From the A Ford Across the Skunk River area, just keep following the Skunk River north and west and you’ll stumble across this area shortly.
When you enter the area you’ll find yourself along the northern end of the map, from which head south a short distance to find Lumberjacks led by a man named Corax facing off against a Nixie named Melianse. The Nixie, while outnumbered, does have a trump card in the form of two bewitched Lumberjacks, whose lives she threatens in response to Corax’s aggression. Getting drawn into this stalemate starts the quest Feather Tokens - which is really the key encounter in this area.
If you pick the [Neutral] option you’ll just watch as both sides butcher each other, and Jaethal will show she’s a poor gambler, as the Nixie does not, in fact, have a better chance of winning. After Corax and his Lumberjacks defeat their fellows, the Giant Frogs Melianse summons, and the Nixie herself, you can talk to him again and decide to finish what the Nixie started [Chaotic Evil] by attacking the grieving Lumberjacks. Melianse herself has little of interest to loot and Corax has a Greataxe +1.
Alternatively you can pick the dialogue option [Solve the problem with force] “You know what? To hells with it…” after which you’ll get the option to attack Melianse, the lumberjacks, or both sides. The first two actions are [Neutral Evil] while the last is [Chaotic Evil]. Resorting to violence hastily in this case is an evil act no matter how you slice it, and considering the rewards, there’s not much incentive to do so, you know, save for the joy of killing, experience, and Corax’s Greataxe +1.
If carnage and violence doesn’t appeal to you, take a more diplomatic approach by picking the dialogue option “What’s going on here?”, to find out that the conflict has arisen predictably enough. A fey creature’s home is being ravaged by some hard-working men with axes, and both sides clearly view each other as an over-bred menace.
Don’t bother trying to appeal to the Nixie, she won’t even consider disarming by surrendering her captives. Instead pick the dialogue option [Try to reason with the loggers] “Listen to me, guys…” to get a variety of checks where you can attempt to resolve the situation peacefully. These include a [Knowledge (World) 22] check, a [Diplomacy 22] check or an [Intimidate 22] check, the last of which is a [Lawful Neutral] action and a fair assertion of your property rights. Fortunately if you fail at one of these checks, you can attempt another, so unless you’re dead-set on a particular outcome you should be capable enough of passing at least one of these checks.
After the lumberjacks have been convinced, you’ll have to negotiate with Melianse, who complicates matters by making more demands. It seems the lumberjacks leaving isn’t all the Nixie wants, she wants the restoration of the trees they felled. Pick the dialogue option “How are we supposed to restore a tree that’s already been cut down?” and she’ll tell you to gather some feather tokens, which are made by “your people’s mages” or by her cousin - a Dryad named Tiressia, who won’t be encountered for quite some time (you’ll find her in the Swamp Witch’s Hut area, but she has her own issues you’ll need to resolve, first…). Alternatively, if you’re following this guide chronologically, you could have bought A Pouch of Feather Tokens from Bartholomew in the Lone House area.