Buyer beware:
By NICK GEVOCK Chronicle Staff Writer

Sellers say CBM proposals have dried up Bozeman Pass housing market

Set among the pines interspersed with lush meadows, Jan and Karen Krieger's quaint home on 12 acres near Bozeman Pass is many people's Montana dream home.
Days are quiet, the views immense, and in the evening, a steady chorus of crickets is the only thing that breaks the silence.

"It backs up to public land, has a guest house, two gardens and two springs," Karen Krieger said. "We ski, bike and hike right out the door; it's an incredible place."

But after racking up the miles to get their two youngsters to ballet and soccer, the Kriegers decided to move into Bozeman. That's when they got a hard lesson in how the prospect of coalbed methane drilling can spook potential buyers.

Karen Krieger said at $212,500 ...quot;...quot; the low end of what their real estate agent recommended -- they priced the 1,700-square-foot house to move.

Three or four people have toured the house nearly every week since it was listed in January, but the Kriegers haven't had an offer.

"Most people go through all the positives, and then they say, 'What's with this coalbed methane thing,'" Jan Krieger said. "We've asked Realtors point blank, was it the house, the price, the winter access?

"They say it's the coalbed methane."

The problem seems clear for the Kriegers, but there are differing opinions among real estate professionals on whether coalbed methane is affecting real estate values. Some say it's too early to tell; others contend buyers are clearly steering shy of land in the area.

The J.M. Huber Corp. received state permission to drill test wells in the area about a year ago. That company has leased the mineral rights on 18,000 acres in the area.

Coalbed methane drilling involves pumping millions of gallons of water to get to the gas, and requires compression stations and building roads to get to the wells. It can be a messy process, and that is scaring away potential buyers, some local professionals say.

"We had a sale for a ranch for $1.5 million," said Livingston real estate agent Dave Viers. "They found out that Huber had the mineral rights, and they dumped it."

Viers said another piece of land near Bozeman Pass sold only after the owner dropped the price.

And Huber hasn't even drilled one hole yet.

But Viers notes that the economy has weakened, which certainly contributes to slower sales in the area. "I don't know how much of this you can lay at Huber's doorstep," he said.

To the frustration of some sellers, numbers from the Gallatin Association of Realtors Multiple Listing Service indicate the market hasn't screeched to a halt. Almost as many homes in the Bozeman Pass area have sold through the first half of this year as last year.

Six homes, ranging in price from $199,000 to $1.72 million, have sold this year in the Trail Creek, Bridger Canyon and west Park County areas, according to the MLS. Last year seven properties with the MLS in those areas had sold through the first half of the year.

It's premature to say that property values are dropping near the potential coalbed methane drilling areas, said Marty Bakken, a broker with Remax Realty Group in Bozeman.

"Nobody knows if there's coalbed methane up there yet," Bakken said. "It's going to take another year to tell what the impact is, because most of these (properties) haven't been on the market very long."

In Gallatin County, the recently approved emergency zoning district in the area and a subsequent moratorium on gas drilling has put the brakes on Huber's plans.

Viers said he doesn't think the moratorium will do much to ease people's fear of making a long-term investment in the area.

"It's just going to prolong the agony; I don't think there's any way to prevent Huber from doing what they want to do," he said. "There's some people up there where the well could literally be drilled in their front yard, and those just will not sell."

The Kriegers are in that boat. Like most of their neighbors, they don't own their mineral rights. In addition, the moratorium doesn't apply because their home sits in Park County, just over the line.

"Now that they have protection (in Gallatin County), we are sitting ducks," Karen Krieger said.

Other western communities, too, have seen drilling influence the housing market.

Landowners in La Plata County, Colo., have had a tough time selling their property when drilling comes in, said Phil Taylor, an agent with Century 21 Caver Real Estate, Inc. in Durango. The area has a lot in common with Gallatin County -- Durango is a small town with a college and has spectacular peaks within a few miles.

La Plata County has hundreds of coalbed methane wells, mostly east and south of town that often sit close to rural homes, Taylor said. Several homeowners associations have sued the gas companies for tainting water wells.

"You get an aerial view and they are everywhere, and there are little roads leading to every one of them," he said of the wells. "We get nothing but bad tasting, smelly water.

"They've ruined our county."

When drilling comes in, homes nearby don't sell because the owners are often unwilling to drop their price, Taylor said.

"You'll have a property that would normally have sold for $200,000 , and it will sit on the market seemingly forever," Taylor said. "It will sell for what it would have sold for two years ago, while similar properties will sell for $275,000."

He said most of his buyers tell him upfront to not bother showing them land with gas wells nearby.

Selling property in a mountain area -- where you have to plow your own roads and winters can be tough -- whittles down the number of potential buyers right off the bat, said the Kriegers' real estate agent, Dave Gluek. Gas drilling on the horizon only makes it worse, and people might expect a break in the price to deal with it.

"You think of the pool of buyers up there, how many are going to accept the coalbed gas?" he said. "There's always a buyer for every seat, it's just at what price."

The Kriegers haven't even had a "ridiculous offer," Jan said. The couple has given up on selling the place for now, taking their house off the market and renting it out while going to Mexico, where Jan will be a teacher for a year.

They bought a house in Bozeman last year, which they are also renting out for a year to make the mortgage payment.

"We're going to ride it out, because it's our asset and to sell at a great loss isn't worth it," Karen Krieger said. "Our dream was to put the down payment down there (on the Bozeman house), and then sell this and drop that mortgage down, but it didn't work.

"To sell, we need coalbed methane to go away."


Nick Gevock is at ngevock@dailychronicle.com