bluff, east of Ferndale overlooking the Eel River Valley. Makes his real living installing wood and gas stoves in people's houses.

If you were the conclusion-jumping sort, you might jump to one about Shultz. A Republican, probably. And if you drove out to his ranch and stopped to read the sign posted on a tree at the entrance to his long driveway, you'd be certain of it. It's a trespassers-beware notice, talking about a person's constitutional right to keep and bear arms and to defend against unreasonable search and seizure of his property. At the bottom it's signed, "Briceland Family Ranch." It's something his son Jonathan, in a fit of fury, printed from the Internet after those gas guys came around one too many times.

Well, Shultz is indeed a true-to-the-bone local boy whose lineage dates back on one side to 1854 when his white ancestors -- Bricelands and such -- settled in Southern Humboldt. His other ancestors go back to time immemorial and the local Yurok and Wylacki tribes, and he's "one-eighth Indian." He happens to be a Democrat. That sweatshirt he wears has "Berkeley" printed on it. And, even though he admits to the irony of a gas-stove installer saying this, Shultz doesn't want gas wells drilled on his property. Or roads scraped, or pipes buried.

On this sunny but wind-bit Sunday in early February, as Shultz opens the door of his pickup truck and gets in, his dog Sybil, a rare red McNab heeler whom Shultz named after one of his old "horn-rimmed, pioneer-style" aunts, starts dancing around out on the ground and barking her head off. She lunges side to side, her haunches a-pivot and front legs boxer-nimble, and when the truck starts to move forward she dashes ahead then wheels back and barks some more, in full herder mode, as Shultz maneuvers between the hills enveloping his big yellow house.

Dew glitters white on the green pasture grass. But it hasn't rained for days and the ground is hard -- otherwise, it'd be so boggy a truck couldn't make it out here and you'd have to walk, says Shultz. Up ahead, to the north, a dark line of old Doug firs and underbrush form a snaggly windbreak on the edge of the bluff. In a corner where two fences meet sits a small trailer. Shultz' sister, who lives way up Price Creek in the boonies, likes to camp out there in the summer, picking berries and watching the lights of Fortuna at night. Right now, a kite is hovering mid-air near the trailer, wings shivering, eyes probing the grass for mice. Shultz stops the truck at a bowl-like spot in the north field and gets out. Sybil wanders a few feet off to sit and stare into space.

"This," he says, "right in the middle of my hay field, is about where they want to put the gas well. When it rains, all the water runs down and this whole thing is a pond, and all the frogs hatch. That's why the grass grows so good, because it's all subirrigated. I can grow tremendous hay down here. The grass gets up to four feet tall in the summertime." The land has never been plowed, and like a lot of farmers around here, Shultz is toying with getting organic certification.

"We keep this whole piece just pretty much the way it's always been, because this is for the animals," Shultz says. "And, you know, I hunt, my son hunts and my sister hunts. The deer come from up there" -- he points to the tree-covered ridges to the south. "This is all wild corridor, all the way down into the valley. We get bobcats, the occasional mountain lion, bears. The animals gotta live somewhere. HSU students, they came out here and found 10 kinds of raptors."

At the bluff's edge, looking through the branches of a statuesque fir, you can see the entire Eel River Valley, from east where the Eel River, freshly joined by the Van Duzen, snakes through, to west, past Ferndale, where river and land meet ocean. Dairy farms and ranches liberally dot the undulating verdant bottomlands -- if you drive around down there you see a lot of little signs hung from fenceposts announcing their affiliations: "Horizon Organic" or "Rumiano" or "Humboldt Creamery."

Shultz has spent most of his time up here on the bluff, ever since he was a kid. His great-grandparents, Carl and Mary Briceland, bought the ranch in February 1964 and retired to it. Then that December came the big '64 flood. "And all the dairyman who'd been saying 'who'd ever want a hill place,' you know, said they wished they had one," Shultz says. "Grandpa let everyone bring their cows up and we had dairy cows all over the place."

