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But there is a catch: In approving the leases at a hearing in Helena, Mont., on Tuesday, the state placed stipulations in 16 of the leases that could set a nationwide precedent for how best to allow for increased energy development without harming wildlife.

On those parcels along the Yellowstone, Shields and Boulder rivers, and their direct tributaries, the state will forbid any drilling activity or infrastructure -- such as well pads, roads or traffic -- within a quarter mile of the waterway.

"That's a pretty substantial setback," said Tom Richmond, administrator of the Montana Oil and Gas Conservation Board. Richmond said he sampled oil and gas lease setback requirements on public land in 12 states and found none with a setback requirement even close to a quarter mile.

Environmentalists praise the setback, saying it is something that federal agencies managing public resources, like the Bureau of Land Management, as well as other states, could use to balance the obvious demand for more domestic energy production with the need to protect valuable wildlife.

"I don't know of any states in the West that are doing something like this," said Scott Bosse, director of aquatic conservation at the Greater Yellowstone Coalition, which pushed for the setbacks. "Montana has set the bar high with these stipulations, and the state is essentially saying that we're going to do a better job than other states have done to protect our hunting and fishing heritage."

Still, Bosse and others are not happy that Montana this week moved forward with other plans to drill for natural gas on 262 plots of state trust land covering 121,880 acres statewide. But what concerns environmental advocates is that Tuesday's lease sale included 141 parcels on more than 48,000 acres in the south-central part of the state -- a region that until now has not seen a lot of interest in drilling activity. This includes areas near the Yellowstone and Boulder rivers, legendary for their abundance of Yellowstone cutthroat, westslope and rainbow trout.

In moving forward, the state declined a formal request from the Greater Yellowstone Coalition and Montana Trout Unlimited to delay leasing more than 30 of the most environmentally sensitive parcels for several months until it could conclusively determine what impact the drilling activity would have on fish habitat.

Mary Sexton, director of the Montana Department of Natural Resources and Conservation, said she decided not to delay the lease sale because the drilling is proposed on state trust lands -- parcels where all the leasing revenue will go toward public schools. Last year, oil and gas leases generated more than $30 million for public schools statewide.

"If we defer leases we could lose the opportunity. And for state trust lands, our primary function is to look at revenue generating opportunities," Sexton said. "There may never be any drilling on these sites. But we get a lease payment regardless."

Wildlife vs. domestic energy

The controversy over drilling in Montana is the latest in the ongoing -- and often contentious -- debate over whether to open up more federal and state public lands to drilling activity. Pro-drilling advocates have argued for increased domestic energy production as a strategy to lower $4-a-gallon gasoline and rising natural gas costs. But conservation groups worry that the mad rush could cause irreversible damage to the environment and, as a result, the hunting and fishing industries.

Much of the debate has centered on lands in the western United States, which are rich in fossil fuels -- particularly natural gas -- and have abundant wildlife. It is also a region that is dominated by public land.

Colorado, New Mexico, Utah and Wyoming together contain about 30 percent of natural gas reserves, according to the New York Times, making them attractive targets for energy companies. And last year, about 90 percent of onshore federal drilling permits were issued in these four states, according to federal public lands data analyzed by the Wilderness Society.

Now, it is Montana's turn to see expanded drilling activity in environmentally sensitive regions that have not seen much drilling before.

Oil and gas leasing activity has been on the rise in Montana since 2001, though industry experts say there has been very little actual production. The state last year had 4,345 oil and gas leases covering nearly 1.8 million acres, according to state data.

But most of the drilling in Montana has been on the state's east side. The recent interest in drilling activity in the state's south-central area was sparked by three exploratory wells drilled by the Bill Barrett Corp. of Denver that appear to have found natural gas deposits in the Cody Shale, said Richmond, the Montana Oil and Gas Conservation Board administrator.

And more drilling in the state is expected, Richmond added. "I don't think we'll be inundated," he said, "But it's coming."

A delicate balance

The chief concern associated with increased drilling activity there is potential effects to fish habitat, particularly the Yellowstone cutthroat trout and the westslope cutthroat trout. Both are very popular sports fish, and they have been impacted dramatically by overfishing.

Populations of both trout species have been declining in Montana for years. Part of the reason is an invasion over the decades of non-native fish species, such as lake trout. Another is the introduction from Europe of a microscopic parasite that can lead to whirling disease.

Environmentalists and regulators are also concerned that increased drilling will create additional runoff from drilling operations, as well as from roads needed to transport equipment and work crews to the drilling sites, damaging the habitat of both fish species. This, they say, could lead to fragmentation of the habitat with the construction of riprap and other structures designed to channel the river and prevent erosion.

