Bittersweet Boom

By Lisa Takeuchi Cullen

A third-generation rancher on the windswept prairies of eastern Wyoming, Frank Eathorne doesn't have much time or use for complaining. But one day this spring, he drove 80 miles in his GMC truck with a BUSH-CHENEY bumper sticker to do just that. It wasn't that he minded the oil-and-gas boom currently flooding the state with jobs and royalties. The problem, he told a government panel in a hotel ballroom in Casper, is that the rush to drill in Wyoming is swiping the land right out from under its people.

"When my grandfather bought this place, he thought he owned it," Eathorne said. "He found out later he only owned the grass."

Like many landowners in the mineral-rich states of Wyoming, Colorado, Utah, New Mexico and Montana, Eathorne owns the rights to only the surface of his 32,000 acres; the Federal Government owns most of what lies beneath. Washington, increasingly eager to find domestic sources of energy, is leasing the subsurface rights of those so-called split estates at an unprecedented pace to energy companies. Wyoming's abundance of gas reserves makes it especially attractive. The state's citizens have lived through energy booms--and busts--before. But while oil and gas jobs came and went, the ranch remained. This time, ranchers say, the boom risks ruining the land that has always sustained them for the easy-come, easy-go riches below.

When the oilmen first called years ago, Eathorne, 66, never dreamed that the rolling grasslands his family has owned since 1944 would one day sprout 40 oil wells, 80 miles of pipeline and three railroad tracks. In recent years, he has set some house rules. In a "surface-use agreement," he stipulated that the workers leave their dogs at home so they wouldn't harass his 1,000 sheep and 500 head of cattle. But he and his wife had to build a new house on the far corner of the property to get away from the noise. They are paid for their troubles--$1,500 a month for damages and $400 a year in royalties for their fractional share of mineral rights. But the checks do little to restore Eathorne's sense of peace. "Until the oil companies came along, we thought it was our land," he says. "It wouldn't hurt my feelings if they just went away."

Eathorne's situation is a dark side of an oil boom that has otherwise re-energized the state's economy. Last year, as energy companies swarmed the state, Wyoming produced nearly double the natural gas it did 10 years ago. Even its production of oil, which had been ebbing, is expected to rise this year. More rigs are operating in Wyoming today than at any other time in the past 20 years, and revenue from mineral royalties and taxes topped $1.6 billion in 2005, pumping state budgets with cash. In Casper, the state's energy-industry hub, a 36-hole public golf course, a gleaming pool and river walks opened recently to serve its 50,000 residents. A new hospital and courthouse are under consideration.

The boom tastes especially sweet to the thousands of roustabouts, roughnecks and pumpers who are now gainfully employed. Jobs in Wyoming's mining sector, which includes oil, gas and coal production, are growing at about 15% a year--three times as fast as any other category, according to the state's department of employment. And the jobs are good ones. The average salary in the mining sector, which now employs 1 in 10 of Wyoming's workers, is $61,000, double that in other industries. An oil-field worker, or roughneck, can often earn $90,000.

Like any boomtown, Wyoming has its share of worried citizens. Violent crime and drug use are up; methamphetamine-related arrests soared sevenfold from 1992 to 2004. Critics blame the rise in part on the influx of oil-industry workers, 1 in 5 of whom come from out of state. The population of mule deer around Jonah Field, a heavily drilled gas reserve in the west, has fallen by half over the past three years. New drilling techniques are producing enormous amounts of wastewater--just one reason environmentalists like Jill Morrison of the Powder River Basin Resource Council predict, "We're going to be paying for all this for a long, long time."

But few battles resonate with the Wyomingite more deeply than the one between landowners and energy producers. Split estates were set up by the Homestead Act of 1916 to let the Federal Government retain the rights to the coal, gas and oil in certain Western states while still encouraging farmers and ranchers to settle there. "The idea was to prevent landowners from selling over to mineral companies" and creating corporate monopolies, says Melinda Harm Benson of the Ruckelshaus Institute of Environment and Natural Resources at the University of Wyoming. The U.S. thus owns the mineral rights under 48% of the private land in Wyoming.

Owning a split estate didn't much concern Wyoming ranchers until the current oil boom. "Many landowners didn't even know they owned split estates--until the oilman showed up at their door," says Morrison, who lives in the mineral-rich Powder River Basin in the north. Two years ago, two energy companies notified her friend Steve Adami of their intent to drill on his 5,000 acres in Buffalo. When he refused, they simply "bonded on"--the energy companies' practice of posting a bond required by the Bureau of Land Management (BLM), after which they can legally exercise their leased mineral rights. The size of the bond posted for use of 1,280 acres: $2,176, of which Adami has not seen a penny. "To get the money, I have to sue," says Adami, 51, whose ancestors were Wyoming sharecroppers. "That won't even cover my attorney's fees." He seethes at the 16 wells and miles of trenches that render a large parcel of his land unsuitable for grazing his 180 head of cattle.

The bureau, a division of the Department of the Interior, leases the rights by auction to such energy producers as BP America and Anadarko. But state officials say the agency is handing out leases too quickly, favoring the interests of oil and gas companies over those of citizens. (Many point out that Halliburton--former employer of native son Dick Cheney--is a major player in oil-field services.) Urged by the Bush Administration, the bureau approved four times as many applications to drill on public lands in five Western states in fiscal 2004 as it did five years earlier.

Those who run Wyoming tread a fine line, reveling in the boom's economic boost to the state but mindful of the growing unrest among residents. State politicians helped landowners win a key battle last year when they passed a law that in essence stripped mineral-rights owners of their historically dominant status. Before the law, nothing forbade energy companies to drill and produce on land without so much as notifying or paying damages to its surface owner. But even that measure of protection is at risk in a political scuffle between Wyoming and federal authorities. In a letter to the Wyoming Oil and Gas Conservation Commission, Kathleen Clarke, the BLM's director, indicated that federal rules trumped the state law that Wyoming had just passed. Clarke promised to work closely with the state "to ensure fair protection of surface-owner interests." Governor Dave Freudenthal, a Democrat up for re-election in November, says that isn't enough. "What the BLM is doing at the national level is rattling a saber, sending a signal that companies do not have to comply," he tells TIME. "But we will enforce."

Even if that protection holds up, it may not be enough to restore what many ranchers have already lost. Donley Darnell, 58, owner of 64,000 acres of ranch land near Newcastle in northeastern Wyoming, appreciates the royalty checks he gets, but he doesn't see why Wyoming's landowners should subsidize the energy industry for a few thousand dollars a year. And come the next bust, those payments may vanish instantly. The scars on their land won't.

With reporting by Rita Healy/Casper