Down there, in the valley, a couple of rectangles of dirt have been scraped into the green pastures. Small green and gray tanks huddle on them. Those are well pads, built a few years back, from which two companies are already producing gas. One of the gas companies, Foothills Resources, has acquired dozens of mineral rights leases down in the lowlands and even up in the hills and bluffs and has plans that could potentially see many more well pads, one to two acres in size and with up to five wells apiece on them, checkering the valley. In January, Foothills conducted a seismic study of the region that had guys crawling around everywhere on four-wheelers, dropping bags of equipment from helicopters, trailing cables all over the place, detonating charges into the earth. The data will tell them more precisely where to drill their wells.

"I finally had to lock all the gates up," Shultz says.

The other company, Forexco, Inc., has more modest plans -- but its 960-acre project could directly impact Shultz. Forexco has already built the two producing well pads down below. And, it drilled a pipeline 80 feet under the bed of the Eel River -- a proud technological feat -- to tie the new wells in with PG&E's main gas transmission pipeline on the other side at a place called Alton. Now, according to its latest proposal filed with the county, Forexco wants to put in four more well pads, one to two acres in size each and with two to five wells apiece. Two pads would go below the bluff. The other two pads would go up top, one of them on Shultz' ranch. Figuring in pads, roads, and pipes, Forexco estimates the project would disturb about 10 acres of land, total. But almost four of those would be on Shultz' property. And they'd be disturbed for anywhere from five to 60 or more years. He'd also lose some privacy. During the couple weeks of drilling, the place would be lit up all night, and noisy. After that, for the life of the wells, a well inspector would come around daily.

Back in the truck, Sybil dancing and yipping out front, Shultz drives along a track toward the south side of the ranch. He slows next to a craggy old fir. "This is the butcherin' tree," he says. A big limb, that finally broke off, used to jut out and that's where they'd hang a butchered steer. A hawk cries from another tree. "That's my Cooper's hawk. And the other day I had a golden eagle flying around here." He also found, one day under the butcherin' tree, the head and wing of a barn owl. He figures the golden eagle killed it. "I found his face in the road, like that, lookin' straight up." He pauses, laughs. "Yeah, Indians, you know: Owl's are bad news. I brought it home and my wife says, 'You're not bringing that in the house.' But it was so cool, you know, because is it a sign, or what?"

Well, a friend of his told him he's "screwed" -- that well pad's coming. That's because when Shultz' great-grandparents bought this ranch they were unable to convince the prior owners to relinquish the mineral rights. So now those people's heirs -- eight of them -- own the right to exploit the minerals beneath Shultz' land, or to lease or sell the rights to someone else. According to that 1964 deed his grandpa signed, Shultz has to allow the mineral exploiters onto his property. "Even if I owned the mineral rights, I'm still against this thing," he says. "They want to build this road through my property and gravel it and tear down my fences and modify things."

Why did they come back, these oil and gas men? If Zephyr, Chevron and ARCO couldn't get excited about the Eel River basin in the past, what's different now? Well, like we said, the first guys wanted oil and found only gas. And then, around 1990, ARCO found plenty of gas but, as Foothills President John Moran explains it, "There was no gas market at the time." There also was no way to get the gas from the field over to PG&E's main line. "ARCO applied to build a pipeline under the river, but then they pulled out of California," says Moran. BP bought ARCO, and ARCO "disappeared." Besides, those big guys, they like to go after much bigger prospects than this valley.

Almost a decade later, with gas prices up and a growing demand, one of ARCO's geologists who'd wandered all over this place, Jere Jay, remembered those successful, but abandoned, gas wells. And Jay, who started his own company in Texas, Innex Energy, is the one who spawned the latest activity.

Yeah, it gets confusing. A lot of company names have been swirling around out in the dairyland for some time now. When the most recent wells were being drilled, a few years back, people got all excited because they saw Halliburton trucks roaming around. And guys from Forexco, Innex, Foothills and Maverick Petroleum (an agent first of Forexco, but now of Foothills, apparently) have all been knocking on their doors, talking about different stuff.

Just let it wash over you for atmosphere. You can really go down some rabbit holes trying to untangle the dealings and relationships between oil companies. Maverick, for instance, is on record at the county assessor's as having, in 2004, assigned some of the Shultz property mineral rights leases to a company called EOG Resources -- Enron Oil and Gas, formerly part of Enron and one of the world's biggest oil and gas companies. But is EOG involved now in the Eel River basin? Hard to say.

