DENVER - Leaders in two western Colorado communities feeling the effects of the Rockies' energy boom say they don't oppose natural gas drilling - they just don't want it in their watersheds.

Palisade and Grand Junction are waiting for decisions on their formal protests of federal oil and gas leases on land that supplies their drinking water or borders the sites.

"A few thousand acres is just a drop in the bucket to them, but to us it's our livelihood and our future," said Jim Bennett, a member of the Palisade town council.

Town officials question the wisdom of potentially endangering water sources in the high desert area where diversions from the Colorado River have turned the town of about 2,800 into a green oasis of neat rows of fruit orchards and vineyards.

The Colorado BLM has yanked leases from its quarterly auctions after taking a second look at them. A 40-acre parcel near a reservoir where Craig wants to build boat ramps and other recreational facilities was withdrawn from the May 11 auction, but could be offered later.

Mel Lloyd, spokeswoman for the BLM office in Grand Junction, has heard complaints that some areas should be off limits to drilling. Her response is that Congress has directed the BLM to develop the nation's energy resources.

"We're mandated to look at every available acreage that's been evaluated and allowed for development under our resource management plans," Lloyd said.

The Bureau of Land Management auctioned thousands of acres in their watersheds in February despite the cities' objections and requests from Colorado Sen. Ken Salazar and Congressman John Salazar to withdraw the leases.

The leases are on hold while the BLM considers the objections, but Palisade and Grand Junction are looking ahead in case energy companies start drilling holes in the ground.

They've talked to state and federal officials and written letters detailing their concerns and suggestions. They've met with other local governments and are organizing more forums.

The two communities are also weighing their legal options if moves are made to drill natural gas owned by the federal government. The land lying over the minerals is owned by Palisade and Grand Junction.

"The town feels drilling in watersheds is illogical when there are thousands and thousands of acres out there that are available," said Tim Sarmo, Palisade town administrator.

Western Colorado and parts of Utah and Wyoming are seeing record drilling rates as gas prices remain high and the Bush administration pushes for more domestic energy production. The BLM has sold oil and gas leases on hundreds of thousands of acres of public land in the Rockies in the past several months.

The agency has also listened to the concerns of Palisade and Grand Junction and looked at strengthening the development guidelines when companies apply for drilling permits, Lloyd added.

"We drink the water. We're part of the community as well," she said.

Palisade and Grand Junction officials said they're not reassured. Greg Trainor, Grand Junction's utilities manager, said the city believed agreements it has with BLM on resource management on the Grand Mesa would protect the watersheds on the large flattop mountain that towers over the communities.

After realizing that the land was going on the auction block, Grand Junction bid on a handful of parcels, including the tract where several springs are tapped for drinking water. Trainor, who represented the city, dropped out of the bidding when the price hit $300 an acre.

Trainor said surrounding tracts went for only $20 to $40 an acre. He said he doesn't know which energy companies the buyer was representing.

As the communities battle to protect their water, they are tapping all available resources, including Palisade's watershed protection ordinance and federal drinking water laws. Trainor said he would like to see the state health department actively support the communities.

"Up to now, we've been duking this thing out on our own," Trainor said.

The Colorado Department of Public Health and Environment can't prevent the BLM from approving drilling, said Steve Gunderson, director of the state water quality control division. The division, however, does have say over impacts on surface water.

Gunderson said the Colorado Oil and Gas Conservation Commission regulates drilling and works closely with the health department on protecting groundwater. He said the Colorado Water Quality Control Commission would intervene if safeguards weren't adequate.

Palisade Mayor Doug Edwards said he's not convinced the BLM and other agencies have the staff and time to keep up with the escalating pace of drilling. He's worried about the potential fouling of drinking water and possible damage to the new $6 million water treatment plant the town will start building this summer.

"We're looking at what we can do to protect our watersheds for the future," Edwards said.