Blue Heelers are very smart. They are herders and need something to do at all times. If they don't have this...ie. cattle to herd on a huge ranch, then they become unhappy...which leads to destruction ... According to everyone I've talked to, he's unhappy with the living space, and this is his way of telling us. I read it's normal for the breed. They need a ranch with jobs to do.
I'm sorry to be critical, I know this is a difficult time for you, but I have to say something about this. You are drawing vast generalizations about the ACD breed - generalizations which are NOT true in the majority of cases. Yes, they are smart dogs. Yes, they like to have a "job" to do. However, it is NOT true that the "job" HAS to be "cattle to herd on a huge ranch". Their "job" can be guarding the yard, playing ball with a child, learning agility or flyball. My ACD, Queenie, has lived as a house dog with us for almost nine years. Her "job" is chasing a tennis ball and guarding the yard from people passing by on the sidewalk. She's never even seen a cow. There are literally tens of thousands of ACDs living perfectly happy lives as house pets with active family in cities and suburbs. To generalize that this breed is ONLY happy on ranch is wrong and unfair.

Having owned, rescued and trained ACDs for many years, I have to say that your dog's behavior - while certainly not unheard - is also certainly not the norm for the breed. There is something else going on there beside just the fact that your dog is an ACD. Have you had a vet check with a complete blood panel, to start with? If you want to try it, put your dog in flyball or agility. It works wonders - obedience on a leash is NOT enough activity for an ACD. There ARE ways to entertain and busy an ACD without him living on a ranch, obviously, because a LOT of families keep them as pets.

I have to agree with Cataholic about the letter. I find this particularly heartbreaking ... "always had a clear view though to inside the house where she would lay and watch us as she was guarding the back yard." The dog couldn't come in because she was muddy, so she had to watch her family from outside? And that is supposed to be comforting and reassuring? Me personally, I wouldn't place one of my rescue dogs here.