What's key to remember is that there are two main companies prospecting out in this valley (as far as we know). They're working on separate projects. And they seem to disagree about what's really out there. Of course, they all started out as friends.

Forexco, a private Texas corporation run out of North Carolina by Dan Forsberg, his brother and a son, wants to drill only into the shallow natural gas reservoir, between 2,500 and 4,500 feet below the surface, which it believes is centered under Weymouth Bluff and extends a tiny bit into the bottoms.

Foothills -- a publicly traded company incorporated in Nevada, headquartered in Bakersfield, and founded a year ago by three long-time oil men -- wants to explore the rest of the Grizzly Bluff field. Foothills is already pumping gas out of the shallow zone -- from Forexco's well pads. Long story short: When Jay, the president of Innex, came back to his old Eel River stomping grounds, he started gathering lease agreements. And he brought in Forexco to put some wells in the shallow zone and build the pipe under the river. Then they disagreed. Innex wanted to drill deeper. Forexco didn't. In a court settlement, Innex kept the data and all the leases out in the bottomlands, plus the right to drill from the two pads already in. Forexco could also keep drilling from those initial wells, and said it would confine future work to Weymouth Bluff and the shallow zone. After the split, a friend of Jay's formed Foothills with two other partners. And now Innex and Foothills are a team.

Whew.

Foothills has high hopes for the "deeper play," in the lower strata between 3,000 and 10,500 feet below the surface. It hasn't pitched a formal proposal to the county yet, said Foothills President John Moran. "But we're right smack in the middle of doing an EIR" on the whole thing, he says. It hopes to drill some wells this summer.

Forexco, meanwhile, has applied to the county to go ahead with the second phase of its project: the four well pads in the Weymouth Bluff reservoir. And in its proposal it makes repeated efforts to distance itself from that other company, Foothills, and its "highly speculative" schemes on the deeper reservoir: "The natural gas [there] is not of commercial quantity or quality." Data from deep wells already drilled, says Forexco, produced gas that was too wet. Foothills' Moran says Forexco just didn't drill in "the right places."

And somebody's crowing about Foothills. In 2006 on the website HotStockMarket.com ("The largest penny stock forum on the Internet!"), "The Phantom Trader" said the new company is going to be "an absolute blockbuster." The Trader went on: "It's got all the ingredients for a winning play top-notch management, plenty of cash, and one of the best undeveloped gas plays I've ever seen." The Trader says the company plans to drill, at a cost of $1 million apiece, two wells in the shallow play, each producing "1.5 million cubic feet a day," amounting to "a cash flow of about $3.6 million a year." And it plans 40 more wells. Plus, the Trader says, the well pads are already in, the county permits in hand, and a pipe already there to take the gas to PG&E's main line. "This is more like gas mining. And I haven't even gotten to the deeper play. The deeper prospect holds from 1 to 3 trillion cubic feet. This is what gives this company sex appeal. The deep play could turn this cash flow machine into a bonanza gas company overnight. And the risk factor is as low as it can get."

Dan Forsberg, Forexco's president, says he wishes Foothills well. "We're not into the high-risk, high-return type production," he says. "Foothills, they're a very large company with lots and lots of sales. We're private. Our vision is to be small and quiet. We're the guy next door. They're the guy downtown."

It's all six of one, half a dozen of the other to Annette Adams. On a streaky rainbow afternoon in mid-February, Annette, her husband Martin, and her mom, Clorina Paine, sit around a table in the solarium of the Adams' "piggy pink" house (Annette chose the color -- she was a 4-H leader). A frog croaks loudly from a corner, and the Adams' black and white cat -- pretty, but he bites -- saunters over to stare out the window at some deer grazing in the pasture. The Adams built this house in 1978. It's on 60 acres owned by Paine, next to Barber Creek in the bottomlands and at the base of the bluff, just below Calvin Shultz' ranch. Mike Brazil rents their pasture to graze his organic dairy cows.

Forexco wants to put a well pad on this land, and connect it to an underground pipe that would come down from the bluff top. Paine and the Adams don't want it. Paine, 83, owns this property, but lives closer to Ferndale on her 317-acre Williams Creek ranch. She owns the mineral rights over there -- why, she even leased them to a gas company awhile back, because she says the Williams Creek land is bigger, and not as good for grazing anyway. But the lease expired before they did anything with it. Here on Barber Creek, where her daughter lives, the mineral rights belong to the previous owners.