"When you start to constrict a river, the velocity of the water picks up and turns the river into a kind of a fast-flowing ditch," said Bosse, the Greater Yellowstone Coalition official. "That means less shelter for fish. When you constrict a river, the fish don't have those habitats they need, and instead are fighting to stay in the current. Usually when this happens the fish leave that area and go someplace else."

For these reasons, the U.S. Fish and Wildlife Service in 2006 explored whether to place the Yellowstone cutthroat on the federal endangered species list but decided against such a determination. However, BLM, the U.S. Forest Service and the Montana Department of Natural Resources and Conservation consider both trout species to be environmentally sensitive and worthy of special protection.

Last year, BLM, the Forest Service and Fish and Wildlife Service signed a conservation agreement with the state outlining steps and goals designed to protect the Yellowstone and westslope in Montana.

Montana's proactive approach

While environmentalists are wary of the effects of leasing areas for oil and gas drilling near pristine waterways, they praise the state for at least taking some significant steps to mitigate potential damage.

"We're striking a balance," Sexton said.

That has been a priority of Montana Gov. Brian Schweitzer (D), state officials and environmentalists say. "The governor gets this issue," said Bosse. "He knows what's at stake."

Still, Gibson with Trout Unlimited said the state is rushing to push the drilling in two south Montana counties -- Sweet Grass and Park -- that are in the middle of what he calls "trout country" and that have not seen major oil and gas leasing activity in decades.

"We're not against energy development, it's just as it moves into pristine trout country we want to look at things from a more holistic view," Gibson said. "Up 'til now, most development has been looked at parcel to parcel. We want to take a watershed approach. We want to look at where is the state going from here? Are these gas wells the only ones we'll see, or will we see five wells, 10 wells, or 50?"

Meanwhile, Dave Galt, executive director of the Montana Petroleum Association, an industry trade group, said the concerns about environmental damage to the area and its wildlife are overblown. He said there have been numerous riverbed-drilling projects in the state over the years and not a single significant environmental incident has occurred.

Galt said the quarter-mile setback on the 16 parcels is completely unnecessary. "It's purely over-reactionary on the part of Trout Unlimited and the other groups," he said.

The need for coordinated action

While Sexton said the quarter-mile setback stipulations are meant to protect wildlife, she acknowledges that the impact could be minimal on the overall watershed since many of the parcels in the south-central part of the state are federal public lands, managed by BLM, or private parcels.

"These are dispersed and isolated parcels. So even though we put these stipulations on our lands, if there's not a complimentary effort on federal or private land, it will have a patchwork effect," Sexton said.

BLM does not currently have a quarter-mile setback on oil and gas leases on BLM-managed lands. That could soon change in southern Montana, said Jim Albano, lead natural resource specialist for the agency's Montana state office.

Albano said agency officials have discussed with the state the possibility of BLM adding a half-mile setback on oil and gas leases on federal lands in southern Montana. The agency, he said, plans to add the stipulation to a revised resource management plan, set to be finalized later this month, that covers part of the south-central region at issue.

"We are interested, and we are working with all of the stakeholders because we want to have a landscape approach" to oil and gas leasing in the region, said Christine Tincher, chief of public affairs for the agency's regional office in Billings, Mont. "That landscape approach is something of a high priority and interest to us."

Environmentalists still have doubts

Still, all that may not be enough to avoid some negative effects.

As an example, Bosse and others point to damage they say was done by drilling activity in Wyoming. "We don't want oil and gas drilling to do what it's done to Wyoming," Bosse said.

Drilling there has caused some wildlife impacts "that are pretty dramatic," said Brian Rutledge, executive director of Audubon Wyoming.

Rutledge complains that drilling activity in Wyoming over the past 15 years has created "massive fragmentation" of the landscape, as roads and well pads have cut wildlife habitat into a patchwork quilt. And Bosse notes that in the once-pristine Pinedale area in western Wyoming, "there are a lot of severe air quality impacts," including ground-level ozone pollution problems -- a prospect that was once thought to be impossible in such a sparsely populated region. The cause? At least part of the blame goes to the increased traffic to and from the wells as well as pollution directly from the wells.

And in terms of impact to wildlife, Bosse points to studies that show populations of mule deer near drilling sites have been cut in half in recent years.

The situation is even worse for the sage grouse, a ground bird that the Fish and Wildlife Service is considering adding to the federal Endangered Species Act list. Rutledge points to studies in the state that show sage grouse populations have dropped as much as 80 percent where full-scale drilling activity is in place.

Audubon Wyoming and other groups have asked the federal government to limit gas wells to one per square mile, a threshold below which not much wildlife habitat damage occurs.

"We're certainly not trying to see that gas is not extracted from the ground," Rutledge said. "We're just trying to see that some sage grouse habitat is left when the gas is gone. I'd like to have some of the Western wildlands left when they're done."

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