David Henderson, manager of the Carroll Ranch near Cameron, vividly remembers that morning four months ago. Blue, his prized Australian blue heeler, barked then streaked off toward a nearby pond. Henderson had seen a wolf in the area a day before and had a bad feeling. By 9 a.m. Henderson was on the scene, but the 8-year-old dog was dead.

"Blue was family. He was a working dog, and there is no way to replace him. He did everything I wanted him to, and he just asked for a little love in return," Henderson said. "I don't have a problem with wolves in the wilderness, but for that wolf to come in and run my dog out of the yard and run him down and kill him. ..."

Wolf managers expect problems to increase as the population grows and more wolves move through agricultural land. But they also say a look at the big picture shows wolves aren't the outlaws they often are made out to be.

Wolves were all but exterminated in Montana by the 1930s in an effort to protect livestock. They were listed as an endangered species in 1974 and the populations in Glacier and Yellowstone national parks and northwest Montana have grown.

Wolves are increasingly popping up in cattle country, including the Augusta area, where the once-powerful Sawtooth pack raised havoc with ranchers but was wiped out by 1996. Last year the U.S. Fish and Wildlife Service confirmed the existence of a new wolf pack, the Gates Park pack, in the Bob Marshall Wilderness now living in the North Fork of the Sun River.

When the wolf is taken off the endangered species list, livestock owners will have more options in dealing with the carnivores. Federal wolf managers hope the wolf will be off the list by 2003, opening up the door to state management.

Rep. Linda Holden, R-Valier, says understanding will be the key in keeping harmony in cattle country.

"This area feels pretty strongly about the wolf. If we delist it would be great," said Holden, who also is a member of the house agriculture committee.

Those in the livestock industry say the sooner the better. Jay Bodner, natural resources coordinator for the Montana Stockgrowers, said most livestock owners believe Montana can manage the wolf population better than the federal government. They share the concerns of others that the changeover won't happen overnight.

"Right now the plan is probably going to get extended over a few years in our best-case scenario. We realize that but continue to push," he said. "It continues to be a big issue no matter where we go. It comes up at local stockgrowers meetings anywhere in the state."

Wolves in Montana, Idaho and Wyoming killed 138 sheep last year, up about 75 percent from the 80 sheep killed the year before. Four llamas and six dogs also were confirmed killed by wolves.

Last year wolves killed 40 cattle, compared with 32 the year before.

A look at the larger picture, however, reveals that wolves' impact on the industry is fairly small. Montana ranchers in 2000, for example, lost 3,800 cattle to predators including eagles, mountain lions, coyotes and domestic dogs.

Livestock owners argue that in many cases they are unable to prove a wolf kill and numbers are often much higher.

When wolves were reintroduced in the West, many predicted it would be the end for livestock. But depredations are far below what many anticipated.

"It's almost like the boy who cried wolf," said Ed Bangs, wolf recovery specialist for the U.S. Fish and Wildlife Service. "Reality has made the argument for wolves more rational."

In most cases livestock owners are reimbursed by private organizations for their losses. In an equally large number of cases the troublesome wolf is found and killed. Entire packs have been killed on a handful of occasions because of run-ins with livestock. In 2001 18 wolves were relocated and 19 were killed.

Once wolf management falls under the state, rules could allow livestock owners the option of shooting a wolf that roams onto private ground. A state plan is still being drafted for Montana, and it will likely address the livestock question in detail.

Although wolf biologists point out that livestock kills haven't shot through the roof, in some cases just one kill is too many.

A gray wolf killed a calf 27 miles north of Cut Bank in 1999 on Tom Tuma's property. Wildlife managers found large tracks, 4 inches and 5 inches long, and bite marks on the calf's neck -- clear signs of a wolf kill. The wolf could have dropped in from Glacier National Park or Alberta. But Tuma suspects it was more than a one-time deal. He would really like to see the state take over wolf management.

"I prefer the state, but I don't think the people of Montana should pay for it," said Tuma, who ranches north of Cut Bank.

Henderson said the Carroll Ranch hasn't confirmed any cattle kills caused by wolves. He still wouldn't mind seeing the state take over wolf management, and having a hunting season for wolves.

"As long as that wolf is not hunted, they are going to get brave. They don't know any different. That wolf was probably doing what he thought was right when he killed my dog," he said.

Defenders of Wildlife, a nonprofit group, has compensated farmers and ranchers who can document losses of livestock to wolves since 1987. That program has paid out about $232,105 to 202 livestock owners.

The Rockport Hutterite Colony west of Pendroy, for example, received $10 each for 12 ewes and $250 each for three rams killed by wolves in 1999.

Accepting payment is often viewed by some ranchers as collaborating with the enemy.

Tom France, regional director in Missoula for the National Wildlife Federation, said he believes that kind of polarization is dissipating. And he believes the states will collectively invent good management plans.

"I think we need to be patient as we devise safeguards," he said. "There are many hurdles to cross, and I think we are seeing more and more that state management of the species is a legitimate and good goal to work for.

"But I don't think it will be an easy road or a quick road," he added.

Blue, an Australian blue heeler, at a ranch near Cameron.

A wildlife manager holds Blue shortly after a wolf killed the dog in March on a ranch near Cameron.