Annette has put a pretty table cloth on the table, added a plate piled high with homemade cookies, and a teapot and mugs. Anyone who comes by gets the same sort of hospitality. "The man that came here, the contract land man -- Scott Roberts, he was with Maverick -- he just dropped in and introduced himself one day," says Annette. "He was very nice, very pleasant. I was making raspberry jam, and he told me his daughter just loves raspberry jam. So I gave him a jar."

Another guy, Larry Henderson -- a local engineer from Bayside hired by Forexco to help it clear regulatory and other hurdles -- came by, too. He was straightforward and cordial. "I told him, the first time I met him in December, that I was flat out against it," says Martin.

And then there was Ed LeLouis from Bakersfield. He went out to Williams Creek to visit Clorina Paine a number of times. The first couple of visits, he "wasn't too bad," Paine says. He wanted her to sign permission to allow access to her Barber Creek land; she refused. "The last time he came, just before Christmas, I told him, I don't have the mineral rights there. But he kept going on and on. He was trying to fool me, I think. He said, you could get like, $15,000 to $18,000 a month. He wouldn't go, he wouldn't go, he wouldn't go. It was getting dark, and I was wanting to get my dinner going. I was scared." She called a friend, who told her not to sign anything. "And Mr. LeLouis, he said to me, 'Well, Mr. Henderson is going to be real mad I didn't get your signature!' And he took his notebook and folder and left."

After he left, she called her daughter. Annette was so mad she cried. When she talked to Henderson, she says she told him, "I truly believe family should hand down property. This is my inheritance. And this is for my children. I don't want a hunk taken out of it."

Aside from that, there's also the crumbly sandstone bluff to worry about. "They will be drilling up on Calvin's, and the pipe would come down this bluff," says Annette. "Well, we had a slide here. It was the middle of the night, and we heard this rumble. This was in the early '80s. And we moved the kids to the living room, and we came out in the morning."

"And you could see where the trees had come down the bluff and made a dam," continues Martin. The bluff had collapsed, and only the tree-dam had kept it from smashing their house. "It's unstable," says Annette.

Larry Henderson -- the local agent for Forexco -- seems surprised at the tale about LeLouis. "The Ed LeLouis I know wouldn't do that," he says. But anyway, Henderson says, maybe that pad won't have to go on the Paine property, after all, but instead could go over onto the willing neighbor's, the Houghs', side.

Forexco's got a bigger headache, anyway. Well, headaches. Shultz and a couple of others are putting up enough resistance to worry Forexco. Last Wednesday night, Forexco met with some of them, as well as landowners who are for the project, in Ferndale. Shultz reported afterward that "some cussing ensued," on his part anyway -- he says he was trying to point out to the willing landowners that they should be getting a lot more in rent for their good grazing land than what the gas guys are paying them. Henderson, however, reported they made progress.

The biggest headache is from the county. The county wants Forexco to do a full environmental impact report, taking into consideration the cumulative impacts of their past project, proposed future project, and the as-yet undeclared, undefined, and unrelated Foothills project. Forexco, which was able to put in its first wells and the pipe under the river with the minimal scrutiny, has appealed that decision. But county planner Michael Wheeler says the county has "a problem with multiple parties with multiple projects. Forexco thinks the county should just look at their [second-phase] application with blinders on. But we say no, they have to look at the cumulative impacts -- on agriculture, on aesthetics. Try to picture [the valley] dotted with well pads."

The exploration companies like to point out that the county itself has set a limit of one well pad per 80 acres. "We are not going to destroy the dairyland," says Foothills President Moran, exasperated. "People get the damnedest ideas about things they don't understand. This doesn't happen in Bakersfield. People there understand it -- they're used to this."

There are also state regulations. The state monitors the actual well drilling, and makes companies put up bonds -- from $15,000 per well pad to a couple hundred thousand dollars, depending on the depth and number of wells. Should the company bail out, the bond covers the cost of plugging the wells and removing the well pads. (If you feel wonky, you can see how much a well is producing on the state's oil, gas and geothermal site, www.consrv.ca.gov/dog. Look in "online well records search." Foothills' wells, however, are confidential for a couple years.)

Woody Murphy, whose company has helped build some of the well pads and also services the wells on Tompkins Hill and in the Grizzly Bluff field -- hauling away wastewater and impurities scrubbed from the gas at the wellhead -- doesn't see what all the fuss is about. He thinks the gas exploration here could bring local prosperity. "I see the day when you'll see natural gas in Ferndale," Murphy says. "If I were a bettin' man, I'd go to Vegas and bet on it. I see it in the next 10 years. I see Ferndale becoming a much bigger community -- I think it'd be great."

Well, no one's promised, specifically, to hook up Ferndale. But, yeah, there is some cash coming in. The county gets tax money. And, says Innex President Jere Jay, while a well's being drilled, the workers "check in at the hotel on the Riverwalk and at the Ivanhoe, and have a beer at the end of the day." And the mineral rights lessors, how exactly do they make out? People are pretty secretive about that. It depends on how close they are to a producing well. "I know ranchers are getting as little as $50, to over $10,000, in a month," says Jay. And that's as much detail as he'll commit to.

Even so, Murphy says he knows "a lot of dairymen who would sell in a New York minute. A lot of them have gotten out of the dairy business because there's no money it." Or they've cut way back, like his friend John Vevoda, who reduced his herd from 1,460 to 500 head. Vevoda's dairy sits on top of the shallow reservoir beneath Weymouth Bluff, and next door to a producing well on Kenny Christiansen's land. He owns the mineral rights under his land, and he leased them to the gas companies. So now he gets some royalties from the nearby well, a monthly check -- it fluctuates, he says, but he won't mention any amounts. "You don't depend on it," Vevoda says. "They don't even know how much gas is here. I'm not getting excited about it. It's not going to save the farm."

But if the money -- for the local landowners -- isn't something to get excited about, Shultz says, why do it? He says he's also worried that all these well pads might pop up across the valley, but the gas won't be able to go anywhere. He points to Forexco's document, which states that PG&E can only take so much gas from the Grizzly Bluff field into its tie-in line across the river. Forexco's project wouldn't exceed the limit, but Foothill's projected production could. There would have to be more pipes drilled under the river, and PG&E would have to make "major improvements and investments" to its facilities and "major changes" to its policies, writes Forexco.

It's hard confirming exactly how much gas PG&E will take from Grizzly Bluff. PG&E's Roger Graham says all the gas produced in Humboldt, if it meets PG&E's strict standards, must be used in Humboldt. It can't go south. About 11 percent of Humboldt County's natural gas use is locally produced. PG&E gets most of its gas from Canada and Oregon; it comes up from the Sacramento Valley, via Red Bluff, to Humboldt -- the end of the line. But PG&E doesn't necessarily buy the local gas -- the producers can sell it to anyone, and PG&E can buy gas from anyone, and does. "It's like a banking system," Graham says. "And if no one buys [the producer's gas], they can't put it in the system. They have to shut it in. Or, they lower their price. But there's a lot of buyers and a lot of sellers," so shutting out local wells isn't common, he says. "And gas is needed."

The trouble is, as anyone studying the industry will tell you, the demand for natural gas -- relatively clean-burning fuel -- is ramping up frenetically just as the world's major reservoirs are diminishing, underdeveloped fields like the Eel River Valley notwithstanding.

"That's what I told the gas guys," Shultz says, wandering around back up on his hilly bluff, red dog Sybil at his side. "You guys are, like, headin' the wrong direction. You've got global warming, we're past peak oil -- we've gotta wean people off this crap. You want to put windmills on my place, I might be interested. If they figured out [how to protect] the birds and everything."

Until then, he says, he'll hold out as long as he can against those gas guys. He laughs, says half-jokingly, "I've made subtle hints -- you know, farm boys and firearms." Not that he'd really do that. "After talking to lawyers and all that, the only way I can get this thing stopped is to bring out all the ecological crap that's going to happen."

A hawk, a redtail, cries from the air, and suddenly there's a dogfight between it and a slender white kite. And then it's over. "The kite ran the redtail off," says Shultz, looking satisfied.

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